MCQs of Economics - Monopoly – Multiple Choice Question

Question 1 of 37

1. Question

X inefficiency occurs when:

The price is greater than the marginal cost
The price is greater than the average cost
Costs are higher than they could be due to a lack of competitive pressure
There are external cost

Question 2 of 37

2. Question

The marginal revenue curve in monopoly:

Equals the demand curve
Is parallel with the demand curve
Lies below and converges with the demand curve
Lies below and diverges from the demand curve

Question 3 of 37

3. Question

In monopoly when abnormal profits are made:

The price set is greater than the marginal cost
The price is less than the average cost
The average revenue equals the marginal cost
Revenue equals total cost

Question 4 of 37

4. Question

In monopoly in long run equilibrium

The firm is Productively efficient
The firm is allocatively inefficient
The firm produces where marginal cost is less than marginal revenue
The firm produces at the socially optimal level

Question 5 of 37

5. Question

Barriers to entry do not include

Patents
Internal economies of scale
Mobility of resources
High investment costs

Question 6 of 37

6. Question

In a monopoly which of the following is not true:

Products are differentiated
There is freedom of entry and exit into the industry in the long run
The firm is a price taker
There is one main sellers

Question 7 of 37

7. Question

In monopoly which of the following is true?

There are many buyers and sellers
There is one main buyer
There is one main seller
The actions of one firm do not affect the market price and quantity

Question 8 of 37

8. Question

According to Schumpeter:

Monopolies are inefficient
Monopoly profits ac as an incentive for innovation
Monopolies are alocatively efficient
Monopolies are productively efficeint

Question 9 of 37

9. Question

A welfare loss occurs in monopoly where

The price is greater than the marginal cost
The price is greater than the marginal benefit
The price is greater than the average revenue
The price is greater than the marginal revenue

Question 10 of 37

10. Question

In the UK the government:

Bans monopolies
Fines all monopolies
Prevents firms acquiring more than 25% of the market
Has the right to investigate monopolies and will assess each one on its own merits

Question 11 of 37

11. Question

Which of the following is not a barrier to entry in a monopolized market?

A single firm is very large
The government gives a single firm the exclusive right to produce some good
The costs of production make a single producer more efficient than a large number of production
A key resource is owned by a single firm

Question 12 of 37

12. Question

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

natural monopoly
perfect competitor
government monopoly
regulated monopoly

Question 13 of 37

13. Question

When a monopolist produces an additional unit, the marginal revenue generated by that unit must be:

below the price because the price effect outweighs the output effect
above the price because the output effect outweighs the price effect
above the price because the price effect outweighs the output effect
below the price because the output effect outweighs the price effect

Question 14 of 37

14. Question

A monopolist maximizes profit by producing the quantity at which

marginal revenue equals marginal cost
marginal revenue equals price
marginal cost equals price
marginal cost equals demand
none of these answers

Question 15 of 37

15. Question

Which of the following statements about price and marginal cost in competitive and monopolized markets is true?

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

Question 16 of 37

16. Question

Thomas is a monopolist in the production of your textbook because:

Thomson has a legally protected exclusive right to produce this textbook
Thomson owns a key resource in the production of textbooks.
Thomson is a natural monopoly,
Thomson is a very large company

Question 17 of 37

17. Question

Refer to Exhibit 4. The profit-maximizing monopolist will choose the price and quantity represented by point

(A)
(B)
(C)
(D)

Question 18 of 37

18. Question

Refer to Exhibit 4. The efficient price and quantity are represent by point

(D)
(A)
(B)
(C)

Question 19 of 37

19. Question

The inefficiency associated with monopoly is due to

underproduction of the good
the monopoly's profits
the monopoly's losses
overproduction of the good

Question 20 of 37

20. Question

Compared to a perfectly competitive market a monopoly market will usually generate

higher prices and lower output
higher prices and higher output
lower prices and lower output
lower prices and higher output

Question 21 of 37

21. Question

The monopolist’s supply curve

does not exist
is the marginal cost curve above average variable cost
is the marginal cost curve above average total cost
is the upward-sloping portion of the average total cost curve
The upward-sloping portion of the average variable cost

Question 22 of 37

22. Question

Using government regulations to force a natural monopoly to charge a price equal to his marginal cost will:

Cause the monopolist to exit the market
improve efficieny
raise the price of good
attract additional firms to enter the market.

Question 23 of 37

23. Question

The purpose of antitrust (also known as competition) laws is to

Increase competition in an industry by preventing mergers and breaking up large firms.
regulate the prices charged by a monopoly
increase merger activity to help generate synergies that reduce costs and raise efficiency.
create public ownership of natural monopolies
all of these answers

Question 24 of 37

24. Question

Public ownership of natural monopolies:

tends to be inefficient.
usually lowers the cost of production dramatically.
creates synergies between the newly acquired firm and other government-owned companies.
does none of the things described in these answers

Question 25 of 37

25. Question

Which of the follow statements about price discrimination is not true?

Perfect price discrimination generates a deadweight loss
Price discrimination can raise economic welfare.
price discrimination requires that seller be able to separate buyers according to their willingness to pay.
Price discrimination increases a monopolist's profits.
For a monopolist to engage in price discrimination buyers must be unable to engage in arbitrage.

Question 26 of 37

26. Question

If regulators break up a natural monopoly into many smaller firms, the cost of production

will rise
will fall
will remain the same
could either rise or fall depending on the elasticity of the monopolist's supply curve

Question 27 of 37

27. Question

A monopoly is able to continue to generate economic profits in the long run because

there is some barrier to entry to that market
Potential competitors sometimes don't notice the the profits.
the monopolist is financially powerful.
antitrust laws eliminate competitors for a specified number of years.
of all of the things described in these answers

Question 28 of 37

28. Question

If a marginal revenue exceeds marginal cost, a monopolists should

increase should
decrease output
keep output the same because profits are maximized when marginal revenue exceeds marginal cost
raise the price

Question 29 of 37

29. Question

Which of the following is a characteristic of pure monopoly?

One seller of the product
low barriers to entry
close substitute products
perfect information

Question 30 of 37

30. Question

In pure monopoly, what is the relation between the price and the marginal revenue?

the price is greater than the marginal revenue
the price is less than the marginal revenue
there is no relation
they are equal

Question 31 of 37

31. Question

In order to maximize profits, a monopoly company will produce that quantity at which the:

marginal revenue equals average total cost
Price equals marginal revenue
marginal revenue equals marginal cost
total revenue equals total cost

Question 32 of 37

32. Question

Quantity price Total Cost
1. $100$ 60
2. 95 130
3. 90 210
4. 85 300
5. 80 400
This monopolist should produce:

1
2
3
4
5

Question 33 of 37

33. Question

Compared to the case of perfect competition, a monopolist is more likely to:

charge a higher price
produce a lower quantity of the product
make a greater amount of economic profit
all of the above

Question 34 of 37

34. Question

Which of the following is necessary for a natural monopoly?

economies of scale
a high proportion of the total cost in the cost of capital goods
the market is very small
all of the above

Question 35 of 37

35. Question

Which of the following best defines price discrimination?

charging different prices on the basis of race
charging different prices for goods with different costs of production
charging different prices based on cost-of-service differences
selling a certain product of given quality and cost per unit at different prices to different buyers

Question 36 of 37

36. Question

In order to practice price discrimination which of the following is needed?

some degree of monopoly power
an ability to separate the market
an ability to prevent reselling
all of the above

Question 37 of 37

37. Question

In price discrimination, which section of the market is charged the higher price?

The section with the richest people
The section with the oldest people
The section with the most inelastic demand
The section with the most elastic demand

Economics - Monopoly

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