Question 1

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. A

Question 2

Use the figure to answer the following question(s).
Figure 11-10
 
Given the cost and revenue curves illustrated in Figure 11-10, what price will a profit-maximizing monopolist charge?

Accepted Answer

A)  P 1 
B)  P 2 
C)  P 3 
D)  P 4 
A)  P 1 
B)  P 2 
C)  P 3 
D)  P 4 D

Question 3

Use the figure to answer the following question(s).
Figure 11-14
 
What quantity would the industry depicted in Figure 11-14 produce if member firms were successfully colluding?

Accepted Answer

A)  Q 1 
B)  Q 2 
C)  Q 3 
D)  Q 4 
A)  Q 1 
B)  Q 2 
C)  Q 3 
D)  Q 4 B

Question 4

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 5

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 6

Which one of the following factors reduces the likelihood that a cartel agreement will lead to higher producer profit?

Accepted Answer

A)  significant barriers to entry into the cartelized market 
B)  the development of substitutes for the good produced by the cartel 
C)  government restrictions that limit competition from new rivals 
D)  a small number of sellers involved in the cartel agreement 
A)  significant barriers to entry into the cartelized market 
B)  the development of substitutes for the good produced by the cartel 
C)  government restrictions that limit competition from new rivals 
D)  a small number of sellers involved in the cartel agreement

Question 7

A market situation in which the average total costs of production continually decline with increased output until the entire market is supplied is called

Accepted Answer

A)  a legal monopoly. 
B)  a natural monopoly. 
C)  diminishing returns to scale. 
D)  diminishing returns to a variable factor. 
A)  a legal monopoly. 
B)  a natural monopoly. 
C)  diminishing returns to scale. 
D)  diminishing returns to a variable factor.

Question 8

A market situation where a small number of sellers compose the entire industry is called

Accepted Answer

A)  monopolistic competition. 
B)  monopsony. 
C)  monopoly. 
D)  oligopoly. 
A)  monopolistic competition. 
B)  monopsony. 
C)  monopoly. 
D)  oligopoly.

Question 9

An oligopolistic firm that is deciding the price to charge, the output to produce, or the quality of product to offer, must consider

Accepted Answer

A)  the regulatory price limits that are always present with oligopoly. 
B)  the potential reactions of rivals in the market. 
C)  the fact that per-unit costs will usually increase as the scale of production increases. 
D)  that entry barriers into oligopolistic markets are low. 
A)  the regulatory price limits that are always present with oligopoly. 
B)  the potential reactions of rivals in the market. 
C)  the fact that per-unit costs will usually increase as the scale of production increases. 
D)  that entry barriers into oligopolistic markets are low.

Question 10

Which of the following is an obstacle that would reduce the likelihood of effective collusion among oligopolists?

Accepted Answer

A)  a highly inelastic market demand for the product 
B)  a small number of firms in the market 
C)  production of a homogeneous product 
D)  highly unstable demand for the product 
A)  a highly inelastic market demand for the product 
B)  a small number of firms in the market 
C)  production of a homogeneous product 
D)  highly unstable demand for the product

Question 11

Figure 11-18  
The total revenue for the firm in Figure 11-18, a monopolist that maximizes profit while charging all customers the same price, is

Accepted Answer

A)  $2,574 
B)  $2,808 
C)  $2,100 
D)  $1,638 
E)  $3,300 
A)  $2,574 
B)  $2,808 
C)  $2,100 
D)  $1,638 
E)  $3,300

Question 12

If mutual interdependence among firms is present, each profit-maximizing firm in the market

Accepted Answer

A)  produces a product that must be identical to the products of its rivals. 
B)  must consider the reactions of its rivals when it determines its price policy. 
C)  faces a perfectly elastic demand curve for its product. 
D)  faces a perfectly inelastic demand curve for its product. 
A)  produces a product that must be identical to the products of its rivals. 
B)  must consider the reactions of its rivals when it determines its price policy. 
C)  faces a perfectly elastic demand curve for its product. 
D)  faces a perfectly inelastic demand curve for its product.

Question 13

Use the table to answer the following question.
Table 11-6
  The demand and cost schedules of a monopolist are presented in Table 11-6. What price should a profit-maximizing monopolist charge?

Accepted Answer

A)  $14 
B)  $13 
C)  $12 
D)  $11 
A)  $14 
B)  $13 
C)  $12 
D)  $11

Question 14

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 15

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 16

How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached if the market was competitive?

Accepted Answer

A)  The output of the monopolist will be larger and the price lower. 
B)  The output of the monopolist will be larger and the price higher. 
C)  The output of the monopolist will be smaller and the price lower. 
D)  The output of the monopolist will be smaller and the price higher. 
A)  The output of the monopolist will be larger and the price lower. 
B)  The output of the monopolist will be larger and the price higher. 
C)  The output of the monopolist will be smaller and the price lower. 
D)  The output of the monopolist will be smaller and the price higher.

Question 17

An industry is said to be a natural monopoly when

Accepted Answer

A)  legal barriers limit entry into the market. 
B)  diseconomies of scale are present in the market. 
C)  the market demand for the product supplied by a firm is inelastic. 
D)  long-run ATC continues to decline as firm size increases. 
E)  larger firms have higher per-unit costs than their smaller rivals. 
A)  legal barriers limit entry into the market. 
B)  diseconomies of scale are present in the market. 
C)  the market demand for the product supplied by a firm is inelastic. 
D)  long-run ATC continues to decline as firm size increases. 
E)  larger firms have higher per-unit costs than their smaller rivals.

