Question 1

A monopoly is characterized by all of the following except

Accepted Answer

A)  there are only a few sellers each selling a unique product. 
B)  entry barriers are high. 
C)  there are no close substitutes to the firm's product. 
D)  the firm has market power. 
A)  there are only a few sellers each selling a unique product. 
B)  entry barriers are high. 
C)  there are no close substitutes to the firm's product. 
D)  the firm has market power.

Question 2

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 3

Figure 15-7  
-Refer to Figure 15-7. Use the figure above to answer the following questions.
a. What is the profit-maximizing quantity and what price will the monopolist charge?
b. What is the total revenue at the profit-maximizing output level?
c. What is the total cost at the profit-maximizing output level?
d. What is the profit?
e. What is the profit per unit (average profit) at the profit-maximizing output level?
f. If this industry was organized as a perfectly competitive industry, what would be the profit-maximizing price and quantity?

Accepted Answer

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

Question 4

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

Accepted Answer

A)  16%. 
B)  20%. 
C)  25%. 
D)  It cannot be determined from the information given. 
A)  16%. 
B)  20%. 
C)  25%. 
D)  It cannot be determined from the information given.

Question 5

Figure 15-10  
-Refer to Figure 15-10. What is the area that represents consumer surplus under a monopoly?

Accepted Answer

A)  the triangle P0P1F 
B)  the triangle P0P2E 
C)  the trapezium P1P2EF 
D)  the rectangle P1P3HF 
A)  the triangle P0P1F 
B)  the triangle P0P2E 
C)  the trapezium P1P2EF 
D)  the rectangle P1P3HF

Question 6

What type of protection does U.S. law grant the creator of a book, film or piece of music?

Accepted Answer

A)  a public franchise, which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death 
B)  a copyright, which grants exclusive rights to the creation's author for 20 years after the work is created 
C)  a patent, which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death 
D)  a copyright, which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death 
A)  a public franchise, which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death 
B)  a copyright, which grants exclusive rights to the creation's author for 20 years after the work is created 
C)  a patent, which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death 
D)  a copyright, which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death

Question 7

A profit-maximizing monopoly produces a lower output level than would be produced if the industry were perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 8

To maximize profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and charges a price given by the demand curve at that output level.

Accepted Answer

A) True 
 B)False

Question 9

Figure 15-2   Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2. The firm's profit-maximizing price is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 10

Figure 15-6   Figure 15-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-6. The monopolist's total revenue is

Accepted Answer

A)  $1,116. 
B)  $1,488. 
C)  $1,726.40 
D)  $1,826. 
A)  $1,116. 
B)  $1,488. 
C)  $1,726.40 
D)  $1,826.

Question 11

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

Accepted Answer

A natural monopoly arises when the produ

Question 12

The Google search engine has a market share of ________ in the United States and ________ in Europe.

Accepted Answer

A)  90 percent; 25 percent 
B)  50 percent; 50 percent 
C)  70 percent; 90 percent 
D)  45 percent; 15 percent 
A)  90 percent; 25 percent 
B)  50 percent; 50 percent 
C)  70 percent; 90 percent 
D)  45 percent; 15 percent

Question 13

Figure 15-11   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 15-11 shows the cable television market in Upstate New York.
-Refer to Figure 15-11. Suppose the local government imposes a $2.50 per month tax on cable companies. What happens to the price charged by the cable company following the imposition of this tax?

Accepted Answer

A)  The price rises from PM to (PM + $2.50). 
B)  The price rises from PM but it increases by an amount less than $2.50. 
C)  The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly's markup. 
D)  The price remains at PM. 
A)  The price rises from PM to (PM + $2.50). 
B)  The price rises from PM but it increases by an amount less than $2.50. 
C)  The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly's markup. 
D)  The price remains at PM.

Question 14

Figure 15-2   Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2. 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 15

a. What is the difference between a horizontal merger and a vertical merger?
b. Give an example of each type of merger.
c. Could a horizontal merger be welfare improving?

Accepted Answer

a. A horizontal merger is a merger betwe

Question 16

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power. Harberger found that

Accepted Answer

A)  the loss of economic efficiency in the U.S. economy due to market power was less than 1 percent of the value of production. 
B)  because of the increase in the average size of firms since World War II, the loss of economic efficiency has been relatively large, about 10 percent of the value of total production in the United States. 
C)  although the number of monopolies was small, the large number of other non-competitive firms in the United States resulted in a large loss of economic efficiency, about 20 percent of the value of total production. 
D)  the loss of economic efficiency in the U.S. economy due to market power was small around 1973, about 1 percent of the value of production, but has since grown to about 10 percent. 
A)  the loss of economic efficiency in the U.S. economy due to market power was less than 1 percent of the value of production. 
B)  because of the increase in the average size of firms since World War II, the loss of economic efficiency has been relatively large, about 10 percent of the value of total production in the United States. 
C)  although the number of monopolies was small, the large number of other non-competitive firms in the United States resulted in a large loss of economic efficiency, about 20 percent of the value of total production. 
D)  the loss of economic efficiency in the U.S. economy due to market power was small around 1973, about 1 percent of the value of production, but has since grown to about 10 percent.

Question 17

Figure 15-13  
-Refer to Figure 15-13. From the monopoly graph above, identify the area representing the deadweight loss. Would the deadweight loss be larger if the demand curve was more elastic or less elastic?

Accepted Answer

The deadweight loss = area C + D. The le

Question 18

An example of a monopoly based on control of a key resource is

Accepted Answer

A)  Major League Baseball. 
B)  the Paul Ecke Ranch monopoly on poinsettias. 
C)  Microsoft's Windows operating system. 
D)  the U.S. Food and Drug Administration. 
A)  Major League Baseball. 
B)  the Paul Ecke Ranch monopoly on poinsettias. 
C)  Microsoft's Windows operating system. 
D)  the U.S. Food and Drug Administration.

Question 19

Producers in perfect competition receive a smaller producer surplus than a monopoly producer.

Accepted Answer

A) True 
 B)False

Question 20

There are several types of barriers to entry that can create a monopoly. Which of the following barriers is the result of government action?

Accepted Answer

A)  network externalities 
B)  public franchise 
C)  economies of scale 
D)  control of a key resource 
A)  network externalities 
B)  public franchise 
C)  economies of scale 
D)  control of a key resource

Exam 15: Monopoly and Antitrust Policy

A monopoly is characterized by all of the following except

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.

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

Figure 15-10 -Refer to Figure 15-10. What is the area that represents consumer surplus under a monopoly?

What type of protection does U.S. law grant the creator of a book, film or piece of music?

A profit-maximizing monopoly produces a lower output level than would be produced if the industry were perfectly competitive.

To maximize profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and charges a price given by the demand curve at that output level.

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2. The firm's profit-maximizing price is

Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6. The monopolist's total revenue is

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

The Google search engine has a market share of ________ in the United States and ________ in Europe.

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2. If the firm's average total cost curve is ATC1, the firm will

a. What is the difference between a horizontal merger and a vertical merger? b. Give an example of each type of merger. c. Could a horizontal merger be welfare improving?

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power. Harberger found that

Figure 15-13 -Refer to Figure 15-13. From the monopoly graph above, identify the area representing the deadweight loss. Would the deadweight loss be larger if the demand curve was more elastic or less elastic?

An example of a monopoly based on control of a key resource is

Producers in perfect competition receive a smaller producer surplus than a monopoly producer.

There are several types of barriers to entry that can create a monopoly. Which of the following barriers is the result of government action?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The Google search engine has a market share of in the United States and in Europe.