Question

1. Which of the following are effects of monopoly? A. Monopoly causes a reduction in economic efficiency. B. Monopoly causes a reduction in consumer surplus. C. Monopoly causes an increase in producer surplus. D. All of the above.

2.If a pure monopolist is choosing an output level where marginal revenue is positive but smaller than marginal cost: A. the firm should produce more output. B. the firm should maintain its output level, but raise the price. C. the firm should produce less output. D. it is probably maximizing profits.

3.When the patent expires on a pharmaceutical drug, what happens to the market? A. It shifts from being a monopoly to being perfectly competitive. B. It remains a monopoly, but profits are lower. C. It remains perfectly competitive, but profits are higher. D. It shifts from being perfectly competitive to being a monopoly.

Answer 1

a) "D"

All the given options are correct, as a monopoly will produce lesser than the perfect market and at a higher price it is inefficient and reduce the consumer surplus and transfer it to the producer. The answer is "D".

b) "B"

As the MR is less than the MC the firm is producing more and have a lower price, they will have to increase the price and reduce the output to maximize the profit. here, they will only increase the price.

c) "A"

It shifts from being aa monopoly to being a perfect competitive market