Question 1

In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will

Accepted Answer

A) lower price to expand revenue possibilities. 
B) reduce output and raise price. 
C) maintain the current price if profit is still positive. 
D) increase plant size to lower marginal cost. 
E) decrease plant size to lower marginal cost. 
A) lower price to expand revenue possibilities. 
B) reduce output and raise price. 
C) maintain the current price if profit is still positive. 
D) increase plant size to lower marginal cost. 
E) decrease plant size to lower marginal cost.

Question 2

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 3

Which one of the following factors increases the likelihood that a cartel agreement will lead to higher profit for cartel members?

Accepted Answer

A) free entry into the cartelized market 
B) a small number of sellers involved in the cartel agreement 
C) the cartel members produce a differentiated product 
D) highly unstable demand for the product produced by the cartel 
A) free entry into the cartelized market 
B) a small number of sellers involved in the cartel agreement 
C) the cartel members produce a differentiated product 
D) highly unstable demand for the product produced by the cartel

Question 4

Which one of the following is the best description of a monopolist?

Accepted Answer

A) a firm that produces a single product 
B) a firm that is the sole producer of a narrowly defined product class, such as yellow, grade-A butter produced in Jackson County, Wisconsin 
C) a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry 
D) a firm that is large relative to its competitors 
A) a firm that produces a single product 
B) a firm that is the sole producer of a narrowly defined product class, such as yellow, grade-A butter produced in Jackson County, Wisconsin 
C) a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry 
D) a firm that is large relative to its competitors

Question 5

A monopoly is best defined as

Accepted Answer

A) a single seller of a product that has characteristics very similar to the products produced in other industries. 
B) a single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry. 
C) a market in which a small number of rival sellers produce the entire market output. 
D) any firm operating in a contestable market. 
A) a single seller of a product that has characteristics very similar to the products produced in other industries. 
B) a single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry. 
C) a market in which a small number of rival sellers produce the entire market output. 
D) any firm operating in a contestable market.

Question 6

Which of the following is not a barrier that limits the entry of potential competitors into a market?

Accepted Answer

A) government licensing 
B) control over an essential resource 
C) an elastic demand for a product 
D) patent rights 
A) government licensing 
B) control over an essential resource 
C) an elastic demand for a product 
D) patent rights

Question 7

Cartel agreements are difficult to maintain because individual members

Accepted Answer

A) can gain by raising their price above the price that is best for the cartel. 
B) are often unable to police the price and output policies of other members. 
C) can gain by secretly raising their price above the price that is best for the cartel. 
D) can enforce price arrangements vigorously in court. 
A) can gain by raising their price above the price that is best for the cartel. 
B) are often unable to police the price and output policies of other members. 
C) can gain by secretly raising their price above the price that is best for the cartel. 
D) can enforce price arrangements vigorously in court.

Question 8

Which of the following is an important side effect of government licensing and other grants of monopoly power?

Accepted Answer

A) The number of options available to consumers is increased. 
B) Competition is enhanced. 
C) Firms will produce more efficiently. 
D) Rent-seeking is encouraged. 
A) The number of options available to consumers is increased. 
B) Competition is enhanced. 
C) Firms will produce more efficiently. 
D) Rent-seeking is encouraged.

Question 9

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 10

When natural monopoly is present in an industry, the per-unit costs of production will be

Accepted Answer

A) lowest when there are a large number of producers in the industry. 
B) lowest when a single firm generates the entire output of the industry. 
C) lower for small firms than for large firms. 
D) minimized at the output that maximizes the industry's profitability. 
A) lowest when there are a large number of producers in the industry. 
B) lowest when a single firm generates the entire output of the industry. 
C) lower for small firms than for large firms. 
D) minimized at the output that maximizes the industry's profitability.

Question 11

A natural monopoly exists when

Accepted Answer

A) a single firm has control over a natural resource, such as timber. 
B) ATC in an industry will be at a minimum if output is produced by a single firm. 
C) a firm has an exclusive patent or license to produce a product granted by the government. 
D) entering the industry is barred by governmental authorities. 
A) a single firm has control over a natural resource, such as timber. 
B) ATC in an industry will be at a minimum if output is produced by a single firm. 
C) a firm has an exclusive patent or license to produce a product granted by the government. 
D) entering the industry is barred by governmental authorities.

