Question 1

Figure 11-20
  
-The production level that will maximize the profit for the monopoly in Figure 11-20 is

Accepted Answer

A) 0 
B) 22 
C) 17 
D) 12 
E) more than 22 
A) 0 
B) 22 
C) 17 
D) 12 
E) more than 22

Question 2

Being a monopolist in the market

Accepted Answer

A) guarantees a positive short-run profit. 
B) guarantees a positive long-run profit. 
C) does not invalidate the profit-maximization rule to produce where MR = MC. 
D) All of the above are correct. 
A) guarantees a positive short-run profit. 
B) guarantees a positive long-run profit. 
C) does not invalidate the profit-maximization rule to produce where MR = MC. 
D) All of the above are correct.

Question 3

A market situation where a small number of sellers compose the entire industry is called

Accepted Answer

A) monopolistic competition. 
B) monopsony. 
C) monopoly. 
D) oligopoly. 
A) monopolistic competition. 
B) monopsony. 
C) monopoly. 
D) oligopoly.

Question 4

Other things constant, production of an identical product in an oligopolistic industry

Accepted Answer

A) makes it likely that a cartel will disintegrate. 
B) makes secret price cuts easier to detect. 
C) makes collusion more difficult. 
D) causes irrational pricing policies in the long run. 
A) makes it likely that a cartel will disintegrate. 
B) makes secret price cuts easier to detect. 
C) makes collusion more difficult. 
D) causes irrational pricing policies in the long run.

Question 5

In markets characterized by oligopoly,

Accepted Answer

A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B) collusive agreements will always prevail. 
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. 
A) the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B) collusive agreements will always prevail. 
C) collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D) pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

Question 6

New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that

Accepted Answer

A) cab fares will be lower. 
B) cab fares will be higher. 
C) the cost of operating a taxicab will be lower. 
D) subway fares will decrease. 
A) cab fares will be lower. 
B) cab fares will be higher. 
C) the cost of operating a taxicab will be lower. 
D) subway fares will decrease.

Question 7

Which of the following are illegal under the antitrust laws of the United States?

Accepted Answer

A) charging prices that exceed average total costs 
B) charging some consumers different prices than others 
C) mergers that unnecessarily create excessively large firms 
D) collusive behavior or other actions designed to create a monopoly or cartel 
A) charging prices that exceed average total costs 
B) charging some consumers different prices than others 
C) mergers that unnecessarily create excessively large firms 
D) collusive behavior or other actions designed to create a monopoly or cartel

Question 8

An organization of sellers designed to coordinate their supply decisions to maximize joint profits is called a

Accepted Answer

A) consumer cooperative. 
B) marketing association. 
C) regulatory agency. 
D) cartel. 
A) consumer cooperative. 
B) marketing association. 
C) regulatory agency. 
D) cartel.

Question 9

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

Accepted Answer

A) price-taker firms 
B) pure monopoly 
C) price searchers with low entry barriers 
D) oligopoly 
A) price-taker firms 
B) pure monopoly 
C) price searchers with low entry barriers 
D) oligopoly

Question 10

Economists generally criticize high barriers to market entry because

Accepted Answer

A) the ability of consumers to discipline producers is weakened. 
B) unregulated monopolists and oligopolists can often gain by increasing output and raising price. 
C) legal barriers to entry will encourage firms to "invest" resources in developing highly desired products that consumers are willing to pay more for. 
D) entry barriers are popular with consumers but not businesses. 
A) the ability of consumers to discipline producers is weakened. 
B) unregulated monopolists and oligopolists can often gain by increasing output and raising price. 
C) legal barriers to entry will encourage firms to "invest" resources in developing highly desired products that consumers are willing to pay more for. 
D) entry barriers are popular with consumers but not businesses.

Question 11

Which of the following is true of a monopolist's demand curve?

Accepted Answer

A) It is perfectly elastic. 
B) It is perfectly inelastic. 
C) It indicates that the monopolist will be able to sell more units at a higher price. 
D) It is identical with the industry demand curve for the product. 
A) It is perfectly elastic. 
B) It is perfectly inelastic. 
C) It indicates that the monopolist will be able to sell more units at a higher price. 
D) It is identical with the industry demand curve for the product.

Question 12

An expansion in the number of plumbers in a local area has resulted in lower profits. The local plumbing contractors have called a meeting to discuss ways to improve their long-run profitability. Of the four plans being discussed seriously, which would most likely increase their long-run profits?

Accepted Answer

A) passage of legislation requiring new contractors to be licensed, which would require passing a stiff licensing exam and paying a $5,000 fee 
B) an "off-the-record" agreement that each plumbing contractor would increase his or her prices by an average of 7 percent 
C) passage of legislation requiring the local government to share the cost of installing all private sewage systems 
D) repeal of the current tax on installations of plumbing units 
A) passage of legislation requiring new contractors to be licensed, which would require passing a stiff licensing exam and paying a $5,000 fee 
B) an "off-the-record" agreement that each plumbing contractor would increase his or her prices by an average of 7 percent 
C) passage of legislation requiring the local government to share the cost of installing all private sewage systems 
D) repeal of the current tax on installations of plumbing units

Question 13

Monopolists are criticized because they are inefficient. What is meant by this statement?

