651 652 653 654 Market structures are categorized by the following two criteria the number of firms and the size of the firms Incorrect whether or not products are differentiated and the extent of advertising Incorrect the number of firms and whether or not products are differentiated True Answer Correct the size of the firms and the extent of advertising Incorrect Which of the following statements about the differences between monopoly and perfect competition is incorrect A monopolist has market power while a perfect competitor does not Incorrect Unlike a perfectly competitive firm a monopoly can make positive economic profits in the long run Incorrect A monopoly will charge a higher price and produce a smaller quantity than a competitive market with the same demand and cost structure Incorrect Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry True Answer Correct Which of the following statements concerning monopoly is true Monopoly firms are automatically larger than perfectly competitive firms Incorrect A monopoly has no rivals True Answer Correct Barriers to entry do not prevent other firms from entering a monopolized industry Incorrect Monopolists produce more output than competitive firms Incorrect Firms in which of the following market structures have the most market power monopoly True Answer Correct duopoly Incorrect oligopoly Incorrect monopolistic competition Incorrect 655 656 657 658 An industry with a single producer that sells a single product with no substitutes is a perfect competition Incorrect monopoly True Answer Correct oligopoly Incorrect monopolistic competition Incorrect An industry with a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is a duopoly Incorrect a monopoly True Answer Correct an oligopoly Incorrect perfect competition Incorrect A monopoly is a market characterized by a single seller True Answer Correct a product with many close substitutes Incorrect a large number of small firms Incorrect a small number of large firms Incorrect Which of the following statements best characterizes a monopoly A monopoly produces a product with no close substitutes True Answer Correct is composed of a single buyer and several sellers Incorrect is composed of a large number of small firms Incorrect is composed of a small number of large firms Incorrect 659 Diamond rings are relatively scarce because according to geologists diamonds are less common than any other gem quality colored stone Incorrect the demand for diamonds is so high Incorrect De Beers limits the quantity of diamonds supplied to the market True Answer Correct of monopolistic competition Incorrect 660 661 662 663 664 De Beers became a monopoly by establishing control over diamond mines True Answer Correct economies of scale Incorrect technological superiority Incorrect ownership of a patent Incorrect A monopolist is likely to and than a comparable perfectly competitive firm produce more charge more Incorrect produce less charge more True Answer Correct produce more charge less Incorrect produce less charge less Incorrect In contrast with perfect competition a monopolist produces more at a lower price Incorrect produces where MR MC and a perfectly competitively firm produces where P MC Incorrect may have economic profits in the long run True Answer Correct earns zero economic profits in the long run Incorrect Because of monopoly consumers experience than with perfect competition more choices Incorrect larger quantities Incorrect higher quality Incorrect higher prices True Answer Correct The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as product differentiation Incorrect barrier to entry Incorrect market power True Answer Correct patents and copyrights Incorrect 665 666 667 668 669 Compared to a perfectly competitive market a monopolist will produce and charge a price less higher True Answer Correct less lower Incorrect more higher Incorrect more lower Incorrect Most electric gas and water companies are examples of unregulated monopolies Incorrect natural monopolies True Answer Correct restricted input monopolies Incorrect sunk cost monopolies Incorrect Suppose that you build a high speed magnetically powered transportation system from New York to Los Angeles High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand Your monopoly would result from control of a scarce resource or input Incorrect technological superiority Incorrect increasing returns to scale True Answer Correct government created barriers Incorrect If your farm had the only known source of a rare cocoa bean needed to make chocolate covered peanuts your monopoly would result from control of a scarce resource or input True Answer Correct technological superiority Incorrect increasing returns to scale Incorrect government created barriers Incorrect If your local government gave you the exclusive right to sell breakfast bagels in your community your monopoly would result from control of a scarce resource or input Incorrect technological superiority Incorrect increasing returns to scale Incorrect government created barriers True Answer Correct 670 671 672 The De Beers company is described as a monopolist in the production of diamonds True Answer Correct software Incorrect oil Incorrect beer Incorrect You own a lemonade stand in a competitive lemonade market and as such you are a price taking firm Which of the following events would most likely increase your market power The government abolishes the system of patents and copyrights Incorrect A booming economy increases the demand for lemonade and attracts entry into the market Incorrect The average total cost curve for firms in the industry is horizontal Incorrect You own exclusive rights to harvest lemons from all domestic citrus orchards True Answer Correct Conditions that prevent the entry of new firms in a monopoly market are barriers to entry True Answer Correct terms of sale Incorrect labor market stipulations Incorrect production controls Incorrect 673 A natural monopoly exists whenever a single firm is owned and operated by the federal or local government Incorrect is investor owned but has been
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