Question 1

Figure 15-15   Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15. The firm would maximize profit by producing

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units.

Question 2

Identify two ways by which the government controls monopolies?

Accepted Answer

The government control monopol

Question 3

What is the difference between a public franchise and a public enterprise?

Accepted Answer

A)  A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government. 
B)  A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government. 
C)  A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government. 
D)  Both refer to a service provided directly to consumers through the government, but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries. 
A)  A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government. 
B)  A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government. 
C)  A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government. 
D)  Both refer to a service provided directly to consumers through the government, but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries.

Question 4

To maintain a monopoly, a firm must have

Accepted Answer

A)  a perfectly inelastic demand. 
B)  an insurmountable barrier to entry. 
C)  marginal revenue equal to demand. 
D)  few competitors. 
A)  a perfectly inelastic demand. 
B)  an insurmountable barrier to entry. 
C)  marginal revenue equal to demand. 
D)  few competitors.

Question 5

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

Accepted Answer

A)  Each natural monopoly is made a public franchise. The public franchise is then required to set its price equal to its marginal cost. 
B)  Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C)  Natural monopolies are privately owned and allowed to set their own prices. Government regulation of the firms would result in greater deadweight losses. 
D)  Local or state regulatory commissions usually set prices for natural monopolies. 
A)  Each natural monopoly is made a public franchise. The public franchise is then required to set its price equal to its marginal cost. 
B)  Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C)  Natural monopolies are privately owned and allowed to set their own prices. Government regulation of the firms would result in greater deadweight losses. 
D)  Local or state regulatory commissions usually set prices for natural monopolies.

Question 6

Figure 15-5  
-Refer to Figure 15-5. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Accepted Answer

A)  continue to produce because price is greater than average variable cost. 
B)  shut down because price is greater than marginal cost. 
C)  shut down because price is less than average total cost. 
D)  continue to produce because a monopolist always earns a profit. 
A)  continue to produce because price is greater than average variable cost. 
B)  shut down because price is greater than marginal cost. 
C)  shut down because price is less than average total cost. 
D)  continue to produce because a monopolist always earns a profit.

Question 7

Figure 15-14  
-A Herfindahl-Hirschman Index is calculated by

Accepted Answer

A)  summing the amount of sales by the four largest firms and dividing by total industry sales. 
B)  dividing the number of firms wanting to merge by the total number in the industry. 
C)  summing the squares of the market shares of each firm in the industry. 
D)  summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures. 
A)  summing the amount of sales by the four largest firms and dividing by total industry sales. 
B)  dividing the number of firms wanting to merge by the total number in the industry. 
C)  summing the squares of the market shares of each firm in the industry. 
D)  summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.

Question 8

Article Summary
Arguing that a merger would lead to higher prices, reduced service, and significantly less competition, the Justice Department and attorneys general from 6 states and the District of Columbia filed a lawsuit in August to challenge the pending merger of American Airlines and US Airways. The lawsuit took some by surprise as the Justice Department has in recent years approved the mergers of Delta with Northwest and United with Continental. The European Union approved the merger in August, and American and US Airways had hoped to complete the merger by September.
Source: Even Perez, "US government seeks to block American-US Airways merger," CNN.com, August 13, 2013.
-Refer to the Article Summary. A merger between two competitors such as American Airlines and US Airways may ultimately be approved by the Department of Justice and the FTC if the two companies can substantiate ________ as a result of the merger.

Accepted Answer

A)  increases in revenue for the merged company 
B)  an increase in the HHI to over 1,800 
C)  decreases in marginal revenue for the merged company 
D)  increases in economic efficiency 
A)  increases in revenue for the merged company 
B)  an increase in the HHI to over 1,800 
C)  decreases in marginal revenue for the merged company 
D)  increases in economic efficiency

Question 9

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?

Accepted Answer

A)  If a merger would result in an Index value less than 1,000, the merger would not be challenged. 
B)  If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged. 
C)  If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged. 
D)  If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged. 
A)  If a merger would result in an Index value less than 1,000, the merger would not be challenged. 
B)  If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged. 
C)  If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged. 
D)  If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged.

Question 10

Figure 15-9   Figure 15-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-9. What is the difference between the monopoly output and the perfectly competitive output?

Accepted Answer

A)  140 units 
B)  240 units 
C)  340 units 
D)  560 units 
A)  140 units 
B)  240 units 
C)  340 units 
D)  560 units

Question 11

Some economists believe that the economy benefits from firms having market power. Which of the following is an argument that has been made to support this position?

Accepted Answer

A)  Large firms are better able than small firms to spend funds on research and development required to develop new products. 
B)  Competition is very rare in the U.S. economy and few new products are produced by smaller, competitive firms. 
C)  Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. 
D)  Large firms can afford to lobby the U.S. government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries. 
A)  Large firms are better able than small firms to spend funds on research and development required to develop new products. 
B)  Competition is very rare in the U.S. economy and few new products are produced by smaller, competitive firms. 
C)  Research has shown that the deadweight loss from monopolies is a small percentage of the value of production in the United States. 
D)  Large firms can afford to lobby the U.S. government in order to impose restrictions on imports and reduce the outsourcing of jobs to other countries.

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15. The firm would maximize profit by producing

Identify two ways by which the government controls monopolies?

What is the difference between a public franchise and a public enterprise?

To maintain a monopoly, a firm must have

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

Figure 15-5 -Refer to Figure 15-5. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Figure 15-14 -A Herfindahl-Hirschman Index is calculated by

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9. What is the difference between the monopoly output and the perfectly competitive output?

Some economists believe that the economy benefits from firms having market power. Which of the following is an argument that has been made to support this position?

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

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Exam 15: Monopoly and Antitrust Policy

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15. The firm would maximize profit by producing

Identify two ways by which the government controls monopolies?

What is the difference between a public franchise and a public enterprise?

To maintain a monopoly, a firm must have

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit. How are prices usually set in natural monopoly markets in the United States?

Figure 15-5 -Refer to Figure 15-5. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Figure 15-14 -A Herfindahl-Hirschman Index is calculated by

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed. Which of the following statements regarding the value of the Index for a given industry is true?

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9. What is the difference between the monopoly output and the perfectly competitive output?

Some economists believe that the economy benefits from firms having market power. Which of the following is an argument that has been made to support this position?

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