Macroeconomics Principles and Policy 11th Edition by William J. Baumol – Test Bank

Chapter 11—Monopoly

TRUE/FALSE

1. A pure monopoly is defined as having only one seller.

ANS: T PTS: 1 DIF: Easy NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

2. Monopolies are always large firms with great economies of scale.

ANS: F PTS: 1 DIF: Moderate NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

3. Pure monopoly is able to exist because the firm’s product is better than the substitutes that are available in the market.

ANS: F PTS: 1 DIF: Moderate NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

4. Pure monopoly is not studied because of its descriptive realism, but because it is a stepping stone toward more realistic models.

ANS: T PTS: 1 DIF: Easy NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

5. Pure monopoly markets are very common in the real world.

ANS: F PTS: 1 DIF: Easy NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

6. Under monopoly, resources are allocated as efficiently as in perfect competition.

ANS: F PTS: 1 DIF: Easy NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

7. The two basic reasons why a monopoly exists are barriers to entry and cost advantages.

ANS: T PTS: 1 DIF: Moderate NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

8. The key element in preserving a monopoly is keeping rivals out of the market.

ANS: T PTS: 1 DIF: Easy NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

9. Owning a patent can provide a firm with monopolistic power.

ANS: T PTS: 1 DIF: Easy NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

10. There exist only two causes of monopoly: barriers to entry and government restrictions.

ANS: F PTS: 1 DIF: Moderate NAT: Analytic
LOC: Monopoly TOP: Monopoly Defined

11. Control of a scarce resource or input can serve as an entry barrier.

ANS: T PTS: 1 DIF: Easy NAT: Analytic
LOC: Scarcity, tradeoffs, and opportunity cost TOP: Monopoly Defined