Deck 14: Monopoly

Question 1

One barrier to entry into a monopoly market is:

A)having a natural monopoly.
B)ownership of a key resource.
C)government intervention.
D)All of these are barriers to entry.

Answer 1

All of these are barriers to entry.

Question 2

An essential characteristic of a monopoly is:

A)the good must have no close substitutes.
B)there can only be a few sellers in the market.
C)only one buyer must exist.
D)many buyers must exist.

Answer 2

the good must have no close substitutes.

Question 3

A monopoly:

A)is a price taker.
B)often faces competition from several other firms producing close substitutes.
C)restricts its output.
D)sets a low price by controlling the level of output.

Answer 3

restricts its output.

Question 4

One barrier to entry into a monopoly market is:

A)a natural monopoly.
B)commonplace inputs.
C)bulk buying.
D)price gouging.

Question 5

One of the reasons why monopolies exist is:

A)there are barriers to entry into the market.
B)there is easy entry and exit into and out of the market.
C)the goods sold are highly inaccessible to buyers.
D)geographical differences.

Question 6

One barrier to entry into a monopolist market is:

A)the ownership of a key resource or input.
B)too many competitors already in the market.
C)high input costs.
D)few buyers.

Question 7

Monopoly power in a market causes:

A)monopolists to profit.
B)consumers to lose.
C)surplus to be lost.
D)All of these statements are true.

Question 8

Most U.S.firms face:

A)perfect competition.
B)some degree of competition.
C)market power resting in a few large firms in every industry.
D)no competition at all.

Question 9

Natural monopolies are the natural result of:

A)competition in markets in which economies of scale exist over the relevant range of output.
B)geographical happenstance.
C)fierce tactics.
D)government regulations intended to encourage competition.

Question 10

A market in which a single firm can produce,at a lower cost than multiple firms,the entire quantity of output demanded is called:

A)a natural monopoly.
B)diseconomies of scale.
C)government intervention.
D)price gouging.

Question 11

A monopoly is:

A)a firm that is the sole producer of a good or service with no close substitutes.
B)a firm that is the sole producer of a good or service with many close substitutes.
C)a firm that is the producer of a good or service with just a few large competitors.
D)a firm that produces a good or service that is identical to many others sold in the market.

Question 12

One barrier to entry into a monopoly market is:

A)very large fixed costs relative to variable costs.
B)the existence of large economies of scale.
C)the high cost of required infrastructure for an industry.
D)All of these statements are true.

Question 13

A perfect monopoly:

A)refers to a single seller.
B)is rare.
C)controls 100 percent of the market for a product.
D)All of these statements are true.

Question 14

A natural monopoly is a market in which a single firm:

A)can produce,at a lower cost than multiple firms,the entire quantity of output demanded.
B)owns a key resource or input into the production of the good.
C)is protected from competition through government legislation.
D)gains market share over time through aggressive tactics.

Question 15

DeBeers was able to profit the most from the diamond market by selling:

A)a lot of diamonds at low prices.
B)few diamonds at high prices.
C)a lot of diamonds at high prices.
D)a few diamonds at low prices.

Question 16

A monopoly:

A)has no competition at all.
B)has complete market control.
C)restricts output to maximize profits.
D)All of these statements are true.

Question 17

A firm that is the sole producer of a good or service with no close substitutes is called a:

A)perfectly competitive firm.
B)monopolist.
C)oligopolist.
D)monopolistically competitive firm.

Question 18

A monopoly:

A)has no competition at all.
B)has just a few large competitors.
C)has many competitors.
D)Any of these could be true for a monopoly.

Question 19

Diamonds are expensive because:

A)very few diamonds are discovered each year.
B)the seller of most diamonds in the world restricts output.
C)they are a symbol of luxury.
D)they are a form of conspicuous consumption.

Question 20

Firms can have a high degree of monopoly power and not be a perfect monopoly if they:

A)control 80 to 90 percent of the market.
B)are the single producer of a product.
C)have only a small number of competitors.
D)intimidate the other businesses in the market.

Question 21

One reason a government might choose to protect monopoly rights in an industry is:

A)because it is in the public's interest to do so.
B)to benefit insiders.
C)to encourage innovation.
D)All of these may be true.

