Firms: Monopoly - Question Bank

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Question Bank - Economics

Firms: Monopoly

Q1. Which of the following is not a barrier to entry in a monopolized market? (Select one answer) (a) A single firm is very large (b) The government gives a single firm the exclusive right to produce some good (c) The costs of production make a single producer more efficient than a large number of producers (d) A key resource is owned by a single firm

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Q2. When a monopolist produces an additional unit, the marginal revenue generated by that unit must be (Select one answer) (a) below the price because the price effect outweighs the output effect (b) above the price because the output effect outweighs the price effect (c) above the price because the price effect outweighs the output effect (d) below the price because the output effect outweighs the price effect

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Q3. A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a (Select one answer) (a) natural monopoly (b) perfect competitor (c) government monopoly (d) regulated monopoly

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Q4. Compared to a perfectly competitive market, a monopoly market will usually generate (Select one answer) (a) higher prices and lower output (b) higher prices and higher output (c) lower prices and lower output (d) lower prices and higher output

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Q5. A monopoly is able to continue to generate economic profits in the long run because (Select one answer) (a) there is some barrier to entry to that market (b) potential competitors sometimes don't notice the profits (c) the monopolist is financially powerful (d) antitrust laws eliminate competitors for a specified number of years (e) of all of the things described in these answers

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Q6. The diagram below represents an industry that was in perfect competition that has become a monopoly. Click on the area that shows the level of consumer surplus that will exist under the monopoly. (Click on the image to select your answer)

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Q7. The diagram below represents an industry that was in perfect competition that has become a monopoly. Click on the area that shows the level of producer surplus that will exist under the monopoly. (Click on the image to select your answer)

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Q8. If regulators break up a natural monopoly into many smaller firms, the cost of production (Select one answer) (a) will rise (b) will fall (c) will remain the same (d) could either rise or fall depending on the elasticity of the monopolist's supply curve

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Q9. The diagram below represents an industry that was in perfect competition that has become a monopoly. Click on the area that shows the deadweight welfare loss that will result under the monopoly. (Click on the image to select your answer)

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Q10. A monopolist maximizes profit by producing the quantity at which (Select one answer) (a) marginal revenue equals marginal cost (b) marginal revenue equals price (c) marginal cost equals price (d) marginal cost equals demand (d) none of these answers

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