Question 1

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

Figure 15-16
   
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Accepted Answer

A) This results in a misallocation of resources. 
B) The marginal cost of producing the last unit sold exceeds the marginal benefit. 
C) The firm will sustain persistent losses and will not continue in business in the long run. 
D) The firm will break even. 
A) This results in a misallocation of resources. 
B) The marginal cost of producing the last unit sold exceeds the marginal benefit. 
C) The firm will sustain persistent losses and will not continue in business in the long run. 
D) The firm will break even.

Question 3

Figure 15-5
  
-Refer to Figure 15-5.If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Accepted Answer

A) continue to produce because price is greater than average variable cost. 
B) shut down because price is greater than marginal cost. 
C) shut down because price is less than average total cost. 
D) continue to produce because a monopolist always earns a profit. 
A) continue to produce because price is greater than average variable cost. 
B) shut down because price is greater than marginal cost. 
C) shut down because price is less than average total cost. 
D) continue to produce because a monopolist always earns a profit.

Question 4

When the government makes a firm the exclusive legal provider of a good or service, it grants the firm

Accepted Answer

A) a copyright. 
B) a network externality. 
C) a quota. 
D) a public franchise. 
A) a copyright. 
B) a network externality. 
C) a quota. 
D) a public franchise.

Question 5

For which of the following firms is patent protection of vital importance?

Accepted Answer

A) furniture producers 
B) software firms 
C) pharmaceutical firms 
D) auto makers 
A) furniture producers 
B) software firms 
C) pharmaceutical firms 
D) auto makers

Question 6

A monopoly is a firm that is the only seller of a good or service that does not have

Accepted Answer

A) a patent. 
B) a close complement. 
C) a barrier to entry. 
D) a close substitute. 
A) a patent. 
B) a close complement. 
C) a barrier to entry. 
D) a close substitute.

Question 7

Equilibrium in a perfectly competitive market results in the greatest amount of economic surplus, or total benefit to society, from the production of a good.Why, then, did Joseph Schumpeter argue that an economy may benefit more from firms that have market power than from firms that are perfectly competitive?

Accepted Answer

Schumpeter did not deny that perfectly c

Question 8

A patent

Accepted Answer

A) grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B) grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C) gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D) gives a firm the exclusive right to a new product during the product inventor's lifetime. 
A) grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B) grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C) gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D) gives a firm the exclusive right to a new product during the product inventor's lifetime.

Question 9

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 the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Accepted Answer

A) $124 
B) $42 
C) $36 
D) $12 
A) $124 
B) $42 
C) $36 
D) $12

Question 10

Figure 15-2
   
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.To maximize profit, the firm will produce at output level

Accepted Answer

A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄. 
A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄.

Question 11

After having a monopoly in the diamond market for many years, by 2000 the De Beers company faced competition from other companies.To maintain its market share, De Beers

Accepted Answer

A) began buying so-called "blood diamonds" in order to keep these diamonds out of the control of other diamond companies. 
B) adopted a strategy of differentiating its diamonds. Each of its diamonds is now marked with a microscopic brand. 
C) bought diamond mines in Canada and Russia that had been its competitors. 
D) lowered the prices of its diamonds to make the market appear less profitable to potential competitors. 
A) began buying so-called "blood diamonds" in order to keep these diamonds out of the control of other diamond companies. 
B) adopted a strategy of differentiating its diamonds. Each of its diamonds is now marked with a microscopic brand. 
C) bought diamond mines in Canada and Russia that had been its competitors. 
D) lowered the prices of its diamonds to make the market appear less profitable to potential competitors.

Question 12

The United States Post Office

Accepted Answer

A) faces no competition for its mail services. 
B) has a monopoly in the provision of first-class mail service. 
C) can safely ignore the prices for mail services charged by its rivals such as FedEx and UPS. 
D) is an example of a monopoly that results from the ownership of a key resource: first class mail service. 
A) faces no competition for its mail services. 
B) has a monopoly in the provision of first-class mail service. 
C) can safely ignore the prices for mail services charged by its rivals such as FedEx and UPS. 
D) is an example of a monopoly that results from the ownership of a key resource: first class mail service.

Question 13

Figure 15-17
   
Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not.The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 15-17.An economics professor argues: "I think the course should be priced so as to achieve economic efficiency." How much profit (or loss)will the college make on the course if it charges this price?

