Monopoly

One of the requirements for a monopoly is that

• products are high priced

• there are several close substitutes for the product

• there is a unique product with no close substitutes

• the product cannot be produced by small firms

A monopoly is a market with

• many suppliers

• no barriers to entry

• many substitutes

• one supplier

Firms face competition when the good they produce

• is unique

• has a close substitute

• is in a market with natural barriers to entry

• is in a market with legal barriers to entry

Which is true about monopolies?

• Monopolies always earn an economic profit.

• The market demand and the firm's demand are the same.

• Monopolies have perfectly inelastic demand.

• The monopolist's supply curve is the same as the market demand curve.

Which describes a barrier to entry?

• something that establishes a barrier to expanding output

• anything that protects a firm from new competitors

• a regulation that bars a monopoly from earning profit

• firms already in the market incur a loss so no firm wants to enter

A barrier to entry is

• an economic term for economies of scale

• illegal in most markets

• anything that prevents new firms from entering the market

• a factor that increases competition

Patents

• encourage the invention of new products and production methods

• stimulate innovation

• are exclusive rights granted to the inventor of a product or service

• all of the above

Building contractors lobbied the city council to pass a law requiring all people working on residential dwellings to be licensed. Why?

• to guarantee that work is of high quality

• to create a legal barrier to entry

• to reduce the cost of building dwellings

• to insure that more dwellings are constructed

What is the main difference between the profit-maximizing actions a perfectly competitive firm can take and those a monopoly can take?

• a competitive firm can only change output, monopoly can change output or price

• they both face downward-sloping demand curves but a perfectly competitive firm's demand is elastic

• a monopoly chooses the highest possible price while a perfect competitor chooses the lowest

A monopolist is

• a price taker

• able to ignore the demand for its product when setting price

• able to set the price for its product

• able to earn only a normal profit in the long run