Question 18

The two conflicting tendencies that a firm has in an oligopolistic industry are the incentive to

Accepted Answer

A)  cheat to maximize joint profits and the incentive to raise prices. 
B)  cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. 
C)  increase output in order to minimize per-unit costs and the incentive to reduce price in order to maximize joint profit. 
D)  cooperate to maximize joint profits and the incentive to cheat on the agreement in order to increase the firm's share of the profit. 
A)  cheat to maximize joint profits and the incentive to raise prices. 
B)  cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. 
C)  increase output in order to minimize per-unit costs and the incentive to reduce price in order to maximize joint profit. 
D)  cooperate to maximize joint profits and the incentive to cheat on the agreement in order to increase the firm's share of the profit.

Question 19

Use the figure to answer the following question(s).
Figure 11-6
 
The demand and cost conditions in an industry are as depicted in Figure 11-6. In the viewpoint of economic efficiency, what would the ideal price and output be?

Accepted Answer

A)  price, P 1; quantity produced, Q 1 
B)  price, P 2; quantity produced, Q 2 
C)  price, P 3; quantity produced, Q 1 
D)  price, P 1; quantity produced, Q 2 
A)  price, P 1; quantity produced, Q 1 
B)  price, P 2; quantity produced, Q 2 
C)  price, P 3; quantity produced, Q 1 
D)  price, P 1; quantity produced, Q 2

Question 20

Figure 11-21  
In Figure 11-21, the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level, as it would be in an unregulated monopoly, is shown by area

Accepted Answer

A)  abc 
B)  adf 
C)  cef 
D)  dfeg 
E)  bcfd 
A)  abc 
B)  adf 
C)  cef 
D)  dfeg 
E)  bcfd

Economists generally criticize high barriers to market entry because

Use the figure to answer the following question(s). Figure 11-10 Given the cost and revenue curves illustrated in Figure 11-10, what price will a profit-maximizing monopolist charge?

Use the figure to answer the following question(s). Figure 11-14 What quantity would the industry depicted in Figure 11-14 produce if member firms were successfully colluding?

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

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

Which one of the following factors reduces the likelihood that a cartel agreement will lead to higher producer profit?

A market situation in which the average total costs of production continually decline with increased output until the entire market is supplied is called

A market situation where a small number of sellers compose the entire industry is called

An oligopolistic firm that is deciding the price to charge, the output to produce, or the quality of product to offer, must consider

Which of the following is an obstacle that would reduce the likelihood of effective collusion among oligopolists?

Figure 11-18 The total revenue for the firm in Figure 11-18, a monopolist that maximizes profit while charging all customers the same price, is

If mutual interdependence among firms is present, each profit-maximizing firm in the market

Use the table to answer the following question. Table 11-6 The demand and cost schedules of a monopolist are presented in Table 11-6. What price should a profit-maximizing monopolist charge?

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

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

How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached if the market was competitive?

An industry is said to be a natural monopoly when

The two conflicting tendencies that a firm has in an oligopolistic industry are the incentive to

Use the figure to answer the following question(s). Figure 11-6 The demand and cost conditions in an industry are as depicted in Figure 11-6. In the viewpoint of economic efficiency, what would the ideal price and output be?

Figure 11-21 In Figure 11-21, the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level, as it would be in an unregulated monopoly, is shown by area

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

Applying the Basics: Special Topics in Economics

Filters

Exam 11: Price-Searcher Markets With High Entry Barriers

Economists generally criticize high barriers to market entry because

Use the figure to answer the following question(s). Figure 11-10 Given the cost and revenue curves illustrated in Figure 11-10, what price will a profit-maximizing monopolist charge?

Use the figure to answer the following question(s). Figure 11-14 What quantity would the industry depicted in Figure 11-14 produce if member firms were successfully colluding?

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

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

Which one of the following factors reduces the likelihood that a cartel agreement will lead to higher producer profit?

A market situation in which the average total costs of production continually decline with increased output until the entire market is supplied is called

A market situation where a small number of sellers compose the entire industry is called

An oligopolistic firm that is deciding the price to charge, the output to produce, or the quality of product to offer, must consider

Which of the following is an obstacle that would reduce the likelihood of effective collusion among oligopolists?

Figure 11-18 The total revenue for the firm in Figure 11-18, a monopolist that maximizes profit while charging all customers the same price, is

If mutual interdependence among firms is present, each profit-maximizing firm in the market

Use the table to answer the following question. Table 11-6 The demand and cost schedules of a monopolist are presented in Table 11-6. What price should a profit-maximizing monopolist charge?

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

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

How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached if the market was competitive?

An industry is said to be a natural monopoly when

The two conflicting tendencies that a firm has in an oligopolistic industry are the incentive to

Use the figure to answer the following question(s). Figure 11-6 The demand and cost conditions in an industry are as depicted in Figure 11-6. In the viewpoint of economic efficiency, what would the ideal price and output be?

Figure 11-21 In Figure 11-21, the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level, as it would be in an unregulated monopoly, is shown by area

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

Applying the Basics: Special Topics in Economics

Filters