Accepted Answer

A) -$2,592,000 
B) -$1,080,000 
C) $0 
D) $450,000 
A) -$2,592,000 
B) -$1,080,000 
C) $0 
D) $450,000

Question 14

Figure 15-12
   
Figure 15-12 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-12.What is the amount of consumer surplus if, instead of monopoly, the industry was organized as a perfectly competitive industry?

Accepted Answer

A) $21 
B) $124 
C) $186 
D) $332 
A) $21 
B) $124 
C) $186 
D) $332

Question 15

Few firms in the United States are monopolies because

Accepted Answer

A) few firms experience economies of scale. 
B) of antitrust laws. 
C) when a firm earns profits, other firms will enter its market. 
D) most products that firms produce have substitutes. 
A) few firms experience economies of scale. 
B) of antitrust laws. 
C) when a firm earns profits, other firms will enter its market. 
D) most products that firms produce have substitutes.

Question 16

Some economists believe that the economy benefits from firms having market power.Which of the following is an argument that has been made to support this position?

Accepted Answer

A) Large firms are better able than small firms to spend funds on research and development required to develop new products. 
B) Competition is very rare in the U.S. economy and few new products are produced by smaller, competitive firms. 
C) Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. 
D) Large firms can afford to lobby the U.S. government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries. 
A) Large firms are better able than small firms to spend funds on research and development required to develop new products. 
B) Competition is very rare in the U.S. economy and few new products are produced by smaller, competitive firms. 
C) Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. 
D) Large firms can afford to lobby the U.S. government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries.

Question 17

Figure 15-9
   
Figure 15-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-9.What is the difference between the monopoly's price and perfectly competitive industry's price?

Accepted Answer

A) The monopoly's price is higher by $9.50. 
B) The monopoly's price is higher by $13. 
C) The monopoly's price is higher by $3.50. 
D) The monopoly's price is higher by $21. 
A) The monopoly's price is higher by $9.50. 
B) The monopoly's price is higher by $13. 
C) The monopoly's price is higher by $3.50. 
D) The monopoly's price is higher by $21.

Question 18

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

Accepted Answer

A) True 
 B)False

Question 19

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 amount of profit that the firm earns?

Accepted Answer

A) $34.50 
B) $42 
C) $47 
D) $49 
A) $34.50 
B) $42 
C) $47 
D) $49

Question 20

A monopoly differs from monopolistic competition in that

Accepted Answer

A) a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B) a monopoly can never make a loss but a firm in monopolistic competition can. 
C) in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. 
D) a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve. 
A) a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B) a monopoly can never make a loss but a firm in monopolistic competition can. 
C) in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. 
D) a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Figure 15-5 -Refer to Figure 15-5.If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

When the government makes a firm the exclusive legal provider of a good or service, it grants the firm

For which of the following firms is patent protection of vital importance?

A monopoly is a firm that is the only seller of a good or service that does not have

A patent

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 the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.To maximize profit, the firm will produce at output level

After having a monopoly in the diamond market for many years, by 2000 the De Beers company faced competition from other companies.To maintain its market share, De Beers

The United States Post Office

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12.What is the amount of consumer surplus if, instead of monopoly, the industry was organized as a perfectly competitive industry?

Few firms in the United States are monopolies because

Some economists believe that the economy benefits from firms having market power.Which of the following is an argument that has been made to support this position?

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the difference between the monopoly's price and perfectly competitive industry's price?

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

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 amount of profit that the firm earns?

A monopoly differs from monopolistic competition in that

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

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Figure 15-5 -Refer to Figure 15-5.If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

When the government makes a firm the exclusive legal provider of a good or service, it grants the firm

For which of the following firms is patent protection of vital importance?

A monopoly is a firm that is the only seller of a good or service that does not have

A patent

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 the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.To maximize profit, the firm will produce at output level

After having a monopoly in the diamond market for many years, by 2000 the De Beers company faced competition from other companies.To maintain its market share, De Beers

The United States Post Office

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12.What is the amount of consumer surplus if, instead of monopoly, the industry was organized as a perfectly competitive industry?

Few firms in the United States are monopolies because

Some economists believe that the economy benefits from firms having market power.Which of the following is an argument that has been made to support this position?

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the difference between the monopoly's price and perfectly competitive industry's price?

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

A monopoly differs from monopolistic competition in that

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