Question 1

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 small and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The price will be too high, but the impact of monopoly on the output is indeterminate. 
A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too small and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The price will be too high, but the impact of monopoly on the output is indeterminate.

Question 2

The prisoners' dilemma is used to illustrate the basic idea that

Accepted Answer

A)  oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement. 
B)  oligopolistic firms are always worse off when they collude. 
C)  oligopolistic firms never have an incentive to cheat on collusive agreements, unlike prisoners. 
D)  students who cheat on economics exams end up in jail. 
A)  oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement. 
B)  oligopolistic firms are always worse off when they collude. 
C)  oligopolistic firms never have an incentive to cheat on collusive agreements, unlike prisoners. 
D)  students who cheat on economics exams end up in jail.

Question 3

Environmental regulation by the government

Accepted Answer

A)  leads to ideal outcomes in most cases. 
B)  is often based on goals for pollution levels that were determined by market signals. 
C)  is most appropriate when the pollution of concern comes from many sources. 
D)  is most likely to be economically efficient when the regulation provides substantial benefits for special-interest groups. 
A)  leads to ideal outcomes in most cases. 
B)  is often based on goals for pollution levels that were determined by market signals. 
C)  is most appropriate when the pollution of concern comes from many sources. 
D)  is most likely to be economically efficient when the regulation provides substantial benefits for special-interest groups.

Question 4

Which of the following is true of marginal revenue for a monopolist that charges a single price?

Accepted Answer

A) P = MR because there are no close substitutes for the monopolist's product. B) P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit. C) P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit. D) P = MR only at the profit-maximizing quantity. A) P = MR because there are no close substitutes for the monopolist's product. B) P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit. C) P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit. D) P = MR only at the profit-maximizing quantity.

Question 5

Figure 11-20  
-The production level that will maximize the profit for the monopoly in Figure 11-20 is

Accepted Answer

A)  0 
B)  22 
C)  17 
D)  12 
E)  more than 22 
A)  0 
B)  22 
C)  17 
D)  12 
E)  more than 22

Question 6

The Redwood City Council has decided that there is an overallocation of resources in the lawn-care industry. Almost every homeowner owns a lawnmower, hose and sprinkler, seeder, spreader, etc., and these items are used, at most, once a week. The council will establish a legal monopoly and select a private firm that will be responsible for all lawn care in the city. What types of rent-seeking activities can be expected as a result of this action?

Accepted Answer

As firms vie for this contract, they wil

Question 7

Figure 11-4  
-What output would a monopolist with the demand and cost conditions depicted in Figure 11-4 produce if ordered by regulators to serve the entire market at average cost?

Accepted Answer

A)  R 
B)  S 
C)  T 
D)  U 
A)  R 
B)  S 
C)  T 
D)  U

Question 8

Which of the following is true about environmental regulation?

Accepted Answer

A)  All types of environmental problems can be solved merely by the enforcement of individual property rights. 
B)  Environmental regulation cannot improve environmental quality. 
C)  Income levels exert little impact on the demand for environmental quality. 
D)  Markets often result in outcomes that are inefficient when it is difficult to assign and enforce property rights. 
A)  All types of environmental problems can be solved merely by the enforcement of individual property rights. 
B)  Environmental regulation cannot improve environmental quality. 
C)  Income levels exert little impact on the demand for environmental quality. 
D)  Markets often result in outcomes that are inefficient when it is difficult to assign and enforce property rights.

Question 9

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve upward sloping, the monopolist

Accepted Answer

A)  is producing his profit-maximizing level of output. 
B)  could increase his profit by increasing his output. 
C)  could increase his profit by increasing his price. 
D)  should exit the market if he has positive fixed cost. 
A)  is producing his profit-maximizing level of output. 
B)  could increase his profit by increasing his output. 
C)  could increase his profit by increasing his price. 
D)  should exit the market if he has positive fixed cost.

Question 10

At the long-run equilibrium level of output, the monopolist's marginal cost will

Accepted Answer

A)  exceed price. 
B)  equal price. 
C)  be less than price. 
D)  be less than marginal revenue. 
A)  exceed price. 
B)  equal price. 
C)  be less than price. 
D)  be less than marginal revenue.

