Question 1

Which of the following is NOT a key feature of a monopoly market?

Accepted Answer

There are many suppliers competing for market share.

Question 2

A natural monopoly arises primarily due to which economic concept?

Accepted Answer

Economies of scale

Question 3

Suppose a monopoly faces the following demand and cost conditions: At a price of $$32, it sells 2 units; at 28$$, it sells 3 units. What is the marginal revenue from selling the third unit?

Accepted Answer

$20

Question 4

For a single-price monopoly, which relationship always holds at each level of output?

Accepted Answer

$$MR \u003c P$$

Question 5

If a monopoly produces at a quantity where demand is inelastic, what should it do to increase its economic profit?

Accepted Answer

Decrease output to raise total revenue and lower total cost

Question 6

In a single-price monopoly, total revenue is maximized when:

Accepted Answer

$$MR = 0$$

Question 7

Compared to perfect competition, a single-price monopoly will:

Accepted Answer

Produce a smaller output and charge a higher price

Question 8

Which of the following is an example of a legal barrier to entry?

Accepted Answer

Patent or copyright protection

Question 9

A monopoly maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 10

Which of the following best describes rent seeking in the context of monopoly?

Accepted Answer

The pursuit of economic rent by capturing surplus through buying or creating monopoly power

Question 11

If a monopoly can perfectly price discriminate, what is the relationship between marginal revenue and price?

Accepted Answer

$$MR = P$$

Question 12

Which of the following is NOT a requirement for a monopoly to successfully price discriminate?

Accepted Answer

Product must have a close substitute

Question 13

Under the marginal cost pricing rule for a regulated natural monopoly, what is the likely outcome for the firm?

Accepted Answer

The firm incurs an economic loss

Question 14

Which regulatory approach gives a monopoly the incentive to minimize costs and operate efficiently?

Accepted Answer

Price cap regulation

Question 15

Suppose a government wants to regulate a natural monopoly to achieve efficiency. Which rule should it apply?

Accepted Answer

Set price equal to marginal cost

Question 16

If a monopoly is allowed to price discriminate between business and leisure travelers, what is the likely effect on output and producer surplus?

Accepted Answer

Output increases and producer surplus increases

Question 17

Which of the following statements about perfect competition and monopoly is correct?

Accepted Answer

Monopoly produces at $$MR = MC$$, while perfect competition produces at $$P = MC.$$

Question 18

A monopoly faces a demand curve that is:

Accepted Answer

The market demand curve

Question 19

Which of the following is a consequence of rent-seeking behavior in monopoly markets?

Accepted Answer

Resources are wasted and deadweight loss increases

Question 20

If a monopoly is regulated using the average cost pricing rule, what is the likely outcome?

Accepted Answer

The outcome is inefficient but the deadweight loss is smaller than with no regulation

Monopoly: Structure, Pricing, and Regulation in Microeconomics

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