Question 1

Which of the following is true?

Accepted Answer

A) A monopolist is always guaranteed to earn positive economic profits regardless of their cost of production or the price they charge. 
B) A monopolist will charge the highest price possible for their product because no matter what price they charge,people will still have to buy it. 
C) A monopolist has no incentive to find more cost-efficient methods of production because they are protected from competition from other sellers. 
D) None of the above are correct. 
A) A monopolist is always guaranteed to earn positive economic profits regardless of their cost of production or the price they charge. 
B) A monopolist will charge the highest price possible for their product because no matter what price they charge,people will still have to buy it. 
C) A monopolist has no incentive to find more cost-efficient methods of production because they are protected from competition from other sellers. 
D) None of the above are correct.

Question 2

An oligopolistic market

Accepted Answer

A) has a small number of rival firms,and each is large relative to the size of the market. 
B) is characterized by firms that merely take the price that is determined by the forces of supply and demand in the market. 
C) has low entry barriers facing firms that may be interested in entering the market. 
D) has a large number of firms that are small relative to the size of the market. 
A) has a small number of rival firms,and each is large relative to the size of the market. 
B) is characterized by firms that merely take the price that is determined by the forces of supply and demand in the market. 
C) has low entry barriers facing firms that may be interested in entering the market. 
D) has a large number of firms that are small relative to the size of the market.

Question 3

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 4

The incentive for managers of a government-operated firm (for example,a state university or the U.S.Post Office)to operate efficiently will be

Accepted Answer

A) low because all government workers are lazy. 
B) low because there are no residual claimants to monitor and institute cost-reducing measures. 
C) high because government employees and officials will be less concerned with personal gain. 
D) high because voters can easily detect those who are to blame for inefficiencies and replace them. 
A) low because all government workers are lazy. 
B) low because there are no residual claimants to monitor and institute cost-reducing measures. 
C) high because government employees and officials will be less concerned with personal gain. 
D) high because voters can easily detect those who are to blame for inefficiencies and replace them.

Question 5

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 6

At his current level of output,a monopolist has an MR of $10,an MC of $6,and an economic profit of zero.If the market demand curve is downward sloping and his marginal cost curve upward sloping,the monopolist

Accepted Answer

A) is producing his profit-maximizing level of output. 
B) could increase his profit by increasing his output. 
C) could increase his profit by increasing his price. 
D) should exit the market if he has positive fixed cost. 
A) is producing his profit-maximizing level of output. 
B) could increase his profit by increasing his output. 
C) could increase his profit by increasing his price. 
D) should exit the market if he has positive fixed cost.

Question 7

A monopolist will earn economic profits as long as his price exceeds

Accepted Answer

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

Question 8

Which of the following is a characteristic of an oligopolistic industry?

Accepted Answer

A) interdependence of a firm's price and output decisions 
B) low barriers to entry 
C) small output of individual firms relative to the total market 
D) a large number of competing firms 
A) interdependence of a firm's price and output decisions 
B) low barriers to entry 
C) small output of individual firms relative to the total market 
D) a large number of competing firms

Question 9

Cartel members have an incentive to cheat on cartel agreements because

Accepted Answer

A) the cartel cannot maximize profits. 
B) the cartel price is the competitive price. 
C) the demand curve for the firm is more elastic than the cartel's demand curve. 
D) the industry profit would be higher under competitive conditions. 
A) the cartel cannot maximize profits. 
B) the cartel price is the competitive price. 
C) the demand curve for the firm is more elastic than the cartel's demand curve. 
D) the industry profit would be higher under competitive conditions.

Question 10

Which of the following is true?

Accepted Answer

A) Competitive forces are stronger in markets with high entry barriers than in those where entry barriers are low. 
B) Quality competition is an important element of the competitive process. 
C) If the production of a good is highly profitable,the development of substitute products will be discouraged. 
D) High barriers to entry are only the result of natural factors not artificial factors like government regulations. 
A) Competitive forces are stronger in markets with high entry barriers than in those where entry barriers are low. 
B) Quality competition is an important element of the competitive process. 
C) If the production of a good is highly profitable,the development of substitute products will be discouraged. 
D) High barriers to entry are only the result of natural factors not artificial factors like government regulations.

Question 11

Patent laws that allow the inventor to maintain monopoly rights to an invention increase the price of the product and

Accepted Answer

A) increase the profitability of inventive activities,thereby speeding up technological developments. 
B) increase the profitability of inventive activities,thereby slowing down technological developments. 
C) decrease the profitability of inventive activities,thereby speeding up technological developments. 
D) decrease the profitability of inventive activities,thereby slowing down technological developments. 
A) increase the profitability of inventive activities,thereby speeding up technological developments. 
B) increase the profitability of inventive activities,thereby slowing down technological developments. 
C) decrease the profitability of inventive activities,thereby speeding up technological developments. 
D) decrease the profitability of inventive activities,thereby slowing down technological developments.