Question 22

A monopoly:

A)is constrained because its decisions cannot affect market price.
B)is constrained by demand.
C)faces a horizontal demand curve.
D)is constantly threatened by the entry of new firms.

Question 23

Government regulations:

A)always seek to increase competition.
B)sometimes protect monopoly power in certain industries.
C)never protect monopoly rights.
D)usually are ineffective.

Question 24

One way DeBeers managed to maintain control over the diamond industry was to:

A)continue to be the sole diamond producer by buying all existing diamonds.
B)create the illusion of no close substitutes through marketing.
C)punish consumers who sought to store their wealth in diamonds.
D)All of these statements are true.

Question 25

Predatory pricing is:

A)temporarily slashing prices below cost to force competitors out of the market.
B)an aggressive business move to maintain market power.
C)used to discourage competitors.
D)All of these statements are true.

Question 26

The most a monopolist can sell at any given price is:

A)the amount he alone can supply the market with.
B)the amount demanders are willing to buy at that price.
C)constrained by the availability of inputs.
D)less than if it were a perfectly competitive market.

Question 27

One way a government might protect monopoly rights is by:

A)granting a patent.
B)heavily taxing alcohol and cigarettes.
C)running unsubsidized state-owned enterprises that compete with private firms.
D)All of these are ways the government protects monopoly rights.

Question 28

Predatory pricing:

A)is an aggressive business move to maintain market power.
B)was used by DeBeers to maintain control over the diamond market.
C)is when a firm intimidates others to maintain the high prices the largest firms set.
D)All of these statements are true.

Question 29

When the monopolist decides to supply a given amount to the market,it will:

A)set the price higher than it would be in perfect competition.
B)set the price higher than what demanders are willing to pay for that amount.
C)only sell that amount if it charges what the demanders are willing to pay for that amount.
D)set the price lower than the demand curve to create a perceived shortage.

Question 30

The monopolist is always constrained by:

A)the amount demanders are willing to buy at any given price.
B)his production capacity.
C)the barriers to entry.
D)government regulation.

Question 31

Protecting intellectual property rights:

A)can reduce total surplus for society.
B)never increases total surplus for society.
C)never affects total surplus for society.
D)always increases total surplus for society.

Question 32

One way a government might protect monopoly rights is by:

A)protecting intellectual property rights.
B)subsidizing a state-owned entity.
C)making it illegal to enter an industry.
D)All of these are ways to protect monopoly rights.

Question 33

One way DeBeers managed to maintain control over the diamond industry was to:

A)punish companies that did business with other independent diamond producers.
B)create the illusion of no close substitutes through marketing.
C)buy companies that newly discovered diamond deposits.
D)All of these statements are true.

Question 34

If the monopolist charges a high price,he will sell:

A)as many as he supplies to the market at that price.
B)more than demanders want to buy at that price.
C)less than if he were to charge a lower price.
D)more than if he were to charge a lower price.

Question 35

At any price the monopolist sets,it can sell:

A)as many as it wants.
B)as many as demanders are willing to buy.
C)more than a perfectly competitive market would sell.
D)less than quantity demanded to keep the item rare.

Question 36

Protecting intellectual property rights:

A)always benefits society.
B)never benefits society.
C)rarely affects society overall.
D)is hotly debated whether it benefits or costs society overall.

Question 37

One way a government might protect monopoly rights is by:

A)granting a patent.
B)having copyright laws.
C)subsidizing state-owned entities.
D)All of these are ways to protect monopoly rights.

Question 38

Protecting intellectual property rights:

A)encourages research and development.
B)gives incentive to innovate.
C)can reduce total surplus for society.
D)All of these statements are true.

Question 39

The monopolist faces:

A)a perfectly elastic demand curve.
B)a downward sloping demand curve.
C)a perfectly inelastic demand curve.
D)The monopolist may face any of these demand curves.

Question 40

Monopoly power is:

A)unwelcome by all small businesses.
B)welcomed by some small businesses.
C)helpful in very large industries.
D)helpful in very small industries.

Question 41

For a monopolist,average revenues:

A)are always equal to price.
B)equal price only at the profit maximizing quantity.
C)are always zero at the profit maximizing quantity.
D)are maximized when total revenues are maximized.

