A Monopoly Differs from Monopolistic Competition in That

question 8

Multiple Choice

A monopoly differs from monopolistic competition in that

• A) a monopoly has market power while a firm in monopolistic competition does not have any market power.
• B) a monopoly can never incur a loss, but a firm in monopolistic competition can.
• C) in a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure.
• D) a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

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Definitions:

Hurdle Rate

The minimum return rate on an investment required by an investor or manager, often used in capital budgeting.

Internal Rate

Short for Internal Rate of Return (IRR), a metric used in capital budgeting to estimate the profitability of potential investments.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows.

Useful Life

The estimated lifespan of a fixed asset, during which it can be expected to contribute to company operations.