Question 1

The Federal Trade Commission (FTC)Act

Accepted Answer

A) gave the FTC full power to regulate mergers. 
B) closed the loopholes in the Sherman and Clayton Acts. 
C) divided authority to police mergers between the FTC and the Department of Justice. 
D) prohibited charging buyers different prices if the result would reduce competition. 
A) gave the FTC full power to regulate mergers. 
B) closed the loopholes in the Sherman and Clayton Acts. 
C) divided authority to police mergers between the FTC and the Department of Justice. 
D) prohibited charging buyers different prices if the result would reduce competition.

Question 2

A patent or copyright is a barrier to entry based on

Accepted Answer

A) ownership of a key necessary raw material. 
B) large economies of scale as output increases. 
C) government action to protect a producer. 
D) widespread network externalities. 
A) ownership of a key necessary raw material. 
B) large economies of scale as output increases. 
C) government action to protect a producer. 
D) widespread network externalities.

Question 3

Microsoft hires marketing and sales specialists to decide what prices it should set for its products,whereas a wealthy corn farmer in Iowa,who sells his output in the world commodity market,does not.Why is this so?

Accepted Answer

A) because Microsoft is large enough to hire the best people in the field 
B) because Microsoft could potentially lose sales if it sets prices indiscriminately 
C) because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects 
D) because unlike Microsoft, the wealthy corn farmer is probably a monopolist 
A) because Microsoft is large enough to hire the best people in the field 
B) because Microsoft could potentially lose sales if it sets prices indiscriminately 
C) because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects 
D) because unlike Microsoft, the wealthy corn farmer is probably a monopolist

Question 4

A profit maximizing monopoly's price is

Accepted Answer

A) the same as the price that would prevail if the industry was perfectly competitive. 
B) less than the price that would prevail if the industry was perfectly competitive. 
C) greater than the price that would prevail if the industry was perfectly competitive. 
D) not consistently related to price that would prevail if the market was perfectly competitive. 
A) the same as the price that would prevail if the industry was perfectly competitive. 
B) less than the price that would prevail if the industry was perfectly competitive. 
C) greater than the price that would prevail if the industry was perfectly competitive. 
D) not consistently related to price that would prevail if the market was perfectly competitive.

Question 5

A Herfindahl-Hirschman Index is calculated by

Accepted Answer

A) summing the amount of sales by the four largest firms and dividing by total industry sales. 
B) dividing the number of firms wanting to merge by the total number in the industry. 
C) summing the squares of the market shares of each firm in the industry. 
D) summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures. 
A) summing the amount of sales by the four largest firms and dividing by total industry sales. 
B) dividing the number of firms wanting to merge by the total number in the industry. 
C) summing the squares of the market shares of each firm in the industry. 
D) summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.

Question 6

The ability of a firm to charge a price greater than marginal cost is called

Accepted Answer

A) monopoly power. 
B) price-making power. 
C) cost-plus pricing. 
D) market power. 
A) monopoly power. 
B) price-making power. 
C) cost-plus pricing. 
D) market power.

Question 7

Figure 10-6
   
Figure 10-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 10-6.The monopolist earns a profit of

Accepted Answer

A) $0. 
B) $170. 
C) $248. 
D) $372. 
A) $0. 
B) $170. 
C) $248. 
D) $372.

Question 8

Relative to a perfectly competitive market,a monopoly results in

Accepted Answer

A) a gain in producer surplus equal to the gain in consumer surplus. 
B) a gain in producer surplus equal to the loss in consumer surplus. 
C) a gain in producer surplus less than the loss in consumer surplus. 
D) greater economic efficiency. 
A) a gain in producer surplus equal to the gain in consumer surplus. 
B) a gain in producer surplus equal to the loss in consumer surplus. 
C) a gain in producer surplus less than the loss in consumer surplus. 
D) greater economic efficiency.

Question 9

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Accepted Answer

A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) corresponding to the demand curve where marginal revenue equals zero. 
A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) corresponding to the demand curve where marginal revenue equals zero.

Question 10

Because a monopoly's demand curve is the same as the market demand curve for its product

Accepted Answer

A) the monopoly's marginal revenue equals its price. 
B) the monopoly is a price taker. 
C) the monopoly must lower its price to sell more of its product. 
D) the monopoly's average total cost always falls as it increases its output. 
A) the monopoly's marginal revenue equals its price. 
B) the monopoly is a price taker. 
C) the monopoly must lower its price to sell more of its product. 
D) the monopoly's average total cost always falls as it increases its output.

Question 11

Figure 10-11
   
In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region.Figure 10-11 shows the cable television market in Upstate New York.
-Refer to Figure 10-11.What is the size of the deadweight loss prior to Verizon entering the market and what happens to this deadweight loss after Verizon does enter the market?

Accepted Answer

A) The deadweight loss of area D is converted to consumer surplus. 
B) The deadweight loss of area C+D is converted to consumer surplus 
C) The deadweight loss of area D is converted to producer surplus. 
D) The total deadweight loss is the area D+F; D is converted to consumer surplus and F to producer surplus. 
A) The deadweight loss of area D is converted to consumer surplus. 
B) The deadweight loss of area C+D is converted to consumer surplus 
C) The deadweight loss of area D is converted to producer surplus. 
D) The total deadweight loss is the area D+F; D is converted to consumer surplus and F to producer surplus.

