@ maltuple question @ QUESTION 1 What is true about ‘monopoly’? Neither buyers n

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@maltuple question@

QUESTION 1

What is true about ‘monopoly’?

Neither buyers nor the seller has market power.

Only seller has market power.

Only buyers have market power.

Buyers and seller both have market power.

10 points   

QUESTION 2

Barrier to entry that is responsible for the existence of monopoly can be created by all of the following except:

Network Externalities.

Natural monopoly.

Patents.

Licensing policy of the government.

10 points   

QUESTION 3

Which of the following is NOT the case in ‘monopoly’ regarding Average and Marginal Revenue.

A monopoly firm faces declining Average Revenue and Marginal Revenue curves.

Marginal Revenue equals the price for the first unit sold.

Monopoly firm can sell additional unit only by lowering the price.

Marginal Revenue increases after reaching a certain minimum level.

10 points   

QUESTION 4

A monopoly firm’s revenue increases by raising the price under following condition.

e demand of its product is unity elastic.

The demand of its product is inelastic.

The demand of its product is elastic.

Elasticity does not matter in this regard.

10 points   

QUESTION 5

Monopoly firm’s profit maximizing output level is the one at which ______

marginal Revenue is equal to Marginal Cost.

Average Revenue is equal to Marginal Cost.

marginal Revenue is greater that Marginal Cost.

Average Revenue is equal to Average Cost.

10 points   

QUESTION 6

Which of the following will necessarily be the case under ‘monopoly’ if compared to perfect competition?

Quantity will be high but price will be low.

Quantity sold will be less, price will be higher.

Quantity sold and price both will be low.

Quantity sold and Price both will be higher.

10 points   

QUESTION 7

Discriminatory monopoly means:

Selling the same goods to some consumers cheaper for their being permanent customer.

Selling the same good to the different sets of consumers at different price.

Selling the different quality of the same goods to different set of consumers.

Selling different goods to different consumers at different price.

10 points   

QUESTION 8

Discriminatory monopoly is NOT possible without the existence of ______

Market power.

Different consumer groups with no information exchange.

Impossibility of re-sale.

All of the above.

10 points   

QUESTION 9

Social cost of the monopoly is indicated by:

Government’s inability to tax a monopolist.

Monopoly firms never carry out corporate’s social responsibilities.

A monopoly firm always selling substandard products.

Deadweight loss associated with it.

10 points   

QUESTION 10

In the figure below ‘deadweight loss is represented by area:

‘D’ alone

‘B’ alone.

A, B, and D taken together.

‘A’ only

10 points   

QUESTION 11

A monopoly firm engaged in discrimination between two markets sells cheaper in the market in which demand is ______

Inelastic

Unitary elastic

Elastic

Demand curve is rectangular parabola.

10 points   

QUESTION 12

‘Network externalities’ implies:

Value of a product to consumer decreases with the number of other consumers using it.

None of the above.

Value of a product to consumer increases with the number of other consumers using it.

Value of a product to consumer remains unchanged with the number of other consumers using it.

10 points   

QUESTION 13

‘Natural monopoly’ means:

A market in which the economies of scale in production are so large that only a single large firm can earn a profit.

Nature of the product is such that it cannot be produced by more than one firm.

A market in which demand is so short that not more than one firm can profitably operate.

A firm marketing a product which is endowed by nature.

10 points   

QUESTION 14

What is NOT true about ‘patents’?

Patent is granted to a firm that discovers something novel by spending on research.

Patents incentivizes the research and development.

Modification over the patented product cannot be done.

Patents create monopoly.

10 points   

QUESTION 15

What is NOT true about Average Revenue curve of a monopoly firm?

It remains constant.

represents average revenue to be higher than marginal revenue at each level of output except the first unit.

It always slops down ward.

It is same as the market demand curve of its product.

10 points   

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Neither buyers nor the seller has market power.

Only seller has market power.

Only buyers have market power.

Buyers and seller both have market power.

Explanation / Answer

Question 1

Monopoly refers to a market structure in which there is only one seller.

Entire market is served by a single seller. So, seller has the entire market power.

The correct answer is the option (2).

Question 2

Factors responsible for existence of monopoly are as follows -

1. Occurence of natural monopoly due to decline of average cost of production over a large range of output.

2. Issuance of patent to a firm that gives it exclusive right to produce the good.

3. Government giving license to a single firm to operate in the market.

These factors create strong barriers to entry.

Network externalities does not create barriers to entry that leads to existence of monopoly.

The correct answer is the option (1).

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