Question 11

For a privately owned business in a competitive market setting,

Accepted Answer

A)  reducing resource use while producing the same output adds to profit and typically reduces waste products and thus cuts pollution as well. 
B)  when property rights are well-defined and strictly enforced, the firm will be able to pollute air and water without having to bear the cost of the damages imposed on others. 
C)  wasteful use of resources results in more pollution but greater profit. 
D)  reducing pollution almost never pays. 
A)  reducing resource use while producing the same output adds to profit and typically reduces waste products and thus cuts pollution as well. 
B)  when property rights are well-defined and strictly enforced, the firm will be able to pollute air and water without having to bear the cost of the damages imposed on others. 
C)  wasteful use of resources results in more pollution but greater profit. 
D)  reducing pollution almost never pays.

Question 12

Which of the following is an example of a deficiency caused by a regulatory approach to pollution?

Accepted Answer

A)  Ignored information provided by market signals. 
B)  Special interest influence on policies. 
C)  Lack of accountability by regulators for costs of regulation. 
D)  All of the above. 
A)  Ignored information provided by market signals. 
B)  Special interest influence on policies. 
C)  Lack of accountability by regulators for costs of regulation. 
D)  All of the above.

Question 13

One key characteristic that is distinctive of an oligopoly market is that

Accepted Answer

A)  the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. 
B)  the decisions of one seller often influence the price of products, the output, and the profits of rival firms. 
C)  there is only one firm that produces a product for which there are no good substitutes. 
D)  there are many sellers in the market and each is small relative to the total market. 
A)  the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. 
B)  the decisions of one seller often influence the price of products, the output, and the profits of rival firms. 
C)  there is only one firm that produces a product for which there are no good substitutes. 
D)  there are many sellers in the market and each is small relative to the total market.

Question 14

Individual transferable quotas (ITQs) have been shown to

Accepted Answer

A)  increase the value of fisheries but reduce the safety of fishers as the season is shortened. 
B)  end overfishing by making the use of efficient technology illegal. 
C)  increase the safety of fishing but not the value to consumers of the product. 
D)  increase the value to consumers of the product and raise the price received by fishers. 
A)  increase the value of fisheries but reduce the safety of fishers as the season is shortened. 
B)  end overfishing by making the use of efficient technology illegal. 
C)  increase the safety of fishing but not the value to consumers of the product. 
D)  increase the value to consumers of the product and raise the price received by fishers.

Question 15

If zinc suppliers are successful in forming an international zinc cartel, they will

Accepted Answer

A)  lower output and raise prices, which discourages the entry of new firms into the industry. 
B)  lower output, raise prices, and have a need to prevent the entry of new firms into the industry. 
C)  raise output and raise prices, which discourages the entry of new firms into the industry. 
D)  raise output, raise prices, and have a need to prevent the entry of new firms into the industry. 
A)  lower output and raise prices, which discourages the entry of new firms into the industry. 
B)  lower output, raise prices, and have a need to prevent the entry of new firms into the industry. 
C)  raise output and raise prices, which discourages the entry of new firms into the industry. 
D)  raise output, raise prices, and have a need to prevent the entry of new firms into the industry.

Question 16

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

Accepted Answer

A)  low entry barriers into the market 
B)  a production of a homogenous product 
C)  a stable market demand for the product 
D)  a highly inelastic market demand for the product 
A)  low entry barriers into the market 
B)  a production of a homogenous product 
C)  a stable market demand for the product 
D)  a highly inelastic market demand for the product

Question 17

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?

Accepted Answer

A)  Raise price and lower output. 
B)  Lower price and lower output. 
C)  Raise price and raise output. 
D)  Lower price and raise output. 
E)  Lower output but leave price unchanged. 
A)  Raise price and lower output. 
B)  Lower price and lower output. 
C)  Raise price and raise output. 
D)  Lower price and raise output. 
E)  Lower output but leave price unchanged.

