ECN 104 Lecture Notes - Lecture 3: Economic Equilibrium, Opportunity Cost, Competitive Equilibrium
6 Jun 2018
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Chapter8Monopoly
Copyright (c) 2010 McGraw-Hill Ryerson Limited. Page 1
CHAPTER 8
Monopoly
Topic Question numbers
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8.1 Characteristics of monopoly 1-91
Examples of monopoly 1-4
Dual objectives of the study of monopoly 5
Barriers to entry 6-12
Monopoly demand 13-91
8.2 Output and price determination 92-141
Cost data 92-96
MR=MC Rule 97-125
No monopoly supply curve 126-128
Misconceptions about monopoly pricing 129-130
Possibility of losses by monopolist 131-141
8.3 Economic effects of monopoly 142-195
Price, output, and efficiency 142-168
Income transfer 169-170
Cost complications 171-193
Assessment and policy options 194-195
8.4 Price discrimination 196-212
Conditions 196-203
Examples of price discrimination 204-209
Graphical analysis 210-212
8.5 Regulated monopoly 213-241
Socially optimal price: P=MC 213-225
Fair-return price: P=ATC 226-233
Dilemma of regulation 234-241
8.6 Monopoly and deadweight loss 242-243
The last word 244-249
True-False Questions 250-286
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Chapter8Monopoly
Copyright (c) 2010McGraw-Hill Ryerson Limited. Page 2
1. Which of the following approximates a monopoly?
A) the foreign exchange market
B) the Winnipeg wheat market
C) the diamond market
D) the soft drink market
Ans: C Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 192-193 Subtopic: Examples of monopoly Type: Application
2. Which of the following is a characteristic of monopoly?
A) close substitute products
B) barriers to entry
C) the absence of market power
D) "price taking"
Ans: B Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 192-193 Subtopic: Examples of monopoly Type: Application
3. Monopoly means:
A) any market in which the demand curve to the firm is downward sloping.
B) a standardized product being produced by many firms.
C) a large number of firms producing a differentiated product.
D) a single firm producing a product for which there are no close substitutes.
Ans: D Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 192-193 Subtopic: Examples of monopoly Type: Definition
4. Which of the following is correct?
A) Both perfect competitive and monopolistic firms are "price takers."
B) Both perfect competitive and monopolistic firms are "price makers."
C) A perfect competitive firm is a "price taker," while a monopolist is a "price maker."
D) A perfect competitive firm is a "price maker," while a monopolist is a "price taker."
Ans: C Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 192-193 Subtopic: Examples of monopoly Type: Definition
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Chapter8Monopoly
Copyright (c) 2010McGraw-Hill Ryerson Limited. Page 3
5. The dual objective of studying the monopolistic market structure is:
A) to know about this market structure as well as understanding monopolistic-
Competition and oligopolistic market structures.
B) to be able to compare it with the other extreme namely, perfect competition.
C) to be able to study the behaviour of some of the industries characterized by that.
D) All of the above.
Ans: D Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 192-193 Subtopic: Dual objectives of the study of monopoly
Type: Application
6. A monopolist is:
A) any firm realizing all existing economies of scale.
B) any firm whose demand curve is downward sloping.
C) any firm which can engage in price discrimination.
D) a one-firm industry.
Ans: D Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 193-194 Subtopic: Barriers to entry Type: Definition
7. Barriers to entering an industry:
A) are justified because they result in allocative efficiency.
B) are justified because they result in productive efficiency.
C) are the basis for monopoly.
D) apply only to ly monopolistic industries.
Ans: C Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 193-194 Subtopic: Barriers to entry Type: Application
8. Which of the following is not a barrier to entry?
A) patents
B) X-inefficiency
C) economies of scale
D) ownership of essential resources
Ans: B Level: Easy Main Topic: 8.1 Characteristics of monopoly
Page: 194-195 Subtopic: Barriers to entry Type: Application
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