Question 1

The chances of successful collusion are greatest when

Accepted Answer

A)  firms are producing a differentiated product. 
B)  there are many firms in the industry. 
C)  there are tiny firms and huge firms together in the same industry. 
D)  demand curves and cost curves are similar among the firms in the industry. 
E)  demand is falling. 
A)  firms are producing a differentiated product. 
B)  there are many firms in the industry. 
C)  there are tiny firms and huge firms together in the same industry. 
D)  demand curves and cost curves are similar among the firms in the industry. 
E)  demand is falling.

Question 2

-The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge?

Accepted Answer

A)  $10 
B)  $9 
C)  $8 
D)  $7 
A)  $10 
B)  $9 
C)  $8 
D)  $7

Question 3

If entry-restricting legal barriers effectively organized the funeral home industry of a large city into a monopoly cartel, economic theory indicates that, compared to the previously competitive situation,

Accepted Answer

A)  the price of funeral services would decline, and output would increase. 
B)  both the price and output of funeral services would decline. 
C)  the price of funeral services would increase, and output would decline. 
D)  both the price and output of funeral services would increase. 
A)  the price of funeral services would decline, and output would increase. 
B)  both the price and output of funeral services would decline. 
C)  the price of funeral services would increase, and output would decline. 
D)  both the price and output of funeral services would increase.

Question 4

Use the figure to answer the following question(s).
Figure 11-3  
-The cost and demand conditions for a monopolist are depicted in Figure 11-3. If the monopolist is maximizing profit, it will charge a price of

Accepted Answer

A)  $10 and produce an output of 20,000. 
B)  $20 and produce an output of 10,000. 
C)  $20 and produce an output of 20,000. 
D)  more than $20. 
A)  $10 and produce an output of 20,000. 
B)  $20 and produce an output of 10,000. 
C)  $20 and produce an output of 20,000. 
D)  more than $20.

Question 5

If the government wants a natural monopoly to earn a "fair return" or zero economic profit, it will set

Accepted Answer

A)  price equal to marginal cost. 
B)  price equal to average total cost. 
C)  price equal to average revenue. 
D)  marginal cost equal to marginal revenue. 
E)  marginal cost equal to average total cost. 
A)  price equal to marginal cost. 
B)  price equal to average total cost. 
C)  price equal to average revenue. 
D)  marginal cost equal to marginal revenue. 
E)  marginal cost equal to average total cost.

Question 6

A monopoly is most likely to emerge in a market when

Accepted Answer

A)  the producers in the market have U-shaped average total cost curves. 
B)  the price elasticity of demand for the product is high. 
C)  the cost of entry and exit into the market is low. 
D)  economies of scale are large relative to market demand. 
A)  the producers in the market have U-shaped average total cost curves. 
B)  the price elasticity of demand for the product is high. 
C)  the cost of entry and exit into the market is low. 
D)  economies of scale are large relative to market demand.

Question 7

Which one of the following factors increases the likelihood that a cartel agreement will lead to higher profit for cartel members?

Accepted Answer

A)  free entry into the cartelized market 
B)  a small number of sellers involved in the cartel agreement 
C)  the cartel members produce a differentiated product 
D)  highly unstable demand for the product produced by the cartel 
A)  free entry into the cartelized market 
B)  a small number of sellers involved in the cartel agreement 
C)  the cartel members produce a differentiated product 
D)  highly unstable demand for the product produced by the cartel

Question 8

Which of the following is the most efficient method to reduce pollution emissions?

Accepted Answer

A)  Government pollution charges or taxes. 
B)  Non-tradable emission standards that cap allowable pollution. 
C)  Common law enforcement of property rights, when those rights are well-defined and transaction costs are low. 
D)  Legislated regulations limiting the quantity of emissions allowed by each firm. 
A)  Government pollution charges or taxes. 
B)  Non-tradable emission standards that cap allowable pollution. 
C)  Common law enforcement of property rights, when those rights are well-defined and transaction costs are low. 
D)  Legislated regulations limiting the quantity of emissions allowed by each firm.

Question 9

In some industries where firms experience declining average total costs over the full range of output that consumers are willing to buy,

Accepted Answer

A)  a smaller firm will always have lower per-unit costs. 
B)  many firms will tend to emerge from the competitive process. 
C)  a single large firm will develop, and it will have cost advantages that protect it from potential rivals. 
D)  a single large firm will develop, and it will buy out any smaller rival firms to avoid the small firms' production at a lower per-unit cost. 
A)  a smaller firm will always have lower per-unit costs. 
B)  many firms will tend to emerge from the competitive process. 
C)  a single large firm will develop, and it will have cost advantages that protect it from potential rivals. 
D)  a single large firm will develop, and it will buy out any smaller rival firms to avoid the small firms' production at a lower per-unit cost.

