Question 1

If a monopoly wants to sell a larger quantity, it must

Accepted Answer

In order to sell a larger quantity, a monopoly must set a lower price. This can be a difficult decision for a monopoly since there is no competition to force them to lower their price. However, setting a lower price can encourage more consumers to purchase their product and potentially increase profits in the long run.

Question 2

Which of the following is NOT correct about patents?

Accepted Answer

While patents may provide temporary monopoly power to the firm that holds them, they do not enable a firm to become a permanent monopoly. Patents eventually expire, allowing competitors to enter the market and potentially offer alternative or improved versions of the patented product or service.

Question 3

A single-price monopoly faces a linear demand curve. If the marginal revenue for the second unit is $20, then the marginal revenue for the

Accepted Answer

In a linear demand curve, the marginal revenue decreases as the quantity sold increases. Therefore, the marginal revenue for the third unit is less than $20.

Question 4

For a monopoly, marginal revenue is equal to

Accepted Answer

Marginal revenue for a monopoly is the change in total revenue brought about by a one-unit increase in quantity sold. It is not equal to the price of the product or the quantity sold at a given price, as these are the demand curve and total revenue curve, respectively. Marginal revenue also does not refer to the amount people buy between two prices, as this is the quantity demanded at those prices.

Question 5

A price-discriminating monopoly is a monopoly that

Accepted Answer

A price-discriminating monopoly sells different units of a good or service at different prices. This allows the monopoly to extract more revenue by charging higher prices to customers with a higher willingness to pay and a lower price to customers with a lower willingness to pay. This type of monopoly can arise when the monopoly can segregate the market into different groups with different price elasticities of demand.

Question 6

-The table above gives the demand for a monopolist's output. Between which two quantities is demand elastic?

Accepted Answer

The answer of 
-The table above gives the demand for...

Question 7

A single-price monopoly can sell 10 units of its product at a price of $45 each, but to sell 11 units the monopoly must cut the price to $44. What is the marginal revenue of the extra unit sold?

Accepted Answer

The marginal revenue of an extra unit sold is the change in total revenue when one additional unit is sold. In this case, the monopoly is only able to sell an extra unit by reducing the price from $45 to $44.

So the marginal revenue of the extra unit sold is:

Marginal Revenue = Change in Total Revenue / Change in Quantity

Marginal Revenue = ($44 x 11) - ($45 x 10) / (11 - 10)

Marginal Revenue = $484 - $450 = $34

Therefore, the best choice is C.

Question 8

Price discrimination is

Accepted Answer

Price discrimination is defined as charging different prices for different units. Therefore, option B is the correct answer. Option A is incorrect because price discrimination is not always illegal in Australia. Option C is incorrect because setting the price to minimise the quantity sold is not related to price discrimination. Option D is incorrect because price discrimination involves charging different prices to different consumers, not the same price to all consumers. Option E is incorrect because only option B is correct.

Question 9

-The table above gives the demand for a monopolist's output. Between which two quantities is marginal revenue equal to 0?

Accepted Answer

Marginal revenue is zero when total revenue is maximized. This typically occurs between the quantity levels where total revenue stops increasing and starts decreasing.

Question 10

If a monopoly wants to sell a greater quantity of output, it must

Accepted Answer

Monopolies have the ability to set their own prices because they are the only supplier of a particular product. However, if they want to sell more output, they must lower their price in order to incentivize consumers to purchase more. This is because the demand curve for a monopoly slopes downward, meaning that as the price increases, the quantity demanded decreases. Therefore, if the monopoly wants to sell more output, it must lower its price to increase the quantity demanded.

Question 11

Pizza producers charge one price for a single pizza and almost give away a second one. This is an example of

Accepted Answer

This is an example of price discrimination as the pizza producers are charging different prices for the same product (one at regular price and the second at a discounted price) based on the number of pizzas purchased.

Question 12

Which of the following is ALWAYS true for a single-price monopolist?

Accepted Answer

For a single-price monopolist, the price (P) is always greater than marginal revenue (MR) because the monopolist must lower the price to sell additional units, causing MR to be less than the price.

Question 13

Which of the following is an example of price discrimination?

Accepted Answer

Price discrimination occurs when different prices are charged to different consumers for the same product or service, not based on cost differences. Option B is an example of price discrimination as Albert pays less due to his senior citizen status.

Question 14

A monopoly market has

Accepted Answer

A monopoly market has only one firm that has the power to set prices and control the market.

Question 15

For a single-price monopolist, why is marginal revenue less than price?

Accepted Answer

To sell an additional unit, a monopolist must lower the price on all units sold, causing marginal revenue to be less than the price.

Question 16

Price discrimination is prevented in situations where

Accepted Answer

Price discrimination can occur when a seller is able to charge different prices to different customers based on their willingness to pay. However, if customers are able to resell the good, then the seller cannot discriminate based on willingness to pay because customers who paid a lower price could potentially sell to customers who were willing to pay a higher price. This would eliminate the seller's ability to extract additional surplus from those who were willing to pay more.

Question 17

A petrol station on a remote stretch of the Stuart Highway in the Northern Territory has a monopoly over the retail petrol market for hundreds of kilometres. The station decides not to price discriminate. As a result, all consumers will pay

Accepted Answer

Since the petrol station decides not to price discriminate, it will charge all consumers the same single price. This price may not necessarily be the lowest or highest price, but it will be the same price for everyone.

Question 18

A natural monopoly is one that arises from

Accepted Answer

A natural monopoly arises from economies of scale, meaning that one firm can produce goods or services at a lower cost than multiple firms due to the firm's size and resources. This makes it difficult for competitors to enter the market and compete effectively. The other options (A, C, D, and E) do not necessarily lead to a natural monopoly.

Question 19

In Norway, where the government runs liquor stores, the monopoly results from

Accepted Answer

The government monopoly on liquor stores is a result of legal restrictions. The Norwegian government has created laws and regulations that limit the sale of alcohol to only state-run liquor stores. This is done with the intention of reducing alcohol-related harm in the country.

Question 20

A ________ can price discriminate if, in part, it ________.

Accepted Answer

Price discrimination involves charging different prices to different customers based on their willingness to pay. A monopoly can price discriminate because it is the only seller of a particular product, and it can prevent the resale of its product to different customer groups. This allows the monopoly to charge different prices to different groups of customers, maximizing its profits.

Quiz 15: Monopoly