Question 1

A monopoly firm's demand curve

Accepted Answer

A)  is the same as the market demand curve. 
B)  is perfectly inelastic. 
C)  is more inelastic than the demand curve for the product. 
D)  is inelastic at high prices and elastic at lower prices. 
A)  is the same as the market demand curve. 
B)  is perfectly inelastic. 
C)  is more inelastic than the demand curve for the product. 
D)  is inelastic at high prices and elastic at lower prices.

Question 2

Figure 15-10  
-Refer to Figure 15-10. The deadweight loss due to a monopoly is represented by the area

Accepted Answer

A)  FHE. 
B)  FGE. 
C)  GEH. 
D)  FQ1Q2E. 
A)  FHE. 
B)  FGE. 
C)  GEH. 
D)  FQ1Q2E.

Question 3

To be a natural monopoly a firm must

Accepted Answer

A)  control a key resource input. 
B)  have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C)  have significant network externalities. 
D)  be very large relative to the total market. 
A)  control a key resource input. 
B)  have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C)  have significant network externalities. 
D)  be very large relative to the total market.

Question 4

To have a monopoly in an industry there must be

Accepted Answer

A)  barriers to entry so high that no other firms can enter the industry. 
B)  a patent or copyright giving the firm exclusive rights to sell a product for 20 years. 
C)  an inelastic demand for the industry's product. 
D)  a public franchise, making the monopoly the exclusive legal provider of a good or service. 
A)  barriers to entry so high that no other firms can enter the industry. 
B)  a patent or copyright giving the firm exclusive rights to sell a product for 20 years. 
C)  an inelastic demand for the industry's product. 
D)  a public franchise, making the monopoly the exclusive legal provider of a good or service.

Question 5

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly?

Accepted Answer

A)  Each must lower its price to sell more output. 
B)  Each sets a price for its product that will maximize its revenue. 
C)  Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. 
D)  Each maximizes profits by producing a quantity for which price equals marginal cost. 
A)  Each must lower its price to sell more output. 
B)  Each sets a price for its product that will maximize its revenue. 
C)  Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. 
D)  Each maximizes profits by producing a quantity for which price equals marginal cost.

Question 7

Explain why the monopolist has no supply curve?

Accepted Answer

A supply curve that shows the relationsh

Question 8

A firm that has the ability to control to some degree the price of the product it sells

Accepted Answer

A)  is also able to dictate the quantity purchased. 
B)  faces a demand curve that is inelastic throughout the range of market demand. 
C)  is a price maker. 
D)  faces a perfectly inelastic demand curve. 
A)  is also able to dictate the quantity purchased. 
B)  faces a demand curve that is inelastic throughout the range of market demand. 
C)  is a price maker. 
D)  faces a perfectly inelastic demand curve.

Question 9

In 1935, the U.S. Patent and Trademark Office issued Parker Brothers a trademark on the use of the name Monopoly for a board game. Hasbro bought Parker Brothers in 1991. Which of the following statements is true regarding the trademark on the name Monopoly for a board game?

Accepted Answer

A)  The original trademark expired well before Hasbro bought Parker Brothers, so they never had a trademark on Monopoly. 
B)  Trademarks never expire, so Hasbro continues to have a trademark on the name Monopoly. 
C)  The trademark expired in 2011, 20 years after Hasbro's purchase of Parker Brothers. 
D)  The trademark expired in 1955, 20 years after the trademark was issued to Parker Brothers. 
A)  The original trademark expired well before Hasbro bought Parker Brothers, so they never had a trademark on Monopoly. 
B)  Trademarks never expire, so Hasbro continues to have a trademark on the name Monopoly. 
C)  The trademark expired in 2011, 20 years after Hasbro's purchase of Parker Brothers. 
D)  The trademark expired in 1955, 20 years after the trademark was issued to Parker Brothers.

Question 10

Figure 15-9   Figure 15-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-9. At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production?

Accepted Answer

A)  $8 
B)  $11.50 
C)  $21 
D)  There is no difference. 
A)  $8 
B)  $11.50 
C)  $21 
D)  There is no difference.

Question 11

Consider two industries, industry W and industry X. In industry W there are five companies, each with a market share of 20% of total sales. In industry X, there are six companies. One company has a 50% market share and each of the other five firms has a market share of 10%.
a. Calculate the four-firm concentration ratio for each industry.
b. Calculate the Herfindahl-Hirschman Index (HHI) for each industry.
c. What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

a. The concentration ratio in industry W

Question 12

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so?

