Question 1

What should a profit maximizing monopolist do if she is currently producing where MC < MR?

Accepted Answer

A) Increase output until MC = MR. 
B) Decrease output until MC = MR. 
C) Shut down in the long run. 
D) Keep producing at this level. 
E) Operate only in the short run. 
A) Increase output until MC = MR. 
B) Decrease output until MC = MR. 
C) Shut down in the long run. 
D) Keep producing at this level. 
E) Operate only in the short run.

Question 2

Figure 11-18
  
-The total revenue for the firm in Figure 11-18,a monopolist that maximizes profit while charging all customers the same price,is

Accepted Answer

A) $2,574 
B) $2,808 
C) $2,100 
D) $1,638 
E) $3,300 
A) $2,574 
B) $2,808 
C) $2,100 
D) $1,638 
E) $3,300

Question 3

When economists talk about a barrier to entry,they are referring to

Accepted Answer

A) a factor that makes it difficult for potential competitors to enter a market. 
B) the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. 
C) the downward-sloping portion of the long-run average total cost curve. 
D) the declining output experienced as additional units of a variable input are used with a given amount of a fixed input. 
A) a factor that makes it difficult for potential competitors to enter a market. 
B) the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. 
C) the downward-sloping portion of the long-run average total cost curve. 
D) the declining output experienced as additional units of a variable input are used with a given amount of a fixed input.

Question 4

Antitrust action restructures a previously monopolized industry into a competitive industry.If economies of scale are unimportant in the industry,the expected result of this movement from monopoly to competition is

Accepted Answer

A) a reduction in output and an increase in price in the industry. 
B) a reduction in both price and output in the industry. 
C) an increase in both price and output in the industry. 
D) an increase in output and a reduction in price in the industry. 
A) a reduction in output and an increase in price in the industry. 
B) a reduction in both price and output in the industry. 
C) an increase in both price and output in the industry. 
D) an increase in output and a reduction in price in the industry.

Question 5

Table 11-1
  
-Refer to Table 11-1.The marginal cost of the fourth unit is

Accepted Answer

A) $7. 
B) $12. 
C) $25. 
D) $60. 
A) $7. 
B) $12. 
C) $25. 
D) $60.

Question 6

A monopolist has less to gain from cost-saving measures in the production process when

Accepted Answer

A) the monopoly is unregulated. 
B) regulators use average cost pricing to set the monopolist's price. 
C) the demand for the product of the monopolist is inelastic. 
D) changes in the regulated price occur only after considerable delay. 
A) the monopoly is unregulated. 
B) regulators use average cost pricing to set the monopolist's price. 
C) the demand for the product of the monopolist is inelastic. 
D) changes in the regulated price occur only after considerable delay.

Question 7

Laws designed to prevent monopoly and promote competition are known as

Accepted Answer

A) antitrust laws. 
B) statutory amendments. 
C) fair-pricing legislation. 
D) breakup bills. 
A) antitrust laws. 
B) statutory amendments. 
C) fair-pricing legislation. 
D) breakup bills.

Question 8

A market situation in which only a small number of mutually interdependent,rival sellers exists is known as a(n)

Accepted Answer

A) oligopoly market. 
B) monopoly market. 
C) open price-taker market. 
D) competitive price-searcher market. 
A) oligopoly market. 
B) monopoly market. 
C) open price-taker market. 
D) competitive price-searcher market.

Question 9

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 10

Figure 11-3
  
-What is the maximum profit per month that the monopolist will be able to earn in Figure 11-3?

Accepted Answer

A) zero 
B) approximately $20,000 
C) approximately $50,000 
D) approximately $100,000 
A) zero 
B) approximately $20,000 
C) approximately $50,000 
D) approximately $100,000

Question 11

At a given output level,a monopolist earns a profit only if the

Accepted Answer

A) slope of its TR curve exceeds the slope of his TC curve. 
B) height of its MR curve exceeds the height of his MC curve. 
C) height of its demand curve exceeds the height of his MR curve. 
D) height of its demand curve exceeds the height of his ATC curve. 
A) slope of its TR curve exceeds the slope of his TC curve. 
B) height of its MR curve exceeds the height of his MC curve. 
C) height of its demand curve exceeds the height of his MR curve. 
D) height of its demand curve exceeds the height of his ATC curve.

Question 12

In the area of business,rent-seeking often involves

Accepted Answer

A) the use of resources to construct high-priced rental housing. 
B) the use of resources to secure and maintain a grant of monopoly power from the government. 
C) an agreement between firms to raise prices and limit entry. 
D) an agreement between a firm and a customer that makes both parties better off. 
A) the use of resources to construct high-priced rental housing. 
B) the use of resources to secure and maintain a grant of monopoly power from the government. 
C) an agreement between firms to raise prices and limit entry. 
D) an agreement between a firm and a customer that makes both parties better off.

Question 13

Table 11-5
  
-The demand and cost schedules of a monopolist are presented in Table 11-5.What price should a profit-maximizing monopolist charge?

Accepted Answer

A) $10 
B) $9 
C) $8 
D) $7 
A) $10 
B) $9 
C) $8 
D) $7

Question 14

When a regulatory agency uses marginal cost pricing to regulate a monopolist,

Accepted Answer

A) price will exceed marginal cost. 
B) production costs will probably exceed the total revenues of the monopolist. 
C) marginal cost will equal average total cost. 
D) social welfare could be improved if average cost pricing was used instead 
A) price will exceed marginal cost. 
B) production costs will probably exceed the total revenues of the monopolist. 
C) marginal cost will equal average total cost. 
D) social welfare could be improved if average cost pricing was used instead

Question 15

The figure below illustrates the cost and revenue structure for a monopoly firm.
Figure 11-17
  
-Refer to Figure 11-17.If the monopoly firm is currently producing Q₃ units of output,then a decrease in output will necessarily cause profit to

Accepted Answer

A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q₂. 
D) increase as long as the new level of output is at least Q₁. 
A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q₂. 
D) increase as long as the new level of output is at least Q₁.

Question 16

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 17

"Market power" is an expression used to indicate that a firm has

Accepted Answer

A) no rivals. 
B) the power to sell a given output at whatever price it chooses. 
C) some freedom from the rigors of intense competition. 
D) a monopoly over the product it produces. 
A) no rivals. 
B) the power to sell a given output at whatever price it chooses. 
C) some freedom from the rigors of intense competition. 
D) a monopoly over the product it produces.

Question 18

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.

Question 19

Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?

Accepted Answer

A) when the monopolist operates on the inelastic portion of the demand curve 
B) when the monopolist is a profit maximizer rather than a revenue maximizer 
C) when substantial diseconomies of scale are present 
D) when substantial economies of scale are present 
A) when the monopolist operates on the inelastic portion of the demand curve 
B) when the monopolist is a profit maximizer rather than a revenue maximizer 
C) when substantial diseconomies of scale are present 
D) when substantial economies of scale are present

Question 20

Figure 11-2
  
-The cost and demand conditions for a monopolist are depicted in Figure 11-2.If the monopolist is maximizing profit,it will charge a price of

Accepted Answer

A) $30 and produce an output of 4,000. 
B) $40 and produce an output of 4,000. 
C) $40 and produce an output of 2,000. 
D) more than $40. 
A) $30 and produce an output of 4,000. 
B) $40 and produce an output of 4,000. 
C) $40 and produce an output of 2,000. 
D) more than $40.

Exam 24: Aprice-Searcher Markets With High Entry Barriers

What should a profit maximizing monopolist do if she is currently producing where MC < MR?

Figure 11-18 -The total revenue for the firm in Figure 11-18,a monopolist that maximizes profit while charging all customers the same price,is

When economists talk about a barrier to entry,they are referring to

Antitrust action restructures a previously monopolized industry into a competitive industry.If economies of scale are unimportant in the industry,the expected result of this movement from monopoly to competition is

Table 11-1 -Refer to Table 11-1.The marginal cost of the fourth unit is

A monopolist has less to gain from cost-saving measures in the production process when

Laws designed to prevent monopoly and promote competition are known as

A market situation in which only a small number of mutually interdependent,rival sellers exists is known as a(n)

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

Figure 11-3 -What is the maximum profit per month that the monopolist will be able to earn in Figure 11-3?

At a given output level,a monopolist earns a profit only if the

In the area of business,rent-seeking often involves

Table 11-5 -The demand and cost schedules of a monopolist are presented in Table 11-5.What price should a profit-maximizing monopolist charge?

When a regulatory agency uses marginal cost pricing to regulate a monopolist,

The figure below illustrates the cost and revenue structure for a monopoly firm. Figure 11-17 -Refer to Figure 11-17.If the monopoly firm is currently producing Q₃ units of output,then a decrease in output will necessarily cause profit to

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?

"Market power" is an expression used to indicate that a firm has

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

Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?

Figure 11-2 -The cost and demand conditions for a monopolist are depicted in Figure 11-2.If the monopolist is maximizing profit,it will charge a price 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

Filters