Question 1

Monopoly is important to study because it:

Accepted Answer

A)  avoids all real-world problems and complexities. 
B)  avoids most real-world problems and complexities. 
C)  is a theoretical model used for analysis. 
D)  is a realistic model of many different markets. 
A)  avoids all real-world problems and complexities. 
B)  avoids most real-world problems and complexities. 
C)  is a theoretical model used for analysis. 
D)  is a realistic model of many different markets.

Question 2

Use the following to answer question(s): Demand, Elasticity, and Total Revenue
  
-(Exhibit: Demand, Elasticity, and Total Revenue) In Panel (a), Curve C is:

Accepted Answer

A)  the average revenue curve. 
B)  the slope of the total revenue curve. 
C)  the change in quantity divided by the change in total revenue. 
D)  the marginal cost curve. 
A)  the average revenue curve. 
B)  the slope of the total revenue curve. 
C)  the change in quantity divided by the change in total revenue. 
D)  the marginal cost curve.

Question 3

A decrease in the fixed costs of a monopoly firm would _______ quantity and _______ price.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  not change; not change 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  not change; not change

Question 4

A downward-sloping demand curve exists for:

Accepted Answer

A)  a monopoly, but not for a perfectly competitive firm. 
B)  a perfectly competitive firm, but not for a monopoly. 
C)  both a monopoly and a perfectly competitive firm. 
D)  either a monopoly or a perfectly competitive firm, depending on the costs of production. 
A)  a monopoly, but not for a perfectly competitive firm. 
B)  a perfectly competitive firm, but not for a monopoly. 
C)  both a monopoly and a perfectly competitive firm. 
D)  either a monopoly or a perfectly competitive firm, depending on the costs of production.

Question 5

Unlike a perfectly competitive firm, a monopoly faces a perfectly elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 6

A feature of monopoly that leads to unfavorable consequences is that it:

Accepted Answer

A)  reduces income inequality. 
B)  sets marginal cost equal to price. 
C)  produces less output than if perfectly competitive firms characterized the same industry. 
D)  charges a lower price than if perfectly competitive firms characterized the same industry. 
A)  reduces income inequality. 
B)  sets marginal cost equal to price. 
C)  produces less output than if perfectly competitive firms characterized the same industry. 
D)  charges a lower price than if perfectly competitive firms characterized the same industry.

Question 7

A monopoly has no effective rivals.

Accepted Answer

A) True 
 B)False

Question 8

A statement that best reflects an evaluation of monopoly firms is that:

Accepted Answer

A)  they are economically efficient. 
B)  they have little or no market power. 
C)  consumers are given fewer choices and higher prices. 
D)  competition should replace all monopolies. 
A)  they are economically efficient. 
B)  they have little or no market power. 
C)  consumers are given fewer choices and higher prices. 
D)  competition should replace all monopolies.

Question 9

If total revenue increases when price falls, demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 10

In 1984, the Department of Justice reached an agreement with AT&T that:

Accepted Answer

A)  allowed AT&T to continue to provide local telecommunications service to established customers but prevented it from accepting any new customers. 
B)  allowed the so-called Baby Bells to provide long-distance service to their local customers. 
C)  separated AT&T from the regional Bell operating companies. 
D)  led to significant degrees of competition and the reduction of monopoly power in local markets with most of the change coming within 10 years after the agreement. 
A)  allowed AT&T to continue to provide local telecommunications service to established customers but prevented it from accepting any new customers. 
B)  allowed the so-called Baby Bells to provide long-distance service to their local customers. 
C)  separated AT&T from the regional Bell operating companies. 
D)  led to significant degrees of competition and the reduction of monopoly power in local markets with most of the change coming within 10 years after the agreement.

Question 11

Define, identify and/or explain each of the following:
a.natural monopoly
b.network effects
c.price setter
d.sunk cost

Accepted Answer

a. A natural monopoly is a type of monop

Question 12

The XYZ Company is a profit-maximizing firm with a monopoly in the production of pennants.The firm sells its pennants for $10 each.We can conclude that the XYZ Company is producing a level of output at which the demand for pennants is:

Accepted Answer

A)  elastic. 
B)  unit price elastic. 
C)  inelastic. 
D)  perfectly inelastic. 
A)  elastic. 
B)  unit price elastic. 
C)  inelastic. 
D)  perfectly inelastic.

Question 13

Use the following to answer question(s): Chip Production
Assume that Sandy Chip Products, Inc., is the world's only producer of a special kind of computer chip.Its patents assure that it will continue to be the only producer for at least the next decade.Chip production requires clean water.The firm gets its water from a river, which is being polluted by paper mills located upstream.Sandy Chip therefore has to process the water before using it.A recently enacted pollution-control program, whereby the paper mills will be fined for polluting the river, will result in less pollution and thus lower Sandy Chip's costs.Sandy Chip expects its marginal and average cost to fall by $20 per chip.
-(Exhibit: Chip Production) If in response to its reduction in cost, Sandy Chip changes its price in a profit-maximizing way, then we can predict that its total output will:

Accepted Answer

A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  It is not possible to make a determination from the information given. 
A)  rise. 
B)  fall. 
C)  remain unchanged. 
D)  It is not possible to make a determination from the information given.

Question 14

In general, a monopolist is likely to:

Accepted Answer

A)  earn lower profits than a perfectly competitive firm. 
B)  earn about the same profits as a perfectly competitive firm. 
C)  sell less output than if perfectly competitive firms characterized the same industry. 
D)  sell more output than if perfectly competitive firms characterized the same industry. 
A)  earn lower profits than a perfectly competitive firm. 
B)  earn about the same profits as a perfectly competitive firm. 
C)  sell less output than if perfectly competitive firms characterized the same industry. 
D)  sell more output than if perfectly competitive firms characterized the same industry.