Accepted Answer

A)  because Microsoft is large enough to hire the best people in the field 
B)  because Microsoft could potentially lose sales if it sets prices indiscriminately 
C)  because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price, but Microsoft's optimal output depends on the price it selects 
D)  because unlike Microsoft, the wealthy corn farmer is probably a monopolist 
A)  because Microsoft is large enough to hire the best people in the field 
B)  because Microsoft could potentially lose sales if it sets prices indiscriminately 
C)  because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price, but Microsoft's optimal output depends on the price it selects 
D)  because unlike Microsoft, the wealthy corn farmer is probably a monopolist

Question 13

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. The standards used by the Department of Justice and the FTC to evaluate a potential merger such as the one between American Airlines and US Airways are based on market concentration as determined by the

Accepted Answer

A)  Herfindahl-Hirschman Index. 
B)  Clayton Antitrust Act. 
C)  Anti-Collusion Task Force. 
D)  Robinson-Patman Act. 
A)  Herfindahl-Hirschman Index. 
B)  Clayton Antitrust Act. 
C)  Anti-Collusion Task Force. 
D)  Robinson-Patman Act.

Question 14

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 15

If we use a narrow definition of monopoly, then a monopoly is defined as a firm

Accepted Answer

A)  that has been granted special production rights by the government. 
B)  that can ignore the actions of all other firms because it produces a superior product compared to its rivals' products. 
C)  that can ignore the actions of all other firms because it produces a product for which there are no close substitutes. 
D)  that has the largest market share in an industry. 
A)  that has been granted special production rights by the government. 
B)  that can ignore the actions of all other firms because it produces a superior product compared to its rivals' products. 
C)  that can ignore the actions of all other firms because it produces a product for which there are no close substitutes. 
D)  that has the largest market share in an industry.

Question 16

Merger guidelines developed by the Antitrust Division of the U.S. Department of Justice use four-firm concentration ratios as measures of concentration.

Accepted Answer

A) True 
 B)False

Question 17

The National Football League has long-term leases with the stadiums in major cities. Control of these stadiums is an entry barrier to a potential new football league.

Accepted Answer

A) True 
 B)False

Question 18

In the United States, government policies with respect to monopolies and collusion are embodied in

Accepted Answer

A)  the U.S. Constitution. 
B)  common law, which the United States adopted from English law. 
C)  the Supreme Court. 
D)  antitrust laws. 
A)  the U.S. Constitution. 
B)  common law, which the United States adopted from English law. 
C)  the Supreme Court. 
D)  antitrust laws.

Question 19

In 2011, Microsoft filed a complaint with the European Commission accusing Google of taking steps to monopolize the Internet search engine business. Microsoft's primary complaint was that

Accepted Answer

A)  Google is the only Internet search engine available to Windows operating system users. 
B)  the European Union contracts exclusively with Google for its Internet search engine use. 
C)  Google was using its dominant position as an Internet search engine to exclude competitors. 
D)  Google owns the Internet advertising companies that pay for ads on search engine sites, and has prohibited ads from being sold to competitors. 
A)  Google is the only Internet search engine available to Windows operating system users. 
B)  the European Union contracts exclusively with Google for its Internet search engine use. 
C)  Google was using its dominant position as an Internet search engine to exclude competitors. 
D)  Google owns the Internet advertising companies that pay for ads on search engine sites, and has prohibited ads from being sold to competitors.

Question 20

Table 15-2
   The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 15-2 shows the cost and demand data for this government protected monopolist.
-Refer to Table 15-2. What is the amount of profit that the firm earns?

Accepted Answer

A)  $34.50 
B)  $42 
C)  $47 
D)  $49 
A)  $34.50 
B)  $42 
C)  $47 
D)  $49

Exam 15: Monopoly and Antitrust Policy

A monopoly firm's demand curve

Figure 15-10 -Refer to Figure 15-10. The deadweight loss due to a monopoly is represented by the area

To be a natural monopoly a firm must

To have a monopoly in an industry there must be

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly?

Explain why the monopolist has no supply curve?

A firm that has the ability to control to some degree the price of the product it sells

In 1935, the U.S. Patent and Trademark Office issued Parker Brothers a trademark on the use of the name Monopoly for a board game. Hasbro bought Parker Brothers in 1991. Which of the following statements is true regarding the trademark on the name Monopoly for a board game?

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9. At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production?

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so?

A public franchise

If we use a narrow definition of monopoly, then a monopoly is defined as a firm

Merger guidelines developed by the Antitrust Division of the U.S. Department of Justice use four-firm concentration ratios as measures of concentration.

The National Football League has long-term leases with the stadiums in major cities. Control of these stadiums is an entry barrier to a potential new football league.

In the United States, government policies with respect to monopolies and collusion are embodied in

In 2011, Microsoft filed a complaint with the European Commission accusing Google of taking steps to monopolize the Internet search engine business. Microsoft's primary complaint was that

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