Question 10

When a monopolist is maximizing profit, which of the following conditions will always be satisfied?

Accepted Answer

A)  P = MC 
B)  MR = AVC 
C)  P = ATC 
D)  MR = MC 
A)  P = MC 
B)  MR = AVC 
C)  P = ATC 
D)  MR = MC

Question 11

An economist would argue that global warming is

Accepted Answer

A)  unquestionably a human-generated problem that should be stopped immediately at all costs. 
B)  simply fear mongering, for there is no scientific evidence that the average temperature on earth is changing. 
C)  likely to cause massive starvation as temperatures on earth rise, reducing agricultural productivity. 
D)  a serious issue that may best be addressed primarily by making changes as problems occur in the future. 
A)  unquestionably a human-generated problem that should be stopped immediately at all costs. 
B)  simply fear mongering, for there is no scientific evidence that the average temperature on earth is changing. 
C)  likely to cause massive starvation as temperatures on earth rise, reducing agricultural productivity. 
D)  a serious issue that may best be addressed primarily by making changes as problems occur in the future.

Question 12

Under which one of the following market structures are firms most likely to enter into a price-fixing agreement designed to maximize their joint profit?

Accepted Answer

A)  price-taker markets with low entry barriers 
B)  pure monopoly 
C)  price-searcher markets with low entry barriers 
D)  oligopoly 
A)  price-taker markets with low entry barriers 
B)  pure monopoly 
C)  price-searcher markets with low entry barriers 
D)  oligopoly

Question 13

Which of the following reflects the incentive structure confronted by a typical firm in a cartel?

Accepted Answer

A)  If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
B)  I can never do better for myself than by following agreed-upon cartel policies. 
C)  If everyone cheats, I'm better off and so is everyone else in the cartel. 
D)  If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. 
A)  If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
B)  I can never do better for myself than by following agreed-upon cartel policies. 
C)  If everyone cheats, I'm better off and so is everyone else in the cartel. 
D)  If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat.

Question 14

Property right enforcement and markets can be imperfect, so environmental regulations are often used to correct market failures that result in environmental damages. But governmental regulation itself can be imperfect because

Accepted Answer

A)  both environmental harms and the benefits of reducing them are uncertain and difficult to measure. 
B)  regulation overrides the market, and therefore the regulators do not have market information on the costs imposed on damaged parties or those required to reduce the damages. 
C)  special interests often use the regulatory process to obtain political favors that waste resources and conflict with the stated objectives of the regulation. 
D)  all of the above are true. 
A)  both environmental harms and the benefits of reducing them are uncertain and difficult to measure. 
B)  regulation overrides the market, and therefore the regulators do not have market information on the costs imposed on damaged parties or those required to reduce the damages. 
C)  special interests often use the regulatory process to obtain political favors that waste resources and conflict with the stated objectives of the regulation. 
D)  all of the above are true.

Question 15

When economies of scale are important, imposing competition by splitting a monopolistic firm into many rival units will

Accepted Answer

A)  lead to an increase in the per-unit cost of production in the industry. 
B)  not affect per-unit costs but will affect demand conditions. 
C)  generally increase the social efficiency of production. 
D)  cause the industry demand curve to increase (shift to the right). 
A)  lead to an increase in the per-unit cost of production in the industry. 
B)  not affect per-unit costs but will affect demand conditions. 
C)  generally increase the social efficiency of production. 
D)  cause the industry demand curve to increase (shift to the right).

Question 16

Overfishing in the ocean often

Accepted Answer

A)  is easily solved by shortening the fishing season. 
B)  is not caused by better technologies, which today's fishers would not use if they harmed the resource. 
C)  occurs only when regulators fail to regulate due to corruption. 
D)  is caused by many boats racing to catch more fish in a very short season. 
A)  is easily solved by shortening the fishing season. 
B)  is not caused by better technologies, which today's fishers would not use if they harmed the resource. 
C)  occurs only when regulators fail to regulate due to corruption. 
D)  is caused by many boats racing to catch more fish in a very short season.

Question 17

Which of the following is a major shortcoming of government regulation of business monopoly?

Accepted Answer

A)  The regulators often estimate production costs incorrectly and thus force firms into loss positions. 
B)  The regulators often come to represent the interests of the established firms and use their power to limit competition. 
C)  The regulators usually permit firms to make unusually high accounting profits. 
D)  The regulators, acting in consumers' interests, often force prices so low that even with efficient production techniques the regulated firms lose money. 
A)  The regulators often estimate production costs incorrectly and thus force firms into loss positions. 
B)  The regulators often come to represent the interests of the established firms and use their power to limit competition. 
C)  The regulators usually permit firms to make unusually high accounting profits. 
D)  The regulators, acting in consumers' interests, often force prices so low that even with efficient production techniques the regulated firms lose money.

