Question 1

If a firm's average total cost is less than price where MR = MC,

Accepted Answer

A) the firm should shut down. 
B) the firm should raise its price. 
C) the firm should continue to produce the output it is producing. 
D) the firm should cut back on its output to lower its cost. 
A) the firm should shut down. 
B) the firm should raise its price. 
C) the firm should continue to produce the output it is producing. 
D) the firm should cut back on its output to lower its cost.

Question 2

Which antitrust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms?

Accepted Answer

A) the Clayton Act 
B) the Securities and Exchange Act 
C) the Sherman Act 
D) the Robinson-Patman Act 
A) the Clayton Act 
B) the Securities and Exchange Act 
C) the Sherman Act 
D) the Robinson-Patman Act

Question 3

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Accepted Answer

Patents are designed to encourage creati

Question 4

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Accepted Answer

A) to maximize profit the firm should increase output. 
B) to maximize profit the firm should decrease output. 
C) to maximize profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximize profit. 
A) to maximize profit the firm should increase output. 
B) to maximize profit the firm should decrease output. 
C) to maximize profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximize profit.

Question 5

Table 15-2
   
The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 15-2 shows the cost and demand data for this government-protected monopolist.
-Refer to Table 15-2.What is the profit-maximizing quantity and price for the monopolist?

Accepted Answer

A) Quantity = 8 cases, Price = $9 
B) Quantity = 7 cases, Price = $10 
C) Quantity = 9 cases, Price = $8 
D) Quantity = 10 cases, Price = $7 
A) Quantity = 8 cases, Price = $9 
B) Quantity = 7 cases, Price = $10 
C) Quantity = 9 cases, Price = $8 
D) Quantity = 10 cases, Price = $7

Question 6

A monopolist's profit-maximizing price and output correspond to the point on a graph

Accepted Answer

A) where average total cost is minimized. 
B) where total costs are the smallest relative to price. 
C) where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. 
D) where price is as high as possible. 
A) where average total cost is minimized. 
B) where total costs are the smallest relative to price. 
C) where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. 
D) where price is as high as possible.

Question 7

Figure 15-3
   
Figure 15-3 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit-maximizing/loss-minimizing output level?

Accepted Answer

A) 630 units 
B) 800 units 
C) 850 units 
D) 880 units 
A) 630 units 
B) 800 units 
C) 850 units 
D) 880 units

Question 8

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published, other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

Accepted Answer

A) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States. 
B) The other researchers reached conclusions different from Harberger's; namely, they found that the loss of economic efficiency due to market power is only about 1 percent of the value of production in the United States, much less than Harberger's estimate. 
C) The other researchers reached conclusions different from Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States, significantly greater than Harberger's estimate. 
D) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 1 percent of the value of production in the United States. 
A) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States. 
B) The other researchers reached conclusions different from Harberger's; namely, they found that the loss of economic efficiency due to market power is only about 1 percent of the value of production in the United States, much less than Harberger's estimate. 
C) The other researchers reached conclusions different from Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States, significantly greater than Harberger's estimate. 
D) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 1 percent of the value of production in the United States.

Question 9

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Accepted Answer

A) government antitrust laws. 
B) the pricing decisions of its suppliers. 
C) the pricing decisions of firms that produce complementary products. 
D) the actions of all other firms. 
A) government antitrust laws. 
B) the pricing decisions of its suppliers. 
C) the pricing decisions of firms that produce complementary products. 
D) the actions of all other firms.

Question 10

Using a broad definition, a firm would have a monopoly if

Accepted Answer

A) it produced a product that has no close substitutes. 
B) it does not have to collude with any other producer to earn an economic profit. 
C) there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D) it can make decisions regarding price and output without violating antitrust laws. 
A) it produced a product that has no close substitutes. 
B) it does not have to collude with any other producer to earn an economic profit. 
C) there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D) it can make decisions regarding price and output without violating antitrust laws.

