Deck 13: Monopoly

Question 1

In a monopoly:

A) Several firms dominate the industry.
B) Many firms dominate the industry.
C) One firm dominates the industry.
D) Every firm is a price taker.

Answer 1

C

Question 2

A monopolist faces:

A) A downward sloping demand curve
B) An upward sloping demand curve
C) A horizontal demand curve
D) A downward sloping supply curve

Answer 2

A

Question 3

In monopoly:

A) Average revenue and marginal revenue are equal.
B) The marginal revenue curve is upward sloping.
C) The marginal revenue is below the demand curve and diverging.
D) Marginal revenue equals average cost.

Answer 3

C

Question 4

In the long run in monopoly:

A) Only normal profits are made.
B) Abnormal profits can be made.
C) Firms produce where price equals marginal cost.
D) Firms produce where average cost equals average revenue.

Question 5

A profit-maximizing monopolist produces where:

A) Price equals marginal cost.
B) Marginal revenue equals marginal cost.
C) Marginal revenue equals average cost.
D) Price equals average variable cost.

Question 6

The marginal revenue curve in monopoly:

A) Is the same as the demand curve.
B) Is below the demand curve.
C) Is above the demand curve.
D) Is horizontal.

Question 7

If a lack of competition leads to costs rising this is called:

A) Z efficiency
B) X inefficiency
C) W efficient scale
D) Z deficiency

Question 8

The marginal revenue curve in monopoly is below the demand curve and converges.

Question 9

Productive efficiency occurs at the output where average cost is minimized.

Question 10

A monopolist can make abnormal profits in the long run due to the existence of ________ to entry.

Question 11

A profit-maximizing monopoly:

A) Is a price taker.
B) Can only earn normal profits in the long run.
C) Is not able to benefit from barriers to entry.
D) Is a price maker.

Question 12

Abnormal profit occurs when:

A) Price is greater than average cost.
B) Price is greater than average variable cost.
C) Price is greater than marginal cost.
D) Price is greater than average fixed cost.

Question 13

A monopolist may be allocatively inefficient if:

A) Price is greater than average cost.
B) Price is greater than average revenue.
C) Price is greater than fixed costs.
D) Price is greater than marginal cost.

Question 14

In a monopoly the firm:

A) Is a price taker.
B) Is a price maker.
C) Sets prices in collusion with other firms.
D) None of the above.

Question 15

The Theory of Contestable Markets considers:

A) The likelihood of technology improving
B) The possibility of economies of scale
C) The likelihood of other firms entering the market
D) The likelihood of higher profits