Question 1

Which of the following best explains why economists are generally critical of unregulated monopolists?

Accepted Answer

A)  Monopolists do not try to minimize their costs of production. 
B)  Monopolists produce where marginal revenue is greater than marginal costs. 
C)  Monopolists attempt to produce too many products, and as a result, their prices are high, and consumers waste time trying to choose between too many options. 
D)  Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them. 
A)  Monopolists do not try to minimize their costs of production. 
B)  Monopolists produce where marginal revenue is greater than marginal costs. 
C)  Monopolists attempt to produce too many products, and as a result, their prices are high, and consumers waste time trying to choose between too many options. 
D)  Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them.

Question 2

Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

Accepted Answer

A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too large and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The output of the monopolist will be too small and the price too low. 
A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too large and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The output of the monopolist will be too small and the price too low.

Question 3

The difficulty in analyzing oligopolistic behavior arises from the

Accepted Answer

A)  degree of government regulation of the market structure. 
B)  interdependent nature of oligopolistic decisions. 
C)  large number of firms in the industry. 
D)  market power of consumers. 
A)  degree of government regulation of the market structure. 
B)  interdependent nature of oligopolistic decisions. 
C)  large number of firms in the industry. 
D)  market power of consumers.

Question 4

If pizza used to be produced in a competitive price-taker market, and now the pizza market has become a monopoly, we can expect

Accepted Answer

A)  less pizza to be sold at a higher price. 
B)  more pizza to be sold at a higher price. 
C)  less pizza to be sold at a lower price. 
D)  more pizza to be sold at a lower price. 
E)  the same amount of pizza to be sold at the same price. 
A)  less pizza to be sold at a higher price. 
B)  more pizza to be sold at a higher price. 
C)  less pizza to be sold at a lower price. 
D)  more pizza to be sold at a lower price. 
E)  the same amount of pizza to be sold at the same price.

Question 5

Which of the following provides the most secure protection for a firm with monopoly power?

Accepted Answer

A)  quality advertising 
B)  legal barriers restricting entry into the market of the monopolist 
C)  predatory pricing 
D)  limited economies of scale 
A)  quality advertising 
B)  legal barriers restricting entry into the market of the monopolist 
C)  predatory pricing 
D)  limited economies of scale

Question 6

Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?

Accepted Answer

A)  when the monopolist operates on the inelastic portion of the demand curve 
B)  when the monopolist is a profit maximizer rather than a revenue maximizer 
C)  when substantial diseconomies of scale are present 
D)  when substantial economies of scale are present 
A)  when the monopolist operates on the inelastic portion of the demand curve 
B)  when the monopolist is a profit maximizer rather than a revenue maximizer 
C)  when substantial diseconomies of scale are present 
D)  when substantial economies of scale are present

Question 7

Regulating natural monopolies according to the "rate of return" criterion is likely to

Accepted Answer

A)  reduce the incentive of firms to minimize cost. 
B)  result in a smaller quantity of output than when the natural monopolist is unregulated. 
C)  discourage the firms from investing resources in an effort to influence the decisions of the regulatory agency. 
D)  increase the number of firms in the industry. 
A)  reduce the incentive of firms to minimize cost. 
B)  result in a smaller quantity of output than when the natural monopolist is unregulated. 
C)  discourage the firms from investing resources in an effort to influence the decisions of the regulatory agency. 
D)  increase the number of firms in the industry.

Question 8

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC)?

Accepted Answer

A)  This price will force the firms out of business in the long run. 
B)  The firms have an incentive to pad their fixed costs. 
C)  When price is equal to MC, new firms will enter the industry and drive up the costs of production. 
D)  Both b and c are correct. 
A)  This price will force the firms out of business in the long run. 
B)  The firms have an incentive to pad their fixed costs. 
C)  When price is equal to MC, new firms will enter the industry and drive up the costs of production. 
D)  Both b and c are correct.

Question 9

Which of the following statements about monopoly is most accurate?

Accepted Answer

A)  The monopolist has no incentive to produce efficiently. 
B)  Regardless of what is produced, the monopolist will use too many resources. 
C)  A monopolist has no incentive to keep costs down. 
D)  The monopolist "understocks" the market and charges too high a price. 
A)  The monopolist has no incentive to produce efficiently. 
B)  Regardless of what is produced, the monopolist will use too many resources. 
C)  A monopolist has no incentive to keep costs down. 
D)  The monopolist "understocks" the market and charges too high a price.

Question 10

Figure 11-20  
-The profit-maximizing price the monopoly will charge in Figure 11-20 is

Accepted Answer

A)  irrelevant since the firm should shut down 
B)  $11 
C)  $16 
D)  $18 
E)  $22 
A)  irrelevant since the firm should shut down 
B)  $11 
C)  $16 
D)  $18 
E)  $22

Question 11

Which of the following is true under natural monopoly?

Accepted Answer

A)  the monopolist will ignore consumers' desires. 
B)  the marginal cost curve will lie below the average total cost curve. 
C)  the monopolist will set price equal to marginal cost and will earn economic profits. 
D)  output is produced under conditions of constant cost. 
A)  the monopolist will ignore consumers' desires. 
B)  the marginal cost curve will lie below the average total cost curve. 
C)  the monopolist will set price equal to marginal cost and will earn economic profits. 
D)  output is produced under conditions of constant cost.

Question 12

Which of the following is true?

Accepted Answer

A)  Competitive forces are stronger in markets with high entry barriers than in those where entry barriers are low. 
B)  Quality competition is an important element of the competitive process. 
C)  If the production of a good is highly profitable, the development of substitute products will be discouraged. 
D)  High barriers to entry are only the result of natural factors not artificial factors like government regulations. 
A)  Competitive forces are stronger in markets with high entry barriers than in those where entry barriers are low. 
B)  Quality competition is an important element of the competitive process. 
C)  If the production of a good is highly profitable, the development of substitute products will be discouraged. 
D)  High barriers to entry are only the result of natural factors not artificial factors like government regulations.

Question 13

Use the figure to answer the following question(s).
Figure 11-1  
-What price and output in Figure 11-1 would an unregulated profit-maximizing monopolist choose?

Accepted Answer

A)  price A and output T 
B)  price B and output S 
C)  price B and output R 
D)  price C and output R 
A)  price A and output T 
B)  price B and output S 
C)  price B and output R 
D)  price C and output R

Question 14

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

Accepted Answer

A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

Question 15

Consider the following demand and cost information for a monopoly.
Table 11-1
  
-Refer to Table 11-1. The marginal revenue of the second unit is

Accepted Answer

A)  $10 
B)  $15 
C)  $20 
D)  $25 
A)  $10 
B)  $15 
C)  $20 
D)  $25

Question 16

New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that

Accepted Answer

A)  cab fares will be lower. 
B)  cab fares will be higher. 
C)  the cost of operating a taxicab will be lower. 
D)  subway fares will decrease. 
A)  cab fares will be lower. 
B)  cab fares will be higher. 
C)  the cost of operating a taxicab will be lower. 
D)  subway fares will decrease.

Question 17

Pollution from a privately owned factory that seriously harms a privately owned forest will, if property rights are strongly protected,

Accepted Answer

A)  not result in penalties to the polluter, who has a right to use his property as he wishes. 
B)  make the polluter liable for any damages done to the forest. 
C)  be ignored under the law, in favor of the polluting factory owner. 
D)  never occur. 
A)  not result in penalties to the polluter, who has a right to use his property as he wishes. 
B)  make the polluter liable for any damages done to the forest. 
C)  be ignored under the law, in favor of the polluting factory owner. 
D)  never occur.

Question 18

Concerning environmental regulation, which of the following is true?

