Question

1.    One feature of pure monopoly is that the demand curve
    a.    is vertical
    b.    is horizontal
    c.    slopes upward
    d.    slopes downward


2.    Natural monopolies result from
    a.    copyrights
    b.    patents
    c.    extensive economies of scale in production
    d.    control over an essential natural resource


3.    Consumers who clip and redeem discount coupons
    a.    exhibit more price elasticity of demand for a given product than consumers who do not clip and redeem coupons
    b.    exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons
    c.    exhibit less price elasticity of demand for a given product than consumers who do not clip and redeem coupons    
    d.    cause total revenue to decrease for firms that issue coupons for their products


4.     Assume the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as
    a.    diseconomies of scale in production
    b.    rent seeking
    c.    socially optimal pricing
    d.    perfect price discrimination

Answer 1

Question 1

A pure monopoly has market power to set prices.

However, it cannot sell as much as it can at the price set by it.

In order to sell more, it have to lower the price.

So, in a way, monopoly faces downwardr sloping demand curve.

Thus, one feature of pure monopoly is that the demand curve slopes downward.

Hence, the correct answer is the option (d).

Question 2

Natural monopoly refers to the firm whose average cost declines over a large range of output.

Due to this, the firm becomes able to met the entire market demand at the lowest possible price.

So, natural monopolies results from extensive economies of scale in production.

Hence, the correct answer is the option (c).