Question 1

Which of the following would increase the likelihood that firms in an industry could successfully collude?

Accepted Answer

A)  a large number of firms in the industry 
B)  unstable demand conditions in the industry 
C)  high barriers to entry in the industry 
D)  product characteristics that make it difficult for firms to detect other firms that cheat on the agreement 
A)  a large number of firms in the industry 
B)  unstable demand conditions in the industry 
C)  high barriers to entry in the industry 
D)  product characteristics that make it difficult for firms to detect other firms that cheat on the agreement

Question 2

Figure 11-19  
In the short run, the monopolist depicted in Figure 11-19 should

Accepted Answer

A)  shut down because P  AVC at some output levels. 
D)  continue producing because P > ATC at all output levels. 
E)  continue producing because monopolists never shut down. 
A)  shut down because P  AVC at some output levels. 
D)  continue producing because P > ATC at all output levels. 
E)  continue producing because monopolists never shut down.

Question 3

A natural monopoly is a market where

Accepted Answer

A)  a single firm has control over a vital natural resource. 
B)  many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. 
C)  a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. 
D)  many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm. 
A)  a single firm has control over a vital natural resource. 
B)  many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. 
C)  a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. 
D)  many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.

Question 4

From the viewpoint of allocative efficiency, which of the following is a defect of pure monopoly?

Accepted Answer

A)  The monopolist undersupplies the market and charges too high a price. 
B)  The monopolist is a revenue maximizer not a profit maximizer. 
C)  A monopolist has little incentive to produce efficiently (at a low cost). 
D)  All of the above are true. 
A)  The monopolist undersupplies the market and charges too high a price. 
B)  The monopolist is a revenue maximizer not a profit maximizer. 
C)  A monopolist has little incentive to produce efficiently (at a low cost). 
D)  All of the above are true.

Question 5

A monopolist finds out that if he lowers his price from $10 to $8, sales rise from 100 units to 115 units. Therefore, in this price range,

Accepted Answer

A)  marginal revenue is positive. 
B)  marginal revenue is negative. 
C)  the price elasticity of demand is greater than one. 
D)  both a and c are correct. 
A)  marginal revenue is positive. 
B)  marginal revenue is negative. 
C)  the price elasticity of demand is greater than one. 
D)  both a and c are correct.

Question 6

If marginal revenue exceeds marginal cost, a profit-maximizing monopolist will

Accepted Answer

A)  raise price and decrease output. 
B)  lower price and increase output. 
C)  reduce both output and price. 
D)  hold output constant and raise price. 
A)  raise price and decrease output. 
B)  lower price and increase output. 
C)  reduce both output and price. 
D)  hold output constant and raise price.

Question 7

Cartel agreements are difficult to maintain because individual members

Accepted Answer

A)  can gain by raising their price above the price that is best for the cartel. 
B)  are often unable to police the price and output policies of other members. 
C)  can gain by secretly raising their price above the price that is best for the cartel. 
D)  can enforce price arrangements vigorously in court. 
A)  can gain by raising their price above the price that is best for the cartel. 
B)  are often unable to police the price and output policies of other members. 
C)  can gain by secretly raising their price above the price that is best for the cartel. 
D)  can enforce price arrangements vigorously in court.

Question 8

Which of the following is most likely to contribute to the presence of monopoly in an industry?

Accepted Answer

A)  economies of scale 
B)  an elastic market demand for the product produced by the industry 
C)  inefficiency due to bureaucratic decision-making procedures in the industry 
D)  controlling over 50 percent of the market 
A)  economies of scale 
B)  an elastic market demand for the product produced by the industry 
C)  inefficiency due to bureaucratic decision-making procedures in the industry 
D)  controlling over 50 percent of the market

Question 9

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 10

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 11

As Adam Smith indicated, the trouble with monopoly is that

Accepted Answer

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

Question 12

Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will

Accepted Answer

A)  make an economic profit. 
B)  stay in operation in the short run, but shut down in the long run. 
C)  shut down in the short run. 
D)  lower the price. 
A)  make an economic profit. 
B)  stay in operation in the short run, but shut down in the long run. 
C)  shut down in the short run. 
D)  lower the price.

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

Use the figure to answer the following question(s).
Figure 11-1
 
If a regulatory agency were using the "normal return" (zero economic profit) criteria to impose a price on a monopolist with the cost and demand conditions depicted in Figure 11-1, what price would the regulators set, and what output would the monopolist produce?

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 15

Use the figure to answer the following question(s).
Figure 11-6
 
If the output in the industry is produced by a monopolist, at what price will the good sell and what quantity will be produced in Figure 11-6?

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 3; 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 3; quantity produced, Q 2

Question 16

To be a natural monopoly, a firm must

Accepted Answer

A)  control an essential natural resource input. 
B)  be very large. 
C)  have a continuously falling average cost curve as output rises. 
D)  have falling average costs over a substantial range of total market demand. 
A)  control an essential natural resource input. 
B)  be very large. 
C)  have a continuously falling average cost curve as output rises. 
D)  have falling average costs over a substantial range of total market demand.

Question 17

Figure 11-16  
Refer to Figure 11-16. To maximize its profit, a monopolist would choose which of the following outcomes?

Accepted Answer

A)  100 units of output and a price of $10 per unit 
B)  100 units of output and a price of $20 per unit 
C)  150 units of output and a price of $15 per unit 
D)  200 units of output and a price of $20 per unit 
A)  100 units of output and a price of $10 per unit 
B)  100 units of output and a price of $20 per unit 
C)  150 units of output and a price of $15 per unit 
D)  200 units of output and a price of $20 per unit

Question 18

Which of the following is a characteristic of an oligopolistic industry?

Accepted Answer

A)  interdependence of a firm's price and output decisions 
B)  low barriers to entry 
C)  small output of individual firms relative to the total market 
D)  a large number of competing firms 
A)  interdependence of a firm's price and output decisions 
B)  low barriers to entry 
C)  small output of individual firms relative to the total market 
D)  a large number of competing firms

Question 19

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 20

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

Which of the following would increase the likelihood that firms in an industry could successfully collude?

Figure 11-19 In the short run, the monopolist depicted in Figure 11-19 should

A natural monopoly is a market where

From the viewpoint of allocative efficiency, which of the following is a defect of pure monopoly?

A monopolist finds out that if he lowers his price from $10 to $8, sales rise from 100 units to 115 units. Therefore, in this price range,

If marginal revenue exceeds marginal cost, a profit-maximizing monopolist will

Cartel agreements are difficult to maintain because individual members

Which of the following is most likely to contribute to the presence of monopoly in an industry?

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

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

As Adam Smith indicated, the trouble with monopoly is that

Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will

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?

Use the figure to answer the following question(s). Figure 11-6 If the output in the industry is produced by a monopolist, at what price will the good sell and what quantity will be produced in Figure 11-6?

To be a natural monopoly, a firm must

Figure 11-16 Refer to Figure 11-16. To maximize its profit, a monopolist would choose which of the following outcomes?

Which of the following is a characteristic of an oligopolistic industry?

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

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

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

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Exam 11: Price-Searcher Markets With High Entry Barriers

Which of the following would increase the likelihood that firms in an industry could successfully collude?

Figure 11-19 In the short run, the monopolist depicted in Figure 11-19 should

A natural monopoly is a market where

From the viewpoint of allocative efficiency, which of the following is a defect of pure monopoly?

A monopolist finds out that if he lowers his price from $10 to $8, sales rise from 100 units to 115 units. Therefore, in this price range,

If marginal revenue exceeds marginal cost, a profit-maximizing monopolist will

Cartel agreements are difficult to maintain because individual members

Which of the following is most likely to contribute to the presence of monopoly in an industry?

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

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

As Adam Smith indicated, the trouble with monopoly is that

Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will

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?

Use the figure to answer the following question(s). Figure 11-6 If the output in the industry is produced by a monopolist, at what price will the good sell and what quantity will be produced in Figure 11-6?

To be a natural monopoly, a firm must

Figure 11-16 Refer to Figure 11-16. To maximize its profit, a monopolist would choose which of the following outcomes?

Which of the following is a characteristic of an oligopolistic industry?

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

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

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