Question

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 5) Monopoly is a market structure in which: A) one firm makes up the entire market. B) many firms produce differentiated products. C) many firms produce identical products. D) a few firms dominate the market. 6) A market structure in which one firm makes up the entire market is: A) perfect competition. B) an oligopoly. C) monopolistic competition. D) a monopoly. 7) The demand curve for a monopolist differs from the demand curve faced by a competitive firm because the demand curve for: A) a monopolist is the market demand curve. B) a monopolist lies below its marginal revenue curve. C) a competitive firm lies above its marginal revenue curve. D) a competitive firm is inelastic. 8) If MR > MC, a monopolist should: A) stop producing. B) maintain the same level of production. C) decrease production. D) increase production. TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 9) 9) Monopolies that exist because economies of scale create a barrier to entry are called natural monopolies.

Answer 1

Answer : 5) The answer is option A.

In monopoly market only single seller exist and sell the product. So, for monopoly market a single seller capture the whole market. Hence except option A other options are not correct. Therefore, option A is the correct answer.

6) The answer is option D.

In monopoly market only single seller exist and sell the product. So, for monopoly market a single seller capture the whole market. Hence except option D other options are not correct. Therefore, option D is the correct answer.

7) The answer is option A.

As in monopoly market only one seller exist, hence the demand curve for monopolist is the market demand curve. But the demand curve for competitive firm is not the market demand curve due to existing many sellers in this market. Hence except option A other options are not correct. Therefore, option A is the correct answer.

8) The answer is option D.

For monopoly the profit maximizing condition is MR = MC. Now if MR is greater than MC then the monopolist should produce more which will increase MC. The monopolist should increase it's production level continuously until it reaches to MR = MC condition. Hence except option D other options are not correct. Therefore, option D is the correct answer.

9) The answer is "T".

Monopolies become natural monopolies when economies of scale create entry barrier in the market. Therefore, the given statement is true.