3.1.4.4 Monopoly and Market Power

What is the difference between pure monopoly and monopoly power?

• Pure monopoly has no competitors, while monopoly power can exist with some competitors.

• Pure monopoly has many competitors, while monopoly power has none.

• Pure monopoly and monopoly power are the same.

• Pure monopoly is influenced by advertising, while monopoly power is not.

Which of the following factors influence monopoly power?

• Barriers to entry

• Number of competitors

• Advertising

• All of the above

What is a concentration ratio used to calculate?

• The degree of product differentiation

• The number of competitors

• The market share of the largest firms

• The advertising expenditure

What may result from higher prices and inefficiency in a monopoly?

• Misallocation of resources

• Efficient resource allocation

• Increased competition

• Lower profits

Which of the following is an example of a firm with monopoly power due to economies of scale?

• A small local bakery

• A new tech startup

• A large established firm

• A government agency

What is the term for a firm that can set its own prices in the market?

• Price taker

• Price maker

• Price follower

• Price leader

How can early entrants to a market establish their monopoly power?

• By setting high prices

• By gaining control of a resource

• By reducing advertising costs

• By increasing brand loyalty

How might monopolies exploit consumers?

• By generating export revenue.

• By charging higher prices, leading to under-consumption.

• By investing in research and development.

• By protecting their ideas.

What happens to consumer and producer surplus when a monopolist raises the market price above the competitive equilibrium level?

• There is a gain in consumer surplus and a loss of producer surplus.

• There is a loss of consumer surplus and a gain of producer surplus.

• Both consumer and producer surplus increase.

• Both consumer and producer surplus decrease.

What is one potential long-term benefit of monopolies investing in research and development?

• Higher prices for consumers.

• More invention and innovation.

• Higher production costs.

• Less efficient resource allocation.