Question 15

For a demand curve that is linear and downward sloping, if P > MR, the price elasticity of demand is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  equal to -1. 
D)  none of the above is necessarily true. 
A)  elastic. 
B)  inelastic. 
C)  equal to -1. 
D)  none of the above is necessarily true.

Question 16

The power a firm has to set is own price is called:

Accepted Answer

A)  competition. 
B)  discrimination. 
C)  legislative control. 
D)  monopoly power. 
A)  competition. 
B)  discrimination. 
C)  legislative control. 
D)  monopoly power.

Question 17

An expenditure that cannot be recovered is called a sunk cost.

Accepted Answer

A) True 
 B)False

Question 18

If a firm possesses monopoly power, it means that:

Accepted Answer

A)  the firm can set its own price based on its output decision. 
B)  the firm's demand curve is always elastic. 
C)  the firm is necessarily a monopoly. 
D)  A and C are true. 
A)  the firm can set its own price based on its output decision. 
B)  the firm's demand curve is always elastic. 
C)  the firm is necessarily a monopoly. 
D)  A and C are true.

Question 19

Which of the following is true regarding monopoly?

Accepted Answer

A)  Monopolies produce too much and charge too much from the standpoint of efficiency. 
B)  Monopolies usually are economically efficient because they have economic profits with which to work. 
C)  Monopolies produce too little and charge too much from the standpoint of efficiency. 
D)  Monopolies create an efficiency problem but are not associated with an equity problem. 
A)  Monopolies produce too much and charge too much from the standpoint of efficiency. 
B)  Monopolies usually are economically efficient because they have economic profits with which to work. 
C)  Monopolies produce too little and charge too much from the standpoint of efficiency. 
D)  Monopolies create an efficiency problem but are not associated with an equity problem.

Question 20

In 1984, the Department of Justice reached an agreement with AT&T that:

Accepted Answer

A)  broke down most of the barriers to entry into the telecommunications industry. 
B)  allowed the so-called Baby Bells to continue to have significant monopoly power in the local service areas. 
C)  merged the regional Bell operating companies into a single firm so that they could compete directly with AT&T. 
D)  led to significant degrees of competition and the reduction of monopoly power in local markets with most of the change coming within 10 years after the agreement. 
A)  broke down most of the barriers to entry into the telecommunications industry. 
B)  allowed the so-called Baby Bells to continue to have significant monopoly power in the local service areas. 
C)  merged the regional Bell operating companies into a single firm so that they could compete directly with AT&T. 
D)  led to significant degrees of competition and the reduction of monopoly power in local markets with most of the change coming within 10 years after the agreement.

Monopoly is important to study because it:

Use the following to answer question(s): Demand, Elasticity, and Total Revenue -(Exhibit: Demand, Elasticity, and Total Revenue) In Panel (a), Curve C is:

A decrease in the fixed costs of a monopoly firm would _ quantity and _ price.

A downward-sloping demand curve exists for:

Unlike a perfectly competitive firm, a monopoly faces a perfectly elastic demand curve.

A feature of monopoly that leads to unfavorable consequences is that it:

A monopoly has no effective rivals.

A statement that best reflects an evaluation of monopoly firms is that:

If total revenue increases when price falls, demand is inelastic.

In 1984, the Department of Justice reached an agreement with AT&T that:

Define, identify and/or explain each of the following: a.natural monopoly b.network effects c.price setter d.sunk cost

The XYZ Company is a profit-maximizing firm with a monopoly in the production of pennants.The firm sells its pennants for $10 each.We can conclude that the XYZ Company is producing a level of output at which the demand for pennants is:

In general, a monopolist is likely to:

For a demand curve that is linear and downward sloping, if P > MR, the price elasticity of demand is:

The power a firm has to set is own price is called:

An expenditure that cannot be recovered is called a sunk cost.

If a firm possesses monopoly power, it means that:

Which of the following is true regarding monopoly?

In 1984, the Department of Justice reached an agreement with AT&T that:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 10: Monopoly

Monopoly is important to study because it:

Use the following to answer question(s): Demand, Elasticity, and Total Revenue -(Exhibit: Demand, Elasticity, and Total Revenue) In Panel (a), Curve C is:

A decrease in the fixed costs of a monopoly firm would _______ quantity and _______ price.

A downward-sloping demand curve exists for:

Unlike a perfectly competitive firm, a monopoly faces a perfectly elastic demand curve.

A feature of monopoly that leads to unfavorable consequences is that it:

A monopoly has no effective rivals.

A statement that best reflects an evaluation of monopoly firms is that:

If total revenue increases when price falls, demand is inelastic.

In 1984, the Department of Justice reached an agreement with AT&T that:

Define, identify and/or explain each of the following: a.natural monopoly b.network effects c.price setter d.sunk cost

The XYZ Company is a profit-maximizing firm with a monopoly in the production of pennants.The firm sells its pennants for $10 each.We can conclude that the XYZ Company is producing a level of output at which the demand for pennants is:

In general, a monopolist is likely to:

For a demand curve that is linear and downward sloping, if P > MR, the price elasticity of demand is:

The power a firm has to set is own price is called:

An expenditure that cannot be recovered is called a sunk cost.

If a firm possesses monopoly power, it means that:

Which of the following is true regarding monopoly?

In 1984, the Department of Justice reached an agreement with AT&T that:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

A decrease in the fixed costs of a monopoly firm would _ quantity and _ price.