Deck 14: Monopoly

Question 1

A perfect 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.

Answer 1

D

Question 2

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

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

Answer 2

B

Question 3

Monopoly power in a market causes:

A) monopolists to profit.
B) consumers to gain.
C) market surplus to be constant
D) governments to neve allow them.

Answer 3

A

Question 4

One barrier to entry into a monopoly 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 5

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.

Question 6

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 7

Monopoly power in a market causes:

A) monopolists to earn economic profits of zero.
B) consumers to gain.
C) market surplus to be lost.
D) producers to worry about competition.

Question 8

A monopoly has:

A) no competition at all.
B) just a few large competitors.
C) many competitors.
D) no ability to set price.

Question 9

One of the key reasons why monopolies exist is:

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

Question 10

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) lot of diamonds at high prices.
D) few diamonds at low prices.

Question 11

A perfect monopoly:

A) can be a single seller or small group of firms.
B) can offer a product at the lowest cost possible.
C) controls 100 percent of the market for a product.
D) always engages in price discrimination.

Question 12

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

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

Question 13

A perfect monopoly:

A) refers to a single seller.
B) can extract all consumer surplus from a market.
C) controls 90 to 100 percent of the market for a product.
D) would produce efficient outcomes.

Question 14

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 15

A monopoly:

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

Question 16

One barrier to entry into a monopoly market is:

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

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 is a firm that:

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

Question 19

Which of the following is not considered a barrier to entry into a monopoly market?

A) having a natural monopoly.
B) ownership of a key resource.
C) government intervention.
D) an new product-type is offered.

Question 20

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 21

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 22

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

Question 23

All of the following are ways a government might protect monopoly rights except:

A) protecting intellectual property rights.
B) subsidizing a state-owned entity.
C) making it illegal to enter an industry.
D) heavy taxation of potential competitors.

Question 24

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 25

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

A) set the price equal to marginal cost.
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 26

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 27

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 28

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 29

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 30

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 31

All of the following are reasons a government might choose to protect monopoly rights in an industry except:

A) because it is in the public's interest to do so.
B) to benefit insiders.
C) to encourage innovation.
D) to increase consumer surplus beyond what is achieved through competition.

Question 32

At any price the monopolist sets,it will 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 33

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 34

Natural monopolies are the natural result of:

A) competition in markets where economies of scale exist over the relevant range of output.
B) geographical happenstance.
C) fierce competition from firms in a market.
D) government regulations intended to encourage competition.

Question 35

The monopolist faces a:

A) perfectly elastic demand curve.
B) downward sloping demand curve.
C) perfectly inelastic demand curve.
D) perfectly elastic supply curve.

Question 36

Protecting intellectual property rights:

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

Question 37

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 38

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

Question 39

Protecting intellectual property rights:

A) gives no incentive to innovate.
B) encourages research and development.
C) will increase total surplus for society.
D) only benefits producers in society.

Question 40

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 41

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) $0
B) $200
C) $3,000.
D) $500.

Question 42

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 43

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

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

Question 44

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 45

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 46

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 47

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 48

When a monopolist increases output,total revenue will:

A) increase if the price effect outweighs the quantity effect.
B) decrease if the quantity effect outweighs the price effect.
C) increase if the quantity effect outweighs the price effect.
D) increase but it will have no price effect.

Question 49

For a monopolist,total revenues will:

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

Question 50

Total revenue decreases as output increases when demand is:

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

Question 51

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 52

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 53

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 54

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

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

Question 55

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

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

Question 56

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 57

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

A) is always less than the price.
B) cannot be negative.
C) is zero when total profits are maximized.
D) is always greater than marginal cost.

Question 58

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 59

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

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

Question 60

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

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

Question 61

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 being maximized.
C) ATC equal to AVC.
D) MR is higher than MC.

Question 62

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 63

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 64

The monopolist is able to enjoy profits in the long run because:

A) the firm's price is set above its marginal costs.
B) there is no threat of competition.
C) the firm can charge a price higher than its average total costs in the long run.
D) All of these statements are true.

Question 65

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

A) marginal revenue curve is downward sloping instead of flat.
B) average revenue curve is no longer equal to price.
C) marginal revenue curve is now flat instead of downward sloping.
D) total revenue curve for a monopoly is linear.

Question 66

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) total revenue is maximized.

Question 67

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

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

Question 68

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

A) equal to marginal revenue.
B) equal to marginal cost.
C) chosen according to demand.
D) constant.

Question 69

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) price is equal to marginal revenue.

Question 70

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 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) total revenue is equal to total cost.

Question 72

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.

Question 73

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) selling an output where P = ATC.

Question 74

The monopolist's outcome in the long run differs from that of the perfectly competitive firm in that it:

A) has zero profits in the long run.
B) charges a price above average total costs.
C) charges a price where marginal costs equal average revenue.
D) charges a price equal to MC.

Question 75

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 76

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) the quantity effect is larger than the price effect.

Question 77

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 78

This graph shows the cost and revenue curves faced by a monopoly. According the graph shown,the profit-maximizing decision of the monopolist would be:

A) Q1, P1.
B) Q1, P3.
C) Q2, P2.
D) Q1, P2.

Question 79

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

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

Question 80

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.