Question 1

A monopoly is the only seller of a product

Accepted Answer

A)  with many substitutes. 
B)  without a close substitute. 
C)  with a perfectly inelastic demand. 
D)  without a well-defined demand curve. 
A)  with many substitutes. 
B)  without a close substitute. 
C)  with a perfectly inelastic demand. 
D)  without a well-defined demand curve. B

Question 2

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

Accepted Answer

A)  16%. 
B)  20%. 
C)  25%. 
D)  It cannot be determined from the information given. 
A)  16%. 
B)  20%. 
C)  25%. 
D)  It cannot be determined from the information given. A

Question 3

The U.S. government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.

Accepted Answer

A) True 
 B)False  False

Question 4

What is the difference between a public franchise and a public enterprise?

Accepted Answer

A)  A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government. 
B)  A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government. 
C)  A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government. 
D)  Both refer to a service provided directly to consumers through the government, but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries. 
A)  A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government. 
B)  A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government. 
C)  A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government. 
D)  Both refer to a service provided directly to consumers through the government, but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries.

Question 5

According to the Department of Justice merger guidelines, a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Accepted Answer

A)  lies between 1,500 and 2,500 and the merger raises the Index by 50 points. 
B)  lies between 1,500 and 2,500 and the merger raises the Index by more than 100 points. 
C)  lies above 2,500 and the merger raises the Index by less than 50 points. 
D)  lies below 1,000 and the merger raises the Index by 100 points. 
A)  lies between 1,500 and 2,500 and the merger raises the Index by 50 points. 
B)  lies between 1,500 and 2,500 and the merger raises the Index by more than 100 points. 
C)  lies above 2,500 and the merger raises the Index by less than 50 points. 
D)  lies below 1,000 and the merger raises the Index by 100 points.

Question 6

A monopoly firm is the only seller of a good or service that

Accepted Answer

A)  has a perfectly elastic demand. 
B)  has no close complements. 
C)  does not need to be advertised. 
D)  does not have a close substitute. 
A)  has a perfectly elastic demand. 
B)  has no close complements. 
C)  does not need to be advertised. 
D)  does not have a close substitute.

Question 7

A market economy benefits from market power

Accepted Answer

A)  if the majority of the population are entrepreneurs. 
B)  if firms with market power do research and development with the profits earned. 
C)  if market power gets so bad the government creates public enterprises. 
D)  under no circumstances. 
A)  if the majority of the population are entrepreneurs. 
B)  if firms with market power do research and development with the profits earned. 
C)  if market power gets so bad the government creates public enterprises. 
D)  under no circumstances.

Question 8

Which of the following statements is true?

Accepted Answer

A)  Monopolists are price makers. All other firms are price takers. 
B)  Unlike other industries, monopoly industries have high barriers to entry. 
C)  Only monopoly firms are granted patents and copyrights. 
D)  Unlike other firms, a monopolist's demand curve is the same as the market demand curve. 
A)  Monopolists are price makers. All other firms are price takers. 
B)  Unlike other industries, monopoly industries have high barriers to entry. 
C)  Only monopoly firms are granted patents and copyrights. 
D)  Unlike other firms, a monopolist's demand curve is the same as the market demand curve.

Question 9

The United States Post Office

Accepted Answer

A)  faces no competition for its mail services. 
B)  has a monopoly in the provision of first-class mail service. 
C)  can safely ignore the prices for mail services charged by its rivals such as FedEx and UPS. 
D)  is an example of a monopoly that results from the ownership of a key resource: first class mail service. 
A)  faces no competition for its mail services. 
B)  has a monopoly in the provision of first-class mail service. 
C)  can safely ignore the prices for mail services charged by its rivals such as FedEx and UPS. 
D)  is an example of a monopoly that results from the ownership of a key resource: first class mail service.

Question 10

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market. This reflects which of the following barriers to entry?

Accepted Answer

A)  control of a key resource 
B)  network externalities 
C)  entry blocked by government action 
D)  economies of scale creating a natural monopoly 
A)  control of a key resource 
B)  network externalities 
C)  entry blocked by government action 
D)  economies of scale creating a natural monopoly

Question 11

Figure 15-17   Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 15-17. An economics professor argues: "I think the course should be priced so as to achieve economic efficiency." How much profit (or loss) will the college make on the course if it charges this price?

