Question

QUESTION 16

Which of the following is true about a monopoly?

		A monopoly charges a higher price and produces a lower output level than if the market were competitive.
		A monopoly is guaranteed an economic profit.
		A monopoly charges the highest possible price.
		All of the above.

QUESTION 17

Which of the following is a necessary condition for price discrimination?

		The seller must be able to divide the markets according to the different price elasticities of demand.
		It must be difficult for one buyer to resell the product to another buyer.
		Both of the above.
		None of the above.

QUESTION 18

Mylan became the monopoly of EpiPen, a life saving drug of individuals suffer from severe allergy reaction, because of

		Network externality.
		Economies of scale.
		Patent.
		Ownership of essential resources.

QUESTION 19

A local cable company becomes a monopoly most likely because of

		Network externality.
		Patent.
		Economies of scale.
		Ownership of essential resources.

QUESTION 20

The drawback(s) of a monopoly is (are)

		Deadweight loss.
		Loss of consumer welfare.
		The lack of competition.
		All of the above.

Answer 1

16) first option is correct. there is no guarantee for economic profit because it depends upon the average total cost. It does not charge the highest price possible because it has to maximize profit which implies that if highest price possible is charged the profit will be reduced to zero.

17) both of the above. Reselling should be prevented and market should be divided into segments with different price elasticity

18) patent

19) economies of scale

20) all of the above