ESM Monopoly QUIZ

What is a characteristic of a monopoly?

• High barriers to entry

• Perfect substitutes available

• Many firms competing

• Low market share

What does it mean for a firm to be a price-maker?

• It must follow market prices

• It operates in perfect competition

• It cannot influence market prices

• It has the power to set prices

Which of the following is an example of a natural barrier to entry?

• Patents

• Economies of scale

• Advertising

• High switching costs

What happens to demand in a monopoly market?

• It is downward-sloping and price inelastic

• It is perfectly elastic

• It is perfectly inelastic

• It is upward-sloping

At what point does a monopolist maximize profit?

• Where P = MC

• Where TR = TC

• Where MR = MC

• Where AR = ATC

What is a consequence of monopolies on consumer surplus?

• Increase in consumer surplus

• Equal distribution of surplus

• Loss in consumer surplus

• No effect on consumer surplus

Which company is cited as an example of a monopoly in the eyewear industry?

• Costa del Mar

• Oakley

• Luxottica

• Ray-Ban

What is a natural monopoly?

• A market with perfect substitutes

• A market with no barriers to entry

• A market where one firm can supply the entire industry more efficiently

• A market with many competitors

What is the result of a monopolist earning supernormal profit?

• Decreased market share

• Lower prices for consumers

• High barriers to entry prevent new firms from entering

• Increased competition

What is often granted to natural monopolists to cover losses when operating at allocative efficiency?

• Per-unit subsidies

• Tax breaks

• Increased prices

• Market share incentives