Question 12

When firms use resources in an attempt to secure and maintain grants of market protection from the government,it is called

Accepted Answer

A) rent-seeking. 
B) collusion. 
C) franchising. 
D) resource investment. 
A) rent-seeking. 
B) collusion. 
C) franchising. 
D) resource investment.

Question 13

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 14

Which of the following conditions would increase the likelihood of successful collusion among American automobile producers?

Accepted Answer

A) vigorous enforcement of antitrust laws 
B) strong quality competition that makes it difficult to monitor price cuts by rival firms 
C) imposition of tariffs or quotas on imported automobiles 
D) The market demand for automobiles fluctuates substantially. 
A) vigorous enforcement of antitrust laws 
B) strong quality competition that makes it difficult to monitor price cuts by rival firms 
C) imposition of tariffs or quotas on imported automobiles 
D) The market demand for automobiles fluctuates substantially.

Question 15

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

Accepted Answer

A) $308 
B) $187 
C) $216 
D) $306 
E) $272 
A) $308 
B) $187 
C) $216 
D) $306 
E) $272

Question 16

Cartel agreements are difficult to maintain because individual members

Accepted Answer

A) can gain by raising their price above the price that is best for the cartel. 
B) are often unable to police the price and output policies of other members. 
C) can gain by secretly raising their price above the price that is best for the cartel. 
D) can enforce price arrangements vigorously in court. 
A) can gain by raising their price above the price that is best for the cartel. 
B) are often unable to police the price and output policies of other members. 
C) can gain by secretly raising their price above the price that is best for the cartel. 
D) can enforce price arrangements vigorously in court.

Question 17

Which of the following best fits the definition of a monopoly?

Accepted Answer

A) the local cable company 
B) IBM,the world's largest manufacturer of certain types of computers 
C) Panasonic,the only company that sells Technics brand of stereos 
D) General Motors 
A) the local cable company 
B) IBM,the world's largest manufacturer of certain types of computers 
C) Panasonic,the only company that sells Technics brand of stereos 
D) General Motors

Question 18

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 19

Figure 11-8
  
-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 11-8?

Accepted Answer

A) price,$10;quantity produced,100 
B) price,$15;quantity produced,50 
C) price,$15;quantity produced,75 
D) price,$20;quantity produced,50 
A) price,$10;quantity produced,100 
B) price,$15;quantity produced,50 
C) price,$15;quantity produced,75 
D) price,$20;quantity produced,50

Question 20

If a local government began licensing funeral homes in the area,effectively making them into a cartel,we would expect

Accepted Answer

A) the price of funeral services to rise,and the number of funerals performed in the area to fall. 
B) the price of funeral services to rise,and the number of funerals performed in the area to increase as well. 
C) the price of funeral services to fall,and the number of funerals performed in the area to increase. 
D) the price of funeral services to fall,and the number of funerals performed in the area to fall as well. 
A) the price of funeral services to rise,and the number of funerals performed in the area to fall. 
B) the price of funeral services to rise,and the number of funerals performed in the area to increase as well. 
C) the price of funeral services to fall,and the number of funerals performed in the area to increase. 
D) the price of funeral services to fall,and the number of funerals performed in the area to fall as well.

Exam 24: Aprice-Searcher Markets With High Entry Barriers

Which of the following is true?

An oligopolistic market

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

The incentive for managers of a government-operated firm (for example,a state university or the U.S.Post Office)to operate efficiently will be

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?

At his current level of output,a monopolist has an MR of $10,an MC of $6,and an economic profit of zero.If the market demand curve is downward sloping and his marginal cost curve upward sloping,the monopolist

A monopolist will earn economic profits as long as his price exceeds

Which of the following is a characteristic of an oligopolistic industry?

Cartel members have an incentive to cheat on cartel agreements because

Which of the following is true?

Patent laws that allow the inventor to maintain monopoly rights to an invention increase the price of the product and

When firms use resources in an attempt to secure and maintain grants of market protection from the government,it is called

Allowing firms to receive patents on new inventions

Which of the following conditions would increase the likelihood of successful collusion among American automobile producers?

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

Cartel agreements are difficult to maintain because individual members

Which of the following best fits the definition of a monopoly?

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

Figure 11-8 -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 11-8?

If a local government began licensing funeral homes in the area,effectively making them into a cartel,we would expect

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