Question 1

As a group, oligopolists would always earn the highest profit if they would

Accepted Answer

A) produce the competitive quantity of output. 
B) produce more than the competitive quantity of output. 
C) charge the same price that a monopolist would charge if the market were a monopoly. 
D) operate according to their own individual self-interests. 
A) produce the competitive quantity of output. 
B) produce more than the competitive quantity of output. 
C) charge the same price that a monopolist would charge if the market were a monopoly. 
D) operate according to their own individual self-interests.

Question 2

Breaking a monopoly firm into several rival firms will be unlikely to improve economic efficiency when economies of scale are important because

Accepted Answer

A) several smaller firms will have higher per-unit costs than a single larger firm. 
B) a single firm will have higher per-unit costs than several smaller firms. 
C) it is harder to regulate many smaller firms than it is one large firm. 
D) consumers will find it harder to choose among the products of many alternative sellers. 
A) several smaller firms will have higher per-unit costs than a single larger firm. 
B) a single firm will have higher per-unit costs than several smaller firms. 
C) it is harder to regulate many smaller firms than it is one large firm. 
D) consumers will find it harder to choose among the products of many alternative sellers.

Question 3

If entry-restricting legal barriers effectively organized the funeral home industry of a large city into a monopoly cartel, economic theory indicates that, compared to the previously competitive situation,

Accepted Answer

A) the price of funeral services would decline, and output would increase. 
B) both the price and output of funeral services would decline. 
C) the price of funeral services would increase, and output would decline. 
D) both the price and output of funeral services would increase. 
A) the price of funeral services would decline, and output would increase. 
B) both the price and output of funeral services would decline. 
C) the price of funeral services would increase, and output would decline. 
D) both the price and output of funeral services would increase.

Question 4

Figure 11-18
  
-The profit-maximizing output and price for the firm in Figure 11-18, which charges the same price to all customers, are

Accepted Answer

A) 117 and $14 
B) 150 and $22 
C) 150 and $14 
D) 117 and $22 
E) 117 and $24 
A) 117 and $14 
B) 150 and $22 
C) 150 and $14 
D) 117 and $22 
E) 117 and $24

Question 5

A profit-maximizing monopolist will continue expanding output as long as

Accepted Answer

A) marginal revenue exceeds marginal cost. 
B) marginal revenue is positive. 
C) the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D) economic profit is more than zero. 
A) marginal revenue exceeds marginal cost. 
B) marginal revenue is positive. 
C) the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D) economic profit is more than zero.

Question 6

Which of the following would increase the likelihood that firms in an industry could successfully collude?

Accepted Answer

A) a large number of firms in the industry 
B) unstable demand conditions in the industry 
C) high barriers to entry in the industry 
D) product characteristics that make it difficult for firms to detect other firms that cheat on the agreement 
A) a large number of firms in the industry 
B) unstable demand conditions in the industry 
C) high barriers to entry in the industry 
D) product characteristics that make it difficult for firms to detect other firms that cheat on the agreement

Question 7

An industry is said to be a natural monopoly when

Accepted Answer

A) legal barriers limit entry into the market. 
B) diseconomies of scale are present in the market. 
C) the market demand for the product supplied by a firm is inelastic. 
D) long-run ATC continues to decline as firm size increases. 
E) larger firms have higher per-unit costs than their smaller rivals. 
A) legal barriers limit entry into the market. 
B) diseconomies of scale are present in the market. 
C) the market demand for the product supplied by a firm is inelastic. 
D) long-run ATC continues to decline as firm size increases. 
E) larger firms have higher per-unit costs than their smaller rivals.

Question 8

Collusion

Accepted Answer

A) is exactly the same thing as competition. 
B) involves cooperative actions by sellers at the expense of buyers. 
C) requires competitive actions by sellers to win customers from rival firms. 
D) can only be achieved in price-taker markets. 
A) is exactly the same thing as competition. 
B) involves cooperative actions by sellers at the expense of buyers. 
C) requires competitive actions by sellers to win customers from rival firms. 
D) can only be achieved in price-taker markets.

