Question 1

Which of the following is NOT a characteristic of a monopoly market structure?

Accepted Answer

There are many sellers competing in the market.

Question 2

Which of the following is an example of a legal barrier to entry that can create a monopoly?

Accepted Answer

Patents in the pharmaceutical industry

Question 3

Given the demand curve $$P = 800 - 2Q$$, what is the corresponding marginal revenue (MR) curve?

Accepted Answer

$$MR = 800 - 4Q$$

Question 4

If the price elasticity of demand ($$E_d) is $$less than 1, what can be said about the monopolist's marginal revenue (MR)?

Accepted Answer

MR is negative

Question 5

A monopolist faces a price elasticity of demand $$E_d = 3$$ and sets a price $$P = 600. $$What is the marginal revenue (MR)?

Accepted Answer

$$MR = 400$$

Question 6

Why does a monopoly not have a supply curve?

Accepted Answer

Because there is no unique relationship between price and quantity supplied

Question 7

The Lerner Index is given by $$L = \frac{P - MC}{P}. If $$the price elasticity of demand is $$E_d = -2$$, what is the profit-maximizing mark-up?

Accepted Answer

$$\frac{1}{2}$$

Question 8

Which of the following is a requirement for a monopolist to practice price discrimination?

Accepted Answer

The ability to prevent resale (arbitrage) among buyers

Question 9

Which type of price discrimination involves charging different prices to buyers in completely separate markets?

Accepted Answer

Third-degree price discrimination

Question 10

A monopolist faces two markets: Market A with elastic demand and Market B with inelastic demand. According to third-degree price discrimination, which market will have the higher price?

Accepted Answer

Market B

Question 11

If a monopolist practices first-degree (perfect) price discrimination, what is the outcome regarding allocative efficiency?

Accepted Answer

It is allocatively efficient because all consumer surplus is captured and $$P = MC$$

Question 12

Which of the following best describes second-degree price discrimination?

Accepted Answer

Charging different prices based on the quantity purchased

Question 13

A movie theater offers discounts to pensioners and charges regular prices to other customers. This is an example of:

Accepted Answer

Third-degree price discrimination

Question 14

Which of the following is an example of the hurdle model of price discrimination?

Accepted Answer

Offering a lower price to buyers who cut out coupons

Question 15

A monopolist faces the following demand and marginal cost: $$P = 500 - 2Q$$, $$MC = 100. $$What is the profit-maximizing quantity?

Accepted Answer

Question 16

Which of the following statements about natural monopolies is correct?

Accepted Answer

Natural monopolies occur when a single firm can supply the entire market at a lower average total cost than multiple firms

Question 17

If a monopolist's marginal cost is $$MC = 50$$ and the price elasticity of demand is $$E_d = -2$$, what is the profit-maximizing price?

Accepted Answer

$$P = 100$$

Question 18

Peak-load pricing is most likely to be used when:

Accepted Answer

There are periods of high and low demand and capacity constraints exist

Question 19

Which formula correctly expresses the relationship between marginal revenue (MR), price (P), and price elasticity of demand ($$E_d$$)?

Accepted Answer

$$MR = P \left[1 - \frac{1}{E_d}\right]$$

Monopoly and Price Discrimination: Advanced Microeconomic Analysis

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