Question 1

Figure 10-10
  
-Refer to Figure 10-10.What is the area that represents consumer surplus under a monopoly?

Accepted Answer

A)  the triangle P₀P₁F 
B)  the triangle P₀P₂E 
C)  the area P₁P₂EF 
D)  the rectangle P₁P₃HF 
A)  the triangle P₀P₁F 
B)  the triangle P₀P₂E 
C)  the area P₁P₂EF 
D)  the rectangle P₁P₃HF A

Question 2

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. D

Question 3

Table 10-4
 $\begin{array}{|c|c|c|}
\hline \begin{array}{c}
\text { Price per } \
\text { Dose }
\end{array} & \begin{array}{c}
\text { Quantity Demanded } \
\text { (dose) }
\end{array} & \begin{array}{c}
\text { Total Cost of } \
\text { Production } \
\text { (dollars) }
\end{array} \
\hline \$ 80 & 0 & \$ 80 \
\hline 72 & 1 & 82 \
\hline 64 & 2 & 88 \
\hline 56 & 3 & 100 \
\hline 48 & 4 & 124 \
\hline 40 & 5 & 164 \
\hline 32 & 6 & 208 \
\hline 24 & 7 & 268 \
\hline 16 & 8 & 340 \
\hline
\end{array}$ Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 10-4 shows the demand and the total cost schedule for the firm.
-Refer to Table 10-4.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 A

Question 4

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: Is it true or false? Explain your answer.

Accepted Answer

The statement is false.The monopolist ca

Question 5

The Sherman Act prohibited

Accepted Answer

A)  marginal cost pricing. 
B)  setting price above marginal cost. 
C)  collusive price agreements among rival sellers. 
D)  selling below average total cost. 
A)  marginal cost pricing. 
B)  setting price above marginal cost. 
C)  collusive price agreements among rival sellers. 
D)  selling below average total cost.

Question 6

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

Accepted Answer

A)  it was a public enterprise. 
B)  it had a patent on the manufacture of aluminum. 
C)  the company had a secret technique for making aluminum from bauxite. 
D)  it had control of almost all the available supply of bauxite. 
A)  it was a public enterprise. 
B)  it had a patent on the manufacture of aluminum. 
C)  the company had a secret technique for making aluminum from bauxite. 
D)  it had control of almost all the available supply of bauxite.

Question 7

The demand curve for a monopoly firm

Accepted Answer

A)  is perfectly inelastic. 
B)  lies below its marginal revenue curve. 
C)  is the same as the market demand curve. 
D)  is horizontal. 
A)  is perfectly inelastic. 
B)  lies below its marginal revenue curve. 
C)  is the same as the market demand curve. 
D)  is horizontal.

Question 8

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 9

A profit maximizing monopoly's price is

Accepted Answer

A)  the same as the price that would prevail if the industry was perfectly competitive. 
B)  less than the price that would prevail if the industry was perfectly competitive. 
C)  greater than the price that would prevail if the industry was perfectly competitive. 
D)  not consistently related to price that would prevail if the market was perfectly competitive. 
A)  the same as the price that would prevail if the industry was perfectly competitive. 
B)  less than the price that would prevail if the industry was perfectly competitive. 
C)  greater than the price that would prevail if the industry was perfectly competitive. 
D)  not consistently related to price that would prevail if the market was perfectly competitive.

Question 10

A monopoly is defined as a firm that has the largest market share in an industry.

Accepted Answer

A) True 
 B)False

Question 11

Producers in perfect competition receive a smaller producer surplus than a producer in a monopoly.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Figure 10-17
   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 10-17.The faculty member who designed the course argues: "I think the course should be priced so that the maximum number of students enroll." Which price should this faculty member favor?

Accepted Answer

A)  $0 
B)  $40 
C)  $88 
D)  $150 
A)  $0 
B)  $40 
C)  $88 
D)  $150

Question 14

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 15

What is the difference between a public franchise and a public enterprise?