Question 18

Which of the following conditions would increase the likelihood of successful collusion among American automobile producers?

Accepted Answer

A)  vigorous enforcement of antitrust laws 
B)  strong quality competition that makes it difficult to monitor price cuts by rival firms 
C)  imposition of tariffs or quotas on imported automobiles 
D)  The market demand for automobiles fluctuates substantially. 
A)  vigorous enforcement of antitrust laws 
B)  strong quality competition that makes it difficult to monitor price cuts by rival firms 
C)  imposition of tariffs or quotas on imported automobiles 
D)  The market demand for automobiles fluctuates substantially.

Question 19

Which of the following is true about environmental quality?

Accepted Answer

A)  All types of environmental problems can be solved merely by the enforcement of individual property rights. 
B)  Environmental regulation cannot improve environmental quality. 
C)  Income levels exert little impact on the demand for environmental quality. 
D)  Markets often result in outcomes that are inefficient when it is difficult to assign and enforce property rights. 
A)  All types of environmental problems can be solved merely by the enforcement of individual property rights. 
B)  Environmental regulation cannot improve environmental quality. 
C)  Income levels exert little impact on the demand for environmental quality. 
D)  Markets often result in outcomes that are inefficient when it is difficult to assign and enforce property rights.

Question 20

Economists generally criticize high barriers to market entry because

Accepted Answer

A)  the ability of consumers to discipline producers is weakened. 
B)  unregulated monopolists and oligopolists can often gain by increasing output and raising price. 
C)  legal barriers to entry will encourage firms to "invest" resources in developing highly desired products that consumers are willing to pay more for. 
D)  entry barriers are popular with consumers but not businesses. 
A)  the ability of consumers to discipline producers is weakened. 
B)  unregulated monopolists and oligopolists can often gain by increasing output and raising price. 
C)  legal barriers to entry will encourage firms to "invest" resources in developing highly desired products that consumers are willing to pay more for. 
D)  entry barriers are popular with consumers but not businesses.

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

The prisoners' dilemma is used to illustrate the basic idea that

Environmental regulation by the government

Which of the following is true of marginal revenue for a monopolist that charges a single price?

Figure 11-20 -The production level that will maximize the profit for the monopoly in Figure 11-20 is

Figure 11-4 -What output would a monopolist with the demand and cost conditions depicted in Figure 11-4 produce if ordered by regulators to serve the entire market at average cost?

Which of the following is true about environmental regulation?

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve upward sloping, the monopolist

At the long-run equilibrium level of output, the monopolist's marginal cost will

For a privately owned business in a competitive market setting,

Which of the following is an example of a deficiency caused by a regulatory approach to pollution?

One key characteristic that is distinctive of an oligopoly market is that

Individual transferable quotas (ITQs) have been shown to

If zinc suppliers are successful in forming an international zinc cartel, they will

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?

Which of the following conditions would increase the likelihood of successful collusion among American automobile producers?

Which of the following is true about environmental quality?

Economists generally criticize high barriers to market entry because

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

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

The prisoners' dilemma is used to illustrate the basic idea that

Environmental regulation by the government

Which of the following is true of marginal revenue for a monopolist that charges a single price?

Figure 11-20 -The production level that will maximize the profit for the monopoly in Figure 11-20 is

Figure 11-4 -What output would a monopolist with the demand and cost conditions depicted in Figure 11-4 produce if ordered by regulators to serve the entire market at average cost?

Which of the following is true about environmental regulation?

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve upward sloping, the monopolist

At the long-run equilibrium level of output, the monopolist's marginal cost will

For a privately owned business in a competitive market setting,

Which of the following is an example of a deficiency caused by a regulatory approach to pollution?

One key characteristic that is distinctive of an oligopoly market is that

Individual transferable quotas (ITQs) have been shown to

If zinc suppliers are successful in forming an international zinc cartel, they will

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?

Which of the following conditions would increase the likelihood of successful collusion among American automobile producers?

Which of the following is true about environmental quality?

Economists generally criticize high barriers to market entry because

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