Question 1

A natural monopoly is most likely to occur in which of the following industries?

Accepted Answer

A) the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years 
B) the diamond mining and marketing industry because one firm can control a key resource 
C) the software industry because of the importance of network externalities 
D) an industry where fixed costs are very large relative to variable costs 
A) the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years 
B) the diamond mining and marketing industry because one firm can control a key resource 
C) the software industry because of the importance of network externalities 
D) an industry where fixed costs are very large relative to variable costs

Question 2

Figure 15-2
   
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.The firm's profit-maximizing price is

Accepted Answer

A) P₁. 
B) P₂. 
C) P₃. 
D) P₄. 
A) P₁. 
B) P₂. 
C) P₃. 
D) P₄.

Question 3

Economic efficiency in a free market occurs when

Accepted Answer

A) consumer surplus is maximized. 
B) producer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) price is as low as possible. 
A) consumer surplus is maximized. 
B) producer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) price is as low as possible.

Question 4

Identify two ways by which the government controls monopolies?

Accepted Answer

The government control monopol

Question 5

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

Accepted Answer

A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good. 
B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good. 
C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good. 
D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good. 
A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good. 
B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good. 
C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good. 
D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good.

Question 6

A United States government patent lasts

Accepted Answer

A) forever. 
B) 50 years. 
C) 20 years. 
D) 7 years. 
A) forever. 
B) 50 years. 
C) 20 years. 
D) 7 years.

Question 7

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

Accepted Answer

A) Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. 
B) Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized. 
C) Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price takers. Under monopoly conditions, economic surplus is equal to producer surplus. 
D) Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss. 
A) Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. 
B) Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized. 
C) Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price takers. Under monopoly conditions, economic surplus is equal to producer surplus. 
D) Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss.

Question 8

A merger between the Ford Motor Company and General Motors would be an example of a

Accepted Answer

A) vertical merger. 
B) horizontal merger. 
C) conglomerate merger. 
D) trust. 
A) vertical merger. 
B) horizontal merger. 
C) conglomerate merger. 
D) trust.

Question 9

Figure 15-4
   
Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is the price charged for the profit-maximizing output level?

Accepted Answer

A) $13 
B) $21 
C) $27 
D) $34 
A) $13 
B) $21 
C) $27 
D) $34

Question 10

Figure 15-6
   
Figure 15-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-6.The monopolist's total cost is

Accepted Answer

A) $1,116. 
B) $1,240. 
C) $1,660. 
D) $1,726.40. 
A) $1,116. 
B) $1,240. 
C) $1,660. 
D) $1,726.40.

Question 11

A virtuous cycle occurs

Accepted Answer

A) when lobbyists petition members of Congress to grant a public franchise; the lobbyist then raise money for those Congress members who granted the franchise. 
B) when monopoly profits are used to create new products for additional monopoly profits. 
C) when a firm can attract enough buyers initially to increase a product's usefulness to attract even more buyers. 
D) when a firm's sales volume reaches a level where the firm can take advantage of economies of scale; thereby reducing the price of the product to further boost its sales. 
A) when lobbyists petition members of Congress to grant a public franchise; the lobbyist then raise money for those Congress members who granted the franchise. 
B) when monopoly profits are used to create new products for additional monopoly profits. 
C) when a firm can attract enough buyers initially to increase a product's usefulness to attract even more buyers. 
D) when a firm's sales volume reaches a level where the firm can take advantage of economies of scale; thereby reducing the price of the product to further boost its sales.

Question 12

When the government wants to give an exclusive right to one firm to produce a product, it

Accepted Answer

A) imposes a tariff on imports of the product. 
B) imposes a quota on imports of the product. 
C) grants a patent or copyright to an individual or firm. 
D) uses antitrust laws to keep other firms from entering the market. 
A) imposes a tariff on imports of the product. 
B) imposes a quota on imports of the product. 
C) grants a patent or copyright to an individual or firm. 
D) uses antitrust laws to keep other firms from entering the market.