Accepted Answer

A)  A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government. 
B)  A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government. 
C)  A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government. 
D)  Both refer to a service provided directly to consumers through the government, but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries. 
A)  A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government. 
B)  A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government. 
C)  A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government. 
D)  Both refer to a service provided directly to consumers through the government, but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries.

Question 16

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 17

a.What is the difference between a horizontal merger and a vertical merger?
b.Which type of merger,horizontal or vertical,would the government be most concerned with? Why?
c.Could a horizontal merger be welfare improving?

Accepted Answer

a∙A horizontal merger is a merger betwee

Question 18

Some economists argue that Microsoft become a monopoly in the market for computer software by developing MS-DOS,an operating system used for the first IBM personal computers.The more people who used MS-DOS-based programs,the greater the usefulness of a using a computer with an MS-DOS operating system.The explanation for Microsoft's monopoly is

Accepted Answer

A)  the development of new technology that other firms could not copy. 
B)  control of a key resource which, in this case, is the MS-DOS operating system. 
C)  network externalities. 
D)  patents Microsoft obtained when it developed the MS-DOS operating system. 
A)  the development of new technology that other firms could not copy. 
B)  control of a key resource which, in this case, is the MS-DOS operating system. 
C)  network externalities. 
D)  patents Microsoft obtained when it developed the MS-DOS operating system.

Question 19

Why does a monopoly cause a deadweight loss?

Accepted Answer

A)  because it stops producing output at a point where price is above marginal cost 
B)  because it appropriates a portion of consumer surplus for itself 
C)  because it increases producer surplus at the expense of consumer surplus 
D)  because it does not produce some output for which demand exceeds supply 
A)  because it stops producing output at a point where price is above marginal cost 
B)  because it appropriates a portion of consumer surplus for itself 
C)  because it increases producer surplus at the expense of consumer surplus 
D)  because it does not produce some output for which demand exceeds supply

Question 20

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Accepted Answer

A)  Each natural monopoly is made a public franchise. The public franchise is then required to set its price equal to its marginal cost. 
B)  Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C)  Natural monopolies are privately owned and are allowed to set their own prices. Government regulation of the firms would result in greater deadweight losses. 
D)  Local or state regulatory commissions usually set prices for natural monopolies. 
A)  Each natural monopoly is made a public franchise. The public franchise is then required to set its price equal to its marginal cost. 
B)  Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C)  Natural monopolies are privately owned and are allowed to set their own prices. Government regulation of the firms would result in greater deadweight losses. 
D)  Local or state regulatory commissions usually set prices for natural monopolies.

Figure 10-10 -Refer to Figure 10-10.What is the area that represents consumer surplus under a monopoly?

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?

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: Is it true or false? Explain your answer.

The Sherman Act prohibited

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

The demand curve for a monopoly firm

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

A profit maximizing monopoly's price is

A monopoly is defined as a firm that has the largest market share in an industry.

Producers in perfect competition receive a smaller producer surplus than a producer in a monopoly.

A horizontal merger

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

What is the difference between a public franchise and a public enterprise?

Economic efficiency requires that a natural monopoly's price be

a.What is the difference between a horizontal merger and a vertical merger? b.Which type of merger,horizontal or vertical,would the government be most concerned with? Why? c.Could a horizontal merger be welfare improving?

Why does a monopoly cause a deadweight loss?

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 10: Monopoly and Antitrust Policy

Figure 10-10 -Refer to Figure 10-10.What is the area that represents consumer surplus under a monopoly?

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?

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: Is it true or false? Explain your answer.

The Sherman Act prohibited

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

The demand curve for a monopoly firm

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

A profit maximizing monopoly's price is

A monopoly is defined as a firm that has the largest market share in an industry.

Producers in perfect competition receive a smaller producer surplus than a producer in a monopoly.

A horizontal merger

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

What is the difference between a public franchise and a public enterprise?

Economic efficiency requires that a natural monopoly's price be

a.What is the difference between a horizontal merger and a vertical merger? b.Which type of merger,horizontal or vertical,would the government be most concerned with? Why? c.Could a horizontal merger be welfare improving?

Why does a monopoly cause a deadweight loss?

If a firm is a natural monopoly,competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters