Lesson 4.2.2

4.2.2 Price discrimination, natural monopoly and evaluation Quiz: OCR Economics, Unit 4

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.2.2, Price discrimination, natural monopoly and evaluation: 20 multiple choice questions for the OCR Economics (H460), Unit 4: Market structures, written with Revision Ninja.

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The 20 questions

  1. What condition is essential to prevent consumers reselling a product in price discrimination?

    • Low fixed costs
    • Perfect competition
    • No arbitrage
    • High PED

  2. Which type of price discrimination charges each individual consumer their exact maximum willingness to pay?

    • First degree
    • Second degree
    • Third degree
    • Peak-load

  3. What happens to consumer surplus under perfect first-degree price discrimination?

    • Unchanged
    • Doubles
    • Maximised
    • Reduces to zero

  4. Selling bulk discounts based on the quantity purchased is an example of which pricing strategy?

    • Second degree
    • Third degree
    • Cost-plus
    • First degree

  5. In third-degree price discrimination, which sub-market is charged a higher price?

    • Elastic demand
    • Perfectly elastic
    • Unitary elastic
    • Inelastic demand

  6. What profit-maximising condition applies across sub-markets in third-degree price discrimination?

    • Zero marginal cost
    • Equal prices
    • Equal total revenues
    • Equal marginal revenues

  7. A natural monopoly exists primarily due to which structural economic characteristic?

    • Constant LRAC
    • Low sunk costs
    • High fixed costs
    • Diseconomies of scale

  8. How does Long-Run Average Cost behave across the entire output range of a natural monopoly?

    • Continuously falls
    • Forms U-shape
    • Continuously rises
    • Stays constant

  9. If a regulator forces a natural monopoly to set price equal to marginal cost, what occurs?

    • Supernormal profit
    • Maximum profit
    • Financial loss
    • Normal profit only

  10. Which pricing policy allows a natural monopoly to break even without government subsidies?

    • Peak-load pricing
    • Marginal cost pricing
    • Average cost pricing
    • Predatory pricing

  11. What term describes the waste and inefficiency resulting from a monopoly's lack of competitive pressure?

    • Allocative inefficiency
    • Productive efficiency
    • X-inefficiency
    • Dynamic inefficiency

  12. Peak and off-peak rail ticket pricing is a real-world example of which market practice?

    • Second degree
    • Limit pricing
    • Third degree
    • First degree

  13. Which type of efficiency can monopolies potentially achieve better than perfectly competitive firms?

    • Productive efficiency
    • Dynamic efficiency
    • Social efficiency
    • Allocative efficiency

  14. What is the primary deadweight loss associated with a profit-maximising monopoly?

    • Allocative inefficiency
    • Economies of scale
    • Productive efficiency
    • Dynamic inefficiency

  15. Why can a firm not price discriminate in a perfectly competitive market?

    • Price takers
    • High barriers
    • Product differentiation
    • Asymmetric information

  16. What market structure usually features a single supplier supplying the entire market most efficiently?

    • Perfect competition
    • Natural monopoly
    • Monopolistic competition
    • Duopoly

  17. What practice occurs when profits from one sub-market support losses in another sub-market?

    • Limit pricing
    • Predatory pricing
    • Cost-plus pricing
    • Cross-subsidisation

  18. If a firm faces PED of -0.5 in Market A and -2.0 in Market B, where is price higher?

    • Market A
    • Both equal
    • Market B
    • Neither market

  19. What happens to total revenue when a monopolist successfully introduces price discrimination?

    • Increases
    • Decreases
    • Falls to zero
    • Remains constant

  20. What requirement must be met regarding Minimum Efficient Scale for a natural monopoly to exist?

    • Zero MES
    • Very small MES
    • Very large MES
    • Negative MES

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