Question 1

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 2

Oligopolies would like to act like a

Accepted Answer

A)  duopoly, but self-interest often drives them closer to the competitive outcome. 
B)  competitive firm, but self-interest often drives them closer to the duopoly outcome. 
C)  monopoly, but self-interest often drives them closer to the duopoly outcome. 
D)  monopoly, but self-interest often drives them closer to the competitive outcome. 
A)  duopoly, but self-interest often drives them closer to the competitive outcome. 
B)  competitive firm, but self-interest often drives them closer to the duopoly outcome. 
C)  monopoly, but self-interest often drives them closer to the duopoly outcome. 
D)  monopoly, but self-interest often drives them closer to the competitive outcome.

Question 3

When economists talk about a barrier to entry, they are referring to

Accepted Answer

A)  a factor that makes it difficult for potential competitors to enter a market. 
B)  the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. 
C)  the downward-sloping portion of the long-run average total cost curve. 
D)  the declining output experienced as additional units of a variable input are used with a given amount of a fixed input. 
A)  a factor that makes it difficult for potential competitors to enter a market. 
B)  the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. 
C)  the downward-sloping portion of the long-run average total cost curve. 
D)  the declining output experienced as additional units of a variable input are used with a given amount of a fixed input.

Question 4

Which of the following is the best explanation of why a lack of information is a problem when the government wants to impose price regulation on a monopolist?

Accepted Answer

A)  the government does not have information about which firms are monopolies. 
B)  firms that are monopolies do not have information about their level of profit or about potential competition. 
C)  consumers do not have information about which firms are competitive and which firms are monopolies. 
D)  regulators do not have information about the demand and marginal costs of the firms that they regulate. 
A)  the government does not have information about which firms are monopolies. 
B)  firms that are monopolies do not have information about their level of profit or about potential competition. 
C)  consumers do not have information about which firms are competitive and which firms are monopolies. 
D)  regulators do not have information about the demand and marginal costs of the firms that they regulate.

Question 5

A monopoly is best defined as

Accepted Answer

A)  a single seller of a product that has characteristics very similar to the products produced in other industries. 
B)  a single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry. 
C)  a market in which a small number of rival sellers produce the entire market output. 
D)  any firm operating in a contestable market. 
A)  a single seller of a product that has characteristics very similar to the products produced in other industries. 
B)  a single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry. 
C)  a market in which a small number of rival sellers produce the entire market output. 
D)  any firm operating in a contestable market.

Question 6

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 7

An expansion in the number of plumbers in a local area has resulted in lower profits. The local plumbing contractors have called a meeting to discuss ways to improve their long-run profitability. Of the four plans being discussed seriously, which would most likely increase their long-run profits?

Accepted Answer

A)  passage of legislation requiring new contractors to be licensed, which would require passing a stiff licensing exam and paying a $5,000 fee 
B)  an "off-the-record" agreement that each plumbing contractor would increase his or her prices by an average of 7 percent 
C)  passage of legislation requiring the local government to share the cost of installing all private sewage systems 
D)  repeal of the current tax on installations of plumbing units 
A)  passage of legislation requiring new contractors to be licensed, which would require passing a stiff licensing exam and paying a $5,000 fee 
B)  an "off-the-record" agreement that each plumbing contractor would increase his or her prices by an average of 7 percent 
C)  passage of legislation requiring the local government to share the cost of installing all private sewage systems 
D)  repeal of the current tax on installations of plumbing units

Question 8

A firm that is a "pure monopoly" is

Accepted Answer

A)  a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. 
B)  the only seller of a good for which there are no good substitutes in a market with high barriers to entry. 
C)  the only buyer of a unique raw material. 
D)  the producer of a product subsidized by the government. 
A)  a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. 
B)  the only seller of a good for which there are no good substitutes in a market with high barriers to entry. 
C)  the only buyer of a unique raw material. 
D)  the producer of a product subsidized by the government.

Question 9

When the government imposes a barrier to entry in a market,

Accepted Answer

A)  more resources will be wasted by firms attempting to secure and maintain market power. 
B)  the options available to consumers will increase in the protected market. 
C)  allocative efficiency will be improved by the reduction of wasteful competition. 
D)  consumers will be better able to direct the smaller number of producers to serve their interests. 
A)  more resources will be wasted by firms attempting to secure and maintain market power. 
B)  the options available to consumers will increase in the protected market. 
C)  allocative efficiency will be improved by the reduction of wasteful competition. 
D)  consumers will be better able to direct the smaller number of producers to serve their interests.

Question 10

When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called

Accepted Answer

A)  rent-seeking. 
B)  collusion. 
C)  franchising. 
D)  resource investment. 
A)  rent-seeking. 
B)  collusion. 
C)  franchising. 
D)  resource investment.

Question 11

Consider the following demand and cost information for a monopoly.
Table 11-1
  Refer to Table 11-1. The marginal cost of the fourth unit is

Accepted Answer

A)  $7. 
B)  $12. 
C)  $25. 
D)  $60. 
A)  $7. 
B)  $12. 
C)  $25. 
D)  $60.

Question 12

One of the effects of patents is to

Accepted Answer

A)  reduce incentives for innovation. 
B)  give firms incentives to worry less about minimizing production costs. 
C)  temporarily provide the patent owner with monopoly power. 
D)  reduce the degree of monopoly power in the short run. 
A)  reduce incentives for innovation. 
B)  give firms incentives to worry less about minimizing production costs. 
C)  temporarily provide the patent owner with monopoly power. 
D)  reduce the degree of monopoly power in the short run.

Question 13

Use the figure to answer the following question(s).
Figure 11-14
 
Using Figure 11-14, determine what quantity these firms would produce, in the short run, if the firms were engaging in vigorous competition.

