Chapter 20 Monopoly

Market structure characterized by a single firm dominating the market.

• Oligopoly

• Monopoly

• Purely Competitive

• Monopolistic competition

What is not an advantage of a monopoly?

• achieving economies of scale

• high level of research and development

• producing a greater quantity at profit-maximizing level of output

• higher prices and lower output

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 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

In the 1990s, AT&T controlled 80% of the phone industry and was the ONLY provider of long distance phone service. For the phone industry, this is an example of a:

• A legal monopoly

• A pure monopoly

• A local monopoly

In the 1990s, AT&T controlled 80% of the phone industry and was the ONLY provider of long distance phone service. For long distance phone service, this is an example of a:

• A legal monopoly

• A pure monopoly

• A local monopoly

Which of the following companies are not monopolies

• McDonald's

• CTM

• Microsoft

• Google

When you go to the movies, the theater is a monopoly vendor of popcorn while you're there (why it costs so much). Suppose that the cost to the theater of fake butter flavoring and yellow food coloring rise significantly, what will happen to the price and quantity of popcorn sold by the theater?

• The price of popcorn will rise and the quantity sold will increase

• The price of popcorn will rise and the quantity sold will fall

• The price of popcorn will remain unchanged and the quantity sold will remain unchanged

• The price of popcorn will fall and the quantity sold will fall

Fill in the blank. __________ economies of scale occur due to an increase in the scale of production within a single firm

• Internal

• External

• Complex

• Simple

What are diseconomies of scale?

• Size of a business

• Falling average cost due to expansion

• Rising average costs when a firm becomes too big

• Cost benefits that all firms in an industry can enjoy when the industry expands