The logic of monopoly

The logic of monopoly

by Kendrick Broadus

Multiple Choice

Reductions of combined consumer and producer surplus

• Deadweight loss
• Elasticity
• Tax incidence
• Surplus

Multiple Choice

Efficiency loss is another term for...

• Deadweight loss
• Consumer surplus
• Producer surplus
• Elasticity

Multiple Choice

• A

• B

• C

• D

• E

Multiple Choice

• A

• B

• C

• D

• E

Multiple Choice

Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition? 

• In perfect competition there are no barriers to entry, but there are strong barriers in monopolistic competition. 
• In perfect competition there are many firms, but in monopolistic competition there are only a few firms. 
• In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product. 
• In perfect competition there are few consumers, but in monopolistic competition there are many consumers. 

Multiple Choice

Which of the following could attract new firm to join an industry?

• Normal profits

• Economic losses

• Economic profits

• Accounting profits

Multiple Choice

A firm operating in a perfectly competitive market will shut down when price is below the minimum of a(n) ____________.

• marginal cost curve

• average total cost curve

• average fixed cost curve

• average variable cost curve

Multiple Choice

A perfect competitive firm charges a price that is ____________.

• different to other firms

• higher than other firms

• lower than other firms

• similar to other firms

Multiple Choice

Which of the following describes a monopoly firm?

• Single seller

• Many sellers

• Many substitutes

• No barrier to entry

Multiple Choice

If a monopoly firm practices price discrimination the firm will _____________.

• earn smaller profit

• produce lower quantity than before price discrimination

• charge a higher price when demand is inelastic and a lower price when demand is elastic

• charge a higher price when demand is elastic and a lower price when demand is inelastic

Open Ended

Identify the profit maximizing level of output for this monopoly firm.

Multiple Choice

A market with a large number of sellers

• can only be a perfectly competitive market.

• might be an oligopoly or a perfectly competitive market.

• might be a monopolistically competitive or a perfectly competitive market.

• might be a perfectly competitive, monopolistically competitive, oligopoly, or monopoly market.

• can only be a monopolistically competitive market.

Multiple Choice

The demand curve for a monopolistically competitive firm is downward sloping because:

• the products produced by different firms are not identical

• there are a small number of firms in the market

• the product is produced by using scarce resources

• it is easy for firms to enter or exit the market

Multiple Choice

The graph shows a monopolistically competitive firm:

• making a profit in the short-run
• incurring a loss in the short-run
• making a profit in the long-run
• breaking even in the long-run

Multiple Choice

Price discrimination is not possible under

• Perfect competition

• Monopoly

• Oligopoly

• Monopolistic Competition

Multiple Choice

Which of the following is NOT an example of price discrimination?

• Public transport discounts for students and the elderly

• Airlines charging higher prices during holiday season

• Petrol stations providing cheaper fuel on certain days of the week

• Differences in price between first class and economy class air travel

Multiple Choice

This monopoly will maximize profits at what price?

• A
• B
• C
• R

Multiple Choice

Which of the following could attract new firm to join an industry?

• Normal profits

• Economic losses

• Economic profits

• Accounting profits

Multiple Choice

A perfect competitive firm charges a price that is ____________.

• different to other firms

• higher than other firms

• lower than other firms

• similar to other firms

Multiple Choice

The demand curve for a monopolistically competitive firm is downward sloping because:

• the products produced by different firms are not identical

• there are a small number of firms in the market

• the product is produced by using scarce resources

• it is easy for firms to enter or exit the market

Multiple Choice

The graph shows a monopolistically competitive firm:

• making a profit in the short-run
• incurring a loss in the short-run
• making a profit in the long-run
• breaking even in the long-run

Multiple Choice

In the short run, in monopolistic competition, the producers produce at a level of output that is...

• productively efficient

• allocatively efficient

• profit maximizing

Multiple Choice

Monopolistic competition is a market structure in which few firms sell similar products

• True

• False

Multiple Choice

Universities are engaging in price discrimination when they charge different levels of tuition to poor and wealth students

• True

• False

Multiple Choice

Which of the following statements applies to a price discriminating firm?

• It exploits consumers, especially the poor

• It achieves productive efficiency

• It provides lower prices when the quantity purchased rises

• It charges different prices for the same product

Multiple Choice

Price discrimination is defined as a business charging different consumers ... prices for the ... product, whereby the price difference is not due to the differences in the cost of supplying the customers.

• different …same

• same …same

• same...different

• different …different

Multiple Choice

Price discrimination is not possible under

• Perfect competition

• Monopoly

• Oligopoly

• Monopolistic Competition

Multiple Choice

A firm with market power engages in price discrimination to:

• earn a higher profit
  
• increase consumer surplus
  
• decrease deadweight loss
  
• make its demand more elastic 

Multiple Choice

A single-price monopoly is characterized by a marginal revenue curve that is

• upward sloping.

• downward sloping.

• horizontal.

• vertical.

Multiple Choice

In the monopoly, the firm's marginal revenue curve is ________, while in a perfectly competitive market, each firm's marginal revenue curve is ________.

• downward sloping; horizontal

• horizontal; downward sloping

• upward sloping; horizontal

• downward sloping; upward sloping

Multiple Choice

Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 25th haircut?

• zero

• $5

• $7

• $5.50

Multiple Choice

Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge ________ a movie and will sell ________ movie tickets a week.

• $15; 100

• $12; 200

• $6; 400

• $9; 300

Multiple Choice

monopoly has two key features, which are

• barriers to entry and no close substitutes.

• franchises and barriers to entry.

• barriers to entry and close substitutes.

• close substitutes and no barriers to entry.