Which of the Following Would Erode the Monopoly Pricing Power

question 33

Multiple Choice

Which of the following would erode the monopoly pricing power of a firm that was controlling a market?

• A)New technology developed by the firm that lowered long run average costs.
• B)The development of substitutes for the product by other firms.
• C)A tax on corporate profits.
• D)All of these would reduce the monopoly power of the firm.

---

Definitions:

Profit or Loss

The financial result of an entity's operations and transactions, representing earnings exceeding costs or losses.

Derivative Security

A financial instrument whose value is dependent on the value of an underlying asset, such as options or futures.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends and/or capital appreciation.

Call Option

The right, but not the obligation, to buy an underlying asset at a specified strike price within a specified time frame.