Question 1

Which of the following is a key characteristic that allows a monopoly to arise in a market?

Accepted Answer

There are barriers to entry that prevent other firms from entering.

Question 2

Suppose a single-price monopoly faces the following demand schedule: If the firm sells 2 units at $$16 each, and 3 units at 14 $$each, what is the marginal revenue of selling the third unit?

Accepted Answer

$12

Question 3

For a single-price monopoly, which of the following relationships is always true?

Accepted Answer

$$MR \u003c P$$

Question 4

A monopoly maximizes profit by producing the quantity at which:

Accepted Answer

$$MR = MC$$

Question 5

Compared to perfect competition, a single-price monopoly:

Accepted Answer

Produces a smaller output and charges a higher price.

Question 6

If a monopoly's marginal cost is constant at $$8, and its marginal revenue equals 8 at 100 $$units, what price will the monopoly charge for its profit-maximizing output?

Accepted Answer

The price on the demand curve at 100 units

Question 7

Why does a single-price monopoly's marginal revenue curve lie below its demand curve?

Accepted Answer

Because the monopoly must lower the price on all units to sell an additional unit.

Question 8

Which of the following best describes the economic profit of a monopoly in the long run?

Accepted Answer

It can be positive because barriers to entry protect the monopoly.

Question 9

Suppose a monopoly's total revenue is given by $$TR = 20Q - Q^2$, and its marginal cost is constant at 4$. What is the profit-maximizing output?

Accepted Answer

$$Q = 8$$

Question 10

Which of the following statements about deadweight loss under monopoly is correct?

Accepted Answer

Deadweight loss arises because the monopoly produces less than the efficient output.

Question 11

If a monopoly faces the same cost structure as a perfectly competitive firm, but is protected by barriers to entry, what is the likely outcome?

Accepted Answer

The monopoly will produce less output and charge a higher price.

Question 12

Which of the following is NOT a barrier to entry that can create a monopoly?

Accepted Answer

Product differentiation in a competitive market

Question 13

A single-price monopoly's profit is maximized at the output level where:

Accepted Answer

$$MR = MC$$

Question 14

Which of the following best explains why a monopoly does not produce at the efficient quantity?

Accepted Answer

Because it maximizes profit where $$MR = MC$$, not where $$P = MC.$$

Question 15

Suppose a monopoly can sell 4 units at $$10 each or 5 units at 9 $$each. What is the marginal revenue of the fifth unit?

Accepted Answer

$$5$$

Question 16

Which of the following is true about the relationship between price, marginal revenue, and marginal cost for a profit-maximizing monopoly?

Accepted Answer

$$P \u003e MR = MC$$

Question 17

In the context of monopoly, what is the economic meaning of 'barriers to entry'?

Accepted Answer

They protect the monopoly from competition, allowing long-run profits.

Question 18

If a monopoly is earning an economic profit, what will happen in the long run if there are no barriers to entry?

Accepted Answer

New firms will enter, and profit will fall to zero.

Question 19

Which of the following is a real-world example of a monopoly due to government regulation?

Accepted Answer

A local water utility company

Question 20

Which of the following best describes the inefficiency created by a monopoly?

Accepted Answer

Monopoly creates a deadweight loss because price exceeds marginal cost.

Monopoly: Output and Price Decisions in Microeconomics

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