Question 1

Identify four reasons for high entry barriers? Briefly explain each reason.

Accepted Answer

1. Economies of scale.This occurs when a

Question 2

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?

Accepted Answer

Average revenue is equal to price for an

Question 3

If a firm's average total cost is less than price where MR=MC

Accepted Answer

A) the firm should shut down. 
B) the firm should raise its price. 
C) the firm should continue to produce the output it is producing. 
D) the firm should cut back on its output to lower its cost. 
A) the firm should shut down. 
B) the firm should raise its price. 
C) the firm should continue to produce the output it is producing. 
D) the firm should cut back on its output to lower its cost.

Question 4

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

Accepted Answer

A) Safeway is a monopoly all day because it produces a service that has no close substitutes. 
B) Safeway has a monopoly at midnight but not during the day. 
C) Safeway can ignore the pricing decisions of the other two supermarkets. 
D) Safeway probably has a higher markup to compensate for its higher cost of production. 
A) Safeway is a monopoly all day because it produces a service that has no close substitutes. 
B) Safeway has a monopoly at midnight but not during the day. 
C) Safeway can ignore the pricing decisions of the other two supermarkets. 
D) Safeway probably has a higher markup to compensate for its higher cost of production.

Question 5

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Accepted Answer

A) If a merger would result in an Index value less than 1,000, the merger would not be challenged. 
B) If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged. 
C) If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged. 
D) If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged. 
A) If a merger would result in an Index value less than 1,000, the merger would not be challenged. 
B) If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged. 
C) If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged. 
D) If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged.

Question 6

The demand curve for a monopoly firm

Accepted Answer

A) is perfectly inelastic. 
B) lies below its marginal revenue curve. 
C) is the same as the market demand curve. 
D) is horizontal. 
A) is perfectly inelastic. 
B) lies below its marginal revenue curve. 
C) is the same as the market demand curve. 
D) is horizontal.

Question 7

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

Accepted Answer

A) adding up the market shares of all firms in the industry, squaring this number and then dividing by the number of firms in the industry. 
B) squaring the market shares of each firm in an industry and then adding up the values of the squares. 
C) squaring the four-firm concentration ratio of the industry and dividing this number by the total number of firms in the industry. 
D) determining the market shares of the four largest firms in the industry, but unlike the concentration ratio, the Index includes sales in the United States by foreign firms. 
A) adding up the market shares of all firms in the industry, squaring this number and then dividing by the number of firms in the industry. 
B) squaring the market shares of each firm in an industry and then adding up the values of the squares. 
C) squaring the four-firm concentration ratio of the industry and dividing this number by the total number of firms in the industry. 
D) determining the market shares of the four largest firms in the industry, but unlike the concentration ratio, the Index includes sales in the United States by foreign firms.

Question 8

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Accepted Answer

A) network externalities 
B) public franchise 
C) economies of scale 
D) control of a key resource 
A) network externalities 
B) public franchise 
C) economies of scale 
D) control of a key resource

Question 9

Figure 10-2
   
Figure 10-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 10-2.The firm's profit-maximizing price is

Accepted Answer

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

Question 10

Figure 10-15
   
Figure 10-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-15.The profit-maximizing price is

Accepted Answer

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

Question 11

The Google search engine has a market share of ________ in the United States and ________ in Europe.

Accepted Answer

A) 90 percent; 25 percent 
B) 50 percent; 50 percent 
C) 70 percent; 90 percent 
D) 45 percent; 15 percent 
A) 90 percent; 25 percent 
B) 50 percent; 50 percent 
C) 70 percent; 90 percent 
D) 45 percent; 15 percent

Question 12

In 2011,Microsoft filed a complaint with the European Commission accusing Google of taking steps to monopolize the Internet search engine business.Microsoft's primary complaint was that

Accepted Answer

A) Google is the only Internet search engine available to Windows operating system users. 
B) the European Union contracts exclusively with Google for its Internet search engine use. 
C) Google was using its dominant position as an Internet search engine to exclude competitors. 
D) Google owns the Internet advertising companies that pay for ads on search engine sites, and has prohibited ads from being sold to competitors. 
A) Google is the only Internet search engine available to Windows operating system users. 
B) the European Union contracts exclusively with Google for its Internet search engine use. 
C) Google was using its dominant position as an Internet search engine to exclude competitors. 
D) Google owns the Internet advertising companies that pay for ads on search engine sites, and has prohibited ads from being sold to competitors.

