Question 1

Allowing firms to receive patents on new inventions

Accepted Answer

A)  increases the price consumers pay for patented products. 
B)  gives firms a greater incentive to conduct research and development to invent new products. 
C)  results in much lower prices than would be present if other firms were allowed to compete. 
D)  does both a and b, but not c. 
A)  increases the price consumers pay for patented products. 
B)  gives firms a greater incentive to conduct research and development to invent new products. 
C)  results in much lower prices than would be present if other firms were allowed to compete. 
D)  does both a and b, but not c.

Question 2

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

Accepted Answer

A)  $3,300 
B)  $3,400 
C)  $2,808 
D)  $2,340 
E)  $1,638 
A)  $3,300 
B)  $3,400 
C)  $2,808 
D)  $2,340 
E)  $1,638

Question 3

Which of the following is true of a monopolist's demand curve?

Accepted Answer

A)  It is perfectly elastic. 
B)  It is perfectly inelastic. 
C)  It indicates that the monopolist will be able to sell more units at a higher price. 
D)  It is identical with the industry demand curve for the product. 
A)  It is perfectly elastic. 
B)  It is perfectly inelastic. 
C)  It indicates that the monopolist will be able to sell more units at a higher price. 
D)  It is identical with the industry demand curve for the product.

Question 4

Being a monopolist in the market

Accepted Answer

A)  guarantees a positive short-run profit. 
B)  guarantees a positive long-run profit. 
C)  does not invalidate the profit-maximization rule to produce where MR = MC. 
D)  All of the above are correct. 
A)  guarantees a positive short-run profit. 
B)  guarantees a positive long-run profit. 
C)  does not invalidate the profit-maximization rule to produce where MR = MC. 
D)  All of the above are correct.

Question 5

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

Accepted Answer

A)  price-taker firms 
B)  pure monopoly 
C)  price searchers with low entry barriers 
D)  oligopoly 
A)  price-taker firms 
B)  pure monopoly 
C)  price searchers with low entry barriers 
D)  oligopoly

Question 6

To maximize profits, the monopolist shown in the figure would produce output of

Accepted Answer

A)  Q 1 and charge a price of P 1. 
B)  Q 1 and charge a price of P 2. 
C)  Q 2 and charge a price of P 3. 
D)  Q 1 and charge a price of P 4. 
A)  Q 1 and charge a price of P 1. 
B)  Q 1 and charge a price of P 2. 
C)  Q 2 and charge a price of P 3. 
D)  Q 1 and charge a price of P 4.

Question 7

Which of the following is a unique characteristic of the oligopolistic market structure?

Accepted Answer

A)  low barriers to entry 
B)  a large number of firms producing highly differentiated products that are complements to each other 
C)  product differentiation among the products produced by individual firms 
D)  mutual interdependence among firms in demand, and thus, in price decisions 
A)  low barriers to entry 
B)  a large number of firms producing highly differentiated products that are complements to each other 
C)  product differentiation among the products produced by individual firms 
D)  mutual interdependence among firms in demand, and thus, in price decisions

Question 8

Mr. Stewart owns the only hardware store in a small Midwestern town. His nearest competition is more than 50 miles away, yet he does not earn any economic profit. Does someone need to explain the economic concept of monopoly to him?

Accepted Answer

Most likely, Mr. Stewart is aware of the

Question 9

Since its beginning, the cable television industry has been viewed as a natural monopoly. Typically, cities would grant individual firms local monopolies and then regulate them. Is this a valid approach from an economic perspective? What do you expect the future of the television-viewing market to hold?

Accepted Answer

Economies of scale would appear to be im

Question 10

Figure 11-18  
The profit-maximizing output and price for the firm in Figure 11-18, which charges the same price to all customers, are

Accepted Answer

A)  117 and $14 
B)  150 and $22 
C)  150 and $14 
D)  117 and $22 
E)  117 and $24 
A)  117 and $14 
B)  150 and $22 
C)  150 and $14 
D)  117 and $22 
E)  117 and $24

Question 11

Since patent laws create monopoly power in the short run and thus provide a strong incentive for firms to undertake the risk and effort involved in the development of a technological improvement, we can expect that patent laws

Accepted Answer

A)  are inefficient. 
B)  are damaging to consumer welfare in the long run. 
C)  reflect the power of special interests and the impact that they exert on the regulatory policy. 
D)  may lead to improved products at a lower cost in the long run. 
A)  are inefficient. 
B)  are damaging to consumer welfare in the long run. 
C)  reflect the power of special interests and the impact that they exert on the regulatory policy. 
D)  may lead to improved products at a lower cost in the long run.

Question 12

The demand curve facing an individual oligopolistic firm will be

Accepted Answer

A)  considerably more inelastic than the industry demand curve. 
B)  considerably more elastic than the industry demand curve. 
C)  perfectly elastic at the market price. 
D)  perfectly inelastic at the market price. 
A)  considerably more inelastic than the industry demand curve. 
B)  considerably more elastic than the industry demand curve. 
C)  perfectly elastic at the market price. 
D)  perfectly inelastic at the market price.

Question 13

Figure 11-11  
According to the graph of an oligopolistic industry in Figure 11-11 (points A and C lie on the MC curve), which of the following statements is correct?

Accepted Answer

A)  With perfect collusion, price and outputs are indicated by point A . 
B)  Without collusion, price and outputs are indicated by point B . 
C)  With perfect collusion, price and outputs are indicated by point C . 
D)  With perfect collusion, price and outputs are indicated by point B . 
A)  With perfect collusion, price and outputs are indicated by point A . 
B)  Without collusion, price and outputs are indicated by point B . 
C)  With perfect collusion, price and outputs are indicated by point C . 
D)  With perfect collusion, price and outputs are indicated by point B .

Question 14

For which of the following reasons do regulatory agencies sometimes fail to bring the price and output of a natural monopoly to the ideal level?

Accepted Answer

A)  The regulatory agency does not have all the information concerning a firm's true costs. 
B)  Monopolists may conceal profits by inflating the costs of production by spending money to achieve personal objectives (a very nice office building, for example). 
C)  Regulatory agencies often come to reflect the views of the industries they are supposed to regulate. 
D)  All of the above are reasons. 
A)  The regulatory agency does not have all the information concerning a firm's true costs. 
B)  Monopolists may conceal profits by inflating the costs of production by spending money to achieve personal objectives (a very nice office building, for example). 
C)  Regulatory agencies often come to reflect the views of the industries they are supposed to regulate. 
D)  All of the above are reasons.

Question 15

Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

Accepted Answer

A)  an increase in market output and an increase in the price of the product. 
B)  an increase in market output and an decrease in the price of the product. 
C)  a decrease in market output and an increase in the price of the product. 
D)  a decrease in market output and a decrease in the price of the product. 
A)  an increase in market output and an increase in the price of the product. 
B)  an increase in market output and an decrease in the price of the product. 
C)  a decrease in market output and an increase in the price of the product. 
D)  a decrease in market output and a decrease in the price of the product.

Question 16

Figure 11-18  
The firm in Figure 11-18, a monopolist that maximizes profit by charging all customers the same price, is making a profit of

Accepted Answer

A)  $0 
B)  $234 
C)  $482 
D)  $960 
E)  $468 
A)  $0 
B)  $234 
C)  $482 
D)  $960 
E)  $468

Question 17

A natural monopoly is defined as an industry in which one firm

Accepted Answer

A)  can produce the entire industry output at a lower average cost than a larger number of firms could. 
B)  can produce the entire industry output at a lower marginal cost than a larger number of firms could. 
C)  is very large relative to other firms that could enter the industry. 
D)  can earn higher profits if it is the only firm in the industry rather than if other firms also enter the industry. 
A)  can produce the entire industry output at a lower average cost than a larger number of firms could. 
B)  can produce the entire industry output at a lower marginal cost than a larger number of firms could. 
C)  is very large relative to other firms that could enter the industry. 
D)  can earn higher profits if it is the only firm in the industry rather than if other firms also enter the industry.

Question 18

In the area of business, rent-seeking often involves

Accepted Answer

A)  the use of resources to construct high-priced rental housing. 
B)  the use of resources to secure and maintain a grant of monopoly power from the government. 
C)  an agreement between firms to raise prices and limit entry. 
D)  an agreement between a firm and a customer that makes both parties better off. 
A)  the use of resources to construct high-priced rental housing. 
B)  the use of resources to secure and maintain a grant of monopoly power from the government. 
C)  an agreement between firms to raise prices and limit entry. 
D)  an agreement between a firm and a customer that makes both parties better off.

Question 19

What should a profit maximizing monopolist do if she is currently producing where MC

Accepted Answer

A)  Increase output until MC = MR. 
B)  Decrease output until MC = MR. 
C)  Shut down in the long run. 
D)  Keep producing at this level. 
E)  Operate only in the short run. 
A)  Increase output until MC = MR. 
B)  Decrease output until MC = MR. 
C)  Shut down in the long run. 
D)  Keep producing at this level. 
E)  Operate only in the short run.

Question 20

When barriers to entry are high, a monopolist (or cartel) will often be able to increase their profits by

Accepted Answer

A)  expanding their output so they can increase their price. 
B)  reducing their output so they can raise their price. 
C)  expanding their output so they can lower their price. 
D)  reducing their output so they can lower their price. 
A)  expanding their output so they can increase their price. 
B)  reducing their output so they can raise their price. 
C)  expanding their output so they can lower their price. 
D)  reducing their output so they can lower their price.

Allowing firms to receive patents on new inventions

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

Which of the following is true of a monopolist's demand curve?

Being a monopolist in the market

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

To maximize profits, the monopolist shown in the figure would produce output of

Which of the following is a unique characteristic of the oligopolistic market structure?

Mr. Stewart owns the only hardware store in a small Midwestern town. His nearest competition is more than 50 miles away, yet he does not earn any economic profit. Does someone need to explain the economic concept of monopoly to him?

Figure 11-18 The profit-maximizing output and price for the firm in Figure 11-18, which charges the same price to all customers, are

Since patent laws create monopoly power in the short run and thus provide a strong incentive for firms to undertake the risk and effort involved in the development of a technological improvement, we can expect that patent laws

The demand curve facing an individual oligopolistic firm will be

Figure 11-11 According to the graph of an oligopolistic industry in Figure 11-11 (points A and C lie on the MC curve), which of the following statements is correct?

For which of the following reasons do regulatory agencies sometimes fail to bring the price and output of a natural monopoly to the ideal level?

Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

Figure 11-18 The firm in Figure 11-18, a monopolist that maximizes profit by charging all customers the same price, is making a profit of

A natural monopoly is defined as an industry in which one firm

In the area of business, rent-seeking often involves

What should a profit maximizing monopolist do if she is currently producing where MC

When barriers to entry are high, a monopolist (or cartel) will often be able to increase their profits by

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

Allowing firms to receive patents on new inventions

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

Which of the following is true of a monopolist's demand curve?

Being a monopolist in the market

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

To maximize profits, the monopolist shown in the figure would produce output of

Which of the following is a unique characteristic of the oligopolistic market structure?

Mr. Stewart owns the only hardware store in a small Midwestern town. His nearest competition is more than 50 miles away, yet he does not earn any economic profit. Does someone need to explain the economic concept of monopoly to him?

Figure 11-18 The profit-maximizing output and price for the firm in Figure 11-18, which charges the same price to all customers, are

Since patent laws create monopoly power in the short run and thus provide a strong incentive for firms to undertake the risk and effort involved in the development of a technological improvement, we can expect that patent laws

The demand curve facing an individual oligopolistic firm will be

Figure 11-11 According to the graph of an oligopolistic industry in Figure 11-11 (points A and C lie on the MC curve), which of the following statements is correct?

For which of the following reasons do regulatory agencies sometimes fail to bring the price and output of a natural monopoly to the ideal level?

Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

Figure 11-18 The firm in Figure 11-18, a monopolist that maximizes profit by charging all customers the same price, is making a profit of

A natural monopoly is defined as an industry in which one firm

In the area of business, rent-seeking often involves

What should a profit maximizing monopolist do if she is currently producing where MC

When barriers to entry are high, a monopolist (or cartel) will often be able to increase their profits by

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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