Question 1

From the viewpoint of allocative efficiency,which of the following is a defect of pure monopoly?

Accepted Answer

A) The monopolist undersupplies the market and charges too high a price. 
B) The monopolist is a revenue maximizer not a profit maximizer. 
C) A monopolist has little incentive to produce efficiently (at a low cost). 
D) All of the above are true. 
A) The monopolist undersupplies the market and charges too high a price. 
B) The monopolist is a revenue maximizer not a profit maximizer. 
C) A monopolist has little incentive to produce efficiently (at a low cost). 
D) All of the above are true.

Question 2

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 wants to maximize its profit,it should operate at a level of output equal to

Accepted Answer

A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄. 
A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄.

Question 3

Which of the following reflects the incentive structure confronted by a typical firm in a cartel?

Accepted Answer

A) If I alone cheat,I'm better off;if everyone cheats,I'm worse off. 
B) I can never do better for myself than by following agreed-upon cartel policies. 
C) If everyone cheats,I'm better off and so is everyone else in the cartel. 
D) If I suspect others are planning to cheat,I'll do best for myself by deciding not to cheat. 
A) If I alone cheat,I'm better off;if everyone cheats,I'm worse off. 
B) I can never do better for myself than by following agreed-upon cartel policies. 
C) If everyone cheats,I'm better off and so is everyone else in the cartel. 
D) If I suspect others are planning to cheat,I'll do best for myself by deciding not to cheat.

Question 4

Which of the following is true?

Accepted Answer

A) Competitive forces are present even in markets with high barriers to entry. 
B) Quality competition is an unimportant element of the competitive process. 
C) Profitability and high prices discourage technological change and the development of substitute products. 
D) Government regulations have substantially increased the quality of American manufacturing products in recent years. 
A) Competitive forces are present even in markets with high barriers to entry. 
B) Quality competition is an unimportant element of the competitive process. 
C) Profitability and high prices discourage technological change and the development of substitute products. 
D) Government regulations have substantially increased the quality of American manufacturing products in recent years.

Question 5

Figure 11-2
  
-What is the maximum profit per month that the monopolist will be able to earn in Figure 11-2?

Accepted Answer

A) zero 
B) approximately $10,000 
C) approximately $20,000 
D) approximately $40,000 
A) zero 
B) approximately $10,000 
C) approximately $20,000 
D) approximately $40,000

Question 6

To maximize profit,the monopolist,whose cost and demand conditions are shown below,should charge a price of

Accepted Answer

A) $4. 
B) $5. 
C) $6. 
D) $7. 
A) $4. 
B) $5. 
C) $6. 
D) $7.

Question 7

In general,an organization of sellers designed to coordinate supply decisions so that the joint profits of the members is maximized is called a(n)____.If they are successful,the total market output and price will most closely approximate the output and price in a(n)____ market.(Fill in the blanks. )

Accepted Answer

A) cooperative;open price-taker 
B) cartel;monopoly 
C) cartel;open price-taker 
D) OPEC;competitive price-searcher 
A) cooperative;open price-taker 
B) cartel;monopoly 
C) cartel;open price-taker 
D) OPEC;competitive price-searcher

Question 8

The figure below illustrates the cost and revenue structure for a monopoly firm.
Figure 11-17
  
-Refer to Figure 11-17.The marginal revenue curve for a monopoly firm is depicted by curve

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 9

Which of the following is the best explanation of why a lack of information is a problem when the government wants to impose price regulation on a monopolist?

Accepted Answer

A) the government does not have information about which firms are monopolies. 
B) firms that are monopolies do not have information about their level of profit or about potential competition. 
C) consumers do not have information about which firms are competitive and which firms are monopolies. 
D) regulators do not have information about the demand and marginal costs of the firms that they regulate. 
A) the government does not have information about which firms are monopolies. 
B) firms that are monopolies do not have information about their level of profit or about potential competition. 
C) consumers do not have information about which firms are competitive and which firms are monopolies. 
D) regulators do not have information about the demand and marginal costs of the firms that they regulate.

Question 10

Figure 11-9
  
-From Figure 11-9,indicate the maximum profit a pure monopolist with the cost and demand conditions above would be able to achieve.

Accepted Answer

A) BFEC 
B) AGEC 
C) BHEC 
D) EFH 
A) BFEC 
B) AGEC 
C) BHEC 
D) EFH

Question 11

Government-operated firms with monopoly power

Accepted Answer

A) will necessarily meet the criteria of economic efficiency,as long as price equals average total cost. 
B) will always be more efficient than private firms because they do not have to make a profit. 
C) are likely to be inefficient since some of the monopoly power is likely to serve the interests of the governmental managers and employees. 
D) are highly responsive to changes in the preferences of individual consumers since consumers are also voters. 
A) will necessarily meet the criteria of economic efficiency,as long as price equals average total cost. 
B) will always be more efficient than private firms because they do not have to make a profit. 
C) are likely to be inefficient since some of the monopoly power is likely to serve the interests of the governmental managers and employees. 
D) are highly responsive to changes in the preferences of individual consumers since consumers are also voters.

Question 12

Figure 11-12
  
-Figure 11-12 indicates the industry cost and demand conditions for a product produced in an oligopolistic industry.The price of this product is most likely to be

Accepted Answer

A) greater than P₂. 
B) P₂. 
C) P₁. 
D) in the range between P₁ and P₂. 
A) greater than P₂. 
B) P₂. 
C) P₁. 
D) in the range between P₁ and P₂.

Question 13

The Big River Power Company is a regulated monopolist with pricing structured such that the stockholders receive a "fair" rate of return based on the firm's unit costs.Can economic thinking predict how the company executive offices are likely to be furnished? Given a choice between Hawaii and downtown Cleveland (20 miles away),where would we expect the Board of Directors to meet?

