[Solved] Monopoly MCQ [Free PDF] - Objective Question Answer for Monopoly Quiz - Download Now! (2024)

1. concentration of ownership of raw material
2. legal protection
3. state regulation
4. All of these
5. None of the above

The correct answer isAll of the above

Key Points

The various reasons for the emergence of Monopoly are:

1. Government licensing:

• By not granting licenses to new firms, the government aims to assure that only one firm operates in the market.

2. Patent Rights:

• As a reward for their risk and investment in research, government grants some private companies patent rights.
• The period for which patent rights are granted is known as patent life.

3. Cartel:

• Under cartel, some firms retain their individual identities but coordinate their output and pricing policies in order to act as a monopoly.
• The firms agree among themselves to restrict their total output to the level that maximizes their joint profits.

4. Control on raw materials:

• Monopoly also arises due to sole ownership or control of certain essential raw materials needed in a particular industry.

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Two Sellers and two buyers
2. Two Sellers and Single buyer
3. Single Seller and Single buyer
4. Single Seller and two buyers
5. Not Attempted

The correct answer isSingle seller and Single buyer

Key Points

• A bilateral monopoly exists when a market hasonly one supplier and one buyer.
• The one supplier will tend to act as monopoly power and look to charge high prices to the one buyer.
• The lone buyer will look towards paying a price that is as low as possible.
• Sinceboth parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides' points of maximum profit.
• This climate can exist whenever there is a small contained market, which limits the number of players, or when there are multiple players but the costs to switch buyers or sellers is prohibitively expensive.
• One example occurs when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Monopoly
2. Monopolistic
3. Monopsony
4. Oligopoly
5. None of These

The correct answer is Monopsony.

Key Points

• A monopsony occurs when a firm has market power in employing factors of production. It means there are one buyer and many sellers.
• When the market is under a monopsony, the market is dominated by a single buyer while, in the case of monopoly, a single seller is seen in the market.
• An example of a monopsony is a company coal town, where the coal company acts as the sole employer.

Additional Information

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Two Sellers and two buyers
2. Two Sellers and Single buyer
3. Single Seller and Single buyer
4. Single Seller and two buyers

The correct answer isSingle seller and Single buyer

Key Points

• A bilateral monopoly exists when a market hasonly one supplier and one buyer.
• The one supplier will tend to act as monopoly power and look to charge high prices to the one buyer.
• The lone buyer will look towards paying a price that is as low as possible.
• Sinceboth parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides' points of maximum profit.
• This climate can exist whenever there is a small contained market, which limits the number of players, or when there are multiple players but the costs to switch buyers or sellers is prohibitively expensive.
• One example occurs when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).

Get Started for Free

Trusted by 5.4 Crore+ Students

1. elasticity
2. marginal revenue and price
3. marginal cost and price
4. price and average cost

The correct answer iselasticity

Key PointsProfessor J. Robinson states that:

• "Monopoly power’s elasticity will depend upon many factors, of which the chief is the number of other firms selling the same commodity and the degree to which substitution is possible, from the point of view of buyers, between the output of other firms and the output of the firm in question. If there are few or no other firms producing closely similar commodities, the distribution of wealth among buyers, the conditions of supply of rival commodities, the conditions of supply of jointly-demanded commodities, and all the innumerable factors which affect the demand for any one commodity will influence the demand curve for the individual producer’."

Get Started for Free

Trusted by 5.4 Crore+ Students

Monopoly Question 6

1. Monopoly
2. Monopolistic
3. Monopsony
4. Oligopoly

Monopoly Question 6 Detailed Solution

The correct answer is Monopsony.

• A monopsony occurs when a firm has market power in employing factors of production. It means there are one buyer and many sellers.
• When the market is under a monopsony, the market is dominated by a single buyer while, in the case of monopoly, a single seller is seen in the market.
• An example of a monopsony is a company coal town, where the coal company acts as the sole employer.

Additional Information

Get Started for Free

Trusted by 5.4 Crore+ Students

Monopoly Question 7

1. Earning net profit in all possible situations.
2. Lower output at a higher cost in a normal profit situation
3. Charging different prices from different categories of buyers of the same product
4. Attempting to stall entry of other firms in the market

Monopoly Question 7 Detailed Solution

Determining the Social Cost of Monopoly

1. The result of having a monopolistic market as opposed to a competitive market is restricted output and a higher price.
2. Monopoly creates a social cost, called a deadweight loss, because some consumers who would be willing to pay for the product up to its marginal cost (MC), are not served.
3. In a monopoly, there is no supply curve because monopolists are price setters and not price takers. In the graph below, the MC curve is not the firm’s supply curve. In a competitive market, firms have to passively take the market price as given. The supply curve describes the quantities they will put on the market at any given price. If the firm is a monopoly it does not need that information because it is setting the price.

• In a competitive market, marginal cost tells us the social cost of producing a product, and the demand curve tells us the social benefit of producing the product. The competitive price/output is determined where marginal cost intersects the demand curve, as on the left.

• Monopolist restricts the output to the point at which MC = MR and increases the price to what the market will bear. The result of a monopoly is restricted output and higher price.

Therefore, the monopoly involves social cost mainly due to its emphasis on lower output at a higher cost in a normal profit situation.

