,Chapter 8
Monopoly
MULTIPLE CHOICE
1. Topic: Monopoly, Difficulty: E, Type: SA, Answer: b
Which of the following factors is not a barrier to entry?
a. legally enforced patent rights
b. an inelastic demand for a product
c. licensing
d. control over an essential resource
2. Topic: Monopoly, Difficulty: E, Type: RE, Answer: b
A monopoly is:
a. a seller of a highly advertised and differentiated product in a market with low barriers to
entry in the long run.
b. the only seller of a good for which there are no good substitutes in a market with high
barriers to entry.
c. the only buyer of a unique raw material.
d. the producer of a product subsidized by the government.
3. Topic: Monopoly, Difficulty: E, Type: RE, Answer: d
A monopolist faces a downward-sloping demand curve because:
a. the demand for its product is inelastic.
b. the industry demand curve is horizontal.
c. resource prices increase as the monopolist expands output.
d. the entire market demand curve is the monopolist’s demand curve.
4. Topic: Monopoly, Difficulty: E, Type: RE, Answer: c
Which of the following firms best fits the definition of a monopoly?
a. General Motors
b. Exxon Mobile
c. Local electric utility
d. AT&T
5. Topic: Monopoly, Difficulty: M, Type: RE, Answer: c
Monopoly is a market structure characterized by a:
a. single firm operating as a price taker.
b. few firms operating as price takers.
c. single firm that is not a price taker.
d. none of the above.
6. Topic: Monopoly, Difficulty: M, Type: RE, Answer: a
Alcoa had a monopoly in the U.S. aluminum market from the late nineteenth century until the end
of World War II. Which barrier to entry was the source of Alcoa's monopoly power?
a. Ownership of a vital resource.
b. Government franchises and licenses.
c. Patents and copyrights.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,320 Chapter 8
d. Economies of scale.
7. Topic: Monopoly, Difficulty: M, Type: RE, Answer: c
Which of the following is a market structure of monopoly?
a. Few firms operating as price takers.
b. Single firm operating as a price taker.
c. Single firm that is a price maker.
d. All of the above are true.
8. Topic: Monopoly, Difficulty: M, Type: RE, Answer: d
A monopolized market is characterized by:
a. a sole seller of a product for which there are few suitable substitutes.
b. very strong barriers to entry.
c. a single firm facing the market demand curve.
d. all of the above.
9. Topic: Monopoly, Difficulty: D, Type: RE, Answer: a
The monopolist’s demand curve is:
a. identical to the market demand curve.
b. identical to the marginal revenue curve.
c. below the marginal revenue curve.
d. a horizontal line at the market price.
e. a U-shaped curve.
10. Topic: Natural monopoly, Difficulty: M, Type: RE, Answer: c
A natural monopoly is a market where:
a. a single firm has control over a vital natural resource.
b. many smaller firms can produce the entire market output at the same per-unit cost as
could one large firm.
c. a single large firm can produce the entire market output at a lower per-unit cost than a
group of smaller firms.
d. many smaller firms can produce the entire market output at a lower per-unit cost than
could one large firm.
11. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: d
An industry is said to be a natural monopoly when:
a. legal barriers limit entry into the market.
b. diseconomies of scale are present in the market.
c. the market demand for the product supplied by a firm is inelastic.
d. long-run average cost continues to decline as the quantity of output increases.
12. Topic: Natural monopoly, Difficulty: M, Type: RE, Answer: c
Which of the following is true under natural monopoly?
a. The marginal cost curve will be above the average cost curve.
b. The monopolist will set price equal to marginal cost and will earn economic profits.
c. Economies of scale exist.
d. Output is produced under conditions of constant cost.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Monopoly 321
13. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: a
An industry in which total costs are kept to a minimum because only one firm serves the
whole market is called a:
a. natural monopoly.
b. competitive monopoly.
c. patent monopoly.
d. limit monopoly.
14. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: d
Which of the following firms operates in a natural monopoly?
a. Telephone company.
b. Electric company.
c. Water company.
d. All of the above.
15. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: b
Which barrier to entry results in the creation of a natural monopoly?
a. Legal barriers like government franchises.
b. Economies of scale.
c. Ownership of a vital resource.
d. Patents and copyrights.
16. Topic: Monopolist, Difficulty: D, Type: RE, Answer: d
The demand curve any monopolist uses in making output decisions is:
a. the same as the demand curve facing a perfectly competitive firm.
b. vertical, because there are no close substitutes for its product.
c. horizontal, because there are no close substitutes for its product.
d. the same as the market demand curve.
e. perfectly inelastic.
17. Topic: Monopolist, Difficulty: D, Type: RE, Answer: b
The demand curve a monopolist faces:
a. is more elastic than a perfectly competitive firm’s demand curve.
b. is the market demand curve.
c. is as elastic as a perfectly competitive firm’s demand curve.
d. is not affected by the prices of complements.
e. will not shift in response to a change in consumer tastes.
