Competition and Monopolies

A market in which a single seller dominates

• monopoly

• natural monopoly

• license

• market power

Which of the following is a source of monopoly power?

• Scarcity
• Elasticity of demand
• Barriers to entry
• Low Profits

A barrier to entry is

• A law established by the government to protect new industries.

• A commitment on the part of big business to allow smaller companies to compete.

• An obstacle that prevents additional workers from entering an industry, such as a union.

• An obstacle that makes it difficult for new firms to enter a market.

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 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

Why does no one firm dominate in a perfect competition?

• No firm wants to

• Each firm sells to different people

• Each firm produces exactly the same towards total supply that they cannot influence prices

• One firm will eventually dominate and make it a monopoly

If the entire output of a market is produced by a single seller, the firm

• Is a monopoly.

• Faces perfectly inelastic demand.

• Can charge any price it wants and not lose customers.

• Is producing a new product.

It is usually very difficult to enter a market that is a monopoly.

• True
• False

Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and quantity will be which of the following? 

• P=Higher; Q=Same
• P=Lower; Q=Same
• P=Lower; Q=Higher
• P=Higher; Q=Lower

Perfect competition involves:

• Sellers working together to set prices
• A large number of buyers & sellers
• Difficulty entering & exiting the market
• Little information is available to buyers