Question 1

The price charged by oligopolists will

Accepted Answer

A) equal the equilibrium price in a price-takers market if the oligopolists collude. 
B) equal the monopoly price if the oligopolists do not collude. 
C) generally fall between the monopoly and competitive market equilibrium prices. 
D) be the same whether the oligopolists cooperate with one another or not; only profit is affected. 
A) equal the equilibrium price in a price-takers market if the oligopolists collude. 
B) equal the monopoly price if the oligopolists do not collude. 
C) generally fall between the monopoly and competitive market equilibrium prices. 
D) be the same whether the oligopolists cooperate with one another or not; only profit is affected.

Question 2

Which of the following firms best fits the definition of a monopoly?

Accepted Answer

A) McDonald's, because it is the only firm who produces the Big Mac 
B) a local cable company that has been granted the only license to sell cable in a city by the town council 
C) Ford Motor Company, because there are significant economies of scale in the production of automobiles 
D) Harvard University, because it has a reputation as being one of the top universities in the country 
A) McDonald's, because it is the only firm who produces the Big Mac 
B) a local cable company that has been granted the only license to sell cable in a city by the town council 
C) Ford Motor Company, because there are significant economies of scale in the production of automobiles 
D) Harvard University, because it has a reputation as being one of the top universities in the country

Question 3

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is

Accepted Answer

A) $.01. 
B) $1. 
C) $2.99. 
D) $3. 
E) $600. 
A) $.01. 
B) $1. 
C) $2.99. 
D) $3. 
E) $600.

Question 4

A monopolist will earn economic profits as long as his price exceeds

Accepted Answer

A) marginal revenue. 
B) average fixed cost. 
C) average variable cost. 
D) average total cost. 
A) marginal revenue. 
B) average fixed cost. 
C) average variable cost. 
D) average total cost.

Question 5

To be a natural monopoly, a firm must

Accepted Answer

A) control an essential natural resource input. 
B) be very large. 
C) have a continuously falling average cost curve as output rises. 
D) have falling average costs over a substantial range of total market demand. 
A) control an essential natural resource input. 
B) be very large. 
C) have a continuously falling average cost curve as output rises. 
D) have falling average costs over a substantial range of total market demand.

Question 6

Suppose a monopolist and a competitive price-taker firm have the same cost curves. The monopoly firm would

Accepted Answer

A) charge a lower price than the competitive price-taker firm. 
B) charge a higher price than the competitive price-taker firm. 
C) charge the same price as the competitive price-taker firm. 
D) refuse to operate in the short run unless an economic profit could be made. 
E) refuse to operate in the short run if an economic loss was present. 
A) charge a lower price than the competitive price-taker firm. 
B) charge a higher price than the competitive price-taker firm. 
C) charge the same price as the competitive price-taker firm. 
D) refuse to operate in the short run unless an economic profit could be made. 
E) refuse to operate in the short run if an economic loss was present.

Question 7

The demand curve facing a monopolist

Accepted Answer

A) is perfectly elastic. 
B) lies above its marginal revenue curve. 
C) lies below its marginal revenue curve. 
D) is the same as its marginal revenue curve. 
A) is perfectly elastic. 
B) lies above its marginal revenue curve. 
C) lies below its marginal revenue curve. 
D) is the same as its marginal revenue curve.

Question 8

Which of the following is true?

Accepted Answer

A) A monopolist is always guaranteed to earn positive economic profits regardless of their cost of production or the price they charge. 
B) A monopolist will charge the highest price possible for their product because no matter what price they charge, people will still have to buy it. 
C) A monopolist has no incentive to find more cost-efficient methods of production because they are protected from competition from other sellers. 
D) None of the above are correct. 
A) A monopolist is always guaranteed to earn positive economic profits regardless of their cost of production or the price they charge. 
B) A monopolist will charge the highest price possible for their product because no matter what price they charge, people will still have to buy it. 
C) A monopolist has no incentive to find more cost-efficient methods of production because they are protected from competition from other sellers. 
D) None of the above are correct.

Question 9

Which of the following is a major shortcoming of government regulation of business monopoly?

Accepted Answer

A) The regulators often estimate production costs incorrectly and thus force firms into loss positions. 
B) The regulators often come to represent the interests of the established firms and use their power to limit competition. 
C) The regulators usually permit firms to make unusually high accounting profits. 
D) The regulators, acting in consumers' interests, often force prices so low that even with efficient production techniques the regulated firms lose money. 
A) The regulators often estimate production costs incorrectly and thus force firms into loss positions. 
B) The regulators often come to represent the interests of the established firms and use their power to limit competition. 
C) The regulators usually permit firms to make unusually high accounting profits. 
D) The regulators, acting in consumers' interests, often force prices so low that even with efficient production techniques the regulated firms lose money.

Question 10

Figure 11-2
  
-The cost and demand conditions for a monopolist are depicted in Figure 11-2. If the monopolist is maximizing profit, it will charge a price of

Accepted Answer

A) $30 and produce an output of 4,000. 
B) $40 and produce an output of 4,000. 
C) $40 and produce an output of 2,000. 
D) more than $40. 
A) $30 and produce an output of 4,000. 
B) $40 and produce an output of 4,000. 
C) $40 and produce an output of 2,000. 
D) more than $40.