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

Question 14

Which of the following is a valid criticism of unregulated monopoly?

Accepted Answer

A)  Monopoly limits the options available to consumers. 
B)  Relative to a competitive market, a monopolist generally will produce too great an output. 
C)  Profit-maximizing monopolists will fail to produce at the lowest possible cost. 
D)  A monopoly's output will often be more than if the market were competitive. 
A)  Monopoly limits the options available to consumers. 
B)  Relative to a competitive market, a monopolist generally will produce too great an output. 
C)  Profit-maximizing monopolists will fail to produce at the lowest possible cost. 
D)  A monopoly's output will often be more than if the market were competitive.

Question 15

Which of the following indicates the major difference between monopolists and competitive price searchers?

Accepted Answer

A)  Monopolists will always be able to make economic profit; competitive price searchers will not. 
B)  Barriers to entry are high under monopoly but low in competitive price-searcher markets. 
C)  Monopolists will face a downward-sloping demand curve; competitive price searchers will not. 
D)  Unregulated monopolists will charge prices that exceed marginal cost; competitive price searchers will not. 
A)  Monopolists will always be able to make economic profit; competitive price searchers will not. 
B)  Barriers to entry are high under monopoly but low in competitive price-searcher markets. 
C)  Monopolists will face a downward-sloping demand curve; competitive price searchers will not. 
D)  Unregulated monopolists will charge prices that exceed marginal cost; competitive price searchers will not.

Question 16

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 17

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 18

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is in a competitive price-searcher market?

Accepted Answer

A)  A competitive price searcher produces at the output level where marginal cost equals marginal revenue; a monopolist does not. 
B)  A monopolist faces a downward-sloping demand curve; a competitive price searcher does not. 
C)  A monopolist charges a price higher than marginal cost; a competitive price searcher does not. 
D)  In the long run, a competitive price searcher will earn zero economic profit because of low entry barriers, while a monopolist may earn positive economic profits in the long run. 
A)  A competitive price searcher produces at the output level where marginal cost equals marginal revenue; a monopolist does not. 
B)  A monopolist faces a downward-sloping demand curve; a competitive price searcher does not. 
C)  A monopolist charges a price higher than marginal cost; a competitive price searcher does not. 
D)  In the long run, a competitive price searcher will earn zero economic profit because of low entry barriers, while a monopolist may earn positive economic profits in the long run.

Question 19

The Big River Power Company is a regulated monopolist with pricing structured such that the stockholders receive a "fair" rate of return based on the firm's unit costs. Can economic thinking predict how the company executive offices are likely to be furnished? Given a choice between Hawaii and downtown Cleveland (20 miles away), where would we expect the Board of Directors to meet?

Accepted Answer

We would expect the firm to ha

Question 20

The incentive for managers of a government-operated firm (for example, a state university or the U.S. Post Office) to operate efficiently will be

Accepted Answer

A)  low because all government workers are lazy. 
B)  low because there are no residual claimants to monitor and institute cost-reducing measures. 
C)  high because government employees and officials will be less concerned with personal gain. 
D)  high because voters can easily detect those who are to blame for inefficiencies and replace them. 
A)  low because all government workers are lazy. 
B)  low because there are no residual claimants to monitor and institute cost-reducing measures. 
C)  high because government employees and officials will be less concerned with personal gain. 
D)  high because voters can easily detect those who are to blame for inefficiencies and replace them.

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

Oligopolies would like to act like a

When economists talk about a barrier to entry, they are referring to

Which of the following is the best explanation of why a lack of information is a problem when the government wants to impose price regulation on a monopolist?

A monopoly is best defined as

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,

An expansion in the number of plumbers in a local area has resulted in lower profits. The local plumbing contractors have called a meeting to discuss ways to improve their long-run profitability. Of the four plans being discussed seriously, which would most likely increase their long-run profits?

A firm that is a "pure monopoly" is

When the government imposes a barrier to entry in a market,

When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called

Consider the following demand and cost information for a monopoly. Table 11-1 Refer to Table 11-1. The marginal cost of the fourth unit is

One of the effects of patents is to

Use the figure to answer the following question(s). Figure 11-14 Using Figure 11-14, determine what quantity these firms would produce, in the short run, if the firms were engaging in vigorous competition.

Which of the following is a valid criticism of unregulated monopoly?

Which of the following indicates the major difference between monopolists and competitive price searchers?

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

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

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is in a competitive price-searcher market?

The incentive for managers of a government-operated firm (for example, a state university or the U.S. Post Office) to operate efficiently will 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

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

Oligopolies would like to act like a

When economists talk about a barrier to entry, they are referring to

Which of the following is the best explanation of why a lack of information is a problem when the government wants to impose price regulation on a monopolist?

A monopoly is best defined as

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,

An expansion in the number of plumbers in a local area has resulted in lower profits. The local plumbing contractors have called a meeting to discuss ways to improve their long-run profitability. Of the four plans being discussed seriously, which would most likely increase their long-run profits?

A firm that is a "pure monopoly" is

When the government imposes a barrier to entry in a market,

When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called

Consider the following demand and cost information for a monopoly. Table 11-1 Refer to Table 11-1. The marginal cost of the fourth unit is

One of the effects of patents is to

Use the figure to answer the following question(s). Figure 11-14 Using Figure 11-14, determine what quantity these firms would produce, in the short run, if the firms were engaging in vigorous competition.

Which of the following is a valid criticism of unregulated monopoly?

Which of the following indicates the major difference between monopolists and competitive price searchers?

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

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

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is in a competitive price-searcher market?

The incentive for managers of a government-operated firm (for example, a state university or the U.S. Post Office) to operate efficiently will 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