Question 1

"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 2

(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 3

A law that requires hairdressers to undergo many hours of training and acquire a license before they can offer haircuts to the public, is an example of a

Accepted Answer

A) positive externality. 
B) natural monopoly. 
C) barrier to entry. 
D) public good. 
A) positive externality. 
B) natural monopoly. 
C) barrier to entry. 
D) public good.

Question 4

When oligopolistic firms collude to maximize their joint profits, in comparison with the situation in competitive markets, their actions generally lead to

Accepted Answer

A) a larger output and lower prices. 
B) a smaller output and higher prices. 
C) a smaller output and lower prices. 
D) the same output and higher prices. 
A) a larger output and lower prices. 
B) a smaller output and higher prices. 
C) a smaller output and lower prices. 
D) the same output and higher prices.

Question 5

When a monopolist is producing at the profit-maximizing output level, the value to consumers of one additional unit of output will

Accepted Answer

A) exceed the monopolist's marginal cost. 
B) equal the monopolist's marginal cost. 
C) be less than the monopolist's marginal cost. 
D) exceed the price of the additional unit. 
A) exceed the monopolist's marginal cost. 
B) equal the monopolist's marginal cost. 
C) be less than the monopolist's marginal cost. 
D) exceed the price of the additional unit.

Question 6

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 7

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

Accepted Answer

A) they are unable to maintain the same degree of monopoly power achieved by a monopolist. 
B) each firm's profit always ends up being zero. 
C) competitive pressures are absent from the market. 
D) it will be easier to maintain collusive agreements. 
A) they are unable to maintain the same degree of monopoly power achieved by a monopolist. 
B) each firm's profit always ends up being zero. 
C) competitive pressures are absent from the market. 
D) it will be easier to maintain collusive agreements.

Question 8

Which of the following indicates the major difference between monopolists and competitive price searchers?

Accepted Answer

A) Monopolists will always be able to make economic profit; competitive price searchers will not. 
B) Barriers to entry are high under monopoly but low in competitive price-searcher markets. 
C) Monopolists will face a downward-sloping demand curve; competitive price searchers will not. 
D) Unregulated monopolists will charge prices that exceed marginal cost; competitive price searchers will not. 
A) Monopolists will always be able to make economic profit; competitive price searchers will not. 
B) Barriers to entry are high under monopoly but low in competitive price-searcher markets. 
C) Monopolists will face a downward-sloping demand curve; competitive price searchers will not. 
D) Unregulated monopolists will charge prices that exceed marginal cost; competitive price searchers will not.

Question 9

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 10

Figure 11-16
  
-Refer to Figure 11-16. The allocative inefficiency caused by a profit-maximizing monopoly amounts to

Accepted Answer

A) $150. 
B) $200. 
C) $250. 
D) $300. 
A) $150. 
B) $200. 
C) $250. 
D) $300.

Question 11

When a single firm has control over the market supply of a resource that is essential to the production of a good,

Accepted Answer

A) economies of scale are usually important. 
B) monopoly is frequently the result. 
C) diseconomies of scale are the usual cause. 
D) competition for the resource makes monopoly almost impossible 
A) economies of scale are usually important. 
B) monopoly is frequently the result. 
C) diseconomies of scale are the usual cause. 
D) competition for the resource makes monopoly almost impossible

Question 12

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 13

The key element in preserving a monopoly is

Accepted Answer

A) government subsidy of critical enterprises. 
B) keeping potential rivals out of the market. 
C) guaranteeing availability of substitute products. 
D) increased advertising expenditure. 
A) government subsidy of critical enterprises. 
B) keeping potential rivals out of the market. 
C) guaranteeing availability of substitute products. 
D) increased advertising expenditure.

Question 14

The demand curve of a monopolist is

Accepted Answer

A) identical to the marginal cost curve. 
B) downward sloping and above the marginal revenue curve. 
C) downward sloping and below the marginal revenue. 
D) elastic because of a recognized interdependence with other firms. 
A) identical to the marginal cost curve. 
B) downward sloping and above the marginal revenue curve. 
C) downward sloping and below the marginal revenue. 
D) elastic because of a recognized interdependence with other firms.

Question 15

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 16

When the government imposes a barrier to entry in a market,

Accepted Answer

A) more resources will be wasted by firms attempting to secure and maintain market power. 
B) the options available to consumers will increase in the protected market. 
C) allocative efficiency will be improved by the reduction of wasteful competition. 
D) consumers will be better able to direct the smaller number of producers to serve their interests. 
A) more resources will be wasted by firms attempting to secure and maintain market power. 
B) the options available to consumers will increase in the protected market. 
C) allocative efficiency will be improved by the reduction of wasteful competition. 
D) consumers will be better able to direct the smaller number of producers to serve their interests.

Question 17

Figure 11-13
  
-If the firms in the industry depicted in Figure 11-13 compete with each other, what would the industry's price and output be?

Accepted Answer

A) price, $10; output, 600 
B) price, $15; output, 500 
C) price, $20; output, 400 
D) price, $25; output, 300 
A) price, $10; output, 600 
B) price, $15; output, 500 
C) price, $20; output, 400 
D) price, $25; output, 300

Question 18

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 19

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is in a competitive price-searcher market?

Accepted Answer

A) A competitive price searcher produces at the output level where marginal cost equals marginal revenue; a monopolist does not. 
B) A monopolist faces a downward-sloping demand curve; a competitive price searcher does not. 
C) A monopolist charges a price higher than marginal cost; a competitive price searcher does not. 
D) In the long run, a competitive price searcher will earn zero economic profit because of low entry barriers, while a monopolist may earn positive economic profits in the long run. 
A) A competitive price searcher produces at the output level where marginal cost equals marginal revenue; a monopolist does not. 
B) A monopolist faces a downward-sloping demand curve; a competitive price searcher does not. 
C) A monopolist charges a price higher than marginal cost; a competitive price searcher does not. 
D) In the long run, a competitive price searcher will earn zero economic profit because of low entry barriers, while a monopolist may earn positive economic profits in the long run.

Question 20

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.

Exam 11: A: Price-Searcher Markets With High Entry Barriers

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

(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.

A law that requires hairdressers to undergo many hours of training and acquire a license before they can offer haircuts to the public, is an example of a

When oligopolistic firms collude to maximize their joint profits, in comparison with the situation in competitive markets, their actions generally lead to

When a monopolist is producing at the profit-maximizing output level, the value to consumers of one additional unit of output will

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

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

Which of the following indicates the major difference between monopolists and competitive price searchers?

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?

Figure 11-16 -Refer to Figure 11-16. The allocative inefficiency caused by a profit-maximizing monopoly amounts to

When a single firm has control over the market supply of a resource that is essential to the production of a good,

The key element in preserving a monopoly is

The demand curve of a monopolist is

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

When the government imposes a barrier to entry in a market,

Figure 11-13 -If the firms in the industry depicted in Figure 11-13 compete with each other, what would the industry's price and output be?

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

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is in a competitive price-searcher market?

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

B: Price-Searcher Markets With High 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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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