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- 1. Multiple Choice
Which of the following is not a characteristic of a monopoly market?
Products are not easily substitutable
Market supply is dominated by a single firm
Only weak barriers to entry and exit exist
Firms are price makers
- 2. Multiple Choice
Which of the following is best considered to be a monopoly in the past?
Market for computer operating systems
Restaurant industry
Market for televisions
Vegetable market
- 3. Multiple Choice
The degree of market power a firm has is determined by the extent to which they can ________
Erect barriers to entry and exit
Set prices
Drive out other competing firms from the market
Achieve lower average costs of production
- 4. Multiple Choice
Which of the following are examples of barriers to entry?
i. legal constraints
ii. significant economies of scale
iii. resource rights (ownership)
iv. major start-up costs
i.
i + ii
ii + iii
all of them
- 5. Multiple Choice
What type of demand curve does the monopolist face?
Horizontal
Vertical
Upward sloping
Downward sloping
- 6. Multiple Choice
Compared to a perfectly competitive firm, a monopolist will set a _______ price and _______ level of output.
higher, higher
higher, lower
lower, higher
lower, lower
- 7. Multiple Choice
To maximize revenues, where should a monopolist produce?
Level of output where MR = MC
Level of output where MR = 0
Level of output where MC = min ATC
As far above the equilibrium level of output as possible
- 8. Multiple Choice
A monopolist that focuses on maximizing profit will charge a ____ market price and supply a ______ level of output than a revenue max firm
lower, lower
lower, higher
higher, lower
higher, higher
- 9. Multiple Choice
Which of the following is not a characteristic of natural monopolies?
There are high fixed costs in the industry
The ATC are lowest when only firm operates in the market
LRATC decline as output levels rise
SRATC can be reduced by increased competition
- 10. Multiple Choice
Assume a profit-maximizing monopolists produces 20,000 units of output, that sells this at a price of $55 per unit. Which of the following statements is correct?
MC = MR at an output level of 20,000 units and corresponding point on AR is $55
MC = ATC at an output level of 20,000 units and corresponding point on AR is $55
MR = 0 at an output level of 20,000 units and corresponding point on the demand curve is $55
MC = AR at an output level of 20,000 units and corresponding point on the demand curve is $55
- 11. Multiple Choice
When one producer can supply a good or service at a much lower price (due to significantly lower average costs of production) than if 2 or more suppliers existed in the market, what market situation arises?
Oligopolistic market
legal monopoly
natural monopoly
perfectly competitive market
- 12. Multiple Choice
What should a monopolist do to maximize revenue if it faces relatively inelastic demand for its product?
Reduce prices
Raise prices
Produce to the point where MC = MR
Produce to the point where MC = AC
- 13. Multiple Choice
Which of the following is most likely to be a natural monopoly?
Electricity grid
Smartphone manufacturing industry
courier services industry
telecommunications industry
- 14. Multiple Choice
Which of the following is not an advantage of monopolies?
Large market share implies high levels of output, due to inability to exploit economies of scale
Large abnormal profits can be used to fund innovation
Monopolies tend to sell at lower prices due to the huge economies of scale they achieve
Monopolies may be more cost-efficient being the sole supplier of a good/service than if there were many competing suppliers
- 15. Multiple Choice
Which of the following is not a disadvantage of monopolies?
Consumer surplus is minimized while producer surplus rises
The monopolist sells at a higher price than what is socially optimal yet supplies a lower quantity than what is optimal
Monopolies may face a lack of incentives to innovate, but strong incentives to prevent competition
productive efficiency is achieved because economies of scale are obtainable
- 16. Multiple Choice
Which of the following is not a disadvantage of monopolies?
Consumer surplus is minimized while producer surplus rises
Monopolist sells at higher price than what is socially optimal yet supplies a lower quantity than what is optimal
Monopolies may face a lack of incentives to innovate, but strong incentives to prevent competition
Productive efficiency is achieved because economies of scale are obtainable
- 17. Multiple Choice
According to the monopoly diagram below, the profit maximizing monopolist will produce a quantity of _____ units, and sell at price ______
Q1P1
Q1P2
Q1P3
Q2P4
- 18. Multiple Choice
Assuming the monopolist in the diagram below is producing at the profit maximising level of output, it is making _______ because _____________
Normal profits, AR>MR
Abnormal profits, AR>AC
Losses, MC>AC
Losses AC>MC
- 19. Multiple Choice
With reference to the diagram below, what is the amount of profit or loss being made by the profit maximising monopolist?
Loss of $608,000
Loss of $320,000
Economic profit of $288,000
Economic profit of $320,000
- 20. Multiple Choice
Which of the following statements best defines allocative efficiency?
When firms are able to hire cheaper labour and other factor inputs
When firms use more capital than labour in the production process
When a firm produces at its min ATC
When the marginal costs faced by a firm equals the price it receives
- 21. Multiple Choice
In comparison with a competitive firm, a monopolist usually produces _____ and ____ sells it at a _____ price.
less/higher
more/lower
less/lower
more/higher
- 22. Multiple Choice
Which statement is not true of a natural monopoly?
It has a downward sloping LRATC over a range of output that is able to satisfy the entire market demand
It has a downward sloping SRATC over a range of output that can satisfy a portion of the market demand
It is able to provide a good or service more efficiently than many competing firms
It has major economies of scale
- 23. Multiple Choice
Which of the following is unlikely to characterise a monopoly?
allocative efficiency
significant welfare loss
protection by high barriers to entry
higher price than in a more competitive market
- 24. Multiple Choice
Welfare loss in a monopoly is due to ______ than under competitive conditions
higher costs
lower price
lower output produced
lower PED
- 25. Multiple Choice
Whereas monopolies ______, on the positive side they may ----
have allocative inefficiency/enjoy economies of scale
have welfare loss / have normal profit in the long run
take a portion of consumer surplus / offer consumers lower prices
all of the above
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