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AP Microeconomics Practice Quiz: Monopoly

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 10 questions to check your progress.

Question 1 of 10

The primary reason a single firm can operate as a monopoly in a market is due to the presence of

All Questions (10)

The primary reason a single firm can operate as a monopoly in a market is due to the presence of

A) a perfectly elastic demand curve.

B) significant barriers to entry.

C) a large number of consumers.

D) a product with many close substitutes.

Correct Answer: B

According to the provided content, 'A monopoly exists because of barriers to entry.' These barriers prevent potential competitors from entering the market, allowing a single firm to dominate.

To determine its profit-maximizing level of output, a monopolist will produce the quantity at which

A) marginal revenue equals marginal cost.

B) price equals marginal cost.

C) average total cost is minimized.

D) total revenue is maximized.

Correct Answer: A

The provided text explicitly states that the 'equilibrium (profit-maximizing) quantity is determined by equating marginal revenue (MR) to marginal cost (MC).'

For a single-price monopolist operating at its profit-maximizing quantity, which of the following relationships is correct?

A) Price = Marginal Cost

B) Price < Marginal Cost

C) Price > Marginal Cost

D) Price = Marginal Revenue

Correct Answer: C

The content specifies that for a monopoly at its equilibrium, 'The price charged is greater than the marginal cost.' This is a key distinction from perfectly competitive markets.

A market is considered a natural monopoly when

A) the firm owns a key natural resource.

B) the government grants an exclusive patent to a single firm.

C) a single firm experiences economies of scale over the entire range of market demand.

D) marginal revenue is always positive for the firm.

Correct Answer: C

The provided text defines a natural monopoly as a situation where 'long-run economies of scale for a single firm exist throughout the entire effective demand of its product.' This means the firm's average cost decreases as it expands to supply the whole market.

On a graph of a monopoly, the area of deadweight loss represents

A) the total profit earned by the monopolist.

B) the transfer of surplus from consumers to the producer.

C) the total cost of production for the firm.

D) the net loss of total surplus because the monopolist produces less than the socially optimal quantity.

Correct Answer: D

Deadweight loss in a monopoly market is the loss of economic efficiency (consumer and producer surplus) that occurs when the monopolist restricts output to maximize profit, resulting in a quantity that is less than the socially optimal level.

A monopolist produces 200 units, which is the profit-maximizing quantity where MR = MC. At this quantity, the price is $50 and the average total cost is $35. What is the firm's total profit?

A) $15

B) $3,000

C) $7,000

D) $10,000

Correct Answer: B

Profit is calculated as (Price - Average Total Cost) × Quantity. Using the given data: ($50 - $35) × 200 = $15 × 200 = $3,000.

On a standard graph for a single-price monopoly, consumer surplus is the area

A) below the demand curve and above the price charged by the monopolist.

B) below the price and above the marginal cost curve.

C) between the marginal revenue and marginal cost curves.

D) representing the monopolist's total profit.

Correct Answer: A

Consumer surplus is the difference between the maximum price consumers are willing to pay (represented by the demand curve) and the actual price they pay. On a graph, this is the area under the demand curve and above the monopoly price, up to the quantity sold.

After a monopolist identifies the profit-maximizing quantity of output where marginal revenue equals marginal cost, how does it determine the price to charge?

A) It sets the price equal to the marginal cost at that quantity.

B) It finds the price on the demand curve that corresponds to that quantity.

C) It sets the price equal to the average total cost at that quantity.

D) It finds the price on the marginal revenue curve that corresponds to that quantity.

Correct Answer: B

The firm's decision-making process involves first finding the quantity where MR=MC. Then, to find the highest price consumers are willing to pay for that specific quantity, the firm refers to its demand curve.

The existence of long-run economies of scale in a natural monopoly implies that as the firm's output increases, its

A) long-run average total cost decreases.

B) long-run marginal cost must be greater than its average cost.

C) total revenue will eventually decrease.

D) profit per unit remains constant.

Correct Answer: A

The term 'economies of scale' directly refers to the phenomenon where a firm's long-run average total cost falls as it increases production. This is the defining cost structure of a natural monopoly.

Assume a monopolist is producing at a profit-maximizing output of 10 units and charging a price of $40. At this output, its marginal cost is $20. The allocatively efficient output level is 15 units, where the price would be $30. What is the value of the deadweight loss created by this monopoly?

A) $50

B) $100

C) $150

D) $200

Correct Answer: A

Deadweight loss is the area of the triangle formed by the monopoly outcome and the efficient outcome. The height of the triangle is the difference between the monopoly price and marginal cost at the monopoly quantity ($40 - $20 = $20). The base of the triangle is the difference between the efficient quantity and the monopoly quantity (15 - 10 = 5). The area is (1/2) * base * height = (1/2) * 5 * $20 = $50.