Question 1

Consumers who will pay high prices to be among the first to own certain new products are called

Accepted Answer

A)  savvy consumers. 
B)  naïve consumers. 
C)  gullible. 
D)  early adopters. 
A)  savvy consumers. 
B)  naïve consumers. 
C)  gullible. 
D)  early adopters.

Question 2

Refer to Table 9-3. If Julie charges $10 per hour, what is the value of the consumer surplus received by Dawn?

Accepted Answer

A)  $2 
B)  $10 
C)  $12 
D)  $22 
A)  $2 
B)  $10 
C)  $12 
D)  $22

Question 3

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

Accepted Answer

A price taker has no market power and th

Question 4

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Accepted Answer

A)  most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. 
B)  prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents. 
C)  other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents. 
D)  firms will find ways to obtain additional patent protection-often by making cosmetic changes in drugs that were patented-so that they can continue charging high prices. 
A)  most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. 
B)  prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents. 
C)  other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents. 
D)  firms will find ways to obtain additional patent protection-often by making cosmetic changes in drugs that were patented-so that they can continue charging high prices.

Question 5

Some economists argue that Microsoft became 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 6

Identify two ways by which the government controls monopolies?

Accepted Answer

The government control monopol

Question 7

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 favours 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 favours 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 8

When the government makes a firm the exclusive legal provider of a good or service, it grants the firm

Accepted Answer

A)  a copyright. 
B)  a network externality. 
C)  a quota. 
D)  a public franchise. 
A)  a copyright. 
B)  a network externality. 
C)  a quota. 
D)  a public franchise.

Question 9

-Refer to Figure 9-11. If the firm maximises its profits, the deadweight loss to society due to this monopoly is equal to the area

Accepted Answer

A)  ABF. 
B)  ABEG. 
C)  ACE. 
D)  EFG. 
A)  ABF. 
B)  ABEG. 
C)  ACE. 
D)  EFG.

Question 10

-Refer to Figure 9-3. What happens to the monopolist represented in the diagram in the long run?

Accepted Answer

A)  It will raise its price at least until it breaks even. 
B)  If the cost and demand curves remain the same, it will exit the market. 
C)  The government will subsidise the monopoly to enable it to break even. 
D)  It will be forced out of business by more efficient producers. 
A)  It will raise its price at least until it breaks even. 
B)  If the cost and demand curves remain the same, it will exit the market. 
C)  The government will subsidise the monopoly to enable it to break even. 
D)  It will be forced out of business by more efficient producers.

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

A patent

Accepted Answer

A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D)  gives the firm the exclusive right to a new product during the product inventor's lifetime. 
A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D)  gives the firm the exclusive right to a new product during the product inventor's lifetime.

Question 13

Market power refers to

Accepted Answer

A)  the ability of consumers to dictate what products should be produced. 
B)  the ability of a firm to advertise its product and succeed in selling more output. 
C)  the ability of a firm to sell at a lower price than rival sellers. 
D)  the ability of a firm to charge a price higher than the marginal cost of production. 
A)  the ability of consumers to dictate what products should be produced. 
B)  the ability of a firm to advertise its product and succeed in selling more output. 
C)  the ability of a firm to sell at a lower price than rival sellers. 
D)  the ability of a firm to charge a price higher than the marginal cost of production.

Question 14

A merger between the Ford Motor Company and General Motors would be an example of a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  conglomerate merger. 
D)  trust. 
A)  vertical merger. 
B)  horizontal merger. 
C)  conglomerate merger. 
D)  trust.

Question 15

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 16

In the short run, even if a monopoly's total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits.

Accepted Answer

A) True 
 B)False

Question 17

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market. This reflects which of the following barriers to entry?

Accepted Answer

A)  control of a key resource 
B)  network externalities 
C)  entry blocked by government action 
D)  economies of scale creating a natural monopoly 
A)  control of a key resource 
B)  network externalities 
C)  entry blocked by government action 
D)  economies of scale creating a natural monopoly

Question 18

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. As a result of this change

Accepted Answer

A)  Price will be higher, output will be lower and the deadweight loss will be eliminated. 
B)  Consumer surplus will be smaller, producer surplus will be greater and there will be a reduction in economic efficiency. 
C)  Price will be higher, consumer surplus will be greater and output will be greater. 
D)  Consumer surplus will be smaller and producer surplus will be greater. There will be a net increase in economic surplus. 
A)  Price will be higher, output will be lower and the deadweight loss will be eliminated. 
B)  Consumer surplus will be smaller, producer surplus will be greater and there will be a reduction in economic efficiency. 
C)  Price will be higher, consumer surplus will be greater and output will be greater. 
D)  Consumer surplus will be smaller and producer surplus will be greater. There will be a net increase in economic surplus.

Question 19

-Refer to Figure 9-7. Use the figure above to answer the following questions.
a. What is the profit-maximising quantity and what price will the monopolist charge?
b. What is the total revenue at the profit-maximising output level?
c. What is the total cost at the profit-maximising output level?
d. What is the profit?
e. What is the profit per unit (average profit) at the profit-maximising output level?
f. If this industry was organised as a perfectly competitive industry, what would be the profit-maximising price and quantity?

Accepted Answer

a. Quantity = 50; price = 32
b. Total re

Question 20

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximise profit the firm should decrease output.

Accepted Answer

A) True 
 B)False

Consumers who will pay high prices to be among the first to own certain new products are called

Refer to Table 9-3. If Julie charges $10 per hour, what is the value of the consumer surplus received by Dawn?

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Identify two ways by which the government controls monopolies?

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

When the government makes a firm the exclusive legal provider of a good or service, it grants the firm

-Refer to Figure 9-11. If the firm maximises its profits, the deadweight loss to society due to this monopoly is equal to the area

-Refer to Figure 9-3. What happens to the monopolist represented in the diagram in the long run?

Whenever a firm can charge a price greater than marginal cost

A patent

Market power refers to

A merger between the Ford Motor Company and General Motors would be an example of a

Economic efficiency requires that a natural monopoly's price be

In the short run, even if a monopoly's total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits.

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market. This reflects which of the following barriers to entry?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. As a result of this change

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximise profit the firm should decrease output.

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

Consumers who will pay high prices to be among the first to own certain new products are called

Refer to Table 9-3. If Julie charges $10 per hour, what is the value of the consumer surplus received by Dawn?

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Identify two ways by which the government controls monopolies?

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

When the government makes a firm the exclusive legal provider of a good or service, it grants the firm

-Refer to Figure 9-11. If the firm maximises its profits, the deadweight loss to society due to this monopoly is equal to the area

-Refer to Figure 9-3. What happens to the monopolist represented in the diagram in the long run?

Whenever a firm can charge a price greater than marginal cost

A patent

Market power refers to

A merger between the Ford Motor Company and General Motors would be an example of a

Economic efficiency requires that a natural monopoly's price be

In the short run, even if a monopoly's total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits.

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market. This reflects which of the following barriers to entry?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. As a result of this change

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25, then to maximise profit the firm should decrease output.

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