Micro: Monopoly

What is a characteristic of a monopoly?

• A single seller and significant barriers to entry
• Multiple sellers with no barriers to entry
• Multiple sellers and low barriers to entry
• Single seller with no barriers to entry

What would keep competitors out in the case of a natural monopoly?

• High fixed costs and economies of scale
• Low fixed costs and economies of scale
• Low fixed costs and diseconomies of scale
• High variable costs and diseconomies of scale

What is the monopolist's profit-maximizing output determined by?

• When marginal revenue equals marginal cost
• When total revenue equals total cost
• When average revenue equals average cost
• When price equals marginal cost

What happens to a monopolist's profit in the long run?

• It remains unchanged due to barriers to entry
• It decreases as new firms enter the market
• It fluctuates based on market conditions
• It increases as demand rises

Why are monopolists often viewed negatively by consumers?

• They charge higher prices and provide less product
• They have efficient production processes
• They invest in research and development
• They offer better quality products at lower prices

In a typical monopoly, who must buy the product from the monopolist?

• Anyone who wants to buy the product
• Only government agencies
• People who dislike competition
• Competitors in the market

In a natural monopoly with economies of scale, why is it more efficient to have only one producer?

• High fixed costs are spread over large quantity of production, leading to low cost per unit
• High demand requires multiple producers
• Multiple producers can share costs more efficiently
• High variable costs allow for lower prices

What kind of barriers could prevent competitors from entering a market and lead to a natural monopoly?

• Patents would keep others out, sole ownership of key resource
• High variable costs, lack of demand
• Low costs, abundance of resources
• Patents, sole ownership of key resource

What does the monopolist's profit-maximizing output, Q*, represent?

• Output at which MR = MC
• Output determined by competitors
• Output at maximum price
• Output that maximizes revenue

Why do barriers to entry help protect a monopolist's profit?

• Barriers keep competitors out, maintaining the monopolist's control over the market
• Barriers reduce consumer demand
• Barriers increase competition
• Barriers lower prices