Practice Test on Monopoly with Solutions

In Brief

This page includes solutions to the set of questions related to the Monopoly including competitive firms, characteristic of a competitive market,
What price will the monopolist charge?, How much output will the monopolist produce,
and profit-maximizing monopolist.
This helps learners to ensure their learning on aspects of economics in general but also Monopoly in particular.

Question 1:

1. A competitive firm is a price maker, whereas a monopolist is a price taker.
2. Both a competitive firm and a monopolist are price makers.
3. A competitive firm is a price taker, whereas a monopolist is a price maker.
4. Both a competitive firm and a monopolist are price takers.
5. 1 and 2

Question 2:

1. one buyer
2. barriers to entry.
3. one seller.
4. a product without close substitutes.
5. 2 and 3

Question 3:

1. Free entry is limited.
2. Each firm chooses an output level that maximizes profits.
3. Each firm sells a virtually identical product.
4. Buyers and sellers are price takers.

Question 4:

1. hiring marketing experts to increase consumers' brand loyalty.
2. pricing above marginal cost.
3. selling the same good at different prices to different customers.
4. bundling related products to increase total sales.

Question 5:

1. Teresa charges a higher price than his competitors for his house-cleaning services.
2. Mary offers free counseling services on Sunday afternoons as a form of advertising. .
3. Lisa obtains a copyright for the new financial application that she invented .
4. Joe charges a lower price than his competitors for his airport pickup services.

Question 6:

1. H
2. G
3. F
4. D
5. C
6. B
7. A

Question 7:

1. H
2. G
3. F
4. D
5. C
6. B
7. A
8. L
9. K
10. J
11. O

Question 8:

1. (P4 − P3) × Q2
2. (P4 − P2) × Q2.
3. P3 × Q4.
4. P4 × Q2
5. none of the above

Question 9:

1. (P4 − P3) × Q4
2. (P4 − P2) × Q2.
3. (P5 − P0) × Q1
4. P4 × Q2
5. (P4 − P1) × Q3

Question 10:

1. patents.
2. copyright.
3. free entry.
4. ownership of a key resource by a single firm.
5. none of the above

Question 11:

1. $300
2. $165.
3. $135
4. $100.