18. Topic: Monopolist, Difficulty: D, Type: RE, Answer: a
The demand curve for a monopolist is:
a. the demand curve for the industry.
b. less than the market demand curve.
c. below the marginal revenue curve.
d. nonexistent.
e. the sum of the demand curves of the perfectly competitive firms in the industry.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Monopoly
MULTIPLE CHOICE
1. Topic: Monopoly, Difficulty: E, Type: SA, Answer: b
Which of the following factors is not a barrier to entry?
a. legally enforced patent rights
b. an inelastic demand for a product
c. licensing
d. control over an essential resource
2. Topic: Monopoly, Difficulty: E, Type: RE, Answer: b
A monopoly is:
a. a seller of a highly advertised and differentiated product in a market with low barriers to
entry in the long run.
b. the only seller of a good for which there are no good substitutes in a market with high
barriers to entry.
c. the only buyer of a unique raw material.
d. the producer of a product subsidized by the government.
3. Topic: Monopoly, Difficulty: E, Type: RE, Answer: d
A monopolist faces a downward-sloping demand curve because:
a. the demand for its product is inelastic.
b. the industry demand curve is horizontal.
c. resource prices increase as the monopolist expands output.
d. the entire market demand curve is the monopolist’s demand curve.
4. Topic: Monopoly, Difficulty: E, Type: RE, Answer: c
Which of the following firms best fits the definition of a monopoly?
a. General Motors
b. Exxon Mobile
c. Local electric utility
d. AT&T
5. Topic: Monopoly, Difficulty: M, Type: RE, Answer: c
Monopoly is a market structure characterized by a:
a. single firm operating as a price taker.
b. few firms operating as price takers.
c. single firm that is not a price taker.
d. none of the above.
6. Topic: Monopoly, Difficulty: M, Type: RE, Answer: a
Alcoa had a monopoly in the U.S. aluminum market from the late nineteenth century until the end
of World War II. Which barrier to entry was the source of Alcoa's monopoly power?
a. Ownership of a vital resource.
b. Government franchises and licenses.
c. Patents and copyrights.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,320 Chapter 8
d. Economies of scale.
7. Topic: Monopoly, Difficulty: M, Type: RE, Answer: c
Which of the following is a market structure of monopoly?
a. Few firms operating as price takers.
b. Single firm operating as a price taker.
c. Single firm that is a price maker.
d. All of the above are true.
8. Topic: Monopoly, Difficulty: M, Type: RE, Answer: d
A monopolized market is characterized by:
a. a sole seller of a product for which there are few suitable substitutes.
b. very strong barriers to entry.
c. a single firm facing the market demand curve.
d. all of the above.
9. Topic: Monopoly, Difficulty: D, Type: RE, Answer: a
The monopolist’s demand curve is:
a. identical to the market demand curve.
b. identical to the marginal revenue curve.
c. below the marginal revenue curve.
d. a horizontal line at the market price.
e. a U-shaped curve.
10. Topic: Natural monopoly, Difficulty: M, Type: RE, Answer: c
A natural monopoly is a market where:
a. a single firm has control over a vital natural resource.
b. many smaller firms can produce the entire market output at the same per-unit cost as
could one large firm.
c. a single large firm can produce the entire market output at a lower per-unit cost than a
group of smaller firms.
d. many smaller firms can produce the entire market output at a lower per-unit cost than
could one large firm.
11. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: d
An industry is said to be a natural monopoly when:
a. legal barriers limit entry into the market.
b. diseconomies of scale are present in the market.
c. the market demand for the product supplied by a firm is inelastic.
d. long-run average cost continues to decline as the quantity of output increases.
12. Topic: Natural monopoly, Difficulty: M, Type: RE, Answer: c
Which of the following is true under natural monopoly?
a. The marginal cost curve will be above the average cost curve.
b. The monopolist will set price equal to marginal cost and will earn economic profits.
c. Economies of scale exist.
d. Output is produced under conditions of constant cost.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Monopoly 321
13. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: a
An industry in which total costs are kept to a minimum because only one firm serves the
whole market is called a:
a. natural monopoly.
b. competitive monopoly.
c. patent monopoly.
d. limit monopoly.
14. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: d
Which of the following firms operates in a natural monopoly?
a. Telephone company.
b. Electric company.
c. Water company.
d. All of the above.
15. Topic: Natural monopoly, Difficulty: E, Type: RE, Answer: b
Which barrier to entry results in the creation of a natural monopoly?
a. Legal barriers like government franchises.
b. Economies of scale.
c. Ownership of a vital resource.
d. Patents and copyrights.
16. Topic: Monopolist, Difficulty: D, Type: RE, Answer: d
The demand curve any monopolist uses in making output decisions is:
a. the same as the demand curve facing a perfectly competitive firm.
b. vertical, because there are no close substitutes for its product.
c. horizontal, because there are no close substitutes for its product.
d. the same as the market demand curve.
e. perfectly inelastic.
17. Topic: Monopolist, Difficulty: D, Type: RE, Answer: b
The demand curve a monopolist faces:
a. is more elastic than a perfectly competitive firm’s demand curve.
b. is the market demand curve.
c. is as elastic as a perfectly competitive firm’s demand curve.
d. is not affected by the prices of complements.
e. will not shift in response to a change in consumer tastes.
18. Topic: Monopolist, Difficulty: D, Type: RE, Answer: a
The demand curve for a monopolist is:
a. the demand curve for the industry.
b. less than the market demand curve.
c. below the marginal revenue curve.
d. nonexistent.
e. the sum of the demand curves of the perfectly competitive firms in the industry.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