Question 42

This table represents the revenues faced by a monopolist.
Using the information in the table shown,the marginal revenue for the 3^rd unit is:

A)$600
B)$100
C)$800
D)$500

Question 43

Total revenues increase as output increases along sections of the demand curve that are:

A)downward sloping.
B)price elastic.
C)price inelastic.
D)upward sloping.

Question 44

This table represents the revenues faced by a monopolist.
Using the information in the table shown,the marginal revenue for the 4^th unit is:

A)higher than that of the 3^rd unit.
B)lower than that of the 3^rd unit.
C)the same as that of the 3^rd unit.
D)That cannot be calculated from the information given.

Question 45

This table represents the revenues faced by a monopolist.
Using the information in the table shown,the marginal revenue:

A)is negative after the 6^th unit.
B)increases,then decreases as output increases.
C)increases as output increases.
D)decreases,then increases after the 6^th unit.

Question 46

This table represents the revenues faced by a monopolist.
Using the information in the table shown,the marginal revenue of the 6^th unit is:

A)zero.
B)negative.
C)$3,000.
D)$500.

Question 47

Total revenue decreases as output increases when demand is:

A)downward sloping.
B)perfectly elastic.
C)price inelastic.
D)price elastic.

Question 48

When a monopolist increases output,total revenue:

A)will increase if the price effect outweighs the quantity effect.
B)will decrease if the quantity effect outweighs the price effect.
C)will increase if the quantity effect outweighs the price effect.
D)None of these statements is true.

Question 49

This table represents the revenues faced by a monopolist.
Using the information in the table shown,if you were to graph the first two columns,you would have graphed which curve?

A)Marginal revenue
B)Market supply
C)Market demand
D)Total productivity

Question 50

This table represents the revenues faced by a monopolist.
Using the information in the table shown,the average revenue for this firm:

A)decreases as output increases.
B)increases as output increases.
C)remains constant regardless of level of output.
D)is maximized when total revenue is maximized.

Question 51

If a monopoly wishes to sell more output,it must:

A)lower the price on all units.
B)find a more cost effective way to produce its goods.
C)be in the economies of scale range of its ATC.
D)eliminate its existing competition.

Question 52

This table represents the revenues faced by a monopolist.
Using the information in the table shown,the average revenue for 5 units is:

A)$600
B)$300
C)$3,000
D)$120

Question 53

For a monopolist,the price effect:

A)is the increase in revenues from selling a greater quantity at a lower price.
B)is always outweighed by the quantity effect.
C)is the decrease in revenues from selling a greater quantity at a lower price.
D)always outweighs the quantity effect.

Question 54

For a monopolist,marginal revenue for all units greater than 1:

A)is always less than price.
B)is always equal to price.
C)is never less than price.
D)is minimized at price.

Question 55

For a monopolist,the quantity effect:

A)is the increase in revenues from selling a greater quantity at a lower price.
B)is the decrease in revenues from selling a greater quantity at a lower price.
C)is always outweighed by the price effect.
D)always outweighs the price effect.

Question 56

For a monopoly,for all units greater than one,the marginal revenue curve:

A)lies above the demand curve.
B)lies below the average revenue curve.
C)cannot be negative.
D)All of these statements are true.

Question 57

For a monopoly,marginal revenue for all units greater than 1:

A)is always less than price because of the price effect.
B)is always more than price because of the price effect.
C)is always more than price because of the quantity effect.
D)is always less than price because of the quantity effect.

Question 58

For a monopoly,marginal revenue for all units greater than 1:

A)is always less than the price.
B)can be negative.
C)is zero when total revenues are maximized.
D)All of these statements are true.

Question 59

For a monopolist,total revenues:

A)increase and then decrease as output increases.
B)decrease and then increase as output increases.
C)increase as output increases.
D)decrease as output increases.

Question 60

When a perfectly competitive firm increases output,total revenue:

A)increases,because there is no price effect.
B)decreases,because there is no price effect.
C)increases,because there is no quantity effect.
D)decreases,because there is no quantity effect.

Question 61

When a monopolist chooses the level of output where marginal cost equals marginal revenue:

A)profits are maximized.
B)price is set at marginal revenue.
C)price is equal to average total costs.
D)All of these statements are true.

Question 62

The monopolist's cost curves differ from those of a perfectly competitive firm in that:

A)marginal cost is no longer equal to average variable cost.
B)average total cost is now minimized where it crosses marginal cost.
C)average total cost and average variable costs are now equal.
D)The cost curves are the same for a firm regardless of market structure.

Question 63

At any quantity of output above the intersection of the marginal revenue and marginal cost curves:

A)MR is higher than MC.
B)ATC is lower than AVC.
C)MC is higher than ATC.
D)None of these statements is true.

Question 64

For a monopoly,a negative marginal revenue implies:

A)the price effect is larger than the quantity effect.
B)total revenues are increasing.
C)that the demand is price elastic.
D)All of these statements are true.

Question 65

For a monopoly producing any output level greater than one,the average revenue curve:

A)lies below the demand curve.
B)lies above the marginal revenue curve.
C)is the same as the marginal revenue curve.
D)lies above the demand curve.

Question 66

For a monopolist,at the profit-maximizing level of output:

A)price is chosen according to demand.
B)price is equal to marginal revenue.
C)price is equal to marginal cost.
D)All of these statements are true.

Question 67

A monopolist can maximize profits by:

A)selling as much as he can produce.
B)producing at the level of output at which MR = 0.
C)following the same rules as a perfectly competitive firm.
D)None of these statements is true.

Question 68

When a monopolist chooses the level of output where marginal cost equals marginal revenue:

A)the price equals average revenue.
B)the price equals marginal revenue.
C)the price is lower than average revenue.
D)the price is lower than marginal revenue.

Question 69

At any quantity of output below the intersection of the marginal revenue and marginal cost curves:

A)MR is higher than MC.
B)MC is higher than MR.
C)ATC is lower than AVC.
D)the firm would lose profits producing the units.

Question 70

The monopolist's cost curves differ from those of a perfectly competitive firm in that the:

A)marginal cost curve is downward sloping instead of flat.
B)average total cost curve is not necessarily minimized where it crosses marginal cost.
C)average variable cost in no longer equal to marginal cost.
D)The cost curves are the same for a firm regardless of market structure.

Question 71

For a monopolist,at the profit-maximizing level of output:

A)price is greater than average revenue.
B)average revenue is greater than marginal cost.
C)marginal cost is greater than price.
D)None of these statements is true.

Question 72

For a monopoly,when the price effect outweighs the quantity effect of increased production:

A)total revenues will increase.
B)the demand must be price inelastic.
C)marginal revenue must be increasing.
D)All of these statements are true.

Question 73

The profit-maximizing decision for the monopoly is:

A)to choose the quantity where marginal cost equals marginal revenue.
B)the same as that of the perfectly competitive firm.
C)to choose price according to demand.
D)All of these statements are true.

Question 74

For a monopoly producing any output level greater than one,the average revenue curve:

A)is the same as the demand curve.
B)lies about the demand curve.
C)lies below the demand curve.
D)can be negative.

Question 75

For a monopoly producing any output level greater than one,the marginal revenue curve:

A)lies below the demand curve.
B)lies above the average revenue curve.
C)is minimized when total revenue is maximized.
D)is the same as the demand curve.

Question 76

For a monopolist,at the profit-maximizing level of output:

A)price is greater than marginal revenue.
B)marginal revenue is greater than average revenue.
C)average revenue is greater than price.
D)None of these statements is true.

Question 77

The revenue curves the monopoly faces are different from that a perfectly competitive firm faces in that:

A)the marginal revenue curve is downward sloping instead of flat.
B)the average revenue curve is no longer equal to price.
C)the marginal revenue curve is now flat instead of downward sloping.
D)The revenue curves are the same for a firm regardless of market structure.

Question 78

The monopolist and the perfectly competitive firm both choose to maximize profits by choosing the level of output where:

A)MC equals MR and price is equal to minimum ATC.
B)the two types of firms make their profit-maximizing decision differently.
C)MC equals MR and price is equal to AR.
D)MC equals AR and price is equal to minimum ATC.

Question 79

At any quantity of output above the intersection of the marginal revenue and marginal cost curves:

A)MR is lower than MC.
B)profits are not being maximized.
C)ATC is higher than AVC.
D)All of these statements are true.

Question 80

For a monopoly,when marginal revenue is zero:

A)profits are maximized.
B)total revenue is maximized.
C)marginal revenue is minimized.
D)marginal costs are minimized.