Question 13

Figure 15-16
   
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Accepted Answer

A) Q₀ units; P₀ 
B) Q₂ units; P₂ 
C) Q₁ units; P₄ 
D) Q₃ units; P₃ 
A) Q₀ units; P₀ 
B) Q₂ units; P₂ 
C) Q₁ units; P₄ 
D) Q₃ units; P₃

Question 14

A monopoly firm is the only seller of a good or service that

Accepted Answer

A) has a perfectly elastic demand. 
B) has no close complements. 
C) does not need to be advertised. 
D) does not have a close substitute. 
A) has a perfectly elastic demand. 
B) has no close complements. 
C) does not need to be advertised. 
D) does not have a close substitute.

Question 15

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Accepted Answer

A) True 
 B)False

Question 16

A monopoly is a seller of a product

Accepted Answer

A) with many substitutes. 
B)  without a close substitute. 
C) with a perfectly inelastic demand. 
D) without a well-defined demand curve. 
A) with many substitutes. 
B)  without a close substitute. 
C) with a perfectly inelastic demand. 
D) without a well-defined demand curve.

Question 17

Which of the following statements is consistent with the views of Joseph Schumpeter?

Accepted Answer

A) Research and development by competitive firms is responsible for most technological changes. 
B) An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. 
C) Enforcement of antitrust laws is necessary to promote competition among firms. 
D) A lack of competition discourages firms from developing new technologies. 
A) Research and development by competitive firms is responsible for most technological changes. 
B) An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. 
C) Enforcement of antitrust laws is necessary to promote competition among firms. 
D) A lack of competition discourages firms from developing new technologies.

Question 18

Governments grant patents to encourage

Accepted Answer

A) research and development on new products. 
B) competition. 
C) low prices. 
D) firms to form public enterprises. 
A) research and development on new products. 
B) competition. 
C) low prices. 
D) firms to form public enterprises.

Question 19

Ordinarily, governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Accepted Answer

A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favors to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities. 
A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favors to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities.

Question 20

Table 15-4
   
Shakti Inc.has been granted a patent for its Arnica toothache balm.Table 15-4 shows the demand and the total cost schedule for the firm.
-Refer to Table 15-4.What is Shakti's profit-maximizing output?

Accepted Answer

A) 4 units 
B) 5 units 
C) 6 units 
D) 7 units 
A) 4 units 
B) 5 units 
C) 6 units 
D) 7 units

A natural monopoly is most likely to occur in which of the following industries?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.The firm's profit-maximizing price is

Economic efficiency in a free market occurs when

Identify two ways by which the government controls monopolies?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

A United States government patent lasts

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

A merger between the Ford Motor Company and General Motors would be an example of a

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the price charged for the profit-maximizing output level?

Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist's total cost is

A virtuous cycle occurs

When the government wants to give an exclusive right to one firm to produce a product, it

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.In the absence of any government regulation, the profit-maximizing owners of this firm will produce units and charge a price of .

A monopoly firm is the only seller of a good or service that

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

A monopoly is a seller of a product

Which of the following statements is consistent with the views of Joseph Schumpeter?

Governments grant patents to encourage

Ordinarily, governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Table 15-4 Shakti Inc.has been granted a patent for its Arnica toothache balm.Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is Shakti's profit-maximizing output?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 15: Monopoly and Antitrust Policy

A natural monopoly is most likely to occur in which of the following industries?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.The firm's profit-maximizing price is

Economic efficiency in a free market occurs when

Identify two ways by which the government controls monopolies?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

A United States government patent lasts

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

A merger between the Ford Motor Company and General Motors would be an example of a

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the price charged for the profit-maximizing output level?

Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist's total cost is

A virtuous cycle occurs

When the government wants to give an exclusive right to one firm to produce a product, it

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

A monopoly firm is the only seller of a good or service that

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

A monopoly is a seller of a product

Which of the following statements is consistent with the views of Joseph Schumpeter?

Governments grant patents to encourage

Ordinarily, governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Table 15-4 Shakti Inc.has been granted a patent for its Arnica toothache balm.Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is Shakti's profit-maximizing output?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.In the absence of any government regulation, the profit-maximizing owners of this firm will produce units and charge a price of .