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Multiple Choice Quiz
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1
When the long-run average cost curve continues to decline at very high output, the industry will be:
A)monopolistically competitive.
B)an oligopoly.
C)a monopoly.
D)a natural monopoly.
2
Which of the following is a monopolist that exists as a result of national policy?
A)Microsoft.
B)Canada Post.
C)de Beers.
D)Bombardier.
3
Which of the following is not a barrier to entry?
A)patents.
B)predatory pricing.
C)high advertising costs.
D)lobbying.
4
The marginal revenue for a monopolist is:
A)downward-sloping, because the firm must lower the price on each unit to sell more quantity.
B)horizontal, because the firm is a price setter.
C)horizontal, because the firm charges everyone the same price.
D)vertical, because the firm can charge whatever it wants.
5
Marginal revenue is zero when:
A)price is zero.
B)profits are maximized.
C)total revenue is maximized.
D)average revenue is zero.
6
Suppose a monopolist is producing where MR > MC. In order to maximize profits, this firm should:
A)raise its price and sell more units.
B)lower its price and sell more units.
C)raise its price and sell fewer units.
D)lower its price and sell fewer units.
7
In analyzing a monopolist, you determine that the price elasticity of demand for the firm’s product is (-) Your recommendation to the firm is to:
A)raise its price and sell more units.
B)lower its price and sell more units.
C)raise its price and sell fewer units.
D)lower its price and sell fewer units.
8
The supply curve for a monopolist is:
A)upward-sloping.
B)horizontal.
C)vertical.
D)non-existent.
9
When constant returns to scale are evident:
A)long-run average cost equals long-run marginal cost.
B)long-run average cost equals short-run marginal cost.
C)long-run average revenue equals long-run average cost.
D)long-run average revenue equals long-run marginal revenue.
10
When compared to perfect competition, the inefficiencies of monopoly are evidenced by:
A)lack of consumer choice.
B)greater profits
C)lower output.
D)greater producer surplus.
11
The lowest price that a price-discriminating monopolist is willing to charge is equal to:
A)average variable cost.
B)average total cost.
C)average fixed cost.
D)marginal cost.
12
When comparing a non-discriminating monopolist to a discriminating monopolist, we find that the discriminating monopolist generally has ______ output and _______ profit.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower
13
Cartels tend to be unstable because:
A)they are universally illegal.
B)each cartel member has an incentive to cheat.
C)exit from the industry tends to create a monopoly.
D)consumers will not cooperate.
14
Rent-seeking activity involves:
A)searching for accommodations.
B)charging a very low price to put competitors out of business.
C)charging different consumers different prices for the same good.
D)using productive resources to redistribute profits to particular groups.
15
Joseph Schumpeter suggested that the detrimental effects of monopolies may be offset by:
A)government price controls.
B)consumer boycotts.
C)their greater tendency to invent and innovate.
D)the lower price charged by discriminators.





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