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Chapter 15 Monopoly

Chapter 15 discusses the characteristics and implications of monopolies, including sources of monopoly power, profit maximization, and price setting. It highlights the inefficiencies associated with monopolies, such as deadweight loss and the impact of price discrimination. Additionally, the chapter covers regulation, barriers to entry, and the differences between monopolistic and perfect competition.

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6 views

Chapter 15 Monopoly

Chapter 15 discusses the characteristics and implications of monopolies, including sources of monopoly power, profit maximization, and price setting. It highlights the inefficiencies associated with monopolies, such as deadweight loss and the impact of price discrimination. Additionally, the chapter covers regulation, barriers to entry, and the differences between monopolistic and perfect competition.

Uploaded by

michaelalfaroalcantara2025
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 15: Monopoly

1. Which of the following is a characteristic of a monopoly?


A. Many sellers in the market
B. Free entry and exit
C. A unique product without close substitutes
D. Perfect information

2. Sources of Monopoly Power


Which of the following is NOT a source of monopoly power?
A. Government regulation
B. Ownership of a key resource
C. Perfect competition
D. Economies of scale

3. Profit Maximization
A monopolist maximizes profit by producing the quantity where:
A. Price equals marginal cost
B. Marginal revenue equals marginal cost
C. Total revenue equals total cost
D. Marginal cost equals average total cost

4. Price Setting
In a monopoly, the price charged is:
A. Equal to marginal cost
B. Higher than marginal cost
C. Lower than marginal cost
D. Determined by industry competition
5. Deadweight Loss
The deadweight loss caused by a monopoly occurs because:
A. The monopolist produces too much output.
B. The monopolist charges a price below marginal cost.
C. The monopolist restricts output below the socially optimal level.
D. Consumers have perfect information about prices.

6. Price Discrimination
Price discrimination occurs when:
A. A monopolist charges all consumers the same price.
B. A monopolist charges different prices for the same product to different consumers.
C. A monopolist lowers prices to eliminate competition.
D. A monopolist charges a price equal to marginal cost.

7. Natural Monopoly
A natural monopoly arises when:
A. The government grants exclusive rights to a single producer.
B. A firm’s average costs decline over the range of market demand.
C. There are numerous substitutes for the product.
D. The firm has a patent on the product.

8. Regulation of Monopolies
If a monopoly is regulated to produce at the allocatively efficient level, the regulator would require the
monopolist to set:
A. Price equal to marginal revenue.
B. Price equal to average cost.
C. Price equal to marginal cost.
D. Price higher than marginal cost.

9. Barriers to Entry
Which of the following is NOT considered a barrier to entry in a monopoly market?
A. Patents
B. High startup costs
C. Economies of scale
D. Perfect competition

10. Monopolistic vs. Perfect Competition


A major difference between a monopoly and perfect competition is that:
A. A monopolist can set any price without losing sales.
B. Perfect competitors can only make profits in the short run.
C. A monopolist faces a horizontal demand curve.
D. Perfect competitors produce less than monopolists.

11. Elasticity and Monopoly Pricing


A monopolist will always set its price:
A. In the inelastic portion of the demand curve
B. In the elastic portion of the demand curve
C. At the midpoint of the demand curve
D. Where marginal cost equals average total cost

12. Revenue in Monopoly


For a monopolist, marginal revenue is:
A. Equal to price
B. Always less than price for positive quantities
C. Always greater than price for positive quantities
D. Equal to marginal cost

13. Monopolist's Demand Curve


The demand curve faced by a monopolist is:
A. Horizontal
B. Vertical
C. The same as the market demand curve
D. Downward sloping but more elastic than the market demand curve

14. Profit in the Long Run


In the long run, a monopolist:
A. Can earn economic profits if it maintains barriers to entry
B. Will always break even
C. Will face competition that eliminates profits
D. Cannot produce at an efficient scale

15. Price Discrimination Conditions


For price discrimination to be successful, which condition must be met?
A. The firm must face a perfectly elastic demand curve.
B. The firm must prevent resale between customers.
C. The firm must produce at minimum average total cost.
D. The firm must operate in a perfectly competitive market.

16. Monopoly vs. Socially Optimal Output


Compared to the socially optimal level of output, a monopoly:
A. Produces more and charges a lower price.
B. Produces less and charges a higher price.
C. Produces the same output but charges a higher price.
D. Produces less but charges a lower price.

17. Monopoly and Market Power


Market power is defined as:
A. The ability to set price equal to marginal cost
B. The ability to influence the market price of the product
C. The ability to enter and exit the market freely
D. The ability to produce at minimum cost

18. Anti-Monopoly Legislation


Which of the following is an example of legislation aimed at reducing monopoly power?
A. Patent laws
B. Antitrust laws
C. Tariff laws
D. Consumer protection laws

19. Monopoly Pricing Efficiency


Why is monopoly pricing considered inefficient?
A. It produces too much output, wasting resources.
B. It leads to a loss of consumer surplus and creates deadweight loss.
C. It results in prices that are too low for firms to cover costs.
D. It allows other firms to enter and take profits.

20. Government-Granted Monopoly


A government-granted monopoly is one where:
A. The government owns the firm and runs it as a monopoly.
B. The government gives a single firm the exclusive right to produce a good or service.
C. The firm has no competitors because of high startup costs.
D. The firm engages in predatory pricing to drive out competitors.

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