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Focused topic practice

monopoly MCQs

Practise focused monopoly questions with marked answers for exam preparation and subject revision.

monopoly Mcqs

1. In price discrimination, which section of the market is charged the higher price ?
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A. The section with the richest people

B. The section with the most elastic demand

C. The section with the most inelastic demand

D. The section with the oldest people

2. When a monopolist produces an additional unit, the marginal revenue generated by that unit must be ?
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A. below the price because the price effect outweighs the output effect

B. below the price because the output effect outweighs the price effect

C. above the price because the output effect outweighs the price effect

D. above the price because the price effect outweighs the output effect

3. A monopoly is able to continue to generate economic profits in the long run because ?
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A. Potential competitors sometimes dont notice the the profits.

B. the monopolist is financially powerful.

C. of all of the things described in these answers

D. there is some barrier to entry to that market

E. antitrust laws eliminate competitors for a specified number of years.

4. The monopolists supply curve ?
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A. is the marginal cost curve above average total cost

B. is the marginal cost curve above average variable cost?

C. does not exist

D. is the upward-sloping portion of the average total cost curve

E. The upward-sloping portion of the average variable cost

5. Barriers to entry do not include ?
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A. High investment costs

B. Internal economies of scale

C. Mobility of resources

D. Patents

6. Compared to a perfectly competitive market a monopoly market will usually generate ?
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A. lower prices and lower output

B. higher prices and lower output

C. higher prices and higher output

D. lower prices and higher output

7. In the UK the government ?
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A. Bans monopolies

B. Fines all monopolies

C. Prevents firms acquiring more than 25% of the market

D. Has the right to investigate monopolies and will assess each one on its own merits

8. In monopoly when abnormal profits are made ?
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A. The average revenue equals the marginal cost

B. Revenue equals total cost

C. The price set is greater than the marginal cost

D. The price is less than the average cost

9. Which of the follow statements about price discrimination is not true ?
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A. Price discrimination increases a monopolists profits.

B. Perfect price discrimination generates a deadweight loss

C. For a monopolist to engage in price discrimination buyers must be unable to engage in arbitrage.

D. Price discrimination can raise economic welfare.

E. price discrimination requires that seller be able to separate buyers according to their willingness to pay.

10. In order to practice price discrimination which of the following is needed ?
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A. an ability to separate the market

B. all of the above

C. some degree of monopoly power

D. an ability to prevent reselling

11. According to Schumpeter ?
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A. Monopolies are productively efficient

B. Monopolies are alocatively efficient

C. Monopolies are inefficient

D. Monopoly profits ac as an incentive for innovation

12. Public ownership of natural monopolies ?
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A. creates synergies between the newly acquired firm and other government-owned companies.

B. tends to be inefficient.

C. usually lowers the cost of production dramatically.

D. does none of the things described in these answers

13. This monopolist should produce ?
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A. 2

B. 1

C. 4

D. 5

E. 3

14. In monopoly in long run equilibrium ?
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A. The firm produces at the socially optimal level

B. The firm is allocatively inefficient

C. The firm is Productively efficient

D. The firm produces where marginal cost is less than marginal revenue

15. X inefficiency occurs when ?
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A. The price is greater than the average cost

B. Costs are higher than they could be due to a lack of competitive pressure

C. There are external cost

D. The price is greater than the marginal cost

16. A welfare loss occurs in monopoly where ?
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A. The price is greater than the average revenue

B. The price is greater than the marginal benefit

C. The price is greater than the marginal cost

D. The price is greater than the marginal revenue

17. Compared to the case of perfect competition, a monopolist is more likely to ?
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A. produce a lower quantity of the product

B. make a greater amount of economic profit

C. all of the above

D. charge a higher price

18. Which of the following statements about price and marginal cost in competitive and monopolized markets is true ?
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A. In competitive markets price equals marginal cost, in monopolized markets price equals marginal cost

B. In competitive markets price exceeds marginal cost in monopolized markets price equals marginal cost

C. In competitive markets, price equals marginal cost, in monopolized markets price exceeds marginal cost.

D. In competitive markets price exceeds marginal cost, in monopolized markets price exceeds marginal cost

19. In order to maximize profits, a monopoly company will produce that quantity at which the ?
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A. Price equals marginal revenue

B. total revenue equals total cost

C. marginal revenue equals average total cost

D. marginal revenue equals marginal cost

20. Using government regulations to force a natural monopoly to charge a price equal to his marginal cost will ?
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A. raise the price of good

B. Cause the monopolist to exit the market

C. attract additional firms to enter the market

D. improve efficieny

21. In a monopoly which of the following is not true ?
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A. There is freedom of entry and exit into the industry in the long run

B. There is one main sellers

C. Products are differentiated

D. The firm is a price taker

22. Which of the following is a characteristic of pure monopoly ?
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A. One seller of the product

B. close substitute products

C. perfect information

D. low barriers to entry

23. If regulators break up a natural monopoly into many smaller firms, the cost of production ?
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A. will remain the same

B. will rise

C. will fall

D. could either rise or fall depending on the elasticity of the monopolists supply curve

24. Which of the following is necessary for a natural monopoly ?
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A. a high proportion of the total cost in the cost of capital goods

B. economies of scale

C. the market is very small

D. all of the above

25. The inefficiency associated with monopoly is due to ?
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A. underproduction of the good

B. the monopolys profits

C. the monopolys losses

D. overproduction of the good

26. The purpose of antitrust (also known as competition) laws is to ?
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A. create public ownership of natural monopolies

B. increase merger activity to help generate synergies that reduce costs and raise efficiency.

C. regulate the prices charged by a monopoly

D. all of these answers

E. Increase competition in an industry by preventing mergers and breaking up large firms.

27. A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a ?
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A. government monopoly

B. regulated monopoly

C. natural monopoly

D. perfect competitor

28. In monopoly which of the following is true ?
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A. The actions of one firm do not affect the market price and quantity

B. There are many buyers and sellers

C. There is one main buyer

D. There is one main seller

29. In pure monopoly, what is the relation between the price and the marginal revenue ?
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A. the price is less than the marginal revenue

B. they are equal

C. the price is greater than the marginal revenue

D. there is no relation

30. A monopolist maximizes profit by producing the quantity at which ?
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A. marginal cost equals price

B. marginal revenue equals marginal cost

C. none of these answers

D. marginal revenue equals price

E. marginal cost equals demand

31. Which of the following best defines price discrimination ?
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A. selling a certain product of given quality and cost per unit at different prices to different buyers

B. charging different prices for goods with different costs of production

C. charging different prices based on cost-of-service differences

D. charging different prices on the basis of race

32. Which of the following is not a barrier to entry in a monopolized market ?
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A. The government gives a single firm the exclusive right to produce some good

B. A key resource is owned by a single firm

C. The costs of production make a single producer more efficient than a large number of productions

D. A single firm is very large

33. Thomas is a monopolist in the production of your textbook because ?
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A. Thomson owns a key resource in the production of textbooks.

B. Thomson is a very large company

C. Thomson is a natural monopoly,

D. Thomson has a legally protected exclusive right to produce this textbook

34. If a marginal revenue exceeds marginal cost, a monopolists should?
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A. decrease output

B. increase should

C. keep output the same because profits are maximized when marginal revenue exceeds marginal cost

D. raise the price

35. The marginal revenue curve in monopoly ?
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A. Lies below and converges with the demand curve

B. Lies below and diverges from the demand curve

C. Equals the demand curve

D. Is parallel with the demand curve

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