Accepted Answer

A)  -$2,592,000 
B)  -$1,080,000 
C)  $0 
D)  $450,000 
A)  -$2,592,000 
B)  -$1,080,000 
C)  $0 
D)  $450,000

Question 12

Table 15-3
   Assume Table 15-3 gives the monthly demand and costs for subscriptions to basic cable for Comcast, a cable television monopoly in Philadelphia.
-Refer to Table 15-3. If Comcast wants to maximize its profits, what price (P) should it charge and how many cable subscriptions per month (Q) should it sell?

Accepted Answer

A)  P = $12; Q = 8 
B)  P = $14; Q = 6 
C)  P = $16; Q = 4 
D)  P = $15: Q = 5 
A)  P = $12; Q = 8 
B)  P = $14; Q = 6 
C)  P = $16; Q = 4 
D)  P = $15: Q = 5

Question 13

A merger between U.S. Steel and General Motors would be an example of a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  conglomerate merger. 
D)  conspiracy in restraint of trade. 
A)  vertical merger. 
B)  horizontal merger. 
C)  conglomerate merger. 
D)  conspiracy in restraint of trade.

Question 14

A monopoly differs from monopolistic competition in that

Accepted Answer

A)  a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  a monopoly can never make a loss but a firm in monopolistic competition can. 
C)  in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. 
D)  a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve. 
A)  a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  a monopoly can never make a loss but a firm in monopolistic competition can. 
C)  in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. 
D)  a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

Question 15

A patent

Accepted Answer

A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the patent application is filed with the government. 
D)  gives a firm the exclusive right to a new product during the product inventor's lifetime. 
A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the patent application is filed with the government. 
D)  gives a firm the exclusive right to a new product during the product inventor's lifetime.

Question 16

Firms do not have market power in which of the following market structures?

Accepted Answer

A)  perfect competition only 
B)  perfect competition and monopolistic competition 
C)  oligopoly 
D)  monopoly 
A)  perfect competition only 
B)  perfect competition and monopolistic competition 
C)  oligopoly 
D)  monopoly

Question 17

Provide two examples of a government barrier to entry.

Accepted Answer

1. A patent or copyright which gives an

Question 18

In 2017, the Department of Justice was investigating pharmaceutical companies regarding the pricing of generic drugs. This is an example of attempts by the government

Accepted Answer

A)  to prevent vertical mergers which would significantly reduce competition and raise prices. 
B)  to prevent horizontal mergers which would significantly reduce competition and raise prices. 
C)  to regulate a natural monopoly by establishing government-regulated prices. 
D)  to keep firms from colluding to raise prices. 
A)  to prevent vertical mergers which would significantly reduce competition and raise prices. 
B)  to prevent horizontal mergers which would significantly reduce competition and raise prices. 
C)  to regulate a natural monopoly by establishing government-regulated prices. 
D)  to keep firms from colluding to raise prices.

Question 19

What is a public franchise? Are all public franchises natural monopolies?

Accepted Answer

A public franchise is a firm which the g

Question 20

In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price

Accepted Answer

A)  equal to average total cost where it intersects the demand curve. 
B)  equal to marginal cost where it intersects the demand curve. 
C)  equal to average variable cost where it intersects the demand curve. 
D)  corresponding to the demand curve where marginal revenue equals zero. 
A)  equal to average total cost where it intersects the demand curve. 
B)  equal to marginal cost where it intersects the demand curve. 
C)  equal to average variable cost where it intersects the demand curve. 
D)  corresponding to the demand curve where marginal revenue equals zero.

Exam 15: Monopoly and Antitrust Policy

A monopoly is the only seller of a product

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

The U.S. government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.

What is the difference between a public franchise and a public enterprise?

According to the Department of Justice merger guidelines, a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

A monopoly firm is the only seller of a good or service that

A market economy benefits from market power

Which of the following statements is true?

The United States Post Office

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market. This reflects which of the following barriers to entry?

A merger between U.S. Steel and General Motors would be an example of a

A monopoly differs from monopolistic competition in that

A patent

Firms do not have market power in which of the following market structures?

Provide two examples of a government barrier to entry.

In 2017, the Department of Justice was investigating pharmaceutical companies regarding the pricing of generic drugs. This is an example of attempts by the government

What is a public franchise? Are all public franchises natural monopolies?

In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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