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Free Practice Quiz Question List

3 Monopoly and Market Power Online Quiz Questions

Use this free practice quiz with 20 questions to review 3 Monopoly and Market Power, test your knowledge, and prepare for your next test or exam.

20 questions
01
True or false
1 point

A firm with market power generally faces a downward-sloping demand curve, so selling more usually requires lowering its price.

  1. A

    True

  2. B

    False

02
Choose one
1 point

A seller offers customers lower per-unit prices for larger purchases, and customers choose whether to buy more. Which form of price discrimination does this illustrate?

  1. A

    Charging students less than other identifiable customers

  2. B

    Offering quantity discounts that customers can choose to use

  3. C

    Charging each buyer a personalized price close to their willingness to pay

  4. D

    Charging the same price to every buyer

03
Fill in the blank
1 point

In third-degree price discrimination, a seller charges different prices to different of customers.

04
Choose one
1 point

Which situation meets the definition of price discrimination?

  1. A

    Charging different prices for different products, even when their costs differ

  2. B

    Charging all customers the same price despite differences in their willingness to pay

  3. C

    Charging different prices for the same product when differences in serving costs do not explain the price differences

  4. D

    Charging a price above marginal cost

05
Written response
1 point

What is the economic term for the gap between a firm's price and its marginal cost?

06
Choose one
1 point

Which sequence describes the profit-maximizing choice for a single-price monopolist?

  1. A

    Choose any price and quantity independently, then calculate marginal revenue

  2. B

    Choose output where marginal revenue equals marginal cost, then read the price from the demand curve

  3. C

    Set price equal to average total cost, then choose output

  4. D

    Choose output where price equals average total cost, then set price equal to marginal cost

07
True or false
1 point

If a monopolist chooses output where marginal revenue equals marginal cost, it is guaranteed to earn an economic profit.

  1. A

    True

  2. B

    False

08
Choose all
1 point

Under the usual assumptions of the basic single-price monopoly model, which statements are correct? Select all that apply.

  1. A

    Monopoly output is below the efficient output

  2. B

    The monopoly price exceeds marginal cost

  3. C

    All surplus transferred from consumers to the firm is deadweight loss

  4. D

    The MR = MC rule guarantees positive economic profit

09
Fill in the blank
1 point

Suppose demand is P=100−QP = 100 - Q and marginal cost is constant at 2020 dollars. For a profit-maximizing monopolist, MR=100−2QMR = 100 - 2Q. The chosen quantity is Q=Q = , and the corresponding price is dollars.

10
Choose one
1 point

A seller can identify two customer groups and their demands differ in price elasticity. Under third-degree price discrimination, and all else equal, which group will generally face the higher price?

  1. A

    The group with more elastic demand generally faces the higher price

  2. B

    The group with less elastic demand generally faces the higher price

  3. C

    Both groups must pay the same price

  4. D

    The price difference must be explained by different costs of serving the groups

11
Choose all
1 point

Which conditions can help a firm increase profit through price discrimination? Select all that apply.

  1. A

    The firm has market power

  2. B

    The firm can distinguish customer groups or purchase choices

  3. C

    The firm can limit resale from lower-price buyers to higher-price buyers

  4. D

    The firm must charge a different price to every single customer

12
Open ended
1 point

Compare the welfare effects of uniform monopoly pricing with idealized perfect first-degree price discrimination. Explain how output, deadweight loss, and the distribution of surplus may differ, and why a rise in seller profit alone does not establish that total welfare has increased.

13
True or false
1 point

A firm charges a price above marginal cost. That fact alone is sufficient to establish that it is a legally defined monopolist.

  1. A

    True

  2. B

    False

14
Choose one
1 point

Which statement best describes market power?

  1. A

    The firm’s ability to sell any quantity at the market price

  2. B

    The firm’s ability to influence the price it charges

  3. C

    The firm’s legal status as the only seller in a market

  4. D

    The firm’s ability to set price without considering buyer demand

15
Choose one
1 point

Which procedure describes how a profit-maximizing monopolist chooses its price and output?

  1. A

    Choose price equal to marginal cost, then use demand to determine output

  2. B

    Choose the highest possible price, regardless of how many units sell

  3. C

    Choose output where marginal revenue equals marginal cost, then read the price from demand

  4. D

    Choose output where price equals average total cost, then set price equal to marginal revenue

16
Choose one
1 point

A monopolist chooses output where MR=MC\text{MR}=\text{MC}, but the price read from demand is below average total cost at that output. What follows?

  1. A

    The firm can still make an economic loss if price is below average total cost

  2. B

    The firm must earn an economic profit because marginal revenue equals marginal cost

  3. C

    The firm must break even because price equals marginal cost

  4. D

    The firm’s profit is guaranteed to be zero because marginal revenue is below price

17
Choose one
1 point

A firm offers several service plans at different prices and lets customers choose among them. Which form of price discrimination does this illustrate?

  1. A

    First-degree price discrimination

  2. B

    Third-degree price discrimination

  3. C

    Uniform pricing

  4. D

    Second-degree price discrimination

18
Written response
1 point

A monopolist faces demand P=100−QP=100-Q and constant marginal cost MC=20\text{MC}=20. Its marginal revenue is MR=100−2Q\text{MR}=100-2Q. What output maximizes profit? Enter the answer as a number of units.

19
Written response
1 point

In a single-price monopoly model, competitive output is 8080 units and monopoly output is 4040 units. Over those units, demand falls from 6060 dollars to the constant marginal-cost level of 2020 dollars. What is the deadweight loss? Enter the dollar amount as a number only.

20
Written response
1 point

Under idealized first-degree price discrimination, each buyer pays close to their willingness to pay. How much consumer surplus remains with buyers?