Monopoly Market Characteristics Quiz

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Why might a monopoly firm choose to sustain losses for a long period of time through price wars or massive advertisement campaigns?

To lower production costs

To deter competition (correct)

To increase market share

To maximize consumer surplus

In what situation would long-run average costs (LRAC) be lower under a monopoly than if an industry was shared between competitors?

Perfect competition

Oligopoly

Monopolistic competition

Natural monopoly (correct)

What term is used to describe the situation where a monopoly produces at a lower quantity and higher price than a competitive market, resulting in societal welfare losses?

Total revenue loss

Consumer surplus

Deadweight loss (correct)

Producers' surplus

Why do governments often intervene with legislation to limit the ability of firms to form monopolies?

To promote competition and protect consumer interests Signup and view all the answers

What is the term that describes the situation where a monopoly could produce at a lower price but does not do so, leading to inefficiency?

X-inefficiency Signup and view all the answers

What is a key characteristic of a monopoly market?

There is a barrier to entry Signup and view all the answers

What type of barrier to entry is described as resulting from the industry being more efficient?

Natural barrier Signup and view all the answers

Which deliberate action is taken by a monopolist to deter new entrants?

Limit pricing Signup and view all the answers

What do switching costs refer to in terms of barriers to entry?

Costs of searching for new suppliers Signup and view all the answers

What advantage could a monopolist have due to control of key inputs or economies of scope?

Absolute cost advantages Signup and view all the answers

Monopoly Market Characteristics Quiz

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Questions and Answers

Why might a monopoly firm choose to sustain losses for a long period of time through price wars or massive advertisement campaigns?

In what situation would long-run average costs (LRAC) be lower under a monopoly than if an industry was shared between competitors?

What term is used to describe the situation where a monopoly produces at a lower quantity and higher price than a competitive market, resulting in societal welfare losses?

Why do governments often intervene with legislation to limit the ability of firms to form monopolies?

What is the term that describes the situation where a monopoly could produce at a lower price but does not do so, leading to inefficiency?

What is a key characteristic of a monopoly market?

What type of barrier to entry is described as resulting from the industry being more efficient?

Which deliberate action is taken by a monopolist to deter new entrants?

What do switching costs refer to in terms of barriers to entry?

What advantage could a monopolist have due to control of key inputs or economies of scope?

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