Question 1

In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will

Accepted Answer

A)  lower price to expand revenue possibilities. 
B)  reduce output and raise price. 
C)  maintain the current price if profit is still positive. 
D)  increase plant size to lower marginal cost. 
E)  decrease plant size to lower marginal cost. 
A)  lower price to expand revenue possibilities. 
B)  reduce output and raise price. 
C)  maintain the current price if profit is still positive. 
D)  increase plant size to lower marginal cost. 
E)  decrease plant size to lower marginal cost.

Question 2

Which of the following are illegal under the antitrust laws of the United States?

Accepted Answer

A)  charging prices that exceed average total costs 
B)  charging some consumers different prices than others 
C)  mergers that unnecessarily create excessively large firms 
D)  collusive behavior or other actions designed to create a monopoly or cartel 
A)  charging prices that exceed average total costs 
B)  charging some consumers different prices than others 
C)  mergers that unnecessarily create excessively large firms 
D)  collusive behavior or other actions designed to create a monopoly or cartel

Question 3

Why does the U.S. government maintain a monopoly in the delivery of first-class mail? Does the Postal Service nevertheless face other forms of competition?

Accepted Answer

The Postal Service is designed to provid

Question 4

Use the figure to answer the following question(s).
Figure 11-13
 
If the firms in the industry depicted in Figure 11-13 can effectively operate as a cartel, what would the industry's price and output be?

Accepted Answer

A)  price, $10; output, 600 
B)  price, $20; output, 400 
C)  price, $25; output, 300 
D)  price, $30; output, 200 
A)  price, $10; output, 600 
B)  price, $20; output, 400 
C)  price, $25; output, 300 
D)  price, $30; output, 200

Question 5

A regulatory agency that imposes a price ceiling in order to limit monopoly profits to a "fair rate of return" is forcing the monopolist to sell at a price equal to

Accepted Answer

A)  average fixed cost. 
B)  average total cost. 
C)  marginal cost. 
D)  average variable cost. 
A)  average fixed cost. 
B)  average total cost. 
C)  marginal cost. 
D)  average variable cost.

Question 6

In essence, patents grant their owners

Accepted Answer

A)  a property right to new products and production processes that they have developed. 
B)  the exclusive right to use a newly developed process or product forever. 
C)  the right to use resources owned by their competitors. 
D)  an exemption from laws that prohibit price discrimination. 
A)  a property right to new products and production processes that they have developed. 
B)  the exclusive right to use a newly developed process or product forever. 
C)  the right to use resources owned by their competitors. 
D)  an exemption from laws that prohibit price discrimination.

Question 7

When oligopolistic firms collude to maximize their joint profits, in comparison with the situation in competitive markets, their actions generally lead to

Accepted Answer

A)  a larger output and lower prices. 
B)  a smaller output and higher prices. 
C)  a smaller output and lower prices. 
D)  the same output and higher prices. 
A)  a larger output and lower prices. 
B)  a smaller output and higher prices. 
C)  a smaller output and lower prices. 
D)  the same output and higher prices.

Question 8

A monopoly is most likely to emerge in a market when

Accepted Answer

A)  the producers in the market have U-shaped average total cost curves. 
B)  the price elasticity of demand for the product is high. 
C)  the cost of entry and exit into the market is low. 
D)  economies of scale are large relative to market demand. 
A)  the producers in the market have U-shaped average total cost curves. 
B)  the price elasticity of demand for the product is high. 
C)  the cost of entry and exit into the market is low. 
D)  economies of scale are large relative to market demand.

Question 9

One key characteristic that is distinctive of an oligopoly market is that

Accepted Answer

A)  the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. 
B)  the decisions of one seller often influence the price of products, the output, and the profits of rival firms. 
C)  there is only one firm that produces a product for which there are no good substitutes. 
D)  there are many sellers in the market and each is small relative to the total market. 
A)  the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. 
B)  the decisions of one seller often influence the price of products, the output, and the profits of rival firms. 
C)  there is only one firm that produces a product for which there are no good substitutes. 
D)  there are many sellers in the market and each is small relative to the total market.

Question 10

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC)?

Accepted Answer

A)  This price will force the firms out of business in the long run. 
B)  The firms have an incentive to pad their fixed costs. 
C)  When price is equal to MC, new firms will enter the industry and drive up the costs of production. 
D)  Both b and c are correct. 
A)  This price will force the firms out of business in the long run. 
B)  The firms have an incentive to pad their fixed costs. 
C)  When price is equal to MC, new firms will enter the industry and drive up the costs of production. 
D)  Both b and c are correct.

Question 11

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

Accepted Answer

A)  Marginal revenue and price are equal for a price taker but not a monopolist. 
B)  Monopolists can earn economic profits in the long run, but price takers cannot. 
C)  A price taker sells its output at a price equal to marginal cost, while a monopolist sells its output at a price higher than marginal cost. 
D)  All of the above are true. 
A)  Marginal revenue and price are equal for a price taker but not a monopolist. 
B)  Monopolists can earn economic profits in the long run, but price takers cannot. 
C)  A price taker sells its output at a price equal to marginal cost, while a monopolist sells its output at a price higher than marginal cost. 
D)  All of the above are true.

Question 12

Why is it difficult for economists to predict the price and output policy that will emerge in oligopolistic markets?

Accepted Answer

A)  Economists cannot determine if barriers to entry exist in a market. 
B)  Economists cannot predict the reactions that firms will have to the actions and decisions of other firms. 
C)  The government prevents economists from acquiring the information that would lead to good predictions. 
D)  Firms have a set price and output policy, but the policy is concealed to discourage competition. 
A)  Economists cannot determine if barriers to entry exist in a market. 
B)  Economists cannot predict the reactions that firms will have to the actions and decisions of other firms. 
C)  The government prevents economists from acquiring the information that would lead to good predictions. 
D)  Firms have a set price and output policy, but the policy is concealed to discourage competition.

Question 13

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

Accepted Answer

A)  Individual firms could gain if they charged a price greater than the industry's profit-maximizing price. 
B)  The industry demand curve is more elastic than the demand curve confronting each of the firms in the industry. 
C)  The firms would like to see the industry produce a larger output and charge a lower price. 
D)  The demand curve confronting the individual firms is more elastic than the market demand curve for the product. 
A)  Individual firms could gain if they charged a price greater than the industry's profit-maximizing price. 
B)  The industry demand curve is more elastic than the demand curve confronting each of the firms in the industry. 
C)  The firms would like to see the industry produce a larger output and charge a lower price. 
D)  The demand curve confronting the individual firms is more elastic than the market demand curve for the product.

Question 14

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

Accepted Answer

A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

Question 15

When members of an oligopolistic industry agree to collude, raising their product price substantially above average cost, the passage of time (months and years)

Accepted Answer

A)  is usually needed for the members to solidify their cooperation. 
B)  usually results in finer control of prices and markets by the group and larger profit margins. 
C)  is likely to erode the agreement, as ways to cheat are developed by some participants and new entry is encouraged by the high price. 
D)  seldom has any impact on the agreement, as long as the participants maintain high profit levels as a result of the agreement. 
A)  is usually needed for the members to solidify their cooperation. 
B)  usually results in finer control of prices and markets by the group and larger profit margins. 
C)  is likely to erode the agreement, as ways to cheat are developed by some participants and new entry is encouraged by the high price. 
D)  seldom has any impact on the agreement, as long as the participants maintain high profit levels as a result of the agreement.

Question 16

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

Accepted Answer

A)  restrict output to increase the price even higher. 
B)  raise price and expand output to increase profit. 
C)  lower price and expand output to increase profit. 
D)  attempt to maintain this position because it is consistent with profit maximization. 
A)  restrict output to increase the price even higher. 
B)  raise price and expand output to increase profit. 
C)  lower price and expand output to increase profit. 
D)  attempt to maintain this position because it is consistent with profit maximization.

Question 17

Which one of the following is the best description of a monopolist?

Accepted Answer

A)  a firm that produces a single product 
B)  a firm that is the sole producer of a narrowly defined product class, such as yellow, grade-A butter produced in Jackson County, Wisconsin 
C)  a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry 
D)  a firm that is large relative to its competitors 
A)  a firm that produces a single product 
B)  a firm that is the sole producer of a narrowly defined product class, such as yellow, grade-A butter produced in Jackson County, Wisconsin 
C)  a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry 
D)  a firm that is large relative to its competitors

Question 18

Figure 11-20  
At the profit-maximizing level of production, the monopoly in Figure 11-20 will have a

Accepted Answer

A)  profit per unit of output of $2. 
B)  loss per unit of output of $2. 
C)  loss per unit of output of $5. 
D)  profit per unit of output of $5. 
E)  loss per unit of output of $4. 
A)  profit per unit of output of $2. 
B)  loss per unit of output of $2. 
C)  loss per unit of output of $5. 
D)  profit per unit of output of $5. 
E)  loss per unit of output of $4.

Question 19

When a monopolist is producing at the profit-maximizing output level, the value to consumers of one additional unit of output will

Accepted Answer

A)  exceed the monopolist's marginal cost. 
B)  equal the monopolist's marginal cost. 
C)  be less than the monopolist's marginal cost. 
D)  exceed the price of the additional unit. 
A)  exceed the monopolist's marginal cost. 
B)  equal the monopolist's marginal cost. 
C)  be less than the monopolist's marginal cost. 
D)  exceed the price of the additional unit.

Question 20

The U.S. Postal Service has a monopoly on the delivery of first-class mail due to

Accepted Answer

A)  economies of scale. 
B)  a lack of initiative on the part of competing firms. 
C)  legal barriers limiting entry. 
D)  control over an essential resource. 
A)  economies of scale. 
B)  a lack of initiative on the part of competing firms. 
C)  legal barriers limiting entry. 
D)  control over an essential resource.

In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will

Which of the following are illegal under the antitrust laws of the United States?

Why does the U.S. government maintain a monopoly in the delivery of first-class mail? Does the Postal Service nevertheless face other forms of competition?

Use the figure to answer the following question(s). Figure 11-13 If the firms in the industry depicted in Figure 11-13 can effectively operate as a cartel, what would the industry's price and output be?

A regulatory agency that imposes a price ceiling in order to limit monopoly profits to a "fair rate of return" is forcing the monopolist to sell at a price equal to

In essence, patents grant their owners

When oligopolistic firms collude to maximize their joint profits, in comparison with the situation in competitive markets, their actions generally lead to

A monopoly is most likely to emerge in a market when

One key characteristic that is distinctive of an oligopoly market is that

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC)?

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

Why is it difficult for economists to predict the price and output policy that will emerge in oligopolistic markets?

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

When members of an oligopolistic industry agree to collude, raising their product price substantially above average cost, the passage of time (months and years)

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

Which one of the following is the best description of a monopolist?

Figure 11-20 At the profit-maximizing level of production, the monopoly in Figure 11-20 will have a

When a monopolist is producing at the profit-maximizing output level, the value to consumers of one additional unit of output will

The U.S. Postal Service has a monopoly on the delivery of first-class mail due to

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

In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will

Which of the following are illegal under the antitrust laws of the United States?

Why does the U.S. government maintain a monopoly in the delivery of first-class mail? Does the Postal Service nevertheless face other forms of competition?

Use the figure to answer the following question(s). Figure 11-13 If the firms in the industry depicted in Figure 11-13 can effectively operate as a cartel, what would the industry's price and output be?

A regulatory agency that imposes a price ceiling in order to limit monopoly profits to a "fair rate of return" is forcing the monopolist to sell at a price equal to

In essence, patents grant their owners

When oligopolistic firms collude to maximize their joint profits, in comparison with the situation in competitive markets, their actions generally lead to

A monopoly is most likely to emerge in a market when

One key characteristic that is distinctive of an oligopoly market is that

Which of the following is a problem that arises when regulations force "natural monopolies," like electric utilities, to charge a price that is equal to their marginal cost (MC)?

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

Why is it difficult for economists to predict the price and output policy that will emerge in oligopolistic markets?

Why do oligopolists (or cartel members) have an incentive to cheat on collusive agreements designed to maximize the joint profits of the firms in the industry?

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

When members of an oligopolistic industry agree to collude, raising their product price substantially above average cost, the passage of time (months and years)

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

Which one of the following is the best description of a monopolist?

Figure 11-20 At the profit-maximizing level of production, the monopoly in Figure 11-20 will have a

When a monopolist is producing at the profit-maximizing output level, the value to consumers of one additional unit of output will

The U.S. Postal Service has a monopoly on the delivery of first-class mail due to

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