Question 1

If the market for a product begins as perfectly competitive and then becomes a monopoly, there will be a reduction in economic efficiency and a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 2

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.

Accepted Answer

A) True 
 B)False

Question 3

Figure 15-1
  
-Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

Accepted Answer

A) The fact that this firm is a natural monopoly is shown by the long-run average total cost curve still falling when it crosses the demand curve. 
B) The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits. 
A) The fact that this firm is a natural monopoly is shown by the long-run average total cost curve still falling when it crosses the demand curve. 
B) The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits.

Question 4

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

Accepted Answer

A) $1,116. 
B) $1,488. 
C) $1,726.40 
D) $1,826. 
A) $1,116. 
B) $1,488. 
C) $1,726.40 
D) $1,826.

Question 5

The only firms that do not have market power are

Accepted Answer

A) firms in industries with low barriers to entry. 
B) firms that do not advertise their products. 
C) firms in perfectly competitive markets. 
D) firms that sell identical products. 
A) firms in industries with low barriers to entry. 
B) firms that do not advertise their products. 
C) firms in perfectly competitive markets. 
D) firms that sell identical products.

Question 6

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

Accepted Answer

A) True 
 B)False

Question 7

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Accepted Answer

A) True 
 B)False

Question 8

Figure 15-3
   
Figure 15-3 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-3.What happens to the monopolist represented in the diagram in the long run?

Accepted Answer

A) It will raise its price at least until it breaks even. 
B) If the cost and demand curves remain the same, it will exit the market. 
C) The government will subsidize the monopoly to enable it to break even. 
D) It will be forced out of business by more efficient producers. 
A) It will raise its price at least until it breaks even. 
B) If the cost and demand curves remain the same, it will exit the market. 
C) The government will subsidize the monopoly to enable it to break even. 
D) It will be forced out of business by more efficient producers.

Question 9

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Accepted Answer

A) network externalities 
B) public franchise 
C) economies of scale 
D) control of a key resource 
A) network externalities 
B) public franchise 
C) economies of scale 
D) control of a key resource

Question 10

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Accepted Answer

A) True 
 B)False

Question 11

Figure 15-12
   
Figure 15-12 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-12.If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area

Accepted Answer

A) ABF. 
B) ABEG. 
C) ACE. 
D) EFG. 
A) ABF. 
B) ABEG. 
C) ACE. 
D) EFG.

Question 12

Figure 15-2
   
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.If the firm's average total cost curve is ATC₂, the firm will

Accepted Answer

A) suffer a loss. 
B) break even. 
C) make a profit. 
D) face competition. 
A) suffer a loss. 
B) break even. 
C) make a profit. 
D) face competition.

Question 13

Figure 15-16
   
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit-maximizing owners.If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged?

Accepted Answer

A) Q₄ units; P₆ 
B) Q₁ units; P₄ 
C) Q₁ units; P₁ 
D) Q₃ units; P₃ 
A) Q₄ units; P₆ 
B) Q₁ units; P₄ 
C) Q₁ units; P₁ 
D) Q₃ units; P₃

Question 14

Figure 15-15
   
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.The profit-maximizing price is

Accepted Answer

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

Question 15

The demand curve for a monopoly's product is

Accepted Answer

A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined. 
A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined.

Question 16

Consider two industries, industry W and industry X.In industry W there are five companies, each with a market share of 20% of total sales.In industry X, there are six companies.One company has a 50% market share and each of the other five firms has a market share of 10%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

a.The concentration ratio in industry W

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 economically efficient output level?

Accepted Answer

A) 600 units 
B) 800 units 
C) 940 units 
D) 1160 units 
A) 600 units 
B) 800 units 
C) 940 units 
D) 1160 units

Question 18

Figure 15-8
   
Figure 15-8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time.
-Refer to Figure 15-8.Use the figure above to answer the following questions.
a.Identify the curves labeled A and B.Identify the curve which contains both point Y and point Z.Identify the curve which contains both point V and point W.
b.What is the profit-maximizing quantity and what price will the monopolist charge?
c.What area represents total revenue at the profit-maximizing output level?
d.What area represents total cost at the profit-maximizing output level?
e.What area represents profit?
f.What is the profit per unit (average profit)at the profit-maximizing output level?
g.If this industry was organized as a perfectly competitive industry, what would be the profit-maximizing price and quantity?
h.What area represents the deadweight loss as a result of a monopoly?

Accepted Answer

a.A = Demand curve; B = Marginal revenue

Question 19

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

Accepted Answer

A) control of a key resource 
B) network externalities 
C) entry blocked by government action 
D) economies of scale creating a natural monopoly 
A) control of a key resource 
B) network externalities 
C) entry blocked by government action 
D) economies of scale creating a natural monopoly

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 the economically efficient output level?

Accepted Answer

A) 5 units 
B) 6 units 
C) 7 units 
D) 8 units 
A) 5 units 
B) 6 units 
C) 7 units 
D) 8 units

If the market for a product begins as perfectly competitive and then becomes a monopoly, there will be a reduction in economic efficiency and a deadweight loss.

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.

Figure 15-1 -Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

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

The only firms that do not have market power are

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.What happens to the monopolist represented in the diagram in the long run?

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12.If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.If the firm's average total cost curve is ATC₂, the firm will

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.The profit-maximizing price is

The demand curve for a monopoly's product is

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the economically efficient output level?

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

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 economically efficient output level?

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 the market for a product begins as perfectly competitive and then becomes a monopoly, there will be a reduction in economic efficiency and a deadweight loss.

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.

Figure 15-1 -Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

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

The only firms that do not have market power are

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.What happens to the monopolist represented in the diagram in the long run?

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12.If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.If the firm's average total cost curve is ATC₂, the firm will

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.The profit-maximizing price is

The demand curve for a monopoly's product is

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the economically efficient output level?

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?

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 economically efficient output level?

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