Question 13

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Accepted Answer

A) control of a key raw material. 
B) network externalities. 
C) economies of scale. 
D) perfectly inelastic demand curve. 
A) control of a key raw material. 
B) network externalities. 
C) economies of scale. 
D) perfectly inelastic demand curve.

Question 14

Compared to a monopolistic competitor,a monopolist faces

Accepted Answer

A) a more elastic demand curve. 
B) a more inelastic demand curve. 
C) a more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. 
D) a demand curve that has a price elasticity coefficient of zero. 
A) a more elastic demand curve. 
B) a more inelastic demand curve. 
C) a more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. 
D) a demand curve that has a price elasticity coefficient of zero.

Question 15

The first important federal law passed to regulate monopolies in the United States was the

Accepted Answer

A) Cellar-Kefauver Act. 
B) Clayton Act. 
C) Federal Trade Commission Act. 
D) Sherman Act. 
A) Cellar-Kefauver Act. 
B) Clayton Act. 
C) Federal Trade Commission Act. 
D) Sherman Act.

Question 16

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Accepted Answer

A) True 
 B)False

Question 17

What happens to a monopoly's revenue when it sells more units of its product?

Accepted Answer

The monopolist must lower its price to s

Question 18

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Accepted Answer

A) Each natural monopoly is made a public franchise.The public franchise is then required to set its price equal to its marginal cost. 
B) Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C) Natural monopolies are privately owned and allowed to set their own prices.Government regulation of the firms would result in greater deadweight losses. 
D) Local or state regulatory commissions usually set prices for natural monopolies. 
A) Each natural monopoly is made a public franchise.The public franchise is then required to set its price equal to its marginal cost. 
B) Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C) Natural monopolies are privately owned and allowed to set their own prices.Government regulation of the firms would result in greater deadweight losses. 
D) Local or state regulatory commissions usually set prices for natural monopolies.

Question 19

Table 10-2
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity per } \
\text { Day (cases) }
\end{array} & \begin{array} { c } 
\text { Price per } \
\text { Case }
\end{array} & \text { Total Cost } \
\hline 1 & \$ 16 & \$ 7.00 \
\hline 2 & 15 & 9.50 \
\hline 3 & 14 & 11.00 \
\hline 4 & 13 & 12.00 \
\hline 5 & 12 & 14.50 \
\hline 6 & 11 & 17.50 \
\hline 7 & 10 & 21.00 \
\hline 8 & 9 & 25.00 \
\hline 9 & 8 & 30.00 \
\hline 10 & 7 & 35.50 \
\hline
\end{array}$$ 
The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 10-2 shows the cost and demand data for this government protected monopolist.
-Refer to Table 10-2.What is the amount of profit that the firm earns?

Accepted Answer

A) $34.50 
B) $42 
C) $47 
D) $49 
A) $34.50 
B) $42 
C) $47 
D) $49

Question 20

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Accepted Answer

A) True 
 B)False

Identify four reasons for high entry barriers? Briefly explain each reason.

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?

If a firm's average total cost is less than price where MR=MC

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

The demand curve for a monopoly firm

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Figure 10-2 Figure 10-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-2.The firm's profit-maximizing price is

Figure 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.The profit-maximizing price is

The Google search engine has a market share of in the United States and in Europe.

In 2011,Microsoft filed a complaint with the European Commission accusing Google of taking steps to monopolize the Internet search engine business.Microsoft's primary complaint was that

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Compared to a monopolistic competitor,a monopolist faces

The first important federal law passed to regulate monopolies in the United States was the

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

What happens to a monopoly's revenue when it sells more units of its product?

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

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

Identify four reasons for high entry barriers? Briefly explain each reason.

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?

If a firm's average total cost is less than price where MR=MC

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

The demand curve for a monopoly firm

Merger guidelines developed by the U.S.Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration.This index measures concentration in an industry by

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Figure 10-2 Figure 10-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-2.The firm's profit-maximizing price is

Figure 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.The profit-maximizing price is

The Google search engine has a market share of ________ in the United States and ________ in Europe.

In 2011,Microsoft filed a complaint with the European Commission accusing Google of taking steps to monopolize the Internet search engine business.Microsoft's primary complaint was that

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Compared to a monopolistic competitor,a monopolist faces

The first important federal law passed to regulate monopolies in the United States was the

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

What happens to a monopoly's revenue when it sells more units of its product?

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

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

The Google search engine has a market share of in the United States and in Europe.