Question 1

When a monopolist is maximizing profit,which of the following conditions will always be satisfied?

Accepted Answer

A) P = MC 
B) MR = AVC 
C) P = ATC 
D) MR = MC 
A) P = MC 
B) MR = AVC 
C) P = ATC 
D) MR = MC

Question 2

In which of the following industries would we expect collusion to be most effective?

Accepted Answer

A) retail gasoline,where most gas is sold by a large number of small dealers 
B) crude oil production,where most oil is sold by a small number of large sellers 
C) housing construction,an industry dominated by local firms that produce unique products 
D) soybean production,where there are large numbers of farmers in many countries 
A) retail gasoline,where most gas is sold by a large number of small dealers 
B) crude oil production,where most oil is sold by a small number of large sellers 
C) housing construction,an industry dominated by local firms that produce unique products 
D) soybean production,where there are large numbers of farmers in many countries

Question 3

The figure below depicts the demand,marginal revenue and marginal cost curves of a profit-maximizing monopolist.
Figure 11-15
  
-Refer to Figure 11-15.Which of the following areas represents the deadweight loss due to monopoly pricing?

Accepted Answer

A) Triangle bde 
B) Triangle bge 
C) Rectangle acdb 
D) Rectangle cfgd 
A) Triangle bde 
B) Triangle bge 
C) Rectangle acdb 
D) Rectangle cfgd

Question 4

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 5

If the firms in an oligopolistic industry can collude effectively (from the firms' viewpoints),the resulting price and output in the market will be most similar to that of

Accepted Answer

A) a competitive price-searcher market. 
B) pure monopoly. 
C) bilateral monopoly. 
D) a competitive price-taker market. 
A) a competitive price-searcher market. 
B) pure monopoly. 
C) bilateral monopoly. 
D) a competitive price-taker market.

Question 6

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 7

As a group,oligopolists would always earn the highest profit if they would

Accepted Answer

A) produce the competitive quantity of output. 
B) produce more than the competitive quantity of output. 
C) charge the same price that a monopolist would charge if the market were a monopoly. 
D) operate according to their own individual self-interests. 
A) produce the competitive quantity of output. 
B) produce more than the competitive quantity of output. 
C) charge the same price that a monopolist would charge if the market were a monopoly. 
D) operate according to their own individual self-interests.

Question 8

Under which one of the following market structures are firms most likely to enter into a price-fixing agreement designed to maximize their joint profit?

Accepted Answer

A) price-taker markets with low entry barriers 
B) pure monopoly 
C) price-searcher markets with low entry barriers 
D) oligopoly 
A) price-taker markets with low entry barriers 
B) pure monopoly 
C) price-searcher markets with low entry barriers 
D) oligopoly

Question 9

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 10

In the case where a natural monopoly exists in an industry,

Accepted Answer

A) a competitive market structure will be costly and difficult to maintain. 
B) a competitive market structure will be more efficient and more equitable. 
C) government regulations will always improve efficiency in this industry. 
D) economies of scale will not be a consideration when analyzing the proper structure of the industry. 
A) a competitive market structure will be costly and difficult to maintain. 
B) a competitive market structure will be more efficient and more equitable. 
C) government regulations will always improve efficiency in this industry. 
D) economies of scale will not be a consideration when analyzing the proper structure of the industry.

Question 11

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

Accepted Answer

A) they are unable to maintain the same degree of monopoly power achieved by a monopolist. 
B) each firm's profit always ends up being zero. 
C) competitive pressures are absent from the market. 
D) it will be easier to maintain collusive agreements. 
A) they are unable to maintain the same degree of monopoly power achieved by a monopolist. 
B) each firm's profit always ends up being zero. 
C) competitive pressures are absent from the market. 
D) it will be easier to maintain collusive agreements.

