Multiple Choice Answers

A firm that emerges as the only seller in an industry with economies of scale is a(n):



Natural oligopoly

Natural monopoly


The profit maximizing rule MR = MC applies to:

All firms

Monopolists only

Perfect competitors only

Oligopolistic firms


Constant returns to scale occur when a doubling of all inputs:

Doubles the price of outputs

More than doubles output

Less than doubles output

Exactly doubles output


If a firm triples all its inputs and output triples as a result, then the firm:


Has increasing returns to scale

Has economies of scale

Has constant returns to scale

Will have lower total costs


The term natural monopoly refers to:

Government ownership of parks

The desire of all firms to be monopolists

Industries with small fixed costs

Industries with economies of scale


Suppose both a competitive firm and a monopolist firm are charging $5 for their respective outputs. One can infer that:

Marginal revenue is $5 for both firms

Marginal revenue is $5 for the competitive firmĀ and less than $5 for the monopolist firm

Marginal revenue is less than $5 for both firms

Both firms are earning profits