Question 1

Which of the following best describes a monopoly?

Accepted Answer

A market controlled by a single firm.

Question 2

What is the profit-maximizing condition for a monopolist?

Accepted Answer

$MR = MC$

Question 3

Compared to perfect competition, a monopoly will:

Accepted Answer

Produce less output and charge a higher price.

Question 4

If a monopolist faces a downward-sloping demand curve, what is true about marginal revenue (MR)?

Accepted Answer

MR is less than price for all positive quantities.

Question 5

Which of the following is NOT a general barrier to entry in a monopoly?

Accepted Answer

Perfect information among buyers.

Question 6

A natural monopoly exists when:

Accepted Answer

Long-run average cost decreases as output increases.

Question 7

If a monopolist sets output where $MR = MC$ and charges the corresponding price from the demand curve, what is the result?

Accepted Answer

The monopolist maximizes profit.

Question 8

Which of the following is a characteristic of price discrimination by a monopolist?

Accepted Answer

Charging different prices to different consumers based on willingness to pay.

Question 9

Under a two-part tariff scheme, a monopolist will:

Accepted Answer

Charge a fixed fee plus a per-unit price.

Question 10

Suppose a monopolist faces the following demand and cost functions: $P = 100 - 2Q$ and $MC = 20$. What is the profit-maximizing quantity?

Accepted Answer

$Q = 20$

Question 11

If a monopolist is maximizing profit and $P > MC$, what does this imply about allocative efficiency?

Accepted Answer

The monopolist is not allocatively efficient.

Question 12

Which of the following is true about consumer surplus under monopoly compared to perfect competition?

Accepted Answer

Consumer surplus is lower under monopoly.

Question 13

A monopolist will shut down in the short run if:

Accepted Answer

Price is less than average variable cost at all output levels.

Question 14

Which of the following is a potential benefit of a natural monopoly?

Accepted Answer

Lower average costs due to economies of scale.

Question 15

If a monopolist can perfectly price discriminate, what is the result?

Accepted Answer

All consumer surplus is converted to producer surplus.

Question 16

Which of the following is a real-world example of a barrier to entry that can create a monopoly?

Accepted Answer

A pharmaceutical company holding a patent on a new drug.

Question 17

If a monopolist increases output, what happens to marginal revenue?

Accepted Answer

Marginal revenue decreases.

Question 18

Which of the following is true about the relationship between price and marginal cost in monopoly equilibrium?

Accepted Answer

$P > MC$

Question 19

A monopolist faces the following demand curve: $P = 50 - Q$. If marginal cost is constant at $MC = 10$, what is the monopoly price?

Accepted Answer

$P = 30$

Question 20

Which of the following is a necessary condition for a firm to engage in price discrimination?

Accepted Answer

The firm must be able to prevent resale between consumers.

Monopoly: Structure, Profit Maximization, and Pricing Strategies

Study Guide - Practice Questions