Question 1

Monitoring a monopoly to keep it efficient would itself be efficient if the extra profit achieved by:

Accepted Answer

A) raising production costs is less than the costs of monitoring. 
B) raising production costs exceeds the costs of monitoring. 
C) reducing production costs is less than the costs of monitoring. 
D) reducing production costs exceeds the costs of monitoring. 
A) raising production costs is less than the costs of monitoring. 
B) raising production costs exceeds the costs of monitoring. 
C) reducing production costs is less than the costs of monitoring. 
D) reducing production costs exceeds the costs of monitoring.

Question 2

A contract that makes a manager's salary dependent on total profit would be a type of incentive-compatible contract.

Accepted Answer

A) True 
 B)False

Question 3

Natural monopolies enjoy strong economies of scale, and so as output increases:

Accepted Answer

A) marginal revenue is continually falling. 
B) average costs are continually rising. 
C) average costs are continually falling. 
D) marginal costs are continually rising. 
A) marginal revenue is continually falling. 
B) average costs are continually rising. 
C) average costs are continually falling. 
D) marginal costs are continually rising.

Question 4

Economists often describe competition as a market structure.Why do they also think of competition as a process?

Accepted Answer

Competition may be thought of as a marke

Question 5

Soda companies pay universities for the exclusive right to sell their products on campus. For example, the University of Buffalo agreed to sell only Pepsi on campus in exchange for $220,000 per year. This agreement:

Accepted Answer

A) is beneficial for students because they no longer have to make a choice about which soda to purchase. 
B) is beneficial for students if Pepsi charges a monopoly price on campus. 
C) may be beneficial for students, depending on how the university uses the $220,000. 
D) is harmful to students because the extra money gained by the university cannot be used for their benefit. 
A) is beneficial for students because they no longer have to make a choice about which soda to purchase. 
B) is beneficial for students if Pepsi charges a monopoly price on campus. 
C) may be beneficial for students, depending on how the university uses the $220,000. 
D) is harmful to students because the extra money gained by the university cannot be used for their benefit.

Question 6

Perfect competition is more conducive to technological change than any of the other market structures.

Accepted Answer

A) True 
 B)False

Question 7

Suppliers who are kept out of the market generally do not retaliate because:

Accepted Answer

A) government prevents them from organizing. 
B) they aren't hurt by the restriction. 
C) the costs of organizing are higher than those of demanders. 
D) the costs of organizing and lobbying exceed the expected gains. 
A) government prevents them from organizing. 
B) they aren't hurt by the restriction. 
C) the costs of organizing are higher than those of demanders. 
D) the costs of organizing and lobbying exceed the expected gains.

Question 8

Explain why X-inefficiencies are often associated with lazy monopolists.In your answer,make sure you define a lazy monopolist and X-inefficiency.

Accepted Answer

Lazy monopolists are those producers tha

Question 9

Government has:

Accepted Answer

A) deregulated the electricity industry because domestic producers are facing fierce international competition. 
B) deregulated the entire electricity industry because the bureaucratic costs of maintaining the regulations became too high. 
C) broken the electricity industry into subindustries and deregulated the portions that do not exhibit economies of scale. 
D) broken the electricity industry into subindustries and deregulated the portions that exhibit economies of scale. 
A) deregulated the electricity industry because domestic producers are facing fierce international competition. 
B) deregulated the entire electricity industry because the bureaucratic costs of maintaining the regulations became too high. 
C) broken the electricity industry into subindustries and deregulated the portions that do not exhibit economies of scale. 
D) broken the electricity industry into subindustries and deregulated the portions that exhibit economies of scale.

Question 10

The monitoring problem exists because employees' incentives differ from owners' incentives.

Accepted Answer

A) True 
 B)False

Question 11

Opening an industry to international competition tends to:

Accepted Answer

A) increase X-inefficiency. 
B) force lazy monopolists to increase efficiency. 
C) increase the incidence of lazy monopolists. 
D) raise a monopolist's profit as the price is driven up. 
A) increase X-inefficiency. 
B) force lazy monopolists to increase efficiency. 
C) increase the incidence of lazy monopolists. 
D) raise a monopolist's profit as the price is driven up.

