Question 1

Many communities have granted monopoly rights to cable companies.This is an example of a monopoly created through:

Accepted Answer

A)  government licensing. 
B)  ownership of the cable resources. 
C)  patent protection. 
D)  smart business practices by shrewd entrepreneurs. 
A)  government licensing. 
B)  ownership of the cable resources. 
C)  patent protection. 
D)  smart business practices by shrewd entrepreneurs. A

Question 2

What would be the impact if the government forced the breakup of a natural monopoly to promote greater competition in an industry?

Accepted Answer

A)  Smaller firms would have a cost advantage over larger firms. 
B)  The price paid by consumers would be unchanged. 
C)  The average cost of producing the good would increase. 
D)  The average cost of producing the good would decrease. 
A)  Smaller firms would have a cost advantage over larger firms. 
B)  The price paid by consumers would be unchanged. 
C)  The average cost of producing the good would increase. 
D)  The average cost of producing the good would decrease. C

Question 3

Which of the following best explains why a monopolist's marginal revenue is less than the sale price?

Accepted Answer

A)  To sell more units, a monopolist must increase the price on all units sold. 
B)  As a monopolist expands output, its average total cost declines. 
C)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
D)  When a monopolist reduces price in order to sell more units, it must lower the price of some units that could otherwise have been sold at a higher price. 
A)  To sell more units, a monopolist must increase the price on all units sold. 
B)  As a monopolist expands output, its average total cost declines. 
C)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
D)  When a monopolist reduces price in order to sell more units, it must lower the price of some units that could otherwise have been sold at a higher price. D

Question 4

If a regulatory commission wishes to allow a firm to earn a normal rate of return,it should set price equal to:

Accepted Answer

A)  marginal revenue. 
B)  marginal cost. 
C)  average total cost. 
D)  average variable cost. 
A)  marginal revenue. 
B)  marginal cost. 
C)  average total cost. 
D)  average variable cost.

Question 5

Which of the following gives consumers an incentive to reduce the consumption of a service when the cost of providing the service is the highest?

Accepted Answer

A)  average cost pricing 
B)  constant pricing 
C)  peak load pricing 
D)  regulated pricing 
A)  average cost pricing 
B)  constant pricing 
C)  peak load pricing 
D)  regulated pricing

Question 6

Which of the following is a problem with government regulation of natural monopolies?

Accepted Answer

A)  creation of excessive profits levels 
B)  reduced incentives to cut costs 
C)  decreased number of firms in the market 
D)  lack of influence from special interest groups 
A)  creation of excessive profits levels 
B)  reduced incentives to cut costs 
C)  decreased number of firms in the market 
D)  lack of influence from special interest groups

Question 7

Exhibit 13-4 The following diagram contains information on cost and revenue curves facing a regulated monopoly.   Refer to Exhibit 13-4.Given this information,the monopoly would prefer which of the following price and output combinations?

Accepted Answer

A)  P2 and Q2 
B)  P3 and Q1 
C)  P4 and Q3 
D)  P6 and Q4 
A)  P2 and Q2 
B)  P3 and Q1 
C)  P4 and Q3 
D)  P6 and Q4

Question 8

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return,it should set price which is equal to:

Accepted Answer

A)  marginal cost. 
B)  average fixed cost. 
C)  average variable cost. 
D)  average total cost. 
A)  marginal cost. 
B)  average fixed cost. 
C)  average variable cost. 
D)  average total cost.

Question 9

Profit-maximizing monopolists choose a level of output such that:

Accepted Answer

A)  average total cost is minimized. 
B)  price equals marginal revenue but exceeds average variable cost. 
C)  price equals marginal cost but exceeds average variable cost. 
D)  marginal revenue equals marginal cost. 
A)  average total cost is minimized. 
B)  price equals marginal revenue but exceeds average variable cost. 
C)  price equals marginal cost but exceeds average variable cost. 
D)  marginal revenue equals marginal cost.

Question 10

Why does the government allow some markets to be monopolized by granting patents?

Accepted Answer

A)  to promote a more equal distribution of income 
B)  to correct for negative externalities 
C)  to promote technological progress 
D)  to ensure lower prices for consumers in the short run 
A)  to promote a more equal distribution of income 
B)  to correct for negative externalities 
C)  to promote technological progress 
D)  to ensure lower prices for consumers in the short run

Question 11

Exhibit 13-1   Refer to Exhibit 13-1.The welfare loss due to monopoly is indicated in the diagram as area:

Accepted Answer

A)  DGE. 
B)  DFH. 
C)  DFQ2Q1. 
D)  EGQ3Q1. 
A)  DGE. 
B)  DFH. 
C)  DFQ2Q1. 
D)  EGQ3Q1.

Question 12

Which of the following would likely be an example of a monopolistic industry?

Accepted Answer

A)  fast-food restaurants 
B)  wireless phone service 
C)  auto manufacturing 
D)  none of the above 
A)  fast-food restaurants 
B)  wireless phone service 
C)  auto manufacturing 
D)  none of the above

Question 13

If a public utility is subject to average-cost pricing regulation,it will:

Accepted Answer

A)  earn a normal rate of return. 
B)  produce the socially efficient level of output. 
C)  suffer economic losses without a subsidy. 
D)  earn an above-normal rate of return. 
A)  earn a normal rate of return. 
B)  produce the socially efficient level of output. 
C)  suffer economic losses without a subsidy. 
D)  earn an above-normal rate of return.

