Question 1

Which of the following is NOT a typical barrier to entry that can lead to monopoly power?

Accepted Answer

Perfect information among consumers

Question 2

Suppose a monopoly faces the demand function $P = 700 - 2q$ and has a marginal cost $MC = 6q$. What is the profit-maximizing quantity?

Accepted Answer

$q = 70$

Question 3

For a monopoly, which of the following relationships always holds at the profit-maximizing output?

Accepted Answer

$MR = MC$

Question 4

Why does a monopoly's demand curve coincide with the market demand curve?

Accepted Answer

Because the monopoly is the only seller in the market

Question 5

If a monopoly sets a price above marginal cost ($P > MC$), what does this imply about allocative efficiency?

Accepted Answer

The monopoly is allocatively inefficient because the value to consumers of the last unit exceeds the cost of production

Question 6

Which of the following is an example of a natural monopoly?

Accepted Answer

A single water utility company serving a city due to high infrastructure costs

Question 7

A monopoly earns a profit per unit when:

Accepted Answer

$P > ATC$

Question 8

Which of the following is NOT a necessary condition for price discrimination to be effective?

Accepted Answer

The firm must produce at minimum efficient scale

Question 9

If a monopoly faces the demand curve $P = 700 - 2q$ and chooses $q = 70$, what is the price charged to consumers?

Accepted Answer

$P = 560$

Question 10

Which of the following best describes third-degree (multi-market) price discrimination?

Accepted Answer

Charging different prices to different market segments based on observable characteristics

Question 11

What is the deadweight loss in monopoly compared to perfect competition?

Accepted Answer

It is larger because the monopoly restricts output and raises price above marginal cost

Question 12

Which government policy is most likely to reduce monopoly power in an industry?

Accepted Answer

Enforcing antitrust laws to prevent horizontal mergers

Question 13

A two-part tariff is best described as:

Accepted Answer

A pricing strategy where a firm charges a fixed fee plus a per-unit price

Question 14

Which of the following is a potential consequence of price matching (low price guarantee) policies?

Accepted Answer

They can facilitate collusion and reduce price competition

Question 15

If a monopoly faces an average total cost function $ATC = \frac{8000}{q} + 3q$ and produces $q = 70$ units, what is the average total cost?

Accepted Answer

$ATC = 117$

Question 16

Which of the following is true about perfect (first-degree) price discrimination?

Accepted Answer

The firm charges each consumer their exact willingness to pay

Question 17

Which of the following is a federally regulated industry in Canada where monopoly or near-monopoly is common?

Accepted Answer

Rail transportation

Question 18

Suppose a monopoly's profit is given by $\pi = (P - ATC) 	imes q$. If $P = 560$, $ATC = 117$, and $q = 70$, what is the total profit?

Accepted Answer

$\pi = 16,550$

Question 19

Which of the following is a reason why monopolies are considered inefficient?

Accepted Answer

They do not achieve minimum efficient scale and charge a price above marginal cost

Unit 11: Monopoly and Competition Policy – Study Notes

Study Guide - Practice Questions