Question 9

When members of an oligopolistic industry agree to collude, raising their product price substantially above average cost, the passage of time (months and years)

Accepted Answer

A) is usually needed for the members to solidify their cooperation. 
B) usually results in finer control of prices and markets by the group and larger profit margins. 
C) is likely to erode the agreement, as ways to cheat are developed by some participants and new entry is encouraged by the high price. 
D) seldom has any impact on the agreement, as long as the participants maintain high profit levels as a result of the agreement. 
A) is usually needed for the members to solidify their cooperation. 
B) usually results in finer control of prices and markets by the group and larger profit margins. 
C) is likely to erode the agreement, as ways to cheat are developed by some participants and new entry is encouraged by the high price. 
D) seldom has any impact on the agreement, as long as the participants maintain high profit levels as a result of the agreement.

Question 10

Since patent laws create monopoly power in the short run and thus provide a strong incentive for firms to undertake the risk and effort involved in the development of a technological improvement, we can expect that patent laws

Accepted Answer

A) are inefficient. 
B) are damaging to consumer welfare in the long run. 
C) reflect the power of special interests and the impact that they exert on the regulatory policy. 
D) may lead to improved products at a lower cost in the long run. 
A) are inefficient. 
B) are damaging to consumer welfare in the long run. 
C) reflect the power of special interests and the impact that they exert on the regulatory policy. 
D) may lead to improved products at a lower cost in the long run.

Question 11

Collusion among sellers will be less attractive when

Accepted Answer

A) it is difficult to determine if some firms are providing secret price cuts. 
B) there are a small number of firms in the industry that are easily monitored. 
C) the demand for the product is relatively stable. 
D) the demand for the product is highly inelastic. 
A) it is difficult to determine if some firms are providing secret price cuts. 
B) there are a small number of firms in the industry that are easily monitored. 
C) the demand for the product is relatively stable. 
D) the demand for the product is highly inelastic.

Question 12

Figure 11-18
  
-The total revenue for the firm in Figure 11-18, a monopolist that maximizes profit while charging all customers the same price, is

Accepted Answer

A) $2,574 
B) $2,808 
C) $2,100 
D) $1,638 
E) $3,300 
A) $2,574 
B) $2,808 
C) $2,100 
D) $1,638 
E) $3,300

Question 13

The prisoners' dilemma is used to illustrate the basic idea that

Accepted Answer

A) oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement. 
B) oligopolistic firms are always worse off when they collude. 
C) oligopolistic firms never have an incentive to cheat on collusive agreements, unlike prisoners. 
D) students who cheat on economics exams end up in jail. 
A) oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement. 
B) oligopolistic firms are always worse off when they collude. 
C) oligopolistic firms never have an incentive to cheat on collusive agreements, unlike prisoners. 
D) students who cheat on economics exams end up in jail.

Question 14

Which of the following is true under unregulated monopoly?

Accepted Answer

A) Monopoly results in more output than under pure competition. 
B) Monopoly results in a more efficient allocation of resources than competition. 
C) Monopoly expands the choices available to consumers. 
D) Monopoly results in lower output and higher prices than competition. 
A) Monopoly results in more output than under pure competition. 
B) Monopoly results in a more efficient allocation of resources than competition. 
C) Monopoly expands the choices available to consumers. 
D) Monopoly results in lower output and higher prices than competition.

Question 15

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

Accepted Answer

A) Marginal revenue and price are equal for a price taker but not a monopolist. 
B) Monopolists can earn economic profits in the long run, but price takers cannot. 
C) A price taker sells its output at a price equal to marginal cost, while a monopolist sells its output at a price higher than marginal cost. 
D) All of the above are true. 
A) Marginal revenue and price are equal for a price taker but not a monopolist. 
B) Monopolists can earn economic profits in the long run, but price takers cannot. 
C) A price taker sells its output at a price equal to marginal cost, while a monopolist sells its output at a price higher than marginal cost. 
D) All of the above are true.

Question 16

Figure 11-11
  
-According to the graph of an oligopolistic industry in Figure 11-11 (points A and C lie on the MC curve), which of the following statements is correct?

