Question 1

Suppose that a perfectly competitive industry becomes a monopoly. What effect will this have on consumer surplus, producer surplus, and deadweight loss?

Accepted Answer

If a perfectly competitive industry is monopolised, consumer surplus will decrease, producer surplus will increase, and there will be a deadweight loss.

Question 2

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

Accepted Answer

A)  it produced a product that has 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 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. C

Question 3

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the 'market' that firms are in are broadly defined rather than narrowly defined.

Accepted Answer

A) True 
 B)False  True

Question 4

-Refer to Figure 9-9. What is the difference between the monopoly's price and perfectly competitive industry's price?

Accepted Answer

A)  The monopoly's price is higher by $9.50. 
B)  The monopoly's price is higher by $13. 
C)  The monopoly's price is higher by $3.50. 
D)  The monopoly's price is higher by $21. 
A)  The monopoly's price is higher by $9.50. 
B)  The monopoly's price is higher by $13. 
C)  The monopoly's price is higher by $3.50. 
D)  The monopoly's price is higher by $21.

Question 5

-Refer to Figure 9-2. If the firm's average total cost curve is ATC1, 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 6

When the government wants to give an exclusive right to one firm to produce a product, it

Accepted Answer

A)  imposes a tariff on imports of the product. 
B)  imposes a quota on imports of the product. 
C)  grants a patent or copyright to an individual or firm. 
D)  uses antitrust laws to keep other firms from entering the market. 
A)  imposes a tariff on imports of the product. 
B)  imposes a quota on imports of the product. 
C)  grants a patent or copyright to an individual or firm. 
D)  uses antitrust laws to keep other firms from entering the market.

Question 7

-Refer to Figure 9-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit?

Accepted Answer

A)  loss of $7 per unit 
B)  profit of $30 per unit 
C)  loss of $21 per unit 
D)  profit of $14 per unit 
A)  loss of $7 per unit 
B)  profit of $30 per unit 
C)  loss of $21 per unit 
D)  profit of $14 per unit

Question 8

A monopoly differs from monopolistic competition in that

Accepted Answer

A)  a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  a monopoly can never incur a loss, but a firm in monopolistic competition can. 
C)  in a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure. 
D)  a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve. 
A)  a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  a monopoly can never incur a loss, but a firm in monopolistic competition can. 
C)  in a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure. 
D)  a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

Question 9

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in

Accepted Answer

A)  odd pricing. 
B)  cost-plus pricing. 
C)  price discrimination. 
D)  markup pricing. 
A)  odd pricing. 
B)  cost-plus pricing. 
C)  price discrimination. 
D)  markup pricing.

Question 10

Unlike a perfect competitor, a monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 11

A public franchise

Accepted Answer

A)  is a corporation that is owned by stockholders. 
B)  results from ownership of a key raw material. 
C)  is a government designation that a private firm is the only legal producer of a good or service. 
D)  is an unregulated monopoly necessary for the public good. 
A)  is a corporation that is owned by stockholders. 
B)  results from ownership of a key raw material. 
C)  is a government designation that a private firm is the only legal producer of a good or service. 
D)  is an unregulated monopoly necessary for the public good.

Question 12

Firms do not have market power in which of the following market structures?

Accepted Answer

A)  perfect competition only 
B)  perfect competition and monopolistic competition 
C)  oligopoly 
D)  monopoly 
A)  perfect competition only 
B)  perfect competition and monopolistic competition 
C)  oligopoly 
D)  monopoly

Question 13

-Refer to Figure 9-15. What is the price charged under perfect price discrimination?

Accepted Answer

A)  P3 
B)  P4 
C)  a range of prices corresponding to the demand curve from P3 and above 
D)  a range of prices corresponding to the demand curve from P4 and above 
A)  P3 
B)  P4 
C)  a range of prices corresponding to the demand curve from P3 and above 
D)  a range of prices corresponding to the demand curve from P4 and above

Question 14

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 labour costs higher than for any other business. Profits from patents are needed to pay these labour 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 labour costs higher than for any other business. Profits from patents are needed to pay these labour costs.

