Question 1

A market situation in which only a small number of mutually interdependent, rival sellers exists is known as a(n)

Accepted Answer

A)  oligopoly market. 
B)  monopoly market. 
C)  open price-taker market. 
D)  competitive price-searcher market. 
A)  oligopoly market. 
B)  monopoly market. 
C)  open price-taker market. 
D)  competitive price-searcher market.

Question 2

Which of the following explains why monopoly is uncommon in the real world?

Accepted Answer

A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  price is usually set equal to marginal cost by firms. 
D)  there are reasonable substitutes for most goods. 
A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  price is usually set equal to marginal cost by firms. 
D)  there are reasonable substitutes for most goods.

Question 3

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

Accepted Answer

A)  increase the monopolist's incentive to minimize cost. 
B)  increase output compared to the situation where the firm is unregulated. 
C)  completely eliminate the "welfare loss" due to monopoly. 
D)  do all of the above 
A)  increase the monopolist's incentive to minimize cost. 
B)  increase output compared to the situation where the firm is unregulated. 
C)  completely eliminate the "welfare loss" due to monopoly. 
D)  do all of the above

Question 4

Economic theory suggests that government-operated monopolies will

Accepted Answer

A)  be highly efficient and follow policies that are in the consumers' interest. 
B)  be dominated by persons who, while seeking to serve the public interest, are not hard-nosed enough to run a business efficiently. 
C)  be inefficient because of poor incentives for operational efficiency. 
D)  favor the consumer at the expense of special interest groups in and out of government. 
A)  be highly efficient and follow policies that are in the consumers' interest. 
B)  be dominated by persons who, while seeking to serve the public interest, are not hard-nosed enough to run a business efficiently. 
C)  be inefficient because of poor incentives for operational efficiency. 
D)  favor the consumer at the expense of special interest groups in and out of government.

Question 5

Breaking a monopoly firm into several rival firms will be unlikely to improve economic efficiency when economies of scale are important because

Accepted Answer

A)  several smaller firms will have higher per-unit costs than a single larger firm. 
B)  a single firm will have higher per-unit costs than several smaller firms. 
C)  it is harder to regulate many smaller firms than it is one large firm. 
D)  consumers will find it harder to choose among the products of many alternative sellers. 
A)  several smaller firms will have higher per-unit costs than a single larger firm. 
B)  a single firm will have higher per-unit costs than several smaller firms. 
C)  it is harder to regulate many smaller firms than it is one large firm. 
D)  consumers will find it harder to choose among the products of many alternative sellers.

Question 6

If the average total cost curve is always above the demand curve of a monopolist,

Accepted Answer

A)  the profits of the monopolist will be large. 
B)  the monopolist must be producing inefficiently. 
C)  even a monopolist will suffer economic losses. 
D)  entry will occur, forcing the monopolist to reduce price and expand output. 
A)  the profits of the monopolist will be large. 
B)  the monopolist must be producing inefficiently. 
C)  even a monopolist will suffer economic losses. 
D)  entry will occur, forcing the monopolist to reduce price and expand output.

Question 7

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 8

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 9

The figure below illustrates the cost and revenue structure for a monopoly firm.
Figure 11-17
 
Refer to Figure 11-17. Profit will be maximized by charging a price equal to

Accepted Answer

A)  P0. 
B)  P1. 
C)  P2. 
D)  P3. 
A)  P0. 
B)  P1. 
C)  P2. 
D)  P3.

Question 10

Which of the following is true under unregulated monopoly?

Accepted Answer

A)  Monopoly results in more output than under pure competition. 
B)  Monopoly results in a more efficient allocation of resources than competition. 
C)  Monopoly expands the choices available to consumers. 
D)  Monopoly results in lower output and higher prices than competition. 
A)  Monopoly results in more output than under pure competition. 
B)  Monopoly results in a more efficient allocation of resources than competition. 
C)  Monopoly expands the choices available to consumers. 
D)  Monopoly results in lower output and higher prices than competition.

Question 11

A monopolist will maximize profits by

Accepted Answer

A)  setting his price as high as possible. 
B)  setting his price at the level that will maximize per-unit profit. 
C)  producing the output where marginal revenue equals marginal cost. 
D)  producing the output where price equals marginal cost. 
A)  setting his price as high as possible. 
B)  setting his price at the level that will maximize per-unit profit. 
C)  producing the output where marginal revenue equals marginal cost. 
D)  producing the output where price equals marginal cost.

Question 12

Because of the rise of global competition and free trade,

Accepted Answer

A)  antitrust policy may be less necessary than previously thought. 
B)  U.S. industrial concentration poses more of a threat to consumers. 
C)  U.S. markets are becoming less competitive. 
D)  U.S. manufacturers are seeking fewer trade barriers. 
A)  antitrust policy may be less necessary than previously thought. 
B)  U.S. industrial concentration poses more of a threat to consumers. 
C)  U.S. markets are becoming less competitive. 
D)  U.S. manufacturers are seeking fewer trade barriers.

Question 13

One answer to the problem of natural monopoly is provision of the good by a government-owned and operated firm. Why is that option not used very often?

Accepted Answer

We cannot necessarily expect more effici

Question 14

Which of the following is not a barrier that limits the entry of potential competitors into a market?

