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Monopoly - Quiz Questions

Price discrimination

is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices.

A monopolist produces

less than the socially efficient quantity of output, but at a higher price than in a competitive market.

Which of the following statements is true?

If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

marginal revenue is less than the price of the product.

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Marginal cost and marginal revenue

When a single firm can supply a product to an entire market at a smaller cost than could two or more firms, the industry is called a

natural monopoly.

When a monopoly increases its output and sales,

the output effect works to increase total revenue and the price effect works to decrease total revenue.

The economic inefficiency of a monopolist can be measured by the

deadweight loss.

The marginal revenue of a monopolist falls below price because the firm:

Confronts a downward-sloping demand curve.

A monopolist will charge a price that:

exceeds the marginal cost.

Monopoly is a market structure where

there is a single seller producing a unique product.

Monopoly is the market structure in which

one firm makes up the entire market.

Average revenue for a monopolist is equal to

the price the monopolist sets.

The demand curve for a monopolist is

the same as the market demand curve.

A monopoly firm is different from a competitive firm in that

the monopolist is a price-Maker, whereas the competitive firm is a price-Taker

The price a monopolist charges for its product is

above marginal revenue

The monopolist's marginal revenue is less than price because

the monopolist must lower the price of all units in order to sell an additional unit.

If Marginal Revenue is greater than Marginal Cost, the monopolist should

decrease production.

The welfare loss triangle shows

the welfare costs of monopoly in terms of consumer and producer surplus.

Compared to a perfectly competitive firm, a monopolist

charges a higher price.

The social cost of monopoly refers to the fact that

there is a loss in consumer surplus and producer surplus when a monopolist raises price and restricts output.

Natural monopoly exists when one firm can supply the output demanded at

lower cost than two or more firms.

For a natural monopoly

per unit costs are always falling.

A natural monopoly occurs when a single firm can supply the entire market demand for a product

at a lower average total cost than would be possible if two or more firms supplied the market.

Price discrimination occurs when

consumers are divided into two groups with one group paying a high price and the other paying a low price.

A monopolist engages in price discrimination to

earn more profit than would be possible if every buyer paid the same price.

As compared to a normal monopolist, a price-discriminating monopolist produces a

larger output and charges each consumer a different price.

A price-discriminating monopolist

is able to capture some of the consumers' surplus.

Charging different prices to different customers for reasons other than cost

Price discrimination

The ability to alter the market price of a good or service

Market power

A market controlled by only one seller


A monopoly may persist because of cost advantages over smaller firms if economies of scale exist

Natural Monopoly

Obstacles that make it difficult or impossible for would-be producers to enter a particular market

Barrier to entry

Which of the following is true for a monopolist?

It faces a downward-sloping demand curve; It must lower its price on all of its units in order to sell any additional units; Its marginal revenue curve is below its demand curve.

Market power is

The ability to alter the market price of a product.

The marginal revenue curve is below the demand curve:

If a firm must lower its price to sell additional output.

A barrier to entry is

An obstacle that makes it difficult for new firms to enter a market.

If the firms in a competitive market become plants owned by a monopoly, then the monopoly would

Move upward along the market demand curve as it raises price.

Both a competitive firm and a monopoly

Face downward-sloping market demand curves.

Monopolists set prices

At the output where marginal revenue equals marginal cost.

Compared with a competitive market with the same cost and market-demand circumstances, monopoly results in

Higher prices and lower output.

If a firm has market power, the marginal revenue curve always lies below the demand curve.


Since the monopolist's marginal revenue is below its price, its equilibrium output is the same as a perfectly competitive firm's.


Since a monopolist is a price taker, it cannot have a supply curve.


After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price at which that unit is sold, because of

a downward sloping demand curve.

A monopolist's marginal revenue is less than price because

the monopolist must lower the price of all units in order to sell an additional unit.

Suppose a monopoly is producing at the profit-maximizing level of output. At that level of output

Marginal Revenue = Marginal Cost

The price a monopolist charges for its product is

above marginal revenue.

The supply curve of a monopolist is

nonexistent; a monopolist simply chooses the profit-maximizing point on the market demand curve.

A monopoly's short-run supply curve is its marginal cost curve above minimum average variable cost.


A monopolist should decrease production if

Marginal Revenue < Marginal Cost; MR < MC

Generally speaking, the profit-maximizing output for a monopolist occurs where marginal revenue equals zero.


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