Quiz on Monopoly
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) A market is primarily defined by
1) _______
A) factors that limit potential substitutes.
B) geographical region.
C) type of product.
D) number of stores.
E) time.
2) Products sold in a monopoly market
A) are all consumer goods.
B) are high priced.
C) are homogeneous.
D) are unique.
E) must have no close substitutes.
2) _______
3) It is less costly to have a single television cable provider in most towns,
due to the high setup cost of running cables. What type of barrier to
entry is this?
A) Ownership of an essential resource
B) Legal restrictions created by government
C) Antitrust laws
D) Predatory competition from other firms
E) Large economies of scale
3) _______
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the
question.
4) The government often licenses and regulates prices of firms that 4) _____________
have large economies of scale in production. Why are such firms
allowed to be monopolies, and why are their prices regulated?
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
5) The demand curve for a monopolist is
5) _______
A) equal to the marginal revenue curve.
B) upward sloping.
C) horizontal.
D) the same as the market demand curve.
E) equal to the marginal cost curve.
6) Along a linear demand curve, if marginal revenue is less than zero,
demand is
A) elastic.
B) unit elastic.
C) perfectly inelastic.
D) inelastic.
E) perfectly elastic.
6) _______
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7) Consider the following statements about monopolies and revenue.
7) _______
I. A monopolist will never select an output in the inelastic part of
a linear
demand curve.
II. To maximize revenue, the monopolist should produce at the
midpoint
of a linear demand curve.
III. For a monopolist, marginal revenue is greater than price.
A)
B)
C)
D)
E)
All three statements are true.
I and III are true; II is false.
I and II are true; III is false.
I is false; II and III are true.
All three statements are false.
8) Which of the following graphs best represents the relationship between
total revenue and total cost for a monopolist?
A)
8) _______
B)
C)
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D)
E)
9) A monopolist has no supply curve because
A) marginal revenue is not equal to marginal cost.
B) the firm can supply whatever quantity it chooses.
C) the firm's information about buyers is unreliable.
D) the firm's decision about price and quantity is not based solely on
cost.
E) the firm has no marginal cost curve.
9) _______
Use the figure for the question(s) below.
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10) The figure above shows demand, marginal revenue, and marginal cost
curves for a monopolist. The monopolist's profit-maximizing output
and price are
A)
, .
B)
,
.
C)
,
.
D)
,
.
E)
,
.
10) ______
11) It is difficult for monopolists to perfectly price discriminate because
A) it is not profitable.
B) it is not socially efficient.
C) it is illegal.
D) it is not possible to prevent resale.
E) it is difficult to determine individual willingness to pay.
11) ______
12) A monopoly firm practicing third degree price discrimination will
maximize profit by charging a higher price in the
A) largest market.
B) market in which there are the largest economies of scale.
C) market in which demand is most elastic.
D) market in which demand is most inelastic.
E) smallest market.
12) ______
13) Consider the following statements about price discrimination.
13) ______
I. A perfectly price discriminating monopolist is just as socially
efficient as a perfectly competitive industry.
II. Charging different prices for self-serve and full service gasoline
is an example of price discrimination.
III. Charging different prices to dry clean men's and women's shirts
made of the same fabric is an example of price discrimination.
A)
B)
C)
D)
E)
I is true; II and III are false.
I and II are true; III is false.
I and III are true; II is false.
All three statements are true.
All three statements are false.
14) It is more common to see significant student discounts for services like
haircuts and restaurant meals than for goods like computers or cars.
How can this best be explained?
A) There is no incentive to price discriminate in the computer market.
B) It is difficult to prevent resale of computers and cars.
C) There is no market power in the computer and automobile
industries.
D) Everyone has the same demand for computers and cars and thus
the firms cannot price discriminate.
E) It is illegal to sell computers and cars at different prices to different
consumers.
14) ______
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SHORT ANSWER. Write the word or phrase that best completes each statement or answers the
question.
15) What are the necessary conditions for third degree price
15) _____________
discrimination, and why is each important?
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
16) Which of the following statements correctly describes short run profit in 16) ______
perfectly competitive and monopoly markets?
A) Short-run profit is equal to zero in perfectly competitive markets
but can be positive in monopoly markets.
B) In both markets, profit is equal to zero in the short run.
C) Short-run profit is equal to zero in monopoly markets but can be
positive in perfectly competitive markets.
D) Short-run profit is always less than zero in both markets.
E) Short-run profit can be greater than zero in both markets.
17) Which of the following statements correctly describes the relationship
between price and marginal cost at the profit-maximizing point in
perfectly competitive and monopoly markets?
A) Price is equal to marginal cost in perfectly competitive markets
and greater than marginal cost in monopoly markets.
B) Price is less than marginal cost in both markets.
C) Price is greater than marginal cost in perfectly competitive markets
and equal to marginal cost in monopoly markets.
D) Price is equal to marginal cost in both markets.
E) Price is greater than marginal cost in both markets.
17) ______
Use the figure for the question(s) below.
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18) The figure above shows demand, marginal revenue, marginal cost, and
average total cost curves for a monopolist. What is the monopolist's
profit-maximizing output and price?
A)
,
B)
,
C)
,
D)
,
E)
,
19) The figure above shows demand, marginal revenue, marginal cost, and
average total cost curves for a monopolist. What is the monopolist's
profit-maximizing output and price?
A)
,
B)
,
C)
,
D)
,
E)
,
20) The figure above shows demand, marginal revenue, marginal cost, and
average total cost curves for a monopolist. At the monopolist's profitmaximizing output and price, what area represents the monopolist's
profit?
A) rectangle
18) ______
19) ______
20) ______
B) triangle
C) triangle
D) rectangle
E) rectangle
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1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
17)
18)
19)
20)
A
E
E
With large economies of scale, it is less costly to have a single firm producing. However,
allowing them to choose price would create significant deadweight losses, and thus prices
are generally regulated to reduce such losses.
D
D
C
A
D
C
E
D
C
B
A monopolist must have market power in both markets (if you can't set the price, you can't
price discriminate), there must be different demand in each market (otherwise there is no
gain from price discrimination), and the monopolist must prevent resale (otherwise buyers
in the low-price market will just resell in the other market).
E
A
D
D
D
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