Multiple Choice Questions:
1. Pure monopoly is defined as
a. An industry consisting of a single seller.
b. A market structure that involves many substitute products.
c. A market in which many rival firms compete for sales.
d. A market structure consisting of a single buyer.
2. For a true, or pure, monopoly,
a. There is only one seller of the product.
b. No close substitutes are available.
c. The firm and the industry are the same.
d. It must be virtually impossible for other firms to overcome barriers to entry.
e. All of the above are true.
3. Which of the following is inconsistent with monopoly?
a. A single seller
b. Economies of scale
c. MR < P
d. Free entry and exit
e. Selling in the elastic portion of the demand curve in order to maximize profits
4. For a natural monopoly, which of the following is false?
a. It is more efficient to have a single firm produce the good.
b. Production of the good must involve economies of scale throughout the relevant output range.
c. It would typically result from a firm’s possession of an exclusive patent.
d. One large firm can produce at lower cost than two or more smaller firms.
5. Which of the following is potentially a barrier to entry into a product market?
a. Patent protection on the design of the product
b. Economies of scale in the product market
c. Government licensing of the product’s producers
d. The control of a crucial input necessary to produce the product
e. All of the above
6. A profit-maximizing monopolist sets
a. The product price where marginal cost equals marginal revenue.
b. Output where marginal cost equals marginal revenue.
c. Output where marginal cost equals average revenue.
d. Output where demand equals average total cost.
e. Price equal to the highest dollar amount that any customer is willing to pay.
7. For a monopolist,
a. Its demand curve is downward sloping.
b. Its marginal revenue is less than price.
c. Existing economic profits can be sustained over time.
d. All of the above are true.