39. If you are the only seller of gasoline in a smaller town or community, your

Question

39. If you are the only seller of gasoline in a smaller town or community, your monopoly would result from:
A) sunk costs.
B) location.
C) economies of scale.
D) government restrictions.

40. An expenditure that has already been made that cannot be recovered is a(n):
A) sunk cost.
B) accounting outlay.
C) indirect expense.
D) economy of scale.

41. Suppose that your firm has spent several decades establishing a well-known brand name through advertising. If other firms are prevented from entering your industry because of high advertising expense, your monopoly would result from:
A) sunk costs.
B) location.
C) economies of scale.
D) government restrictions.

42. A restricted-input monopoly is most likely to result if a single firm:
A) is the only seller in a small town or community.
B) is investor owned, but granted the exclusive right by the government to operate in a market.
C) experiences long-run increasing economies of scale over a wide range of output.
D) has gained control over a strategic factor of production.

Explanation / Answer

Because the monopoly is created by the small-town location, the answer to 39 would be B, location. Question 40 is simply the definition of A, a sunk cost. Because it is difficult for new firms to enter due to high costs, the answer to 41 is C, economies of scale. A restricted-input monopoly, as referenced in 43, is a monopoly because they have a unique access to a key input. Thus, D is the answer.

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