Econ
Understanding Monopoly Markets
Welcome to the quiz on monopolies! Test your knowledge on monopolized markets, monopolist behavior, and the economic principles that govern them. This quiz will explore various aspects of monopoly power, barriers to entry, and market efficiency.
By taking this quiz, you will learn about:
- Characteristics of monopolized markets
- How monopolists maximize profit
- Impact of monopoly on social welfare
A monopolized market is characterized by:
A sole supplier, no close substitutes, and barriers to entry.
A sole supplier, many close substitutes, and barriers to entry
A sole supplier, no close substitutes, and free entry.
A sole supplier, a few close substitutes, and free entry.
Which of the following is true of a monopolist?
A monopolist cannot increase profit by charging higher prices to those who value the product more.
A monopolist has the exclusive right to supply a good or service if it has a patent on the good or service.
A monopolist can choose only the quantity produced in a market and not the market price.
A monopolist cannot increase profit by charging a different price for each unit sold.
Which of the following is true of a license?
It provides a stimulus to turn inventions into marketable products.
It is an illegal protection against competition.
It can be a source of market power for a firm.
It grants the holder the exclusive right to sell a product for 20 years.
The source of monopoly power for a firm with economies of scale is:
The ability of the firm to charge different prices for each unit of the good sold to different groups of consumers.
The exclusive right from the government to produce a product for 20 years.
The exclusive right from the judiciary to supply a particular product.
The ability to supply a product at a lower average cost per unit than two or more firms, each producing less.
Which of the following is a barrier to entry in a market?
Diseconomies of scale.
Economies of scale.
Decreasing returns to scale.
Diminishing marginal returns.
Which of the following correctly explains how De Beers maintained a near monopoly by creating a barrier to entry in the market for diamonds?
De Beers owned all the diamond mines across the world.
De Beers bought most of the world's supply of rough diamonds.
De Beers formed a cartel and restricted the supply of diamonds to increase prices in the world market.
De Beers had the largest number of customers in the world.
Which of the following is true of the shape of the demand curve facing a monopolist?
It is vertical.
It is horizontal.
It is upward sloping.
It is downward sloping.
For a monopolist, marginal revenue is:
Equal to price.
Less than price.
Greater than average revenue.
Greater than price.
When a monopolist's marginal revenue is zero, _____.
Total revenue is rising
Total revenue is at a maximum
Total revenue is falling
Total revenue is at a minimum
A monopolist's profit-maximizing level of output occurs at the point where:
Marginal revenue equals marginal cost.
Price equals marginal cost.
Price equals average revenue.
Average total cost is at a minimum.
The output produced by a profit-maximizing monopolist:
Exceeds the level that would maximize social welfare.
Is allocatively efficient.
Is less than than the level that would maximize social welfare.
Is distributionally efficient.
A monopolist produces:
More output than a perfectly competitive firm and charges a higher price.
Less output than a perfectly competitive firm and charges a higher price.
More output than a perfectly competitive firm and charges a lower price.
Less output than a perfectly competitive firm and charges a lower price.
Allocative inefficiency arises in a:
perfectly competitive market as it produces more output than a monopoly and charges a higher price.
Monopoly only if it experiences diseconomies of scale.
Perfectly competitive market only if it faces a labor shortage.
Monopoly as it produces less output than a perfectly competitive firm and charges a higher price.
The deadweight or social loss of a monopoly:
Arises as monopolists restrict output and increase prices.
arises due to productive inefficiency.
arises as monopolists face a relatively elastic demand curve.
Arises due to the high costs of production incurred by monopolists.
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