Micro Unit Vocab

Pure Monopoly

a market structure where one company is the single source for a product and there are no close substitutes for the product available. Pure monopolies are relatively rare. In order for a provider to maintain a pure monopoly, there must be barriers preventing competitors from entering the market.

Natural Monopoly

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

Which is a barrier to entry? A. Patents B. Revenue maximization C. Profit maximization D. Elastic product demand

A

What do economies of scale, the ownership of essential raw materials, and patents have in common? A. They must all be present before price discrimination can be practiced. B. They are all barriers to entry. C. They all help explain why a monopolist's demand and marginal revenue curves coincide. D. They all help explain why the long-run average cost curve is U-shaped.

B

Which assumption is part of the model of monopolistic competition? A. Firms make identical products. B. There is no collusion among firms. C. There are significant barriers to entry into the market. D. There are few buyers and sellers.

B

Which is most characteristic of a pure monopoly? A. There is a dominant firm in a multifirm industry. B. The firm produces a good or a service for which there are no close substitutes. C. The firm has considerable control over the quantity of the output produced, but not over price. D. Exit from the industry is blocked but entry into the industry is relatively easy.

B

Which would be characteristic of monopolistic competition? A. A potential for price-fixing through collusion. B. Relatively small market share for each firm. C. Mutual interdependence among the few firms. D. Product standardization.

B

The goal of product differentiation and advertising in monopolistic competition is to make: A. the firm allocatively efficient even if it is not productively efficient. B. the firm productively efficient even if it is not allocatively efficient. C. price less of a factor and product differences more of a factor in consumer purchases. D. price more of a factor and product differences less of a factor in consumer purchases.

C

The pure monopolist who is nondiscriminating must decrease price on all units of a product sold in order to sell additional units. This explains why: A. there are barriers to entry in pure monopoly. B. a monopoly has a perfectly elastic demand curve. C. marginal revenue is less than average revenue at all levels of output. D. total revenues are greater than total costs at the profit-maximizing level of output.

C

Which industry would be considered to be monopolistically competitive? A. Electronic computers. B. Electric light bulbs. C. Local dry cleaners. D. Men's slacks and jeans.

C

Monopolistic competition is characterized by firms: A. producing differentiated products. B. making economic profits in the long run. C. producing at optimal productive efficiency. D. producing where price equals marginal cost.

A

The downward-sloping demand curve of a monopolistic competitor: A. reflects product differentiation. B. becomes horizontal in the long run. C. indicates collusion among the members of the product group. D. ensures that the firm will produce at minimum average cost in the long run.

A

The monopolistically competitive seller's demand curve will become more elastic the: A. larger the number of competitors. B. greater the degree of product differentiation. C. more significant the barriers to entry. D. smaller the number of competitors.

A

Demand and marginal revenue curves are downward sloping for monopolistically competitive firms because: A. there is free entry and exit. B. product differentiation allows each firm some degree of monopoly power. C. there are a few large firms in the industry and each acts as a monopolist. D. mutual interdependence among all firms in the industry leads to collusion.

B

One difference between monopolistic competition and pure competition is that: A. products can be standardized or differentiated in pure competition. B. there is some control over price in monopolistic competition. C. monopolistic competition has significant barriers to entry. D. firms differentiate their products in pure competition.

B

One major barrier to entry under pure monopoly arises from: A. the availability of close substitutes for a product. B. ownership of essential resources. C. the price taking ability of the firm. D. diseconomies of scale.

B

The classic example of a private, unregulated monopoly is: A. Intel. B. De Beers. C. General Motors. D. General Electric.

B

The demand curve confronting a nondiscriminating pure monopolist is: A. horizontal. B. the same as the industry's demand curve. C. more elastic than the demand curve confronting a competitive firm. D. derived by vertically summing the individual demand curves competitors.

B

68. Monopolistically competitive firms are productively inefficient because production occurs where: A. marginal cost is greater than marginal revenue. B. marginal cost is less than marginal revenue. C. average total cost is greater than the minimum average total cost. D. average total cost is less than the difference between average total cost and average variable cost.

C

A major characteristic of monopolistic competition is: A. mutual interdependence. B. a high degree of collusion among firms. C. a relatively large number of firms selling the product. D. relatively easy entry into an industry but a relatively difficult exit from the industry.

C

A monopolistically competitive industry is like a purely competitive industry in that: A. each industry produces a standardized product. B. nonprice competition is a feature in both industries. C. neither industry has significant barriers to entry. D. firms in both industries face a horizontal demand curve.

C

An exclusive right granted by government for a number of years to an inventor of a product is a: A. copyright. B. franchise. C. patent. D. license.

C

In which industry is monopolistic competition most likely to be found? A. Utilities B. Agriculture C. Retail trade D. Mining

C

One defining characteristic of pure monopoly is that: A. the monopolist is a price taker. B. the monopolist uses advertising. C. the monopolist produces a product with no close substitutes. D. there is relatively easy entry into the industry, but exit is difficult.

C

The demand curve faced by a monopolistically competitive firm is: A. vertical. B. horizontal. C. highly elastic. D. highly inelastic.

C

Which market model is characterized by many firms, differentiated products, and relatively easy entry? A. Pure competition B. Pure monopoly C. Monopolistic competition D. Oligopoly

C

Which set best describes the basic features of monopolistic competition? A. Easy entry, few firms, and standardized products. B. Barriers to entry, few firms, and differentiated products. C. Easy entry, many firms, and differentiated products. D. Barriers to entry, many firms, and standardized products.

C

A feature of monopolistic competition is: A. a patent-protected product. B. homogeneous or standardized products. C. considerable control over price. D. nonprice competition.

D

A monopoly is most likely to emerge and be sustained when: A. output demand is relatively elastic. B. firms have U-shaped average total cost curves. C. fixed capital costs are small relative to total costs. D. economies of scale are large relative to market demand.

D

Monopolistically competitive firms have a: A. horizontal demand curve. B. perfectly inelastic demand curve. C. perfectly elastic demand curve. D. downward-sloping demand curve.

D

Natural monopolies result from: A. patents. B. copyrights. C. control over an essential natural resource. D. extensive economies of scale in production.

D

One feature of pure monopoly is that the demand curve: A. is vertical. B. is horizontal. C. slopes upward. D. slopes downward.

D

One feature of pure monopoly is that the monopolist is: A. a producer of products with close substitutes. B. one of several producers of a product. C. a price taker. D. a price maker.

D

The demand curve for a monopolistically competitive firm has a: A. positive slope and the marginal revenue curve has a negative slope. B. positive slope and the marginal revenue curve has a positive slope. C. negative slope and the marginal revenue curve has a negative slope. D. negative slope and the marginal revenue curve has a positive slope.

D

Under conditions of pure monopoly: A. there are close substitutes. B. there is no advertising. C. the firm is a price taker. D. entry is blocked.

D

Which is a characteristic of monopolistic competition? A. Standardized product. B. A relatively small number of firms. C. Absence of nonprice competition. D. Relatively easy entry.

D

Which is nota form of product differentiation for the monopolistically competitive firm? A. Brand names and trademarks. B. Promotion and packaging. C. Location and accessibility. D. Standard weekday and weekend hours.

D

Which phrase would be most characteristic of pure monopoly? A. Close substitutes B. Efficient advertiser C. Price taker D. Single seller

D