Get Started for Free

Trusted by 5.4 Crore+ Students

Monopoly Question 8

1. Two Sellers and two buyers
2. Two Sellers and Single buyer
3. Single Seller and Single buyer
4. Single Seller and two buyers

Monopoly Question 8 Detailed Solution

The correct answer isSingle seller and Single buyer

Key Points

• A bilateral monopoly exists when a market hasonly one supplier and one buyer.
• The one supplier will tend to act as monopoly power and look to charge high prices to the one buyer.
• The lone buyer will look towards paying a price that is as low as possible.
• Sinceboth parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides' points of maximum profit.
• This climate can exist whenever there is a small contained market, which limits the number of players, or when there are multiple players but the costs to switch buyers or sellers is prohibitively expensive.
• One example occurs when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Monopoly
2. Monopolistic
3. Monopsony
4. Oligopoly

The correct answer is Monopsony.

• A monopsony occurs when a firm has market power in employing factors of production. It means there are one buyer and many sellers.
• When the market is under a monopsony, the market is dominated by a single buyer while, in the case of monopoly, a single seller is seen in the market.
• An example of a monopsony is a company coal town, where the coal company acts as the sole employer.

Additional Information

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Earning net profit in all possible situations.
2. Lower output at a higher cost in a normal profit situation
3. Charging different prices from different categories of buyers of the same product
4. Attempting to stall entry of other firms in the market

Determining the Social Cost of Monopoly

1. The result of having a monopolistic market as opposed to a competitive market is restricted output and a higher price.
2. Monopoly creates a social cost, called a deadweight loss, because some consumers who would be willing to pay for the product up to its marginal cost (MC), are not served.
3. In a monopoly, there is no supply curve because monopolists are price setters and not price takers. In the graph below, the MC curve is not the firm’s supply curve. In a competitive market, firms have to passively take the market price as given. The supply curve describes the quantities they will put on the market at any given price. If the firm is a monopoly it does not need that information because it is setting the price.

• In a competitive market, marginal cost tells us the social cost of producing a product, and the demand curve tells us the social benefit of producing the product. The competitive price/output is determined where marginal cost intersects the demand curve, as on the left.

• Monopolist restricts the output to the point at which MC = MR and increases the price to what the market will bear. The result of a monopoly is restricted output and higher price.

Therefore, the monopoly involves social cost mainly due to its emphasis on lower output at a higher cost in a normal profit situation.

Get Started for Free

Trusted by 5.4 Crore+ Students

1. concentration of ownership of raw material
2. legal protection
3. state regulation
4. All of these

The correct answer isAll of the above

Key Points

The various reasons for the emergence of Monopoly are:

1. Government licensing:

• By not granting licenses to new firms, the government aims to assure that only one firm operates in the market.

2. Patent Rights:

• As a reward for their risk and investment in research, government grants some private companies patent rights.
• The period for which patent rights are granted is known as patent life.

3. Cartel:

• Under cartel, some firms retain their individual identities but coordinate their output and pricing policies in order to act as a monopoly.
• The firms agree among themselves to restrict their total output to the level that maximizes their joint profits.

4. Control on raw materials:

• Monopoly also arises due to sole ownership or control of certain essential raw materials needed in a particular industry.

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Two Sellers and two buyers
2. Two Sellers and Single buyer
3. Single Seller and Single buyer
4. Single Seller and two buyers

The correct answer isSingle seller and Single buyer

Key Points

• A bilateral monopoly exists when a market hasonly one supplier and one buyer.
• The one supplier will tend to act as monopoly power and look to charge high prices to the one buyer.
• The lone buyer will look towards paying a price that is as low as possible.
• Sinceboth parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides' points of maximum profit.
• This climate can exist whenever there is a small contained market, which limits the number of players, or when there are multiple players but the costs to switch buyers or sellers is prohibitively expensive.
• One example occurs when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).

Get Started for Free

Trusted by 5.4 Crore+ Students

1. elasticity
2. marginal revenue and price
3. marginal cost and price
4. price and average cost

The correct answer iselasticity

Key PointsProfessor J. Robinson states that:

• "Monopoly power’s elasticity will depend upon many factors, of which the chief is the number of other firms selling the same commodity and the degree to which substitution is possible, from the point of view of buyers, between the output of other firms and the output of the firm in question. If there are few or no other firms producing closely similar commodities, the distribution of wealth among buyers, the conditions of supply of rival commodities, the conditions of supply of jointly-demanded commodities, and all the innumerable factors which affect the demand for any one commodity will influence the demand curve for the individual producer’."

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Monopoly
2. Monopolistic
3. Monopsony
4. Oligopoly
5. None of These

The correct answer is Monopsony.

Key Points

• A monopsony occurs when a firm has market power in employing factors of production. It means there are one buyer and many sellers.
• When the market is under a monopsony, the market is dominated by a single buyer while, in the case of monopoly, a single seller is seen in the market.
• An example of a monopsony is a company coal town, where the coal company acts as the sole employer.

Additional Information

Get Started for Free

Trusted by 5.4 Crore+ Students

1. Two Sellers and two buyers
2. Two Sellers and Single buyer
3. Single Seller and Single buyer
4. Single Seller and two buyers
5. Not Attempted

The correct answer isSingle seller and Single buyer

Key Points

• A bilateral monopoly exists when a market hasonly one supplier and one buyer.
• The one supplier will tend to act as monopoly power and look to charge high prices to the one buyer.
• The lone buyer will look towards paying a price that is as low as possible.
• Sinceboth parties have conflicting goals, the two sides must negotiate based on the relative bargaining power of each, with a final price settling in between the two sides' points of maximum profit.
• This climate can exist whenever there is a small contained market, which limits the number of players, or when there are multiple players but the costs to switch buyers or sellers is prohibitively expensive.
• One example occurs when a labor union (a monopolist in the supply of labor) faces a single large employer in a factory town (a monopsonist).

Get Started for Free

Trusted by 5.4 Crore+ Students