Chapter 6 – Practice Exam Questions

Chapter 6 – Essay questions

1. Illustrate and explain why a pure monopoly will continue to realise
super normal profits in both the short run and long run. Do you agree
with such a firm? (Explain your answer)

a) What is a monopolistic market structure and what are the

necessary assumptions for it to exist?

b) Illustrate and explain the short run and long position of a profit
maximisation monopolistic firm and discuss why a monopolistic
firm may actually only realise normal profits in the long.

2. Using the ‘Kinked demand curve’, illustrate and explain short run and
long run profit maximising output for oligopolistic firms.

3. What is a contestable market and why might it be seen as being the

most effective market structure?
Chapter 6 - Short answer questions

1. What is imperfect competition and what are the different forms of

imperfect competition in economics?

2. Illustrate and explain why a monopoly firm will always make excessive
profits in both the SR and LR.

3. ‘Which is better competition or monopoly’? Using economic discuss

this question.

4. What is a discriminating monopoly and how can this help increase

profitability?

5. What is a monopolistic firm and how do its profits fair in both the SR
and LR?

6. What is an oligopoly and why is this industry characterised with a

‘kinked demand curve’?
Chapter 6 – Graphing tool questions

1. What is the minimum efficient scale? Illustrate it below.

2. Illustrate both the SR and LR profit maximising position of pure

monopoly.

P, C

Q
3. On the following diagram compare a monopoly with a perfect
competitively firm.

P, C

4. A discriminating monopoly is one which charges different prices to

different buyers. Illustrate below a discriminating monopoly.

P, C

Q
5. Illustrate both the SR and LR profit maximising position for a
monopolistic firm.

P, C

6. In an oligopoly market, firms can maximise their profits through

collusion. Using the Kinked demand curve illustrate this very point.

P, C