$$\text{Profit} = \text{Total Revenue} - \text{Total Cost}$$

Question 1

Which of the following best describes a monopoly?

Accepted Answer

A market with one seller of a good or service with no close substitutes.

Question 2

What is the primary source of market power for Turing Pharmaceuticals when it raised the price of Daraprim from $$13.50 to 750 $$per tablet?

Accepted Answer

Barriers to entry caused by regulatory approval delays.

Question 3

Which equation represents the profit-maximizing rule for a monopolist?

Accepted Answer

$$P \u003e MR = MC$$

Question 4

Suppose a monopolist lowers its price from $$5 to 4 to $$increase sales from 200 to 400 units. What is the total change in revenue?

Accepted Answer

Increase of $600

Question 5

Which of the following is NOT a type of price discrimination?

Accepted Answer

Fourth-degree price discrimination

Question 6

A natural monopoly arises primarily due to:

Accepted Answer

Economies of scale over a large range of output.

Question 7

Which government policy is designed to prevent anti-competitive pricing and deadweight loss?

Accepted Answer

Antitrust policy

Question 8

If a monopolist faces a downward-sloping demand curve, what happens to marginal revenue as output increases?

Accepted Answer

Marginal revenue decreases and can become negative.

Question 9

Which of the following is an example of third-degree price discrimination?

Accepted Answer

Offering senior citizen discounts at a movie theater.

Question 10

Why does a monopoly not have a supply curve?

Accepted Answer

Because the monopolist sets both price and quantity, so the supply relationship does not exist.

Question 11

Which formula represents the calculation of profit for a monopolist?

Accepted Answer

$$	ext{Profit} = 	ext{Total Revenue} - 	ext{Total Cost}$$

Question 12

Which of the following is a real-world example of a firm with natural market power due to control of a key resource?

Accepted Answer

De Beers’ control of diamond production.

Question 13

What is the effect of perfect price discrimination on consumer surplus?

Accepted Answer

Consumer surplus is eliminated.

Question 14

Which of the following best explains why firms offer mail-in rebates instead of upfront discounts?

Accepted Answer

To price discriminate based on consumer willingness to redeem rebates.

Question 15

If the marginal cost of Claritin is constant at $5 and the market is perfectly competitive, what is the equilibrium price?

Accepted Answer

$$5$$

Question 16

Which of the following is a plausible benefit of monopoly for society?

Accepted Answer

Monopolies can spur innovation in industries with strong competitors.

Question 17

What is the main purpose of the Sherman Act (1890)?

Accepted Answer

To prohibit agreements or actions that restrain trade and monopolize markets.

Question 18

Which pricing rule is considered socially optimal for a regulated monopoly?

Accepted Answer

$$P = MC$$

Question 19

If a monopolist is maximizing profit, which relationship must hold?

Accepted Answer

$$MR = MC$$

Question 20

Which of the following is an example of network externalities?

Accepted Answer

A social media platform becoming more valuable as more users join.

Monopoly: Market Power and Its Implications

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