Question 11

Although some economists believe network externalities are important barriers to entry, other economists disagree because

Accepted Answer

A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C) network externalities are really negative externalities. 
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale. 
A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C) network externalities are really negative externalities. 
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale.

Question 12

Economic efficiency requires that a natural monopoly's price be

Accepted Answer

A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) equal to the lowest price the firm can charge and still make a normal profit. 
A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) equal to the lowest price the firm can charge and still make a normal profit.

Question 13

In the United States, government policies with respect to monopolies and collusion are embodied in

Accepted Answer

A) the U.S. Constitution. 
B) common law, which the United States adopted from English law. 
C) the Supreme Court. 
D) antitrust laws. 
A) the U.S. Constitution. 
B) common law, which the United States adopted from English law. 
C) the Supreme Court. 
D) antitrust laws.

Question 14

The ability of a firm to charge a price greater than marginal cost is called

Accepted Answer

A) monopoly power. 
B) price-making power. 
C) cost-plus pricing. 
D) market power. 
A) monopoly power. 
B) price-making power. 
C) cost-plus pricing. 
D) market power.

Question 15

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Accepted Answer

A) True 
 B)False

Question 16

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Accepted Answer

A) True 
 B)False

Question 17

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Accepted Answer

A) the antitrust division of the Department of State and the Securities and Exchange Commission. 
B) the Federal Trade Commission and the Internal Revenue Service. 
C)  the Antitrust Division of the U.S. Department of Justice and the Council of Economic Advisors. 
D) the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice. 
A) the antitrust division of the Department of State and the Securities and Exchange Commission. 
B) the Federal Trade Commission and the Internal Revenue Service. 
C)  the Antitrust Division of the U.S. Department of Justice and the Council of Economic Advisors. 
D) the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice.

Question 18

Figure 15-15
   
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

Accepted Answer

A)  Q₄, P₁ 
B) Q₃, P₂ 
C) Q₂, P₂ 
D) Q₂, P₃ 
A)  Q₄, P₁ 
B) Q₃, P₂ 
C) Q₂, P₂ 
D) Q₂, P₃

Question 19

A horizontal merger

Accepted Answer

A) is a merger between firms in the same industry. 
B) results in a trust (for example, the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914. 
A) is a merger between firms in the same industry. 
B) results in a trust (for example, the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.

Question 20

Long-run economic profits would most likely exist in which market structure?

Accepted Answer

A) monopoly, monopolistic competition, and oligopoly 
B) monopoly and oligopoly 
C) monopoly and monopolistic competition 
D) monopoly only 
A) monopoly, monopolistic competition, and oligopoly 
B) monopoly and oligopoly 
C) monopoly and monopolistic competition 
D) monopoly only

If a firm's average total cost is less than price where MR = MC,

Which antitrust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms?

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

A monopolist's profit-maximizing price and output correspond to the point on a graph

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit-maximizing/loss-minimizing output level?

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published, other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Using a broad definition, a firm would have a monopoly if

Although some economists believe network externalities are important barriers to entry, other economists disagree because

Economic efficiency requires that a natural monopoly's price be

In the United States, government policies with respect to monopolies and collusion are embodied in

The ability of a firm to charge a price greater than marginal cost is called

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

A horizontal merger

Long-run economic profits would most likely exist in which market structure?

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

If a firm's average total cost is less than price where MR = MC,

Which antitrust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms?

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

A monopolist's profit-maximizing price and output correspond to the point on a graph

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit-maximizing/loss-minimizing output level?

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published, other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Using a broad definition, a firm would have a monopoly if

Although some economists believe network externalities are important barriers to entry, other economists disagree because

Economic efficiency requires that a natural monopoly's price be

In the United States, government policies with respect to monopolies and collusion are embodied in

The ability of a firm to charge a price greater than marginal cost is called

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

A horizontal merger

Long-run economic profits would most likely exist in which market structure?

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