Question 1

The ultimate constraint on market power is the market demand curve.

Accepted Answer

A) True 
 B)False

Question 2

Monopolists have an advantage over competitive markets in receiving the full benefit of research and development efforts.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a monopoly firm produces bicycles and can sell 10 bicycles per month at a price of $700 per bicycle.In order to increase sales by one bicycle per month,the monopolist must lower the price of its bicycles by $50 to $650 per bicycle.The marginal revenue of the 11th bicycle is

Accepted Answer

A) $150. 
B) -$50. 
C) $50. 
D) $7,150. 
A) $150. 
B) -$50. 
C) $50. 
D) $7,150.

Question 4

Any firm that has economies of scale will

Accepted Answer

A) Try to spread production over many plants. 
B) Be able to produce at a lower unit cost as it increases production. 
C) Face an upward-sloping long-run average total cost curve. 
D) Prefer to produce a small amount of total industry output. 
A) Try to spread production over many plants. 
B) Be able to produce at a lower unit cost as it increases production. 
C) Face an upward-sloping long-run average total cost curve. 
D) Prefer to produce a small amount of total industry output.

Question 5

The Sherman Act prohibits price discrimination.

Accepted Answer

A) True 
 B)False

Question 6

Monopolists set prices

Accepted Answer

A) On the marginal revenue curve. 
B) Without constraints since there is no competition. 
C) At the output where marginal revenue equals marginal cost. 
D) At the minimum of the long-run average total cost curve. 
A) On the marginal revenue curve. 
B) Without constraints since there is no competition. 
C) At the output where marginal revenue equals marginal cost. 
D) At the minimum of the long-run average total cost curve.

Question 7

Which of the following is an argument in favor of a competitive market structure rather than monopoly?

Accepted Answer

A) Monopolies have greater ability to pursue research and design. 
B) The lure of monopoly power provides a greater incentive for invention and innovation. 
C) Monopolies produce less goods at a higher price than competitive markets,ceteris paribus. 
D) Economies of scale allow a single firm to produce at lower cost than in a competitive market,ceteris paribus. 
A) Monopolies have greater ability to pursue research and design. 
B) The lure of monopoly power provides a greater incentive for invention and innovation. 
C) Monopolies produce less goods at a higher price than competitive markets,ceteris paribus. 
D) Economies of scale allow a single firm to produce at lower cost than in a competitive market,ceteris paribus.

Question 8

A monopoly realizes larger profits than a comparable competitive market by

Accepted Answer

A) Setting a higher price at the competitive level of output,thereby increasing total revenue. 
B) Producing a greater quantity at the competitive price,thereby increasing profits. 
C) Producing at output levels with more favorable cost structures and charging the competitive market price,thereby increasing profits per unit. 
D) Reducing production and pushing prices up. 
A) Setting a higher price at the competitive level of output,thereby increasing total revenue. 
B) Producing a greater quantity at the competitive price,thereby increasing profits. 
C) Producing at output levels with more favorable cost structures and charging the competitive market price,thereby increasing profits per unit. 
D) Reducing production and pushing prices up.

Question 9

In Figure 24.2,total revenue at the profit-maximizing rate of output is

Accepted Answer

A) $22.00. 
B) $6.40. 
C) $4.00. 
D) $16.00. 
A) $22.00. 
B) $6.40. 
C) $4.00. 
D) $16.00.

Question 10

In Figure 24.2,the profit-maximizing monopolist will earn a profit per unit of

Accepted Answer

A) $1.50. 
B) $4.00. 
C) $4.70. 
D) $5.50. 
A) $1.50. 
B) $4.00. 
C) $4.70. 
D) $5.50.

Question 11

Economies of scale occur when the long-run average cost curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 12

In Figure 24.1 total cost is represented by the area

Accepted Answer

A) ABFE. 
B) CDFE. 
C) ABGHE. 
D) ABDC. 
A) ABFE. 
B) CDFE. 
C) ABGHE. 
D) ABDC.

