Question 1

BHP Billiton is a Canadian company that owns mines in Canada that

Accepted Answer

A)  produce nickel. After World War II, BHP Billiton began to compete with another Canadian firm, the International Nickel Company. This competition eventually ended International Nickel's monopoly in this market. 
B)  produce bauxite, the mineral needed to produce aluminum. BHP Billiton began to mine bauxite after World War II. This competition eventually ended the Aluminum Company of America (ALCO
A) 's monopoly in this market. 
C)  produce coal. Until World War II, BHP Billiton had a monopoly on coal in Canada. 
D)  produce diamonds. 
A)  produce nickel. After World War II, BHP Billiton began to compete with another Canadian firm, the International Nickel Company. This competition eventually ended International Nickel's monopoly in this market. 
B)  produce bauxite, the mineral needed to produce aluminum. BHP Billiton began to mine bauxite after World War II. This competition eventually ended the Aluminum Company of America (ALCO
A) 's monopoly in this market. 
C)  produce coal. Until World War II, BHP Billiton had a monopoly on coal in Canada. 
D)  produce diamonds.

Question 2

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 3

Identify the type of merger in each of the following situations and indicate how the post-merger concentration ratio for the industry is affected.
a. A steel company merges with a coal and iron ore mining company.
b. Staples, a retailer of office supplies, acquires Office Depot, another retailer of office supplies.
c. An oil company merges with pipeline, shipping, and railroad companies as well as refineries and gas stations.

Accepted Answer

a. This would be a vertical merger; the

Question 4

Figure 15-9   Figure 15-9 shows the demand and cost curves for a monopolist.
-Compared to perfect competition, the consumer surplus in a monopoly

Accepted Answer

A)  is unchanged because price and output are the same. 
B)  is lower because price is higher and output is lower. 
C)  is higher because price is higher and output is the same. 
D)  is eliminated. 
A)  is unchanged because price and output are the same. 
B)  is lower because price is higher and output is lower. 
C)  is higher because price is higher and output is the same. 
D)  is eliminated.

Question 5

Figure 15-16   Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of ________ and charge a price of ________.

Accepted Answer

A)  Q1 units; P4 
B)  Q1 units; P1 
C)  Q5 units; P3 
D)  Q3 units; P3 
A)  Q1 units; P4 
B)  Q1 units; P1 
C)  Q5 units; P3 
D)  Q3 units; P3

Question 6

Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows: a. Firm A: 30%
B. Firm B: 20%
C. Firms C, D and E: 10% each
D. Firms F, G, H and J: 5% each
What is the value of the Herfindahl-Hirschman Index and how is the industry categorized?

Accepted Answer

A)  1700; moderately concentrated 
B)  1425; moderately concentrated 
C)  1600; moderately concentrated 
D)  2600; highly concentrated 
A)  1700; moderately concentrated 
B)  1425; moderately concentrated 
C)  1600; moderately concentrated 
D)  2600; highly concentrated

Question 7

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

Accepted Answer

A) True 
 B)False

Question 8

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Accepted Answer

A)  to maximize profit, the firm should increase output. 
B)  to maximize profit, the firm should decrease output. 
C)  to maximize profit, the firm should continue to produce the output it is producing. 
D)  Not enough information is given to say what the firm should do to maximize profit. 
A)  to maximize profit, the firm should increase output. 
B)  to maximize profit, the firm should decrease output. 
C)  to maximize profit, the firm should continue to produce the output it is producing. 
D)  Not enough information is given to say what the firm should do to maximize profit.

Question 9

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 10

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly?

Accepted Answer

A)  Yes, there are no substitutes to Peet's coffee. 
B)  No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes. 
C)  Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. 
D)  No, Peet's is not a monopoly because there are many branches of Peet's. 
A)  Yes, there are no substitutes to Peet's coffee. 
B)  No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes. 
C)  Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. 
D)  No, Peet's is not a monopoly because there are many branches of Peet's.

Question 11

Market power in the United States causes a huge loss of economic efficiency.

Accepted Answer

A) True 
 B)False

Question 12

The demand curve for a monopoly firm

Accepted Answer

A)  is perfectly inelastic. 
B)  lies below its marginal revenue curve. 
C)  is the same as the market demand curve. 
D)  is horizontal. 
A)  is perfectly inelastic. 
B)  lies below its marginal revenue curve. 
C)  is the same as the market demand curve. 
D)  is horizontal.

Question 13

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

Accepted Answer

A)  Spuds McKenzie, a wealthy potato farmer in Idaho 
B)  Cheap Gas, one of two gasoline stations in a large rural community 
C)  Santos Tacos, the only taqueria in the small town of Santosville 
D)  Zippie Rentals, a sports car rental service in the downtown Boston area 
A)  Spuds McKenzie, a wealthy potato farmer in Idaho 
B)  Cheap Gas, one of two gasoline stations in a large rural community 
C)  Santos Tacos, the only taqueria in the small town of Santosville 
D)  Zippie Rentals, a sports car rental service in the downtown Boston area

Question 14

Which one of the following about a monopoly is false?

Accepted Answer

A)  A monopoly could make profits in the long run. 
B)  A monopoly could break even in the long run. 
C)  A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly. 
D)  A monopoly status could be temporary. 
A)  A monopoly could make profits in the long run. 
B)  A monopoly could break even in the long run. 
C)  A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly. 
D)  A monopoly status could be temporary.

Question 15

If a monopolist's price is $50 at 63 units of output, and marginal revenue equals marginal cost and average total cost equals $43, then the firm's total profit is

Accepted Answer

A)  $3,150. 
B)  $2,709. 
C)  $441. 
D)  $7. 
A)  $3,150. 
B)  $2,709. 
C)  $441. 
D)  $7.

Question 16

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Accepted Answer

A monopoly's marginal revenue curve lies

Question 17

A possible advantage of a horizontal merger for the economy is that

Accepted Answer

A)  the merging firms could avoid losses. 
B)  the merged firm might reap economies of scale which could translate into lower prices. 
C)  the degree of competition in the industry will be intensified. 
D)  the government stands to collect more corporate income tax revenue. 
A)  the merging firms could avoid losses. 
B)  the merged firm might reap economies of scale which could translate into lower prices. 
C)  the degree of competition in the industry will be intensified. 
D)  the government stands to collect more corporate income tax revenue.

Question 18

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.

Accepted Answer

A) True 
 B)False

Question 19

Figure 15-17  
-Consider two industries, industry Q and industry Z. In industry Q there are 10 companies, each with a market share of 10% of total sales. In industry Z, there are eight companies. One company has a 65% market share and each of the other seven firms has a market share of 5%.
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 Q

Question 20

Figure 15-4   Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4. What is the price charged for the profit-maximizing output level?

Accepted Answer

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

Exam 15: Monopoly and Antitrust Policy

BHP Billiton is a Canadian company that owns mines in Canada that

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

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Compared to perfect competition, the consumer surplus in a monopoly

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of ________ and charge a price of ________.

Consider an industry that is made up of nine firms each with a market share (percent of sales) as follows: a. Firm A: 30% B. Firm B: 20% C. Firms C, D and E: 10% each D. Firms F, G, H and J: 5% each What is the value of the Herfindahl-Hirschman Index and how is the industry categorized?

The term "trust" in antitrust refers to a board of trustees that has collusive control over different companies.

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

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?

Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly?

Market power in the United States causes a huge loss of economic efficiency.

The demand curve for a monopoly firm

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

Which one of the following about a monopoly is false?

If a monopolist's price is $50 at 63 units of output, and marginal revenue equals marginal cost and average total cost equals $43, then the firm's total profit is

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

A possible advantage of a horizontal merger for the economy is that

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then the average profit is $7.

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4. What is the price charged for the profit-maximizing output level?

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

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment, the firm will produce an output of and charge a price of .