Question 12

The adoption of the QWERTY keyboard in the early days of mechanical typewriters, with its continued use today, has been suggested as a metaphor for:

Accepted Answer

A) technological lock-in. 
B) a lazy monopoly. 
C) reverse engineering. 
D) X-inefficiency. 
A) technological lock-in. 
B) a lazy monopoly. 
C) reverse engineering. 
D) X-inefficiency.

Question 13

One way firms protect their monopoly is:

Accepted Answer

A) raising prices. 
B) producing items that can be copied easily. 
C) advertising. 
D) taking advantage of short-run profits. 
A) raising prices. 
B) producing items that can be copied easily. 
C) advertising. 
D) taking advantage of short-run profits.

Question 14

Using the basic supply/demand framework, economic analysis of market structure leads to the conclusion that:

Accepted Answer

A) perfect competition promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
B) monopoly promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
C) oligopoly promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
D) monopolistic competition promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
A) perfect competition promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
B) monopoly promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
C) oligopoly promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss. 
D) monopolistic competition promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss.

Question 15

One reason why our laws and social mores work against competition is:

Accepted Answer

A) society likes the advantages of monopolies. 
B) managers are constantly wanting to operate more efficiently. 
C) society does not want lower prices. 
D) society has other goals besides efficiency. 
A) society likes the advantages of monopolies. 
B) managers are constantly wanting to operate more efficiently. 
C) society does not want lower prices. 
D) society has other goals besides efficiency.

Question 16

The threat of a corporate takeover will help prevent lazy monopolist behavior and lead managers to run more efficient,more profitable firms in order to prevent being taken over.Wouldn't a more efficient,more profitable firm be even more inviting for a corporate takeover? Explain why not.

Accepted Answer

Corporate raiders are generally looking

Question 17

Entrepreneurs care about:

Accepted Answer

A) only profits. 
B) profits and solving problems. 
C) only themselves. 
D) profits and prices. 
A) only profits. 
B) profits and solving problems. 
C) only themselves. 
D) profits and prices.

Question 18

The net effect of restricting entry into a market is to decrease the income of the remaining suppliers.

Accepted Answer

A) True 
 B)False

Question 19

The majority of large corporations are directly controlled by the owners of the corporation.

Accepted Answer

A) True 
 B)False

Question 20

If firms have to spend money on creating and protecting their monopoly power, they're going to buy:

Accepted Answer

A) more monopoly power than if it were free. 
B) the same monopoly power as if it were free. 
C) less monopoly power than if it were free. 
D) no monopoly power. 
A) more monopoly power than if it were free. 
B) the same monopoly power as if it were free. 
C) less monopoly power than if it were free. 
D) no monopoly power.

Exam 16: Real-World Competition and Technology

Monitoring a monopoly to keep it efficient would itself be efficient if the extra profit achieved by:

A contract that makes a manager's salary dependent on total profit would be a type of incentive-compatible contract.

Natural monopolies enjoy strong economies of scale, and so as output increases:

Economists often describe competition as a market structure.Why do they also think of competition as a process?

Soda companies pay universities for the exclusive right to sell their products on campus. For example, the University of Buffalo agreed to sell only Pepsi on campus in exchange for $220,000 per year. This agreement:

Perfect competition is more conducive to technological change than any of the other market structures.

Suppliers who are kept out of the market generally do not retaliate because:

Explain why X-inefficiencies are often associated with lazy monopolists.In your answer,make sure you define a lazy monopolist and X-inefficiency.

Government has:

The monitoring problem exists because employees' incentives differ from owners' incentives.

Opening an industry to international competition tends to:

The adoption of the QWERTY keyboard in the early days of mechanical typewriters, with its continued use today, has been suggested as a metaphor for:

One way firms protect their monopoly is:

Using the basic supply/demand framework, economic analysis of market structure leads to the conclusion that:

One reason why our laws and social mores work against competition is:

The threat of a corporate takeover will help prevent lazy monopolist behavior and lead managers to run more efficient,more profitable firms in order to prevent being taken over.Wouldn't a more efficient,more profitable firm be even more inviting for a corporate takeover? Explain why not.

Entrepreneurs care about:

The net effect of restricting entry into a market is to decrease the income of the remaining suppliers.

The majority of large corporations are directly controlled by the owners of the corporation.

If firms have to spend money on creating and protecting their monopoly power, they're going to buy:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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