Question

Which of the following is true about a monopoly?

Its demand curve is generally less elastic than in more competitive markets.

It will always earn economic profit.

It will always produce the same as a perfectly competitive firm.

If a perfectly competitive firm incurs an economic loss, it should

		shut down immediately.
		try to raise its price.
		shut down in the long run.
		shut down if this loss exceeds fixed cost.

It will always be subject to government regulation. None of these is true.

Which is a required characteristic of a perfectly competitive industry?

		There are few firms so that none can influence market price.
		Products are highly differentiated.
		Barriers to entry are high.
		None of these

Answer 1

1) lts Demand curve is less elastic than in more competitive profits.

( In a monopoly market, there is only a single seller of the commodity. So seller is the price maker. Buyers will buy even if the price is high. Thus, responsiveness of quantity demanded to price is low. Result is less elastic demand curve.)

2) None of this is true.

( If a perfectly competitive firm experiences economic loss, it can continue its operations as long as the price can cover variable costs. But the firm should shut down immediately if the price is lesser than the variable cost.)

3) None of these.

( Given characteristics refer to oligopoly, monopolistic competition and monopoy respectively.)