Cambridge OCR A Level · Economics - H460

Monopoly: Practice Questions

4 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on Monopoly.

7 questions14 marksFree, no account

Question 1

1 mark

Which condition must a profit-maximising monopolist satisfy to determine its equilibrium output level?

Question 2

1 mark

A natural monopoly is most likely to occur in an industry where:

Question 3

1 mark

A monopolist decides to engage in third-degree price discrimination between two markets, Market X and Market Y. If the price elasticity of demand in Market X is \( |1.5| \) and in Market Y is \( |3.0| \), which of the following strategies will maximize profit?

Question 4

1 mark

In a monopoly, what is the relationship between the firm's marginal revenue (MR) and its average revenue (AR) for all units after the first?

Question 5

2 marks

State two key characteristics of a monopoly market structure.

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Question 6

4 marks

Using the concept of allocative efficiency, explain why a monopoly is often considered to have a welfare loss compared to a perfectly competitive market.

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Question 7

4 marks

A local water company operates as a legal monopoly in a specific region due to high infrastructure costs.

(a) Explain two characteristics that define a firm as a monopoly.
(b) Using the concept of economies of scale, explain why this firm might be considered a natural monopoly.

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