1. A monopolist is good a. one of a large number of small firms that produce a b

Question

1. A monopolist is good a. one of a large number of small firms that produce a b. one of a small number of large firms that produce a differentiated good c. a single seller of a product with many close substitutes d. one of a small number of large firms that produce a homogeneous good e. a single seller of a product with no close substitutes 2. U.S. patent laws establish property rights for inventors of new products a. forever b. until a superior invention comes along c. for 3 years d. for 10 years e. for 20 years 3. A natural monopoly results when a firm has a. b. c. a license a patent official approval to produce a product e. exclusive use of a natural resource 4. A monopolist's demand curve is a. its marginal cost curve b. its marginal revenue curve c. identical to the market demand curve d. the same as the demand curve of a firm in perfect competition e. nonexistent 5. For a monopolist, a. P=MR=AR b, P=MR > AR c, P > MR=AR d, P=MR MR

Explanation / Answer

Question 1

Monopoly is said to exist when one firm is the sole producer or seller of a product which has no close substitutes.

So, a monopolist is a single seller of a product with no close substitutes.

The correct answer is the option (e).

Question 2

According to the US Patent Laws, property rights for inventors of new products is granted for 20 years.

The correct answer is the option (e).

Question 3

When there are significant economies of scale and as a result average cost decreases over a wide range of output that is large enough for a single firm to meet the entire market demand, natural monopoly is said to exist.

So, a natural monopoly results when a firm has decreasing average cost over the range of market demand.

The correct answer is the option (d).

Question 4

Monopolist is the sole seller. So, entire market demand is satisfied by the monopolist.

Due to this, a monopolist's demand curve is identical to the market demand curve.

The correct answer is the option (c).

Question 5

A monopolist produces that level of output at which MR equals MC as such level of output enables it to maximize profit.

However, the price is greater than MC as monopolist mark-up the price due to the market power it possess.

So, P > MR.

As we know that P equals AR, thus,

For a monopolist, P = AR > MR

The correct answer is the option (e).

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