Question 18

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

Accepted Answer

A)  Individual firms could gain if they charged a price greater than the industry's profit-maximizing price. 
B)  The industry demand curve is more elastic than the demand curve confronting each of the firms in the industry. 
C)  The firms would like to see the industry produce a larger output and charge a lower price. 
D)  The demand curve confronting the individual firms is more elastic than the market demand curve for the product. 
A)  Individual firms could gain if they charged a price greater than the industry's profit-maximizing price. 
B)  The industry demand curve is more elastic than the demand curve confronting each of the firms in the industry. 
C)  The firms would like to see the industry produce a larger output and charge a lower price. 
D)  The demand curve confronting the individual firms is more elastic than the market demand curve for the product.

Question 19

At a given output level, a monopolist earns a profit only if the

Accepted Answer

A)  slope of its TR curve exceeds the slope of his TC curve. 
B)  height of its MR curve exceeds the height of his MC curve. 
C)  height of its demand curve exceeds the height of his MR curve. 
D)  height of its demand curve exceeds the height of his ATC curve. 
A)  slope of its TR curve exceeds the slope of his TC curve. 
B)  height of its MR curve exceeds the height of his MC curve. 
C)  height of its demand curve exceeds the height of his MR curve. 
D)  height of its demand curve exceeds the height of his ATC curve.

Question 20

If a local community has only one doctor, the monopoly power of the physician will

Accepted Answer

A)  be small if entry barriers into the local market are high. 
B)  depend on how many other physicians there are in the national market. 
C)  be total since there are not any other providers of the same service in the local market. 
D)  be minimal if the entry barriers restricting competition from other physicians are low. 
A)  be small if entry barriers into the local market are high. 
B)  depend on how many other physicians there are in the national market. 
C)  be total since there are not any other providers of the same service in the local market. 
D)  be minimal if the entry barriers restricting competition from other physicians are low.

The chances of successful collusion are greatest when

-The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge?

If entry-restricting legal barriers effectively organized the funeral home industry of a large city into a monopoly cartel, economic theory indicates that, compared to the previously competitive situation,

Use the figure to answer the following question(s). Figure 11-3 -The cost and demand conditions for a monopolist are depicted in Figure 11-3. If the monopolist is maximizing profit, it will charge a price of

If the government wants a natural monopoly to earn a "fair return" or zero economic profit, it will set

A monopoly is most likely to emerge in a market when

Which one of the following factors increases the likelihood that a cartel agreement will lead to higher profit for cartel members?

Which of the following is the most efficient method to reduce pollution emissions?

In some industries where firms experience declining average total costs over the full range of output that consumers are willing to buy,

When a monopolist is maximizing profit, which of the following conditions will always be satisfied?

An economist would argue that global warming is

Under which one of the following market structures are firms most likely to enter into a price-fixing agreement designed to maximize their joint profit?

Which of the following reflects the incentive structure confronted by a typical firm in a cartel?

Property right enforcement and markets can be imperfect, so environmental regulations are often used to correct market failures that result in environmental damages. But governmental regulation itself can be imperfect because

When economies of scale are important, imposing competition by splitting a monopolistic firm into many rival units will

Overfishing in the ocean often

Which of the following is a major shortcoming of government regulation of business monopoly?

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

At a given output level, a monopolist earns a profit only if the

If a local community has only one doctor, the monopoly power of the physician will

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

The chances of successful collusion are greatest when

-The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge?

If entry-restricting legal barriers effectively organized the funeral home industry of a large city into a monopoly cartel, economic theory indicates that, compared to the previously competitive situation,

Use the figure to answer the following question(s). Figure 11-3 -The cost and demand conditions for a monopolist are depicted in Figure 11-3. If the monopolist is maximizing profit, it will charge a price of

If the government wants a natural monopoly to earn a "fair return" or zero economic profit, it will set

A monopoly is most likely to emerge in a market when

Which one of the following factors increases the likelihood that a cartel agreement will lead to higher profit for cartel members?

Which of the following is the most efficient method to reduce pollution emissions?

In some industries where firms experience declining average total costs over the full range of output that consumers are willing to buy,

When a monopolist is maximizing profit, which of the following conditions will always be satisfied?

An economist would argue that global warming is

Under which one of the following market structures are firms most likely to enter into a price-fixing agreement designed to maximize their joint profit?

Which of the following reflects the incentive structure confronted by a typical firm in a cartel?

Property right enforcement and markets can be imperfect, so environmental regulations are often used to correct market failures that result in environmental damages. But governmental regulation itself can be imperfect because

When economies of scale are important, imposing competition by splitting a monopolistic firm into many rival units will

Overfishing in the ocean often

Which of the following is a major shortcoming of government regulation of business monopoly?

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

At a given output level, a monopolist earns a profit only if the

If a local community has only one doctor, the monopoly power of the physician will

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