Accepted Answer

A) Monopolists charge too high a price. 
B) Monopolists don't innovate enough to control pollution. 
C) Monopolists produce a large quantity of waste. 
D) Monopolists usually don't produce at the minimum of the ATC. 
E) Monopolists could use their resources better elsewhere. 
A) Monopolists charge too high a price. 
B) Monopolists don't innovate enough to control pollution. 
C) Monopolists produce a large quantity of waste. 
D) Monopolists usually don't produce at the minimum of the ATC. 
E) Monopolists could use their resources better elsewhere.

Question 14

Figure 11-21
  
-In Figure 11-21, the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level, as it would be in an unregulated monopoly, is shown by area

Accepted Answer

A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd 
A) abc 
B) adf 
C) cef 
D) dfeg 
E) bcfd

Question 15

Figure 11-17
  
-Refer to Figure 11-17. If the monopoly firm is currently producing Q₃ units of output, then a decrease in output will necessarily cause profit to

Accepted Answer

A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q₂. 
D) increase as long as the new level of output is at least Q₁. 
A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q₂. 
D) increase as long as the new level of output is at least Q₁.

Question 16

If a local ready-mix cement company is the only producer of cement in the local market, the monopoly power of the firm will

Accepted Answer

A) be small if entry barriers into the local market are high. 
B) depend on how many other sellers of similar products there are in the national market. 
C) be total since there are not any other sellers of the same product in the local market. 
D) be minimal if the entry barriers restricting competition from other firms are low. 
A) be small if entry barriers into the local market are high. 
B) depend on how many other sellers of similar products there are in the national market. 
C) be total since there are not any other sellers of the same product in the local market. 
D) be minimal if the entry barriers restricting competition from other firms are low.

Question 17

Figure 11-5
  
-Indicate the maximum profit (or minimum loss) a pure monopolist with the cost and demand conditions depicted in Figure 11-5 would be able to achieve.

Accepted Answer

A) profit of AIHE 
B) profit of BKJC 
C) losses of BKJC 
D) losses of EHGF 
A) profit of AIHE 
B) profit of BKJC 
C) losses of BKJC 
D) losses of EHGF

Question 18

Figure 11-7
  
-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 11-7?

Accepted Answer

A) price, $7; quantity produced, 100 
B) price, $10; quantity produced, 170 
C) price, $14; quantity produced, 100 
D) price, $7; quantity produced, 200 
A) price, $7; quantity produced, 100 
B) price, $10; quantity produced, 170 
C) price, $14; quantity produced, 100 
D) price, $7; quantity produced, 200

Question 19

Which one of the following factors reduces the likelihood that a cartel agreement will lead to higher producer profit?

Accepted Answer

A) significant barriers to entry into the cartelized market 
B) the development of substitutes for the good produced by the cartel 
C) government restrictions that limit competition from new rivals 
D) a small number of sellers involved in the cartel agreement 
A) significant barriers to entry into the cartelized market 
B) the development of substitutes for the good produced by the cartel 
C) government restrictions that limit competition from new rivals 
D) a small number of sellers involved in the cartel agreement

Question 20

When entry barriers into a market are high,

Accepted Answer

A) a monopolist will always be able to make an economic profit. 
B) rival firms will enter and drive price down to the level of per-unit costs if the firms in the market are making economic profit. 
C) entry into the market will not take place, at least not quickly, even if the firms currently in the market are making economic profits. 
D) the producers in the market will have little or no incentive to produce efficiently (at a low cost). 
A) a monopolist will always be able to make an economic profit. 
B) rival firms will enter and drive price down to the level of per-unit costs if the firms in the market are making economic profit. 
C) entry into the market will not take place, at least not quickly, even if the firms currently in the market are making economic profits. 
D) the producers in the market will have little or no incentive to produce efficiently (at a low cost).

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

Figure 11-20 -The production level that will maximize the profit for the monopoly in Figure 11-20 is

Being a monopolist in the market

A market situation where a small number of sellers compose the entire industry is called

Other things constant, production of an identical product in an oligopolistic industry

In markets characterized by oligopoly,

New York City limits the number of taxi cabs that can legally operate in the city. The most likely result of this practice is that

Which of the following are illegal under the antitrust laws of the United States?

An organization of sellers designed to coordinate their supply decisions to maximize joint profits is called a

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

Economists generally criticize high barriers to market entry because

Which of the following is true of a monopolist's demand curve?

An expansion in the number of plumbers in a local area has resulted in lower profits. The local plumbing contractors have called a meeting to discuss ways to improve their long-run profitability. Of the four plans being discussed seriously, which would most likely increase their long-run profits?

Monopolists are criticized because they are inefficient. What is meant by this statement?

Figure 11-21 -In Figure 11-21, the increase in consumer surplus that occurs when price is set equal to marginal cost rather than at the profit-maximizing level, as it would be in an unregulated monopoly, is shown by area

Figure 11-17 -Refer to Figure 11-17. If the monopoly firm is currently producing Q₃ units of output, then a decrease in output will necessarily cause profit to

If a local ready-mix cement company is the only producer of cement in the local market, the monopoly power of the firm will

Figure 11-5 -Indicate the maximum profit (or minimum loss) a pure monopolist with the cost and demand conditions depicted in Figure 11-5 would be able to achieve.

Figure 11-7 -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 11-7?

Which one of the following factors reduces the likelihood that a cartel agreement will lead to higher producer profit?

When entry barriers into a market are high,

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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