2015-08-13
369
Consider a transportation corporation named C.R. Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest. Currently, there are plenty of seats on the subway, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans experienced incredible rates of return on their investment, due to the profitability of the corporation.
60. Refer to Scenario 15-1. Which of the following statements are most likely to be true?
| (i) | New entrants to the market know they will have a smaller market share than C.R. Evans currently has. |
| (ii) | C.R. Evans is most likely experiencing increasing average total cost. |
| (iii) | C.R. Evans is a natural monopoly. |
| a. | (i) and (ii) only |
| b. | (ii) and (iii) only |
| c. | (i) and (iii) only |
| d. | (i), (ii), and (iii) |
61. Competitive firms differ from monopolies in which of the following ways?
| (i) | Competitive firms do not have to worry about the price effect lowering their total revenue. | |||
| (ii) | Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge. | |||
| (iii) | Monopolies must lower their price in order to sell more of their product, while competitive firms do not. | |||
| a. | (i) and (ii) only | |||
| b. | (ii) and (iii) only | |||
| c. | (i) and (iii) only | |||
| d. | (i), (ii), and (iii) | |||