Question 11

Figure 11-20
  
-The profit-maximizing price the monopoly will charge in Figure 11-20 is

Accepted Answer

A) irrelevant since the firm should shut down 
B) $11 
C) $16 
D) $18 
E) $22 
A) irrelevant since the firm should shut down 
B) $11 
C) $16 
D) $18 
E) $22

Question 12

Antitrust action restructures a previously monopolized industry into a competitive industry. If economies of scale are unimportant in the industry, the expected result of this movement from monopoly to competition is

Accepted Answer

A) a reduction in output and an increase in price in the industry. 
B) a reduction in both price and output in the industry. 
C) an increase in both price and output in the industry. 
D) an increase in output and a reduction in price in the industry. 
A) a reduction in output and an increase in price in the industry. 
B) a reduction in both price and output in the industry. 
C) an increase in both price and output in the industry. 
D) an increase in output and a reduction in price in the industry.

Question 13

Empirical studies show that the after-tax accounting profits of manufacturing corporations are approximately what percent of sales?

Accepted Answer

A) 1 percent 
B) 5 percent 
C) 15 percent 
D) 25 to 30 percent 
A) 1 percent 
B) 5 percent 
C) 15 percent 
D) 25 to 30 percent

Question 14

Which of the following is a valid criticism of unregulated monopoly?

Accepted Answer

A) Monopoly limits the options available to consumers. 
B) Relative to a competitive market, a monopolist generally will produce too great an output. 
C) Profit-maximizing monopolists will fail to produce at the lowest possible cost. 
D) A monopoly's output will often be more than if the market were competitive. 
A) Monopoly limits the options available to consumers. 
B) Relative to a competitive market, a monopolist generally will produce too great an output. 
C) Profit-maximizing monopolists will fail to produce at the lowest possible cost. 
D) A monopoly's output will often be more than if the market were competitive.

Question 15

An oligopolistic market

Accepted Answer

A) has a small number of rival firms, and each is large relative to the size of the market. 
B) is characterized by firms that merely take the price that is determined by the forces of supply and demand in the market. 
C) has low entry barriers facing firms that may be interested in entering the market. 
D) has a large number of firms that are small relative to the size of the market. 
A) has a small number of rival firms, and each is large relative to the size of the market. 
B) is characterized by firms that merely take the price that is determined by the forces of supply and demand in the market. 
C) has low entry barriers facing firms that may be interested in entering the market. 
D) has a large number of firms that are small relative to the size of the market.

Question 16

When a monopolist is maximizing profit, which of the following conditions will always be satisfied?

Accepted Answer

A) P = MC 
B) MR = AVC 
C) P = ATC 
D) MR = MC 
A) P = MC 
B) MR = AVC 
C) P = ATC 
D) MR = MC

Question 17

In an oligopolistic market, if rival sellers act independently, each will have a strong incentive to

Accepted Answer

A) reduce price in order to increase sales and gain a larger share of the total market. 
B) increase price in order to get a larger share of the market and make larger profits. 
C) restrict output and raise price in order to achieve higher profits. 
D) maintain agreements to lower price and decrease product quality in order to earn higher profits. 
A) reduce price in order to increase sales and gain a larger share of the total market. 
B) increase price in order to get a larger share of the market and make larger profits. 
C) restrict output and raise price in order to achieve higher profits. 
D) maintain agreements to lower price and decrease product quality in order to earn higher profits.

Question 18

Monopolists may be able to earn profit, even in the long run, as the result of

Accepted Answer

A) consumer ignorance. 
B) an inelastic demand for its product. 
C) product differentiation. 
D) high barriers to entry. 
A) consumer ignorance. 
B) an inelastic demand for its product. 
C) product differentiation. 
D) high barriers to entry.

Question 19

A natural monopoly is a market where

Accepted Answer

A) a single firm has control over a vital natural resource. 
B) many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. 
C) a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. 
D) many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm. 
A) a single firm has control over a vital natural resource. 
B) many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. 
C) a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. 
D) many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.

Question 20

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

Accepted Answer

A) inability to keep new firms from entering the market 
B) a small number of firms in the market 
C) a stable market demand for the product 
D) a highly inelastic market demand for the product 
A) inability to keep new firms from entering the market 
B) a small number of firms in the market 
C) a stable market demand for the product 
D) a highly inelastic market demand for the product

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

The price charged by oligopolists will

Which of the following firms best fits the definition of a monopoly?

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is

A monopolist will earn economic profits as long as his price exceeds

To be a natural monopoly, a firm must

Suppose a monopolist and a competitive price-taker firm have the same cost curves. The monopoly firm would

The demand curve facing a monopolist

Which of the following is true?

Which of the following is a major shortcoming of government regulation of business monopoly?

Figure 11-2 -The cost and demand conditions for a monopolist are depicted in Figure 11-2. If the monopolist is maximizing profit, it will charge a price of

Figure 11-20 -The profit-maximizing price the monopoly will charge in Figure 11-20 is

Antitrust action restructures a previously monopolized industry into a competitive industry. If economies of scale are unimportant in the industry, the expected result of this movement from monopoly to competition is

Empirical studies show that the after-tax accounting profits of manufacturing corporations are approximately what percent of sales?

Which of the following is a valid criticism of unregulated monopoly?

An oligopolistic market

When a monopolist is maximizing profit, which of the following conditions will always be satisfied?

In an oligopolistic market, if rival sellers act independently, each will have a strong incentive to

Monopolists may be able to earn profit, even in the long run, as the result of

A natural monopoly is a market where

Which of the following will reduce the likelihood of effective collusion among oligopolistic producers?

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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