Accepted Answer

A)  government licensing 
B)  control over an essential resource 
C)  an elastic demand for a product 
D)  patent rights 
A)  government licensing 
B)  control over an essential resource 
C)  an elastic demand for a product 
D)  patent rights

Question 15

Monopoly is a word derived from Greek origins that means, roughly, single seller. Why is the definition of monopoly as single seller inadequate in economic terms?

Accepted Answer

Single seller does not go far enough to

Question 16

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 17

A major problem with regulatory agencies is that they

Accepted Answer

A)  have no real legal power over the industries they are supposed to regulate. 
B)  tend to be too tough on the firms they are regulating, forcing them into a loss position. 
C)  often underestimate the firm's cost of production and consequently force regulated firms into a loss position. 
D)  often come to represent the interests of established firms in the industry and use their power to limit competition. 
A)  have no real legal power over the industries they are supposed to regulate. 
B)  tend to be too tough on the firms they are regulating, forcing them into a loss position. 
C)  often underestimate the firm's cost of production and consequently force regulated firms into a loss position. 
D)  often come to represent the interests of established firms in the industry and use their power to limit competition.

Question 18

Consider the following demand and cost information for a monopoly.
Table 11-1
  Refer to Table 11-1. The maximum profit this monopolist can earn is

Accepted Answer

A)  $5. 
B)  $15. 
C)  $16 
D)  $28 
A)  $5. 
B)  $15. 
C)  $16 
D)  $28

Question 19

Which of the following is an important side effect of government licensing and other grants of monopoly power?

Accepted Answer

A)  The number of options available to consumers is increased. 
B)  Competition is enhanced. 
C)  Firms will produce more efficiently. 
D)  Rent-seeking is encouraged. 
A)  The number of options available to consumers is increased. 
B)  Competition is enhanced. 
C)  Firms will produce more efficiently. 
D)  Rent-seeking is encouraged.

Question 20

Use the figure to answer the following question(s).
Figure 11-7
 
The demand and cost conditions in an industry are as depicted in Figure 11-7. In the viewpoint of economic efficiency, what would the ideal price and output be?

Accepted Answer

A)  price, $7; quantity produced, 100 
B)  price, $10; quantity produced, 170 
C)  price, $14; quantity produced, 100 
D)  price, $7; quantity produced, 200 
A)  price, $7; quantity produced, 100 
B)  price, $10; quantity produced, 170 
C)  price, $14; quantity produced, 100 
D)  price, $7; quantity produced, 200

A market situation in which only a small number of mutually interdependent, rival sellers exists is known as a(n)

Which of the following explains why monopoly is uncommon in the real world?

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

Economic theory suggests that government-operated monopolies will

Breaking a monopoly firm into several rival firms will be unlikely to improve economic efficiency when economies of scale are important because

If the average total cost curve is always above the demand curve of a monopolist,

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

The figure below illustrates the cost and revenue structure for a monopoly firm. Figure 11-17 Refer to Figure 11-17. Profit will be maximized by charging a price equal to

Which of the following is true under unregulated monopoly?

A monopolist will maximize profits by

Because of the rise of global competition and free trade,

One answer to the problem of natural monopoly is provision of the good by a government-owned and operated firm. Why is that option not used very often?

Which of the following is not a barrier that limits the entry of potential competitors into a market?

Monopoly is a word derived from Greek origins that means, roughly, single seller. Why is the definition of monopoly as single seller inadequate in economic terms?

Which of the following is true?

A major problem with regulatory agencies is that they

Consider the following demand and cost information for a monopoly. Table 11-1 Refer to Table 11-1. The maximum profit this monopolist can earn is

Which of the following is an important side effect of government licensing and other grants of monopoly power?

Use the figure to answer the following question(s). Figure 11-7 The demand and cost conditions in an industry are as depicted in Figure 11-7. In the viewpoint of economic efficiency, what would the ideal price and output be?

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

A market situation in which only a small number of mutually interdependent, rival sellers exists is known as a(n)

Which of the following explains why monopoly is uncommon in the real world?

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

Economic theory suggests that government-operated monopolies will

Breaking a monopoly firm into several rival firms will be unlikely to improve economic efficiency when economies of scale are important because

If the average total cost curve is always above the demand curve of a monopolist,

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

The figure below illustrates the cost and revenue structure for a monopoly firm. Figure 11-17 Refer to Figure 11-17. Profit will be maximized by charging a price equal to

Which of the following is true under unregulated monopoly?

A monopolist will maximize profits by

Because of the rise of global competition and free trade,

One answer to the problem of natural monopoly is provision of the good by a government-owned and operated firm. Why is that option not used very often?

Which of the following is not a barrier that limits the entry of potential competitors into a market?

Monopoly is a word derived from Greek origins that means, roughly, single seller. Why is the definition of monopoly as single seller inadequate in economic terms?

Which of the following is true?

A major problem with regulatory agencies is that they

Consider the following demand and cost information for a monopoly. Table 11-1 Refer to Table 11-1. The maximum profit this monopolist can earn is

Which of the following is an important side effect of government licensing and other grants of monopoly power?

Use the figure to answer the following question(s). Figure 11-7 The demand and cost conditions in an industry are as depicted in Figure 11-7. In the viewpoint of economic efficiency, what would the ideal price and output be?

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