5) Which of the following best approximates a pure monopoly? A) the Kansas City wheat market B) the soft drink market C) the foreign exchange market D) the only grocery store in a small isolated town 6) Which of the following is a characteristic of pure monopoly? A) the absence of market power B) "price taking" C) barriers to entry D) close substitute products 7) 7) Under which of the following situations would a monopolist increase profits by lowering price and increasing output)? A) if it discovered that it was producing where MC = MR B) if it discovered that it was producing where MC < MR C) if it discovered that it was producing where its MC curve intersects its demand curve D) under none of these circumstances because a monopolist would never lower price 8) 8) In the short run, a monopolist's economic profits A) may be positive or negative depending on market demand and cost conditions. B) are always zero because consumers prefer to buy from competitive sellers. C) are always positive because the monopolist is a price-maker. D) are usually negative because of government price regulation. 9) Barriers to entering an industry A) encourage allocative efficiency. B) are the basis for monopoly. C) apply only to purely monopolistic industries. D) encourage productive efficiency. 10) 10) A natural monopoly occurs when A) a firm owns or controls some resource essential to production. B) economies of scale are obtained at relatively low levels of output. C) long-run average costs rise continuously as output is increased.