Accepted Answer

A) With perfect collusion, price and outputs are indicated by point A. 
B) Without collusion, price and outputs are indicated by point B. 
C) With perfect collusion, price and outputs are indicated by point C. 
D) With perfect collusion, price and outputs are indicated by point B. 
A) With perfect collusion, price and outputs are indicated by point A. 
B) Without collusion, price and outputs are indicated by point B. 
C) With perfect collusion, price and outputs are indicated by point C. 
D) With perfect collusion, price and outputs are indicated by point B.

Question 17

Figure 11-1
  
-If a regulatory agency were using the "normal return" (zero economic profit) criteria to impose a price on a monopolist with the cost and demand conditions depicted in Figure 11-1, what price would the regulators set, and what output would the monopolist produce?

Accepted Answer

A) price A and output T 
B) price B and output S 
C) price B and output R 
D) price C and output R 
A) price A and output T 
B) price B and output S 
C) price B and output R 
D) price C and output R

Question 18

Regulating natural monopolies according to the "rate of return" criterion is likely to

Accepted Answer

A) reduce the incentive of firms to minimize cost. 
B) result in a smaller quantity of output than when the natural monopolist is unregulated. 
C) discourage the firms from investing resources in an effort to influence the decisions of the regulatory agency. 
D) increase the number of firms in the industry. 
A) reduce the incentive of firms to minimize cost. 
B) result in a smaller quantity of output than when the natural monopolist is unregulated. 
C) discourage the firms from investing resources in an effort to influence the decisions of the regulatory agency. 
D) increase the number of firms in the industry.

Question 19

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

Accepted Answer

A) To sell more units, the monopolist must reduce price on all units sold. 
B) As the monopolist expands output, the average total cost will decline. 
C) The monopolist charges each consumer the highest possible price. 
D) When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
A) To sell more units, the monopolist must reduce price on all units sold. 
B) As the monopolist expands output, the average total cost will decline. 
C) The monopolist charges each consumer the highest possible price. 
D) When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

Question 20

Laws designed to prevent monopoly and promote competition are known as

Accepted Answer

A) antitrust laws. 
B) statutory amendments. 
C) fair-pricing legislation. 
D) breakup bills. 
A) antitrust laws. 
B) statutory amendments. 
C) fair-pricing legislation. 
D) breakup bills.

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

As a group, oligopolists would always earn the highest profit if they would

Breaking a monopoly firm into several rival firms will be unlikely to improve economic efficiency when economies of scale are important because

If entry-restricting legal barriers effectively organized the funeral home industry of a large city into a monopoly cartel, economic theory indicates that, compared to the previously competitive situation,

Figure 11-18 -The profit-maximizing output and price for the firm in Figure 11-18, which charges the same price to all customers, are

A profit-maximizing monopolist will continue expanding output as long as

Which of the following would increase the likelihood that firms in an industry could successfully collude?

An industry is said to be a natural monopoly when

Collusion

When members of an oligopolistic industry agree to collude, raising their product price substantially above average cost, the passage of time (months and years)

Since patent laws create monopoly power in the short run and thus provide a strong incentive for firms to undertake the risk and effort involved in the development of a technological improvement, we can expect that patent laws

Collusion among sellers will be less attractive when

Figure 11-18 -The total revenue for the firm in Figure 11-18, a monopolist that maximizes profit while charging all customers the same price, is

The prisoners' dilemma is used to illustrate the basic idea that

Which of the following is true under unregulated monopoly?

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

Figure 11-11 -According to the graph of an oligopolistic industry in Figure 11-11 (points A and C lie on the MC curve), which of the following statements is correct?

Figure 11-1 -If a regulatory agency were using the "normal return" (zero economic profit) criteria to impose a price on a monopolist with the cost and demand conditions depicted in Figure 11-1, what price would the regulators set, and what output would the monopolist produce?

Regulating natural monopolies according to the "rate of return" criterion is likely to

Which of the following best explains why the monopolist's marginal revenue is less than the sales price?

Laws designed to prevent monopoly and promote competition are known as

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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