Question 1

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 2

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 3

New York City limits the number of taxi cabs that can legally operate in the city.The most likely result of this practice is that

Accepted Answer

A) cab fares will be lower. 
B) cab fares will be higher. 
C) the cost of operating a taxicab will be lower. 
D) subway fares will decrease. 
A) cab fares will be lower. 
B) cab fares will be higher. 
C) the cost of operating a taxicab will be lower. 
D) subway fares will decrease.

Question 4

Regulating "natural monopolies" according to the "rate of return" criterion is likely to

Accepted Answer

A) increase the monopolist's incentive to minimize cost. 
B) increase output compared to the situation where the firm is unregulated. 
C) completely eliminate the "welfare loss" due to monopoly. 
D) do all of the above 
A) increase the monopolist's incentive to minimize cost. 
B) increase output compared to the situation where the firm is unregulated. 
C) completely eliminate the "welfare loss" due to monopoly. 
D) do all of the above

Question 5

How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached if the market was competitive?

Accepted Answer

A) The output of the monopolist will be larger and the price lower. 
B) The output of the monopolist will be larger and the price higher. 
C) The output of the monopolist will be smaller and the price lower. 
D) The output of the monopolist will be smaller and the price higher. 
A) The output of the monopolist will be larger and the price lower. 
B) The output of the monopolist will be larger and the price higher. 
C) The output of the monopolist will be smaller and the price lower. 
D) The output of the monopolist will be smaller and the price higher.

Question 6

Each member of a cartel

Accepted Answer

A) faces a temptation to cheat on the agreement because lowering its price slightly below the established price will usually increase the firm's sales and profit. 
B) faces a temptation to cheat on the agreement because raising its price slightly above the established price will usually increase the firm's sales and profit. 
C) has no temptation to cheat on the agreement because lowering its price slightly below the established price will usually have no impact on the firm's sales and profit. 
D) has no temptation to cheat on the agreement because raising its price slightly above the established price will usually decrease the firm's sales and profit. 
E) has no temptation to cheat on the agreement because lowering its price slightly below the established price will usually lower the firm's sales and profit. 
A) faces a temptation to cheat on the agreement because lowering its price slightly below the established price will usually increase the firm's sales and profit. 
B) faces a temptation to cheat on the agreement because raising its price slightly above the established price will usually increase the firm's sales and profit. 
C) has no temptation to cheat on the agreement because lowering its price slightly below the established price will usually have no impact on the firm's sales and profit. 
D) has no temptation to cheat on the agreement because raising its price slightly above the established price will usually decrease the firm's sales and profit. 
E) has no temptation to cheat on the agreement because lowering its price slightly below the established price will usually lower the firm's sales and profit.

Question 7

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 8

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

Accepted Answer

A) inability to keep new firms from entering the market 
B) a small number of firms in the market 
C) a stable market demand for the product 
D) a highly inelastic market demand for the product 
A) inability to keep new firms from entering the market 
B) a small number of firms in the market 
C) a stable market demand for the product 
D) a highly inelastic market demand for the product

Question 9

The price charged by oligopolists will

Accepted Answer

A) equal the equilibrium price in a price-takers market if the oligopolists collude. 
B) equal the monopoly price if the oligopolists do not collude. 
C) generally fall between the monopoly and competitive market equilibrium prices. 
D) be the same whether the oligopolists cooperate with one another or not;only profit is affected. 
A) equal the equilibrium price in a price-takers market if the oligopolists collude. 
B) equal the monopoly price if the oligopolists do not collude. 
C) generally fall between the monopoly and competitive market equilibrium prices. 
D) be the same whether the oligopolists cooperate with one another or not;only profit is affected.

Question 10

Table 11-1
  
-Refer to Table 11-1.The marginal revenue of the second unit is

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $25 
A) $10 
B) $15 
C) $20 
D) $25

Question 11

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 12

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

Accepted Answer

A) raise price and decrease output. 
B) lower price and increase output. 
C) reduce both output and price. 
D) hold output constant and raise price. 
A) raise price and decrease output. 
B) lower price and increase output. 
C) reduce both output and price. 
D) hold output constant and raise price.

Question 13

Which of the following is not a barrier that limits the entry of potential competitors into a market?

Accepted Answer

A) government licensing 
B) control over an essential resource 
C) an elastic demand for a product 
D) patent rights 
A) government licensing 
B) control over an essential resource 
C) an elastic demand for a product 
D) patent rights

Question 14

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 15

Figure 11-19
  
-In the short run,the monopolist depicted in Figure 11-19 should

Accepted Answer

A) shut down because P  AVC at some output levels. 
D) continue producing because P > ATC at all output levels. 
E) continue producing because monopolists never shut down. 
A) shut down because P  AVC at some output levels. 
D) continue producing because P > ATC at all output levels. 
E) continue producing because monopolists never shut down.

Question 16

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 17

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 18

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 19

Figure 11-21
  
-In Figure 11-21,the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level,as it would be in an unregulated monopoly,is shown by area

Accepted Answer

A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd 
A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd

Question 20

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

Accepted Answer

A) Q₁ and charge a price of P₁. 
B) Q₁ and charge a price of P₂. 
C) Q₂ and charge a price of P₃. 
D) Q₁ and charge a price of P₄. 
A) Q₁ and charge a price of P₁. 
B) Q₁ and charge a price of P₂. 
C) Q₂ and charge a price of P₃. 
D) Q₁ and charge a price of P₄.

Exam 24: Aprice-Searcher Markets With High Entry Barriers

In essence,patents grant their owners

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

New York City limits the number of taxi cabs that can legally operate in the city.The most likely result of this practice is that

Regulating "natural monopolies" according to the "rate of return" criterion is likely to

How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached if the market was competitive?

Each member of a cartel

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

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

The price charged by oligopolists will

Table 11-1 -Refer to Table 11-1.The marginal revenue of the second unit is

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

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

Which of the following is not a barrier that limits the entry of potential competitors into a market?

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

Figure 11-19 -In the short run,the monopolist depicted in Figure 11-19 should

A firm that is a "pure monopoly" is

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

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?

Figure 11-21 -In Figure 11-21,the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level,as it would be in an unregulated monopoly,is shown by area

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

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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