Q: Which formula correctly calculates a monopolist's profit?

$$Profit = (P - ATC) \times Q$$

Question 1

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

Accepted Answer

Perfectly elastic demand for the product

Question 2

A natural monopoly arises primarily because:

Accepted Answer

Economies of scale are so large that one firm can supply the entire market at a lower average total cost than multiple firms

Question 3

Suppose a monopolist faces the following demand curve: $$P = 100 - 2Q. $$What is the marginal revenue (MR) function?

Accepted Answer

$$MR = 100 - 4Q$$

Question 4

Which of the following best describes the difference between a monopolist and a firm in perfect competition?

Accepted Answer

A monopolist faces a downward-sloping demand curve, while a perfectly competitive firm faces a horizontal demand curve.

Question 5

If a monopolist wants to sell more units, what must it do?

Accepted Answer

Decrease the price

Question 6

Which formula correctly calculates a monopolist's profit?

Accepted Answer

$$Profit = (P - ATC) 	imes Q$$

Question 7

Relative to a perfectly competitive market, a monopoly will:

Accepted Answer

Produce less output at a higher price

Question 8

Which of the following is an example of a network externality?

Accepted Answer

A social media platform becoming more valuable as more users join

Question 9

The Herfindahl-Hirschman Index (HHI) for an industry with four firms having market shares of 40%, 30%, 20%, and 10% is:

Accepted Answer

$$HHI = 3000$$

Question 10

Which government policy is designed to prevent anti-competitive behavior and deadweight loss in markets?

Accepted Answer

Antitrust policy

Question 11

A merger between a steel producer and a car manufacturer is an example of a:

Accepted Answer

Vertical merger

Question 12

If a monopolist is regulated to set price equal to average total cost ($$P = ATC$$), what will be its economic profit?

Accepted Answer

Zero

Question 13

Which of the following is most likely to increase due to the existence of a monopoly?

Accepted Answer

Producer surplus

Question 14

Suppose the government is considering a merger in an industry with an HHI of 2,600. According to DOJ/FTC standards, a merger that increases HHI by 250 points is:

Accepted Answer

Very likely to be challenged

Question 15

Which of the following is NOT a barrier to entry that can lead to monopoly?

Accepted Answer

Free entry and exit

Question 16

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MC = MR$$

Question 17

Which of the following statements about monopoly is TRUE?

Accepted Answer

Monopolists can earn long-run profits due to barriers to entry

Question 18

If a monopolist faces a demand curve $$P = 50 - Q$$ and has a constant marginal cost of $$MC = 10$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 10$$

Question 19

Which of the following is an example of a government-created monopoly?

Accepted Answer

A firm with a patent on a new medication

Question 20

Why does a supply curve not exist for a monopolist?

Accepted Answer

Because the monopolist sets both price and quantity, so there is no unique relationship between price and quantity supplied

Monopoly: Characteristics, Barriers to Entry, and Comparison with Perfect Competition

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