Accepted Answer

We would expect the firm to ha

Question 14

When economies of scale are important,imposing competition by splitting a monopolistic firm into many rival units will

Accepted Answer

A) lead to an increase in the per-unit cost of production in the industry. 
B) not affect per-unit costs but will affect demand conditions. 
C) generally increase the social efficiency of production. 
D) cause the industry demand curve to increase (shift to the right). 
A) lead to an increase in the per-unit cost of production in the industry. 
B) not affect per-unit costs but will affect demand conditions. 
C) generally increase the social efficiency of production. 
D) cause the industry demand curve to increase (shift to the right).

Question 15

(I)Oligopolistic firms have an incentive to collude to increase profits.
(II)Oligopolistic firms have an incentive to cheat on collusive agreements to increase profits.

Accepted Answer

A) I is true;II is false. 
B) I is false;II is true. 
C) Both I and II are false. 
D) Both I and II are true. 
A) I is true;II is false. 
B) I is false;II is true. 
C) Both I and II are false. 
D) Both I and II are true.

Question 16

Which of the following explains why firms in competitive price-searcher and competitive price-taker markets will both have zero economic profits in the long run but a monopoly will not?

Accepted Answer

A) There is always more than one firm in competitive price-searcher and competitive price-taker markets. 
B) Both competitive price-searcher and competitive price-taker markets are characterized by firms producing identical goods,but a monopoly is not. 
C) In both competitive price-searcher and competitive price-taker markets,the barriers to entry are low;this is not true under a monopoly. 
D) A monopoly firm has a downward-sloping demand curve;firms in the other types of markets do not. 
A) There is always more than one firm in competitive price-searcher and competitive price-taker markets. 
B) Both competitive price-searcher and competitive price-taker markets are characterized by firms producing identical goods,but a monopoly is not. 
C) In both competitive price-searcher and competitive price-taker markets,the barriers to entry are low;this is not true under a monopoly. 
D) A monopoly firm has a downward-sloping demand curve;firms in the other types of markets do not.

Question 17

Suppose all automobile manufacturers have collusively agreed to sell their cars at a uniform price.If a firm wanted to break this agreement and not be detected,what would be one way to do this?

Accepted Answer

One answer might be secret price cuts to

Question 18

Which of the following statements is true for a monopolist?

Accepted Answer

A) a monopolist will charge the highest price for which he can sell units of his product. 
B) unregulated monopolists can gain by producing their chosen output at a low cost. 
C) if a firm has a monopoly,it will always be able to earn economic profit. 
D) none of the above statements are true. 
A) a monopolist will charge the highest price for which he can sell units of his product. 
B) unregulated monopolists can gain by producing their chosen output at a low cost. 
C) if a firm has a monopoly,it will always be able to earn economic profit. 
D) none of the above statements are true.

Question 19

Figure 11-3
  
-The cost and demand conditions for a monopolist are depicted in Figure 11-3.If the monopolist is maximizing profit,it will charge a price of

Accepted Answer

A) $10 and produce an output of 20,000. 
B) $20 and produce an output of 10,000. 
C) $20 and produce an output of 20,000. 
D) more than $20. 
A) $10 and produce an output of 20,000. 
B) $20 and produce an output of 10,000. 
C) $20 and produce an output of 20,000. 
D) more than $20.

Question 20

Figure 11-10
  
-If the monopolist is regulated by the "marginal cost pricing" technique,what price in Figure 11-10 will be charged?

Accepted Answer

A) P₁ 
B) P₂ 
C) P₃ 
D) P₄ 
A) P₁ 
B) P₂ 
C) P₃ 
D) P₄

Exam 24: Aprice-Searcher Markets With High Entry Barriers

From the viewpoint of allocative efficiency,which of the following is a defect of pure monopoly?

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 wants to maximize its profit,it should operate at a level of output equal to

Which of the following reflects the incentive structure confronted by a typical firm in a cartel?

Which of the following is true?

Figure 11-2 -What is the maximum profit per month that the monopolist will be able to earn in Figure 11-2?

To maximize profit,the monopolist,whose cost and demand conditions are shown below,should charge a price of

The figure below illustrates the cost and revenue structure for a monopoly firm. Figure 11-17 -Refer to Figure 11-17.The marginal revenue curve for a monopoly firm is depicted by curve

Which of the following is the best explanation of why a lack of information is a problem when the government wants to impose price regulation on a monopolist?

Figure 11-9 -From Figure 11-9,indicate the maximum profit a pure monopolist with the cost and demand conditions above would be able to achieve.

Government-operated firms with monopoly power

Figure 11-12 -Figure 11-12 indicates the industry cost and demand conditions for a product produced in an oligopolistic industry.The price of this product is most likely to be

When economies of scale are important,imposing competition by splitting a monopolistic firm into many rival units will

(I)Oligopolistic firms have an incentive to collude to increase profits. (II)Oligopolistic firms have an incentive to cheat on collusive agreements to increase profits.

Which of the following explains why firms in competitive price-searcher and competitive price-taker markets will both have zero economic profits in the long run but a monopoly will not?

Suppose all automobile manufacturers have collusively agreed to sell their cars at a uniform price.If a firm wanted to break this agreement and not be detected,what would be one way to do this?

Which of the following statements is true for a monopolist?

Figure 11-3 -The cost and demand conditions for a monopolist are depicted in Figure 11-3.If the monopolist is maximizing profit,it will charge a price of

Figure 11-10 -If the monopolist is regulated by the "marginal cost pricing" technique,what price in Figure 11-10 will be charged?

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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