Deck 12: Monopoly

Question 1

The two basic reasons why a monopoly exists are barriers to entry and cost advantages.

Answer 1

True

Question 2

Control of a scarce resource or input can serve as an entry barrier.

Answer 2

True

Question 3

A pure monopoly is defined as having only one seller.

Answer 3

True

Question 4

Monopolies are always large firms with great economies of scale.

Question 5

When a patent expires, the firm holding the patent is able to maintain its monopoly control over the market.

Question 6

Until recently, the drug maker Pfizer enjoyed a monopoly of the cholesterol-control drug Lipitor because of patent rights.

Question 7

Technical superiority can be a source of entry barriers.

Question 8

The ability to keep rivals out of the market is the recipe for creating and maintaining a monopoly.

Question 9

The U.S.Postal Service enjoys a monopoly position because of patent rights.

Question 10

Only government restrictions serve as entry barriers.

Question 11

There exist only two causes of monopoly: barriers to entry and government restrictions.

Question 12

The key element in preserving a monopoly is keeping rivals out of the market.

Question 13

The single source of monopolies is economies of scale.

Question 14

Pure monopoly is able to exist because the firm's product is better than the substitutes that are available in the market.

Question 15

Owning a patent can provide a firm with monopolistic power.

Question 16

Pure monopoly markets are very common in the real world.

Question 17

Owning a patent can always provide a firm with monopoly control of a market.

Question 18

Pure monopoly is not studied because of its descriptive realism, but because it is a stepping stone toward more realistic models.

Question 19

The ability to control a scarce resource or input is a characteristic of perfect competition.

Question 20

Under monopoly, resources are allocated as efficiently as in perfect competition.

Question 21

The marginal revenue curve for a monopolist is always below the demand curve.

Question 22

Public utilities, due to their economies of scale, are permitted by government to charge whatever price that they wish.

Question 23

The presence of large sunk costs often serves as a naturally imposed barrier to entry.

Question 24

In cases of natural monopolies, society would be better off with many firms competing with each other.

Question 25

The marginal revenue curve for a monopolist is the same as its demand curve.

Question 26

The existence of a natural monopoly stems from the size of the firm relative to the total market demand for the product of that firm.

Question 27

The software industry has traits in common with monopoly markets.

Question 28

A monopolist is a price taker, just like a perfect competitor.

Question 29

A natural monopoly is one that deliberately erects entry barriers.

Question 30

A monopolist is a price maker who will lose some business if the price is increased.

Question 31

For natural monopoly markets, government regulators frequently encourage competition among a number of firms.

Question 32

A monopolist is a price maker.

Question 33

A monopolist will maximize profits by producing a quantity specified by setting marginal revenue equal to marginal cost.

Question 34

A monopolist faces a horizontal demand schedule.

Question 35

A monopolist supply curve can be defined in the same way that it can for a perfectly competitive firm.

Question 36

Natural monopolies are of theoretical, but not practical interest.

Question 37

High sunk costs in the jet aircraft market has assured Boeing of a monopoly in the production of jets for the air travel market.

Question 38

Many public utilities are permitted to operate as monopolies because they enjoy economies of large-scale production.

Question 39

If the monopolist's supply curve is drawn, it is a positively sloped curve similar to that for the perfectly competitive market.

Question 40

A natural monopoly occurs when a single firm can produce the entire output of the market at a lower average cost than could many firms.

Question 41

The rule of MC = MR does not apply to a monopolist.

Question 42

A monopolist can maximize profits by determining the quantity where price is equal to marginal cost.

Question 43

A monopoly restricts output and charges a higher price than other types of firms.

Question 44

A similarity between monopoly and perfect competition is that both types of firms are able to earn economic profits in the short run.

Question 45

Although monopoly has lower output than competition, the level of output is efficient.

Question 46

A monopolist can earn a positive economic profit, even in the long run.

Question 47

Entry barriers can lead to long-run economic profits.

Question 48

A monopoly may breed inefficiency by reducing competition and restricting production.

Question 49

Compared to a perfectly competitive industry, a monopoly produces a smaller output and charges a higher price.

Question 50

Entry barriers are present in monopoly markets but are not in perfectly competitive markets.

Question 51

A monopolist maximizes profit by producing the quantity at which MC = MR, just like a perfect competitor.

Question 52

A monopolist's total profit is shown by the difference between price and average cost per unit times the number of units sold.

Question 53

A monopolist's profit per unit is shown by the difference between price and average cost per unit.

Question 54

A monopolist is willing to lose some customers by charging higher prices, since this results in higher profits.

Question 55

Perfect Competition is an industry in which there is only one supplier of a product that has no close substitutes.

Question 56

It is possible to distinguish a monopoly from perfect competition by noting that only competitive firms can earn economic profits in the short run.

Question 57

A monopolist's profit per unit is shown by the difference between price and marginal cost per unit.

Question 58

Since a monopolist firm will lose some customers when the price is increased, it will make every effort to keep the price as low as possible.

Question 59

Adam Smith believed that monopoly is the most efficient market structure.

Question 60

A major difference between a monopoly and perfect competition is that monopolies can earn an economic profit in the long run and a perfectly competitive firm cannot.

Question 61

When theaters charge lower prices for matinee showing, it is not price discrimination, since it is more expensive to operate a theater during the day, as compared to the evening hours.

Question 62

The U.S.Postal Service engages in price discrimination.

Question 63

It is possible that if a monopoly is broken up, the cost of production for that product could increase.

Question 64

Monopoly firms may lead to higher costs than perfectly competitive firms.

Question 65

Economists consider price discrimination to always be undesirable.

Question 66

In the long-run, a monopolist charges the same price as a perfectly competitive firm.

Question 67

Since a monopolist has a unique product, it makes no sense for the firm to advertise.

Question 68

The difference in prices for first-class and coach airline tickets exemplifies price discrimination.

Question 69

A monopolist firm may be more innovative than a competitive firm.

Question 70

The monopoly's ability to restrict output results in lower profits than other types of firms.

Question 71

For a monopoly, MC = MR < P so that MC < MU.

Question 72

Inefficient resource allocation is a major problem with monopolies.

Question 73

In cases of natural monopoly, it is best to have only one firm producing all of the output in a market.

Question 74

Price discrimination allows a monopolist to make higher profits.

Question 75

A monopolist will increase output to the point where MR equals MC and not beyond.

Question 76

Too much of society's scarce resources are used to produce goods in monopoly markets.

Question 77

Price discrimination only occurs under monopoly.

Question 78

A positive aspect of monopolies is that they may aid innovation in the marketplace.

Question 79

A monopoly firm always devotes some of its profits to research.

Question 80

A profit-maximizing monopolist will stop production while MR is still greater than MC.