This is a knowledge quiz about monopoly in microeconomics. You might only know about the word “monopoly” from the popular boardgame which is famous for making families and friends question their loyalty to one another, but the term refers to one person or firm’s exclusive control of the supply or trade in a particular commodity or service. What can you tell us about monopolies in relation to the world of microeconomics? Let’s find out!
One of a large number of small firms that produce a homogeneous good
One of a small number of large firms that produce a differentiated good
A single seller of a product with many close substitutes
One of a small number of large firms that produce a homogeneous good
A single seller of a product with no close substitutes
There are no barriers to entry.
The firm is a price taker.
There are no close substitutes for the product being produced.
There are many firms in the industry.
The firm faces a horizontal demand curve.
The government licenses production of the good to a few firms.
The government grants a patent for the good.
A firm can earn economic profit in the long run.
If price falls below average variable cost, it pays to shut down.
There are no barriers to entry.
Legal restrictions
Diseconomies of scale
Product differentiation
Stable market demand
Rising marginal cost
Cannot profitably enter the industry, even in the long run
May freely enter and leave the industry in both the short run and the long run
May freely enter and leave the industry in the long run only
May freely enter and leave the industry in the short run only
Have no incentive to enter the industry, even if economic profits are present
Small firms merge to form larger firms
One firm has control over the entire supply of a basic input required to produce the product
One firm's monopoly position is created and enforced by the government
One firm receives patent protection for certain basic production processes
Long-run average cost declines as a firm expands output
A license
A patent
Official approval to produce a product
Decreasing average costs over the range of market demand
Exclusive use of a natural resource
The same as the demand curve facing a perfectly competitive firm
Vertical because there are no close substitutes for its product
Horizontal because there are no close substitutes for its product
The same as the market demand curve
Perfectly inelastic
P = MR because there are no close substitutes for the monopolist's product.
P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
AR = MR because there are no close substitutes for the monopolist's product.
P = MR only at the profit-maximizing quantity.
Is the same as its average revenue curve
Is the same as its marginal revenue curve
Is the same as the perfect competitor's demand curve
Lies above its average revenue curve
The monopolist is facing elastic demand.
The monopolist is facing unit elastic demand
The monopolist is facing inelastic demand.
The monopolist is facing perfectly elastic demand
The elasticity of demand cannot be determined with the information given.
Never produces on the inelastic portion of the demand curve because it can increase profit by increasing output
Never produces on the inelastic portion of the demand curve because marginal revenue exceeds marginal cost
Always produces on the inelastic portion of the demand curve
Never produces on the elastic portion of the demand curve because there are no substitutes for the good it produces
Never produces on the inelastic portion of the demand curve because marginal revenue is negative there
Elastic; positive
Elastic; negative
Inelastic; negative
Inelastic; positive
Inelastic; zero
The firm is maximizing its economic profit
The firm is maximizing its total revenue
Total revenue is increasing at an increasing rate as output increases
Total revenue is increasing at a decreasing rate as output increases
Total revenue is decreasing as output increases
Both P and MR remain constant
P is constant, but MR decreases
Both P and MR decrease, but P falls faster than MR
P decreases, but MR is constant
Both P and MR decrease, but MR falls faster than P
P = AR = MR
P > AR = MR
P = AR > MR
P > AR > MR
P = AR < MR
A.The entry of new firms is not a major concern.
B.Monopolists seek to maximize profits.
C.Monopolists can charge any price they want and make a profit.
D.Monopolists can choose any point on the market demand curve.
E.Monopolists can raise price more than 10 percent.
Price equals marginal cost.
Price is greater than marginal cost.
Marginal revenue equals marginal cost
Marginal revenue is less than marginal cost.
Marginal revenue is greater than average revenue.
Can charge whatever price it wants
Charges more than almost any consumer is willing to pay
Is constrained by marginal cost in setting price
Is constrained by demand in setting price
Always earns an economic profit
Raise price and lower output.
Lower price and lower output.
Raise price and raise output.
Lower price and raise output.
Lower output but leave price unchanged.
Price is equal to marginal cost.
Average revenue is equal to marginal cost.
Marginal revenue is positive.
Marginal revenue is less than marginal cost.
Price is greater than average revenue.
A wide variety of substitute products from which consumers can choose
An elimination of barriers to industry entry
A decline in government regulation
A higher price than would exist in a competitive industry
An improvement in allocative efficiency
A monopolist always produces on the inelastic portion of the firm's demand curve.
A monopolist always produces on the inelastic portion of the market demand curve.
A monopolist always produces on the elastic portion of the market demand curve.
A monopolist always produces on the unit elastic portion of the market demand curve.
The presence of a monopolist increases the elasticity of demand.
Always produce in the inelastic range of its demand curve
Never produce in the elastic range of its demand curve
Never produce in the inelastic range of its demand curve
Never produce in the elastic range of its marginal cost curve
Produce in the elastic range of the marginal revenue curve
Lower price to expand revenue possibilities
Restrict output to extract a higher price from customers
Maintain the current price if profit is still positive
Increase plant size to lower marginal cost
Decrease plant size to lower marginal cost