Question 14

A monopoly industry:

Accepted Answer

A)  has very significant barriers to entry. 
B)  faces a downward sloping demand curve. 
C)  may earn economic profits or losses in the short run. 
D)  has all of the above characteristics. 
A)  has very significant barriers to entry. 
B)  faces a downward sloping demand curve. 
C)  may earn economic profits or losses in the short run. 
D)  has all of the above characteristics.

Question 15

Which piece of legislation forbids most forms of price discrimination?

Accepted Answer

A)  Sherman Act 
B)  Robinson-Patman Act 
C)  Cellar-Kefauver Act 
D)  Clayton Act 
A)  Sherman Act 
B)  Robinson-Patman Act 
C)  Cellar-Kefauver Act 
D)  Clayton Act

Question 16

Exhibit 13-6   Refer to Exhibit 13-6.In single price monopoly,producer surplus is area:

Accepted Answer

A)  d 
B)  d + e 
C)  b + d 
D)  b + c + d + e 
A)  d 
B)  d + e 
C)  b + d 
D)  b + c + d + e

Question 17

Monopolies will tend to produce a greater quantity and charge higher prices than perfectly competitive industries.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following accurately describes a major difference between a monopolist and firms in perfectly competitive markets?

Accepted Answer

A)  The monopolist maximizes profit; firms in perfectly competitive markets maximize sales. 
B)  The monopolist may earn long-run economic profit; firms in perfectly competitive markets cannot. 
C)  The monopolist is a price taker; firms in other markets are price searchers. 
D)  The monopolist may earn short-run profit; firms in perfectly competitive markets cannot. 
A)  The monopolist maximizes profit; firms in perfectly competitive markets maximize sales. 
B)  The monopolist may earn long-run economic profit; firms in perfectly competitive markets cannot. 
C)  The monopolist is a price taker; firms in other markets are price searchers. 
D)  The monopolist may earn short-run profit; firms in perfectly competitive markets cannot.

Question 19

Which of the following need not be true of a monopoly?

Accepted Answer

A)  The firm must be the only producer of the product. 
B)  The product must have no close substitutes. 
C)  There must be high barriers to entry. 
D)  The firm must earn an economic profit in the short run.. 
A)  The firm must be the only producer of the product. 
B)  The product must have no close substitutes. 
C)  There must be high barriers to entry. 
D)  The firm must earn an economic profit in the short run..

Question 20

Which of the following is false?

Accepted Answer

A)  A true or pure monopoly exists where there is only one seller of a product for which no close substitute is available. 
B)  The situation in which one large firm can provide the output of the market at a lower cost than two or more smaller firms is called a natural monopoly. 
C)  In monopoly, the market demand curve may be regarded as the demand curve for the firm because it is the market for that particular product. 
D)  A monopoly firm is a price maker, and it will pick a price that is the highest point on its demand curve. 
A)  A true or pure monopoly exists where there is only one seller of a product for which no close substitute is available. 
B)  The situation in which one large firm can provide the output of the market at a lower cost than two or more smaller firms is called a natural monopoly. 
C)  In monopoly, the market demand curve may be regarded as the demand curve for the firm because it is the market for that particular product. 
D)  A monopoly firm is a price maker, and it will pick a price that is the highest point on its demand curve.

Exam 13: Monopoly and Antitrust

Many communities have granted monopoly rights to cable companies.This is an example of a monopoly created through:

What would be the impact if the government forced the breakup of a natural monopoly to promote greater competition in an industry?

Which of the following best explains why a monopolist's marginal revenue is less than the sale price?

If a regulatory commission wishes to allow a firm to earn a normal rate of return,it should set price equal to:

Which of the following gives consumers an incentive to reduce the consumption of a service when the cost of providing the service is the highest?

Which of the following is a problem with government regulation of natural monopolies?

Exhibit 13-4 The following diagram contains information on cost and revenue curves facing a regulated monopoly. Refer to Exhibit 13-4.Given this information,the monopoly would prefer which of the following price and output combinations?

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return,it should set price which is equal to:

Profit-maximizing monopolists choose a level of output such that:

Why does the government allow some markets to be monopolized by granting patents?

Exhibit 13-1 Refer to Exhibit 13-1.The welfare loss due to monopoly is indicated in the diagram as area:

Which of the following would likely be an example of a monopolistic industry?

If a public utility is subject to average-cost pricing regulation,it will:

A monopoly industry:

Which piece of legislation forbids most forms of price discrimination?

Exhibit 13-6 Refer to Exhibit 13-6.In single price monopoly,producer surplus is area:

Monopolies will tend to produce a greater quantity and charge higher prices than perfectly competitive industries.

Which of the following accurately describes a major difference between a monopolist and firms in perfectly competitive markets?

Which of the following need not be true of a monopoly?

Which of the following is false?

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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