Question 1

Figure 10-15
   Figure 10-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-15.The firm would maximize profit by producing

Accepted Answer

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

Question 2

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Accepted Answer

A)  For the first time horizontal mergers were allowed-with government approval-and vertical mergers were allowed without need for approval from the government. 
B)  For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers. 
C)  The Division began to systematically consider the economic consequences of proposed mergers. 
D)  Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system. 
A)  For the first time horizontal mergers were allowed-with government approval-and vertical mergers were allowed without need for approval from the government. 
B)  For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers. 
C)  The Division began to systematically consider the economic consequences of proposed mergers. 
D)  Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system.

Question 3

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 4

Assume a hypothetical case where an industry begins as perfect competition 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 5

Network externalities

Accepted Answer

A)  can only exist when there are economies of scale. 
B)  prevent the dominance of a market by one firm. 
C)  exist when the usefulness of a product increases with the number of consumers who use it. 
D)  are created when celebrity endorsements of products lead to a surge in the demand for those products. 
A)  can only exist when there are economies of scale. 
B)  prevent the dominance of a market by one firm. 
C)  exist when the usefulness of a product increases with the number of consumers who use it. 
D)  are created when celebrity endorsements of products lead to a surge in the demand for those products.

Question 6

Compared to a monopolistic competitor,a monopolist faces

Accepted Answer

A)  a more elastic demand curve. 
B)  a more inelastic demand curve. 
C)  a more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. 
D)  a demand curve that has a price elasticity coefficient of zero. 
A)  a more elastic demand curve. 
B)  a more inelastic demand curve. 
C)  a more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. 
D)  a demand curve that has a price elasticity coefficient of zero.

Question 7

Provide two examples of a government barrier to entry.

Accepted Answer

1. A patent or copyright which gives an

Question 8

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Accepted Answer

A) True 
 B)False

Question 9

Table 10-2
 $\begin{array}{|c|c|c|}
\hline \begin{array}{c}
\text { Quantity per } \
\text { Day (cases) }
\end{array} & \begin{array}{c}
\text { Price per } \
\text { Case }
\end{array} & \text { Total Cost } \
\hline 1 & \$ 16 & \$ 7.00 \
\hline 2 & 15 & 9.50 \
\hline 3 & 14 & 11.00 \
\hline 4 & 13 & 12.00 \
\hline 5 & 12 & 14.50 \
\hline 6 & 11 & 17.50 \
\hline 7 & 10 & 21.00 \
\hline 8 & 9 & 25.00 \
\hline 9 & 8 & 30.00 \
\hline 10 & 7 & 35.50 \
\hline
\end{array}$ The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 10-2 shows the cost and demand data for this government-protected monopolist.
-Refer to Table 10-2.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 10

Figure 10-11
   In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 10-11 shows the cable television market in Upstate New York.
-Refer to Figure 10-11.Following the entry of Verizon,the subscription price falls from PM to PC.What is the increase in consumer surplus as a result of this change?

Accepted Answer

A)  the area A + B + C 
B)  the area B + C 
C)  the area D + F 
D)  the area B + C + D 
A)  the area A + B + C 
B)  the area B + C 
C)  the area D + F 
D)  the area B + C + D

Question 11

Whenever a firm can charge a price greater than marginal cost

Accepted Answer

A)  the firm must be a monopolist. 
B)  there is some loss of economic efficiency. 
C)  consumers have the ability to choose a close substitute. 
D)  the firm will earn economic profits. 
A)  the firm must be a monopolist. 
B)  there is some loss of economic efficiency. 
C)  consumers have the ability to choose a close substitute. 
D)  the firm will earn economic profits.

Question 12

One reason patent protection is vitally important to pharmaceutical firms is

Accepted Answer

A)  successful new drugs are not profitable. If firms are not granted patents many would go out of business and health care would be severely diminished. 
B)  the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process. 
C)  that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D)  the high salaries pharmaceutical firms pay to scientists and doctors make their labor costs higher than for any other business. Profits from patents are needed to pay these labor costs. 
A)  successful new drugs are not profitable. If firms are not granted patents many would go out of business and health care would be severely diminished. 
B)  the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process. 
C)  that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D)  the high salaries pharmaceutical firms pay to scientists and doctors make their labor costs higher than for any other business. Profits from patents are needed to pay these labor costs.

Question 13

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 14

Figure 10-5
  
-Refer to Figure 10-5.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 the price is greater than average variable cost. 
B)  shut down because the price is greater than marginal cost. 
C)  shut down because the price is less than average total cost. 
D)  continue to produce because a monopolist always earns a profit. 
A)  continue to produce because the price is greater than average variable cost. 
B)  shut down because the price is greater than marginal cost. 
C)  shut down because the price is less than average total cost. 
D)  continue to produce because a monopolist always earns a profit.

Question 15

Table 10-2
 $\begin{array}{|c|c|c|}
\hline \begin{array}{c}
\text { Quantity per } \
\text { Day (cases) }
\end{array} & \begin{array}{c}
\text { Price per } \
\text { Case }
\end{array} & \text { Total Cost } \
\hline 1 & \$ 16 & \$ 7.00 \
\hline 2 & 15 & 9.50 \
\hline 3 & 14 & 11.00 \
\hline 4 & 13 & 12.00 \
\hline 5 & 12 & 14.50 \
\hline 6 & 11 & 17.50 \
\hline 7 & 10 & 21.00 \
\hline 8 & 9 & 25.00 \
\hline 9 & 8 & 30.00 \
\hline 10 & 7 & 35.50 \
\hline
\end{array}$ The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 10-2 shows the cost and demand data for this government-protected monopolist.
-Refer to Table 10-2.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 16

Figure 10-16
   Figure 10-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 10-16.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 17

A monopoly firm's demand curve

Accepted Answer

A)  is the same as the market demand curve. 
B)  is perfectly inelastic. 
C)  is more inelastic than the demand curve for the product. 
D)  is inelastic at high prices and elastic at lower prices. 
A)  is the same as the market demand curve. 
B)  is perfectly inelastic. 
C)  is more inelastic than the demand curve for the product. 
D)  is inelastic at high prices and elastic at lower prices.

Question 18

The Federal Trade Commission (FTC)Act

Accepted Answer

A)  gave the FTC full power to regulate mergers. 
B)  closed the loopholes in the Sherman and Clayton Acts. 
C)  divided authority to police mergers between the FTC and the Department of Justice. 
D)  prohibited charging buyers different prices if the result would reduce competition. 
A)  gave the FTC full power to regulate mergers. 
B)  closed the loopholes in the Sherman and Clayton Acts. 
C)  divided authority to police mergers between the FTC and the Department of Justice. 
D)  prohibited charging buyers different prices if the result would reduce competition.

Question 19

If a restaurant was a natural monopoly,its

Accepted Answer

A)  marginal cost curve would still be declining when it crossed the demand curve. 
B)  average total cost curve would still be declining when it crossed the demand curve. 
C)  marginal revenue curve would be the same as its demand curve. 
D)  marginal revenue curve would be horizontal. 
A)  marginal cost curve would still be declining when it crossed the demand curve. 
B)  average total cost curve would still be declining when it crossed the demand curve. 
C)  marginal revenue curve would be the same as its demand curve. 
D)  marginal revenue curve would be horizontal.

Question 20

What is a network externality?

Accepted Answer

A)  It refers to having a network of suppliers and buyers for a good or service. 
B)  It refers to lobbying to form a public enterprise. 
C)  It refers to a situation in which a product's usefulness increases with the number of people using it. 
D)  It refers to a product that requires connection to a network for it to be useful. 
A)  It refers to having a network of suppliers and buyers for a good or service. 
B)  It refers to lobbying to form a public enterprise. 
C)  It refers to a situation in which a product's usefulness increases with the number of people using it. 
D)  It refers to a product that requires connection to a network for it to be useful.

Figure 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.The firm would maximize profit by producing

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

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

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

Network externalities

Compared to a monopolistic competitor,a monopolist faces

Provide two examples of a government barrier to entry.

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Whenever a firm can charge a price greater than marginal cost

One reason patent protection is vitally important to pharmaceutical firms is

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

Figure 10-5 -Refer to Figure 10-5.If the monopolist charges price P* for output Q*,in order to maximize profit or minimize loss in the short run,it should

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

A monopoly firm's demand curve

The Federal Trade Commission (FTC)Act

If a restaurant was a natural monopoly,its

What is a network externality?

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 10-15 Figure 10-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-15.The firm would maximize profit by producing

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

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

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

Network externalities

Compared to a monopolistic competitor,a monopolist faces

Provide two examples of a government barrier to entry.

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Whenever a firm can charge a price greater than marginal cost

One reason patent protection is vitally important to pharmaceutical firms is

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

Figure 10-5 -Refer to Figure 10-5.If the monopolist charges price P* for output Q*,in order to maximize profit or minimize loss in the short run,it should

Figure 10-16 Figure 10-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 10-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

A monopoly firm's demand curve

The Federal Trade Commission (FTC)Act

If a restaurant was a natural monopoly,its

What is a network externality?

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