Chapter 19 — Quiz

Multiple choice

Q1. A monopolist has market power because: a) It faces many competitors b) It is the sole supplier of a product with no close substitutes and barriers prevent entry c) The government sets its price d) It sells identical products to many buyers

Q2. For a monopolist, marginal revenue is: a) Equal to the price b) Greater than the price c) Less than the price d) Always negative

Q3. The monopolist maximizes profit by producing where: a) P = MC b) MR = MC (and then charging the price from the demand curve) c) P = ATC d) MR = ATC

Q4. Compared to perfect competition, a monopolist: a) Produces more at a lower price b) Produces less at a higher price c) Produces the same at the same price d) Produces more at a higher price

Q5. The deadweight loss of monopoly is: a) The monopolist's profit b) The surplus lost because the monopolist produces less than the competitive quantity c) The total revenue of the monopolist d) Zero

Q6. A natural monopoly exists when: a) A firm has a patent b) A single firm can supply the entire market at lower average cost than multiple firms c) The government grants a license d) Network effects are present

Q7. Network effects create monopoly power because: a) The product gets cheaper as more people use it b) The value of the product increases as more people use it, making it very hard for competitors to attract users away c) The government mandates use of one network d) There are no network effects in tech markets

Q8. Third-degree price discrimination involves: a) Charging each customer their exact willingness to pay b) Offering quantity discounts c) Charging different prices to different observable groups (students, seniors, etc.) d) Charging the same price to everyone

Q9. The consumer welfare standard in antitrust says: a) All monopolies are harmful b) A monopoly is harmful only if it raises prices or reduces output for consumers c) Consumer welfare is irrelevant d) Prices should always be zero

Q10. The Sherman Act (1890) prohibits: a) Price discrimination b) Monopolization and attempts to monopolize c) All mergers d) International trade

Q11. Which is NOT a source of monopoly power discussed in the chapter? a) Patents b) Network effects c) High variable costs d) Control of essential inputs

Q12. A federal judge ruled in 2024 that Google had maintained an illegal monopoly in: a) Cloud computing b) Search c) Social media d) E-commerce

Short answer

SA1. Why does a monopolist produce less than a competitive market would?

SA2. Name the four sources of monopoly power and give one example of each.

SA3. Distinguish first-degree from third-degree price discrimination.

SA4. What is the consumer welfare standard, and why do some scholars think it's too narrow for Big Tech?

SA5. Why can a monopolist earn persistent economic profit while a competitive firm earns zero in the long run?

True / False

TF1. A monopolist charges the highest possible price. (True / False)

TF2. Deadweight loss from monopoly is a transfer from consumers to the monopolist. (True / False — be careful!)

TF3. First-degree price discrimination eliminates deadweight loss. (True / False)

TF4. Google Search is free, so Google cannot be a monopoly. (True / False)

TF5. Natural monopolies should be addressed by encouraging more competition. (True / False)

Selected answers in appendices/answers-to-selected.md.