Question 12

In a small,isolated town in a western state,there are only four dentists.In such a case,we can be confident that

Accepted Answer

A) there are high profits in the dental business in this town. 
B) there are no profits in the dental business in this town. 
C) the possibility of new dentists coming to town will limit the profits of the existing dentists. 
D) collusion cannot occur among the four dentists. 
A) there are high profits in the dental business in this town. 
B) there are no profits in the dental business in this town. 
C) the possibility of new dentists coming to town will limit the profits of the existing dentists. 
D) collusion cannot occur among the four dentists.

Question 13

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 14

Table 11-6
  
-The demand and cost schedules of a monopolist are presented in Table 11-6.What price should a profit-maximizing monopolist charge?

Accepted Answer

A) $14 
B) $13 
C) $12 
D) $11 
A) $14 
B) $13 
C) $12 
D) $11

Question 15

Other things constant,production of an identical product in an oligopolistic industry

Accepted Answer

A) makes it likely that a cartel will disintegrate. 
B) makes secret price cuts easier to detect. 
C) makes collusion more difficult. 
D) causes irrational pricing policies in the long run. 
A) makes it likely that a cartel will disintegrate. 
B) makes secret price cuts easier to detect. 
C) makes collusion more difficult. 
D) causes irrational pricing policies in the long run.

Question 16

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 17

The Redwood City Council has decided that there is an overallocation of resources in the lawn-care industry.Almost every homeowner owns a lawnmower,hose and sprinkler,seeder,spreader,etc. ,and these items are used,at most,once a week.The council will establish a legal monopoly and select a private firm that will be responsible for all lawn care in the city.What types of rent-seeking activities can be expected as a result of this action?

Accepted Answer

As firms vie for this contract,they will

Question 18

Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion?

Accepted Answer

A) the presence of a large number of firms in the industry 
B) intense quality competition among firms 
C) low barriers to entry into the industry 
D) a stable demand for the product 
A) the presence of a large number of firms in the industry 
B) intense quality competition among firms 
C) low barriers to entry into the industry 
D) a stable demand for the product

Question 19

Figure 11-7
  
-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 11-7?

Accepted Answer

A) price,$7;quantity produced,100 
B) price,$10;quantity produced,170 
C) price,$14;quantity produced,100 
D) price,$7;quantity produced,200 
A) price,$7;quantity produced,100 
B) price,$10;quantity produced,170 
C) price,$14;quantity produced,100 
D) price,$7;quantity produced,200

Question 20

Figure 11-5
  
-Indicate the maximum profit (or minimum loss)a pure monopolist with the cost and demand conditions depicted in Figure 11-5 would be able to achieve.

Accepted Answer

A) profit of AIHE 
B) profit of BKJC 
C) losses of BKJC 
D) losses of EHGF 
A) profit of AIHE 
B) profit of BKJC 
C) losses of BKJC 
D) losses of EHGF

Exam 24: Aprice-Searcher Markets With High Entry Barriers

When a monopolist is maximizing profit,which of the following conditions will always be satisfied?

In which of the following industries would we expect collusion to be most effective?

The figure below depicts the demand,marginal revenue and marginal cost curves of a profit-maximizing monopolist. Figure 11-15 -Refer to Figure 11-15.Which of the following areas represents the deadweight loss due to monopoly pricing?

Oligopolies would like to act like a

If the firms in an oligopolistic industry can collude effectively (from the firms' viewpoints),the resulting price and output in the market will be most similar to that of

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

As a group,oligopolists would always earn the highest profit if they would

Under which one of the following market structures are firms most likely to enter into a price-fixing agreement designed to maximize their joint profit?

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

In the case where a natural monopoly exists in an industry,

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

In a small,isolated town in a western state,there are only four dentists.In such a case,we can be confident that

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

Table 11-6 -The demand and cost schedules of a monopolist are presented in Table 11-6.What price should a profit-maximizing monopolist charge?

Other things constant,production of an identical product in an oligopolistic industry

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,

Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion?

Figure 11-7 -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 11-7?

Figure 11-5 -Indicate the maximum profit (or minimum loss)a pure monopolist with the cost and demand conditions depicted in Figure 11-5 would be able to achieve.

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice 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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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