Question 15

Book publishers use price discrimination routinely, but the form of price discrimination they use is different from the form used by airlines and other industries. Explain.

Accepted Answer

and a lower price to

Question 16

Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose that the opportunity cost of Joss's time is $1200. Assume that Iris and Daphne do not know each other. If Joss charges the same price per copy to both Iris and Daphne,

Accepted Answer

A)  the report will not get written. 
B)  only Daphne will commission the job and the report will be written. 
C)  both Iris and Daphne will commission the job and the report will be written. 
D)  No conclusion can be drawn without information on the price. 
A)  the report will not get written. 
B)  only Daphne will commission the job and the report will be written. 
C)  both Iris and Daphne will commission the job and the report will be written. 
D)  No conclusion can be drawn without information on the price.

Question 17

To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.

Accepted Answer

A) True 
 B)False

Question 18

If a natural monopoly regulatory commission sets a price where marginal cost is equal to demand,

Accepted Answer

A)  the firm would earn monopoly profits. 
B)  economic efficiency would not be achieved. 
C)  the firm would incur a loss. 
D)  the firm would break even. 
A)  the firm would earn monopoly profits. 
B)  economic efficiency would not be achieved. 
C)  the firm would incur a loss. 
D)  the firm would break even.

Question 19

-Refer to Figure 9-4. What is the price charged for the profit-maximising output level?

Accepted Answer

A)  $13 
B)  $21 
C)  $27 
D)  $34 
A)  $13 
B)  $21 
C)  $27 
D)  $34

Question 20

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Accepted Answer

A network externality exists where the u

Suppose that a perfectly competitive industry becomes a monopoly. What effect will this have on consumer surplus, producer surplus, and deadweight loss?

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

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the 'market' that firms are in are broadly defined rather than narrowly defined.

-Refer to Figure 9-9. What is the difference between the monopoly's price and perfectly competitive industry's price?

-Refer to Figure 9-2. If the firm's average total cost curve is ATC₁, the firm will

When the government wants to give an exclusive right to one firm to produce a product, it

-Refer to Figure 9-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit?

A monopoly differs from monopolistic competition in that

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in

Unlike a perfect competitor, a monopolist faces the market demand curve.

A public franchise

Firms do not have market power in which of the following market structures?

-Refer to Figure 9-15. What is the price charged under perfect price discrimination?

One reason patent protection is vitally important to pharmaceutical firms is

Book publishers use price discrimination routinely, but the form of price discrimination they use is different from the form used by airlines and other industries. Explain.

To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.

If a natural monopoly regulatory commission sets a price where marginal cost is equal to demand,

-Refer to Figure 9-4. What is the price charged for the profit-maximising output level?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 9: Monopoly Markets

Suppose that a perfectly competitive industry becomes a monopoly. What effect will this have on consumer surplus, producer surplus, and deadweight loss?

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

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the 'market' that firms are in are broadly defined rather than narrowly defined.

-Refer to Figure 9-9. What is the difference between the monopoly's price and perfectly competitive industry's price?

-Refer to Figure 9-2. If the firm's average total cost curve is ATC1, the firm will

When the government wants to give an exclusive right to one firm to produce a product, it

-Refer to Figure 9-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit?

A monopoly differs from monopolistic competition in that

If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in

Unlike a perfect competitor, a monopolist faces the market demand curve.

A public franchise

Firms do not have market power in which of the following market structures?

-Refer to Figure 9-15. What is the price charged under perfect price discrimination?

One reason patent protection is vitally important to pharmaceutical firms is

Book publishers use price discrimination routinely, but the form of price discrimination they use is different from the form used by airlines and other industries. Explain.

To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.

If a natural monopoly regulatory commission sets a price where marginal cost is equal to demand,

-Refer to Figure 9-4. What is the price charged for the profit-maximising output level?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

-Refer to Figure 9-2. If the firm's average total cost curve is ATC₁, the firm will