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D089 Principles of Economics Final Retake Exam
Review Questions and Correct Answers Latest
2025/ D089 OA Retake Practice Test 2025
Pure Monopoly Characteristics - ...ANSWER...✓✓ - single
seller
- no close substitutes
- price maker
- blocked entry
- nonprice competition
- example is all public utilities
Barriers of Entry - ...ANSWER...✓✓ 1. Economies of Scale
2. Legal Barriers to Entry (Patents and Licenses)
3. Ownership or Control of Essential Resources
4. Pricing and Other Strategic Barriers to Entry
Pure Monopoly Demand Curve vs Pure Competition
Demand Curve - ...ANSWER...✓✓ Pure Monopoly:
- demand curve is downward sloping because the firm is
a price maker
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- MR < P
Pure Competition:
- demand curve is a horizontal line because the firm is a
price taker
- MR = P = AR
Why is a monopolist the price maker? - ...ANSWER...✓✓
because the monopolist has the ability to control the
output and price
Use elasticity to explain the region of the demand curve
where the monopolist produces - ...ANSWER...✓✓ the
profit seeking monopolist will choose to produce in the
elastic segment of the curve and avoid the inelastic
segment of the curve
What rule explains what output the monopolist will
produce and the price that will be charged? -
...ANSWER...✓✓ MR = MC Rule
P and TR are inversely (opposite) related in the elastic
range - ...ANSWER...✓✓ P↓ TR↑ and P↑ TR↓
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P and TR are proportionally related in the inelastic range
- ...ANSWER...✓✓ P↓ TR↓ and P↑ TR↑
Determine the profit maximizing output and the price for
the pure monopolist when you are given the graph -
...ANSWER...✓✓ - to find the profit maximizing output and
price find the points where MC = MR which is your output
and the point that touches the demand curve is your price
- demand downward sloping
- MR curve downward sloping
Why can losses be experienced in a pure monopoly
market? - ...ANSWER...✓✓ - if ATC is above the demand
curve and MR curve and the AVC is below the demand
curve and MR curve than that will be the loss minimizing
output
Why can a shutdown be experienced in a pure monopoly
market? - ...ANSWER...✓✓ - ATC and AVC will be above
the demand curve and MR curve, which will cause a
shutdown immediately
Equilibrium Output - ...ANSWER...✓✓ - MR > 0
D089 Principles of Economics Final Retake Exam
Review Questions and Correct Answers Latest
2025/ D089 OA Retake Practice Test 2025
Pure Monopoly Characteristics - ...ANSWER...✓✓ - single
seller
- no close substitutes
- price maker
- blocked entry
- nonprice competition
- example is all public utilities
Barriers of Entry - ...ANSWER...✓✓ 1. Economies of Scale
2. Legal Barriers to Entry (Patents and Licenses)
3. Ownership or Control of Essential Resources
4. Pricing and Other Strategic Barriers to Entry
Pure Monopoly Demand Curve vs Pure Competition
Demand Curve - ...ANSWER...✓✓ Pure Monopoly:
- demand curve is downward sloping because the firm is
a price maker
,2|Page
- MR < P
Pure Competition:
- demand curve is a horizontal line because the firm is a
price taker
- MR = P = AR
Why is a monopolist the price maker? - ...ANSWER...✓✓
because the monopolist has the ability to control the
output and price
Use elasticity to explain the region of the demand curve
where the monopolist produces - ...ANSWER...✓✓ the
profit seeking monopolist will choose to produce in the
elastic segment of the curve and avoid the inelastic
segment of the curve
What rule explains what output the monopolist will
produce and the price that will be charged? -
...ANSWER...✓✓ MR = MC Rule
P and TR are inversely (opposite) related in the elastic
range - ...ANSWER...✓✓ P↓ TR↑ and P↑ TR↓
, 3|Page
P and TR are proportionally related in the inelastic range
- ...ANSWER...✓✓ P↓ TR↓ and P↑ TR↑
Determine the profit maximizing output and the price for
the pure monopolist when you are given the graph -
...ANSWER...✓✓ - to find the profit maximizing output and
price find the points where MC = MR which is your output
and the point that touches the demand curve is your price
- demand downward sloping
- MR curve downward sloping
Why can losses be experienced in a pure monopoly
market? - ...ANSWER...✓✓ - if ATC is above the demand
curve and MR curve and the AVC is below the demand
curve and MR curve than that will be the loss minimizing
output
Why can a shutdown be experienced in a pure monopoly
market? - ...ANSWER...✓✓ - ATC and AVC will be above
the demand curve and MR curve, which will cause a
shutdown immediately
Equilibrium Output - ...ANSWER...✓✓ - MR > 0