Question 13

At equilibrium in a monopoly,economic profits will most likely be

Accepted Answer

A) Greater than zero. 
B) Zero. 
C) Normal. 
D) Negative. 
A) Greater than zero. 
B) Zero. 
C) Normal. 
D) Negative.

Question 14

The argument that concentration of market power enhances research and development efforts may be weak because

Accepted Answer

A) Monopolies cannot afford basic research. 
B) A monopoly may have no clear incentive to pursue new research and development. 
C) No one has attempted to gather any empirical evidence. 
D) No existing monopoly has a research and development program. 
A) Monopolies cannot afford basic research. 
B) A monopoly may have no clear incentive to pursue new research and development. 
C) No one has attempted to gather any empirical evidence. 
D) No existing monopoly has a research and development program.

Question 15

Suppose a monopoly concrete contractor builds 20 driveways per month for $10,000 each.In order to increase sales to 21 driveways,the contractor must lower the price of driveways to $9,500.The marginal revenue of the 21st driveway is

Accepted Answer

A) $500. 
B) $199,500. 
C) -$500. 
D) $9,500. 
A) $500. 
B) $199,500. 
C) -$500. 
D) $9,500.

Question 16

Market power is

Accepted Answer

A) A characteristic of all market structures. 
B) The ability to alter the market price of a good or service. 
C) Most common for competitive firms. 
D) Enjoyed by all firms at high levels of output. 
A) A characteristic of all market structures. 
B) The ability to alter the market price of a good or service. 
C) Most common for competitive firms. 
D) Enjoyed by all firms at high levels of output.

Question 17

The profit-maximizing rate of output in Figure 24.1 is

Accepted Answer

A) I. 
B) H. 
C) E. 
D) F. 
A) I. 
B) H. 
C) E. 
D) F.

Question 18

Explain why a perfectly competitive firm can sell as much as it wants at the market price but a monopolist must lower its price to sell more.

Accepted Answer

A perfectly competitive firm is so small

Question 19

State and evaluate the arguments made for concentration of market power.

Accepted Answer

(1)Monopolies have greater ability to pu

Question 20

Monopolies need some type of barrier to entry to keep potential competitors away.

Accepted Answer

A) True 
 B)False

Exam 24: Monopoly

The ultimate constraint on market power is the market demand curve.

Monopolists have an advantage over competitive markets in receiving the full benefit of research and development efforts.

Suppose a monopoly firm produces bicycles and can sell 10 bicycles per month at a price of $700 per bicycle.In order to increase sales by one bicycle per month,the monopolist must lower the price of its bicycles by $50 to $650 per bicycle.The marginal revenue of the 11th bicycle is

Any firm that has economies of scale will

The Sherman Act prohibits price discrimination.

Monopolists set prices

Which of the following is an argument in favor of a competitive market structure rather than monopoly?

A monopoly realizes larger profits than a comparable competitive market by

In Figure 24.2,total revenue at the profit-maximizing rate of output is

In Figure 24.2,the profit-maximizing monopolist will earn a profit per unit of

Economies of scale occur when the long-run average cost curve slopes downward.

In Figure 24.1 total cost is represented by the area

At equilibrium in a monopoly,economic profits will most likely be

The argument that concentration of market power enhances research and development efforts may be weak because

Suppose a monopoly concrete contractor builds 20 driveways per month for $10,000 each.In order to increase sales to 21 driveways,the contractor must lower the price of driveways to $9,500.The marginal revenue of the 21st driveway is

Market power is

The profit-maximizing rate of output in Figure 24.1 is

Explain why a perfectly competitive firm can sell as much as it wants at the market price but a monopolist must lower its price to sell more.

State and evaluate the arguments made for concentration of market power.

Monopolies need some type of barrier to entry to keep potential competitors away.

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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