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Test Bank for Chapter 13 Monopoly Economics: Canada in the Global Environment, 7e (Parkin) [Verified Answers]
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Economics: Canada in the Global Environment, 7e (Parkin) Chapter 13 Monopoly
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11/9/24, 9:49 AM Chapter 13 - TestbanksEconomics: Canada in the Global Environment, 7e (Parkin)
Chapter 13 Monopoly
13.1 Monopoly and How It Arises
1) An exclusive right granted to a firm to supply a good or service is
A) a licence.
B) a patent.
C) a public franchise.
D) the essential characteristic of natural monopoly.
E) an economy of scale.
Answer: C
Diff: 1
Topic: Monopoly and How It Arises
2) A natural monopoly exists when
A) the government protects the firm by granting an exclusive franchise.
B) production can take place with constant returns to scale.
C) there are no rivals in the market.
D) one firm can supply the entire market at a lower cost than two or more firms.
E) the average total cost curve is upward sloping.
Answer: D
Diff: 1
Topic: Monopoly and How It Arises
3) In a natural monopoly, the long-run average cost curve
A) is downward sloping in the relevant range of output levels.
B) is horizontal in the relevant range of output levels.
C) is upward sloping in the relevant range of output levels.
D) may be either upward sloping or downward sloping in the relevant range of output levels.
E) lies below the marginal cost curve.
Answer: A
Diff: 2
Topic: Monopoly and How It Arises
4) Which one of the following is an example of a natural barrier to entry of new firms into an
industry?
A) licensing of professions
B) economies of scale
C) issuing a patent
D) a public franchise
E) all of the above
Answer: B
Diff: 2
Topic: Monopoly and How It Arises
Source: Study Guide
1
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5) To prevent monopoly from arising, there must be
A) a single supplier of a good in the market.
B) no close substitutes for the good.
C) barriers preventing entry of other firms.
D) freedom of entry into the market.
E) economies of scale.
Answer: D
Diff: 2
Topic: Monopoly and How It Arises
6) Suppose in an industry a firm realizes economies of scale over the entire length of its LRAC
curve. In this situation, the firm is
A) a natural monopoly.
B) a fixed-cost monopoly.
C) an output-discriminating monopoly.
D) a perfect-price discriminating monopoly.
E) a constant total variable cost monopoly.
Answer: A
Diff: 2
Topic: Monopoly and How It Arises
7) Which of the following is least likely to be a natural monopoly?
A) subway services
B) electric utilities
C) water and sewer services
D) taxicab service
E) cable television services
Answer: D
Diff: 2
Topic: Monopoly and How It Arises
8) A single-price monopoly is a firm that ________ each unit of its output ________. A
________ monopoly sells different units of a good or service for different prices.
A) produces; at a constant cost; discriminatory
B) must sell; for the same price to all its customers; price-discriminating
C) produces; at a constant cost; price-discriminating
D) must sell; for the same price to all its customers; discriminatory
E) must sell; at the same price as a perfectly competitive firm; price-discriminating
Answer: B
Diff: 2
Topic: Monopoly and How It Arises
Source: MyEconLab
2
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9) Canada Post has a monopoly on residential mail delivery. Pfizer Inc. makes LIPITOR, a
prescription drug that lowers cholesterol. Rogers Communications is the sole provider of cable
television service in some parts of Ontario. The monopolies which are legal monopolies are
________.
A) only Pfizer
B) Canada Post, Pfizer, and Rogers Communications
C) Canada Post and Pfizer
D) only Canada Post
E) none of the above
Answer: C
Diff: 2
Topic: Monopoly and How It Arises
Source: MyEconLab
10) Canada Post has a monopoly on residential mail delivery. Pfizer Inc. makes LIPITOR, a
prescription drug that lowers cholesterol. Rogers Communications is the sole provider of cable
television service in some parts of Ontario. The monopolies which profit from price
discrimination are ________.
A) Canada Post and Rogers Communications
B) only Pfizer
C) only Canada Post
D) all three monopolies
E) none of the above
Answer: D
Diff: 2
Topic: Monopoly and How It Arises
Source: MyEconLab
11) A monopoly arises for two key reasons, which are ________.
A) barriers to entry and no close substitutes
B) franchises and barriers to entry
C) barriers to entry and close substitutes
D) close substitutes and no barriers to entry
E) natural and legal
Answer: A
Topic: Monopoly and How It Arises
Skill: Recognition
AACSB: Reflective Thinking
3
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, 11/9/24, 9:49 AM Chapter 13 - Testbanks
12) A monopoly is a market with a single firm that
A) produces a good or service for which no close substitute exists and which is protected by a
barrier that prevents other firms from selling that good or service.
B) purchases its factors of production from only one supplier because of a barrier preventing it
from buying from other suppliers.
C) produces a good or service for which no close substitute exists and that sells all its output to
one buyer because there is barrier preventing other buyers from purchasing the good or service.
D) cannot control the price it sets for its good or service because there is barrier that prevents the
firm from changing the price.
E) produces its good or service using labour from a single source, which is usually a union.
Answer: A
Topic: Monopoly and How It Arises
Skill: Recognition
AACSB: Reflective Thinking
13) Firms that can price discriminate between customers do so to ________.
A) increase consumer surplus
B) increase employment
C) increase economic profit
D) decrease the quantity they produce
E) increase producer surplus and deadweight loss
Answer: C
Topic: Monopoly and How It Arises
Skill: Recognition
AACSB: Reflective Thinking
4
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