Question

POM CUCI 1. Because of monopoly, consumers experience___than they do with perfect competition. A. more choices B. larger quantities C. higher quality D. higher prices 2. Which statement concerning monopoly is TRUE? A. Monopoly firms are always larger than are perfectly competitive firms. B. A monopoly has no rivals. C. Barriers to entry do not prevent other firms from entering a monopolized industry. D. Monopolists produce more output than does a competitive market with the same demand and cos structure. 3. If your farm had the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from: A. control of a scarce resource or input. B. technological superiority. C. increasing returns to scale. D. government-set barriers. 4. The demand curve for a monopoly is: A. the MR curve above the AVC curve. B. the MR curve above the horizontal axis. C. the entire MR curve. D. above the MR curve. 5. The land you own has the only known source of aloe needed to make anti-itch lotion. In this case, your monopoly results from:

Answer 1

1. D.

Higher prices. A monopolist maximizes profit at the intersection of MR and MC curves and extended to the demand curve, which is downward sloping.

In perfect competition, price is determined by the interaction of demand and supply. Individual firms cannot influence the price. They are price takers.

2. B. A monopolist is the sole producer.

3. A. Control over natural resource.

4. D. Above the MR Curve as the demand is downward sloping and a monopolist can sell more output only by lowering the price.

5. D. Ownership of scarce resources.