Question 1

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

Accepted Answer

There are many close substitutes for the product.

Question 2

Suppose a monopoly faces the inverse demand function $p = 24 - Q$. What is the equation for its marginal revenue curve?

Accepted Answer

$MR = 24 - 2Q$

Question 3

A natural monopoly occurs when:

Accepted Answer

A single firm can supply the entire market at a lower cost than multiple firms due to economies of scale.

Question 4

If a single-price monopoly wants to maximize profit, it should produce the quantity where:

Accepted Answer

$MR = MC$

Question 5

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

Accepted Answer

Produce less output and charge a higher price.

Question 6

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

Accepted Answer

A government-issued patent.

Question 7

For a monopoly, marginal revenue is always:

Accepted Answer

Less than price at every positive quantity.

Question 8

If the demand for a monopoly's product is elastic, what happens to total revenue when the monopoly lowers its price?

Accepted Answer

Total revenue increases.

Question 9

A monopoly never produces an output at which demand is inelastic because:

Accepted Answer

It could increase profit by decreasing output.

Question 10

Suppose a monopoly faces the demand curve $p = 24 - Q$ and has a constant marginal cost of $MC = 8$. What is the profit-maximizing quantity?

Accepted Answer

$Q = 4$

Question 11

Which of the following statements about price discrimination is TRUE?

Accepted Answer

Price discrimination increases a monopoly's profit by capturing consumer surplus.

Question 12

In perfect price discrimination (first-degree), the monopoly:

Accepted Answer

Maximizes total surplus, but captures all of it as profit.

Question 13

Which of the following is a problem governments face when regulating monopolies?

Accepted Answer

They may not know the actual demand and marginal cost curves.

Question 14

If a monopoly is regulated to set its price equal to marginal cost, what is the likely outcome?

Accepted Answer

Deadweight loss is eliminated and output increases to the competitive level.

Question 15

Suppose a theater charges $10 for college students and $5 for seniors, and neither group can resell tickets. This is an example of:

Accepted Answer

Group price discrimination.

Question 16

Which formula correctly expresses a monopoly's marginal revenue when the inverse demand function is linear $p = a - bQ$?

Accepted Answer

$MR = a - 2bQ$

Question 17

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

Accepted Answer

$MR = 0$

Question 18

Which of the following is NOT a type of barrier to entry that can create a monopoly?

Accepted Answer

Low fixed costs and easy market access.

Question 19

A monopoly's deadweight loss arises because:

Accepted Answer

It sets price above marginal cost, reducing output below the efficient level.

Question 20

Which of the following best describes the efficiency of perfect competition compared to monopoly?

Accepted Answer

Perfect competition maximizes total surplus, while monopoly creates a deadweight loss.

Monopoly: Structure, Pricing, and Efficiency in Microeconomics

Study Guide - Practice Questions