Accepted Answer

A)  All types of environmental problems can be solved simply by the enforcement of individual property rights. 
B)  Environmental regulation cannot improve environmental quality. 
C)  Regulation nearly always leads to economically efficient outcomes. 
D)  Government regulation is subject to the same problems caused by lack of information and lack of incentives for economic efficiency that plagued centrally planned economies. 
A)  All types of environmental problems can be solved simply by the enforcement of individual property rights. 
B)  Environmental regulation cannot improve environmental quality. 
C)  Regulation nearly always leads to economically efficient outcomes. 
D)  Government regulation is subject to the same problems caused by lack of information and lack of incentives for economic efficiency that plagued centrally planned economies.

Question 19

Graphically, the marginal revenue curve of a monopolist

Accepted Answer

A)  will sometimes lie below the demand curve of the monopolist. 
B)  will always lie below the demand curve of the monopolist. 
C)  is the same as the demand curve of the monopolist. 
D)  will equal −1 when the elasticity of demand is unitary. 
A)  will sometimes lie below the demand curve of the monopolist. 
B)  will always lie below the demand curve of the monopolist. 
C)  is the same as the demand curve of the monopolist. 
D)  will equal −1 when the elasticity of demand is unitary.

Question 20

Under which of the following market conditions is it most difficult to maintain a cartel agreement?

Accepted Answer

A)  There are many firms in the industry and these firms have similar costs. 
B)  There are many firms in the industry and these firms have different costs. 
C)  There are few firms in the industry and these firms have similar costs. 
D)  There are few firms in the industry and these firms have different costs. 
A)  There are many firms in the industry and these firms have similar costs. 
B)  There are many firms in the industry and these firms have different costs. 
C)  There are few firms in the industry and these firms have similar costs. 
D)  There are few firms in the industry and these firms have different costs.

Which of the following best explains why economists are generally critical of unregulated monopolists?

Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

The difficulty in analyzing oligopolistic behavior arises from the

If pizza used to be produced in a competitive price-taker market, and now the pizza market has become a monopoly, we can expect

Which of the following provides the most secure protection for a firm with monopoly power?

Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?

Regulating natural monopolies according to the "rate of return" criterion is likely to

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC)?

Which of the following statements about monopoly is most accurate?

Figure 11-20 -The profit-maximizing price the monopoly will charge in Figure 11-20 is

Which of the following is true under natural monopoly?

Which of the following is true?

Use the figure to answer the following question(s). Figure 11-1 -What price and output in Figure 11-1 would an unregulated profit-maximizing monopolist choose?

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

Consider the following demand and cost information for a monopoly. Table 11-1 -Refer to Table 11-1. The marginal revenue of the second unit is

New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that

Pollution from a privately owned factory that seriously harms a privately owned forest will, if property rights are strongly protected,

Concerning environmental regulation, which of the following is true?

Graphically, the marginal revenue curve of a monopolist

Under which of the following market conditions is it most difficult to maintain a cartel agreement?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 11: Price-Searcher Markets With High Entry Barriers

Which of the following best explains why economists are generally critical of unregulated monopolists?

Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

The difficulty in analyzing oligopolistic behavior arises from the

If pizza used to be produced in a competitive price-taker market, and now the pizza market has become a monopoly, we can expect

Which of the following provides the most secure protection for a firm with monopoly power?

Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?

Regulating natural monopolies according to the "rate of return" criterion is likely to

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC)?

Which of the following statements about monopoly is most accurate?

Figure 11-20 -The profit-maximizing price the monopoly will charge in Figure 11-20 is

Which of the following is true under natural monopoly?

Which of the following is true?

Use the figure to answer the following question(s). Figure 11-1 -What price and output in Figure 11-1 would an unregulated profit-maximizing monopolist choose?

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

Consider the following demand and cost information for a monopoly. Table 11-1 -Refer to Table 11-1. The marginal revenue of the second unit is

New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that

Pollution from a privately owned factory that seriously harms a privately owned forest will, if property rights are strongly protected,

Concerning environmental regulation, which of the following is true?

Graphically, the marginal revenue curve of a monopolist

Under which of the following market conditions is it most difficult to maintain a cartel agreement?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters