Question 1

Figure 11-20
  
-The profit-maximizing price the monopoly will charge in Figure 11-20 is

Accepted Answer

A) irrelevant since the firm should shut down 
B) $11 
C) $16 
D) $18 
E) $22 
A) irrelevant since the firm should shut down 
B) $11 
C) $16 
D) $18 
E) $22

Question 2

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 3

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 4

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 5

The chances of successful collusion are greatest when

Accepted Answer

A) firms are producing a differentiated product. 
B) there are many firms in the industry. 
C) there are tiny firms and huge firms together in the same industry. 
D) demand curves and cost curves are similar among the firms in the industry. 
E) demand is falling. 
A) firms are producing a differentiated product. 
B) there are many firms in the industry. 
C) there are tiny firms and huge firms together in the same industry. 
D) demand curves and cost curves are similar among the firms in the industry. 
E) demand is falling.

Question 6

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 7

A profit-maximizing monopolist will continue expanding output as long as

Accepted Answer

A) marginal revenue exceeds marginal cost. 
B) marginal revenue is positive. 
C) the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D) economic profit is more than zero. 
A) marginal revenue exceeds marginal cost. 
B) marginal revenue is positive. 
C) the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D) economic profit is more than zero.

Question 8

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.

Question 9

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 p

Question 10

A market situation in which the average total costs of production continually decline with increased output until the entire market is supplied is called

Accepted Answer

A) a legal monopoly. 
B) a natural monopoly. 
C) diminishing returns to scale. 
D) diminishing returns to a variable factor. 
A) a legal monopoly. 
B) a natural monopoly. 
C) diminishing returns to scale. 
D) diminishing returns to a variable factor.

Question 11

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 12

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 13

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 14

Monopolists may be able to earn profit,even in the long run,as the result of

Accepted Answer

A) consumer ignorance. 
B) an inelastic demand for its product. 
C) product differentiation. 
D) high barriers to entry. 
A) consumer ignorance. 
B) an inelastic demand for its product. 
C) product differentiation. 
D) high barriers to entry.

Question 15

For a monopolist that does not price discriminate,economic profit is maximized in the short run at a price of $140.Marginal revenue at that output level is

Accepted Answer

A) equal to $140. 
B) greater than $140. 
C) less than $140. 
D) less than marginal cost. 
E) greater than average revenue. 
A) equal to $140. 
B) greater than $140. 
C) less than $140. 
D) less than marginal cost. 
E) greater than average revenue.

Question 16

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 17

Oligopolistic agreements on price tend to be unstable because

Accepted Answer

A) although the monopoly price is the best price for all firms,oligopolists are unaware of this and thus charge prices that are lower than the price that could be charged by a monopolists,therefore,decreasing social welfare. 
B) although the monopoly price maximizes the joint profits of the firms,a secret price cut by any individual firm will increase the profits of that firm;hence,collusive agreements tend to break down. 
C) the demand for the products of oligopolistic industries is inherently unstable relative to the demand for the products of non-oligopolistic industries because demand for products in oligopolistic industries are dependent on changes in consumer tastes and preferences. 
D) firms in oligopolistic industries have more concern for consumers than do firms in competitive industries. 
A) although the monopoly price is the best price for all firms,oligopolists are unaware of this and thus charge prices that are lower than the price that could be charged by a monopolists,therefore,decreasing social welfare. 
B) although the monopoly price maximizes the joint profits of the firms,a secret price cut by any individual firm will increase the profits of that firm;hence,collusive agreements tend to break down. 
C) the demand for the products of oligopolistic industries is inherently unstable relative to the demand for the products of non-oligopolistic industries because demand for products in oligopolistic industries are dependent on changes in consumer tastes and preferences. 
D) firms in oligopolistic industries have more concern for consumers than do firms in competitive industries.

Question 18

The key element in preserving a monopoly is

Accepted Answer

A) government subsidy of critical enterprises. 
B) keeping potential rivals out of the market. 
C) guaranteeing availability of substitute products. 
D) increased advertising expenditure. 
A) government subsidy of critical enterprises. 
B) keeping potential rivals out of the market. 
C) guaranteeing availability of substitute products. 
D) increased advertising expenditure.

Question 19

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 20

If government officials break a natural monopoly up into several smaller firms,then

Accepted Answer

A) competition will force firms to attain economic profits rather than accounting profits. 
B) competition will force firms to produce surplus output,which drives up price. 
C) the average costs of production will increase. 
D) the average costs of production will decrease. 
A) competition will force firms to attain economic profits rather than accounting profits. 
B) competition will force firms to produce surplus output,which drives up price. 
C) the average costs of production will increase. 
D) the average costs of production will decrease.

Exam 24: Aprice-Searcher Markets With High Entry Barriers

Figure 11-20 -The profit-maximizing price the monopoly will charge in Figure 11-20 is

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

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?

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?

The chances of successful collusion are greatest when

A natural monopoly is a market where

A profit-maximizing monopolist will continue expanding output as long as

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

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?

A market situation in which the average total costs of production continually decline with increased output until the entire market is supplied is called

Figure 11-1 -What price and output in Figure 11-1 would an unregulated profit-maximizing monopolist choose?

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

As Adam Smith indicated,the trouble with monopoly is that

Monopolists may be able to earn profit,even in the long run,as the result of

For a monopolist that does not price discriminate,economic profit is maximized in the short run at a price of $140.Marginal revenue at that output level is

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

Oligopolistic agreements on price tend to be unstable because

The key element in preserving a monopoly is

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

If government officials break a natural monopoly up into several smaller firms,then

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