Question 1

Which of the following is NOT a source of monopoly power for a firm?

Accepted Answer

Having significant diseconomies of scale

Question 2

A natural monopoly occurs when:

Accepted Answer

Economies of scale are so large that one firm can supply the entire market at a lower cost than two or more firms

Question 3

Suppose a single-price monopolist can sell 100 units per day at $$15 per unit, and 120 units per day at 10 $$per unit. What is the marginal revenue when output increases from 100 to 120 units?

Accepted Answer

$-15 per unit

Question 4

Which of the following best describes network externalities?

Accepted Answer

The value of a product increases with the number of consumers who use it

Question 5

In monopoly profit maximization, the firm chooses output where:

Accepted Answer

$$MR = MC$$

Question 6

Compared to perfect competition, a monopoly will:

Accepted Answer

Produce less output and charge a higher price

Question 7

Which of the following is an example of a vertical merger?

Accepted Answer

A tuna producer merging with a soup manufacturer

Question 8

The Herfindahl-Hirschman Index (HHI) for a market with four firms having market shares of 30%, 30%, 20%, and 20% is:

Accepted Answer

$$HHI = 30^2$ + 30^2$ + 20^2$ + 20^2$ = 900 + 900 + 400 + 400 = 2600$$

Question 9

If a monopoly is earning a loss but continues to operate in the short run, which condition must be true?

Accepted Answer

$$P \u003e AVC$$ but $$P \u003c ATC$$

Question 10

Deadweight loss from monopoly represents:

Accepted Answer

A reduction in economic efficiency due to lost consumer and producer surplus

Question 11

Which antitrust law established the Federal Trade Commission to help administer antitrust laws?

Accepted Answer

Federal Trade Commission Act

Question 12

A firm with market power can charge a price:

Accepted Answer

Greater than marginal cost

Question 13

Collusion among firms is best described as:

Accepted Answer

An agreement among firms to charge the same price or otherwise not to compete

Question 14

If the Department of Justice finds that a proposed merger will increase the HHI in a market from 2400 to 2600, what is the likely regulatory response?

Accepted Answer

The merger is likely to be challenged

Question 15

When a monopolist sets a single price for all units sold, the marginal revenue curve:

Accepted Answer

Has twice the slope of the demand curve

Question 16

Which of the following best explains why monopolies may invest more in research and development than perfectly competitive firms?

Accepted Answer

Monopolies are more likely to earn economic profits, providing funds for R&D

Question 17

In a monopoly, the profit-maximizing price is found by:

Accepted Answer

Going straight up from $$Q^* to $$the demand curve

Question 18

Which of the following is most likely to result in a deadweight loss in a market?

Accepted Answer

A monopoly restricting output below the competitive level

Question 19

If a monopolist faces a demand curve $$P = 100 - 2Q$$, what is the equation for its marginal revenue curve?

Accepted Answer

$$MR = 100 - 4Q$$

Question 20

Which of the following best describes a horizontal merger?

Accepted Answer

A merger between firms in the same industry

Monopoly and Antitrust Policy: Principles of Microeconomics (Chapter 15 Study Notes)

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