Question

1.

A basic condition that may give rise to a monopoly is which of the following?

		Relatively low fixed costs and relatively high variable costs
		The existence of long-lasting economies of scale
		Increasing marginal revenue
		Increasing marginal costs

2.

Which of the following will a firm find if it wants to enter a closed monopoly market?

		Moderate barriers to entry
		Major barriers to entry
		Easy entry
		No barriers to entry

3.

What is the least likely strategy of two-part pricing?

		Country clubs
		Night clubs
		Furniture stores
		Costco

4.

The most likely candidate for a monopoly is which of the following?

		General Electric, a large electronics corporation
		Your local electric company
		Sony, the sole producer of PlayStation
		Wal-Mart

Answer 1

1. A basic condition that may give rise to a monopoly is : The existence of long-lasting economies of scale.

Explanation:

The existence of long-lasting economies of scale gives rise to natural monopoly.Under it,production of goods and services expands or increases on a large scale thereby reducing the overall cost of input or the average cost,giving rise to a situation or basic condition for rise of natural monopoly.

2. A firm will find: major barriers to entry if it wants to enter a closed monopoly market.

Explanation:

A firm has to complete with and face a stiff competition with the sole dominant seller of goods present in the market of closed monopoly and therefore it has to face major barriers in order to enter the closed monopoly market.

3. The least likely strategy of two-part-pricing : furniture stores.

Explanation:

Two-part-pricing is a strategy in which a consumer is charged with both entry and usage fees.This strategy is also known as Two part Tariff strategy.Furniture stores dont charge consumers with any such fees and is therefore the least likely strategy of two-part-pricing.

4. The most likely candidate for a monopoly is: Sony,the sole producer of playstation.

Explanation:

Sony,being the sole producer of playstation is most likely candidate for a monopoly because it is the single seller of the particular product or service in the market and is the dominant producer of playstation in the market,and thus,since it satisfies the basic conditions necessary for a firm to be monopoly,it is the most likely candidate for a monopoly.