Question 12

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 13

A natural monopoly is defined as an industry in which one firm

Accepted Answer

A) can produce the entire industry output at a lower average cost than a larger number of firms could. 
B) can produce the entire industry output at a lower marginal cost than a larger number of firms could. 
C) is very large relative to other firms that could enter the industry. 
D) can earn higher profits if it is the only firm in the industry rather than if other firms also enter the industry. 
A) can produce the entire industry output at a lower average cost than a larger number of firms could. 
B) can produce the entire industry output at a lower marginal cost than a larger number of firms could. 
C) is very large relative to other firms that could enter the industry. 
D) can earn higher profits if it is the only firm in the industry rather than if other firms also enter the industry.

Question 14

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 15

Figure 11-12
  
-If the firms in this oligopolistic industry depicted in Figure 11-12 can collude effectively and restrict the entry of potential competitors, the price of their product will tend to be

Accepted Answer

A) greater than P₂. 
B) close to P₂. 
C) approximately equal to P₁. 
D) less than P₁. 
A) greater than P₂. 
B) close to P₂. 
C) approximately equal to P₁. 
D) less than P₁.

Question 16

Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

Accepted Answer

A) an increase in market output and an increase in the price of the product. 
B) an increase in market output and an decrease in the price of the product. 
C) a decrease in market output and an increase in the price of the product. 
D) a decrease in market output and a decrease in the price of the product. 
A) an increase in market output and an increase in the price of the product. 
B) an increase in market output and an decrease in the price of the product. 
C) a decrease in market output and an increase in the price of the product. 
D) a decrease in market output and a decrease in the price of the product.

Question 17

If the firms in an oligopolistic industry can collude effectively (from the firms' viewpoints), the resulting price and output in the market will be most similar to that of

Accepted Answer

A) a competitive price-searcher market. 
B) pure monopoly. 
C) bilateral monopoly. 
D) a competitive price-taker market. 
A) a competitive price-searcher market. 
B) pure monopoly. 
C) bilateral monopoly. 
D) a competitive price-taker market.

Question 18

Table 11-1
  
-Refer to Table 11-1. To maximize profit, the monopolist sets price at

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $25 
A) $10 
B) $15 
C) $20 
D) $25

Question 19

Because of the rise of global competition and free trade,

Accepted Answer

A) antitrust policy may be less necessary than previously thought. 
B) U.S. industrial concentration poses more of a threat to consumers. 
C) U.S. markets are becoming less competitive. 
D) U.S. manufacturers are seeking fewer trade barriers. 
A) antitrust policy may be less necessary than previously thought. 
B) U.S. industrial concentration poses more of a threat to consumers. 
C) U.S. markets are becoming less competitive. 
D) U.S. manufacturers are seeking fewer trade barriers.

Question 20

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.

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

In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will

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?

Which one of the following factors increases the likelihood that a cartel agreement will lead to higher profit for cartel members?

Which one of the following is the best description of a monopolist?

A monopoly is best defined as

Which of the following is not a barrier that limits the entry of potential competitors into a market?

Cartel agreements are difficult to maintain because individual members

Which of the following is an important side effect of government licensing and other grants of monopoly power?

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.

When natural monopoly is present in an industry, the per-unit costs of production will be

A natural monopoly exists when

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

A natural monopoly is defined as an industry in which one firm

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

Figure 11-12 -If the firms in this oligopolistic industry depicted in Figure 11-12 can collude effectively and restrict the entry of potential competitors, the price of their product will tend to be

Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect

If the firms in an oligopolistic industry can collude effectively (from the firms' viewpoints), the resulting price and output in the market will be most similar to that of

Table 11-1 -Refer to Table 11-1. To maximize profit, the monopolist sets price at

Because of the rise of global competition and free trade,

Figure 11-17 -Refer to Figure 11-17. The marginal revenue curve for a monopoly firm is depicted by curve

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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