Question 12

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

Accepted Answer

A) It was a public enterprise; therefore, the Canadian government blocked entry into the market for nickel. 
B) There were important network externalities in the production of nickel. 
C) Economies of scale resulted in the company becoming a natural monopoly. 
D) control of a key resource 
A) It was a public enterprise; therefore, the Canadian government blocked entry into the market for nickel. 
B) There were important network externalities in the production of nickel. 
C) Economies of scale resulted in the company becoming a natural monopoly. 
D) control of a key resource

Question 13

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

Accepted Answer

A) concentration ratios; the Herfindahl-Hirschman Index; market standards 
B) concentration standards; concentration ratios; competitive analysis 
C) economic analysis; political analysis; dynamic analysis 
D) market definition; measure of concentration; merger standards 
A) concentration ratios; the Herfindahl-Hirschman Index; market standards 
B) concentration standards; concentration ratios; competitive analysis 
C) economic analysis; political analysis; dynamic analysis 
D) market definition; measure of concentration; merger standards

Question 14

In a natural monopoly,throughout the range of market demand

Accepted Answer

A) marginal cost is above average total cost and pulls average total cost upward. 
B) average total cost is above marginal cost and pulls marginal cost upward. 
C) marginal cost is below average total cost and pulls average total cost downward. 
D) there are diseconomies of scale. 
A) marginal cost is above average total cost and pulls average total cost upward. 
B) average total cost is above marginal cost and pulls marginal cost upward. 
C) marginal cost is below average total cost and pulls average total cost downward. 
D) there are diseconomies of scale.

Question 15

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly,independent of its output.As a result the monopoly's profit will fall.

Accepted Answer

A) True 
 B)False

Question 16

Although some economists believe network externalities are important barriers to entry,other economists disagree because

Accepted Answer

A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C) network externalities are really negative externalities. 
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale. 
A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C) network externalities are really negative externalities. 
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale.

Question 17

Figure 10-2
   
Figure 10-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 10-2.If the firm's average total cost curve is ATC₁,the firm will

Accepted Answer

A) suffer a loss. 
B) break even. 
C) make a profit. 
D) face competition. 
A) suffer a loss. 
B) break even. 
C) make a profit. 
D) face competition.

Question 18

Some economists believe that the economy benefits from firms having market power.Which of the following is an argument that has been made to support this position?

Accepted Answer

A) Large firms are better able than small firms to spend funds on research and development required to develop new products. 
B) Competition is very rare in the U.S.economy and few new products are produced by smaller, competitive firms. 
C) Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. 
D) Large firms can afford to lobby the U.S.government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries. 
A) Large firms are better able than small firms to spend funds on research and development required to develop new products. 
B) Competition is very rare in the U.S.economy and few new products are produced by smaller, competitive firms. 
C) Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. 
D) Large firms can afford to lobby the U.S.government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries.

Question 19

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

Accepted Answer

A) Spuds McKenzie, a wealthy potato farmer in Idaho 
B) Cheap Gas, one of two gasoline stations in a large rural community 
C) Santos Tacos, the only taqueria in the small town of Santosville 
D) Zippie Rentals, a sports car rental service in the downtown Boston area 
A) Spuds McKenzie, a wealthy potato farmer in Idaho 
B) Cheap Gas, one of two gasoline stations in a large rural community 
C) Santos Tacos, the only taqueria in the small town of Santosville 
D) Zippie Rentals, a sports car rental service in the downtown Boston area

Question 20

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

Accepted Answer

A) True 
 B)False

The Federal Trade Commission (FTC)Act

A patent or copyright is a barrier to entry based on

Microsoft hires marketing and sales specialists to decide what prices it should set for its products,whereas a wealthy corn farmer in Iowa,who sells his output in the world commodity market,does not.Why is this so?

A profit maximizing monopoly's price is

A Herfindahl-Hirschman Index is calculated by

The ability of a firm to charge a price greater than marginal cost is called

Figure 10-6 Figure 10-6 shows the cost and demand curves for a monopolist. -Refer to Figure 10-6.The monopolist earns a profit of

Relative to a perfectly competitive market,a monopoly results in

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Because a monopoly's demand curve is the same as the market demand curve for its product

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

In a natural monopoly,throughout the range of market demand

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly,independent of its output.As a result the monopoly's profit will fall.

Although some economists believe network externalities are important barriers to entry,other economists disagree because

Figure 10-2 Figure 10-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-2.If the firm's average total cost curve is ATC₁,the firm will

Some economists believe that the economy benefits from firms having market power.Which of the following is an argument that has been made to support this position?

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 10: Monopoly and Antitrust Policy

The Federal Trade Commission (FTC)Act

A patent or copyright is a barrier to entry based on

Microsoft hires marketing and sales specialists to decide what prices it should set for its products,whereas a wealthy corn farmer in Iowa,who sells his output in the world commodity market,does not.Why is this so?

A profit maximizing monopoly's price is

A Herfindahl-Hirschman Index is calculated by

The ability of a firm to charge a price greater than marginal cost is called

Figure 10-6 Figure 10-6 shows the cost and demand curves for a monopolist. -Refer to Figure 10-6.The monopolist earns a profit of

Relative to a perfectly competitive market,a monopoly results in

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Because a monopoly's demand curve is the same as the market demand curve for its product

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

Economists played a key role in the development of merger guidelines by the Department of Justice and the Federal Trade Commission in 1982.These guidelines have three main parts.What are these parts?

In a natural monopoly,throughout the range of market demand

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly,independent of its output.As a result the monopoly's profit will fall.

Although some economists believe network externalities are important barriers to entry,other economists disagree because

Figure 10-2 Figure 10-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-2.If the firm's average total cost curve is ATC₁,the firm will

Some economists believe that the economy benefits from firms having market power.Which of the following is an argument that has been made to support this position?

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters