Question 1

Network externalities

Accepted Answer

A)  can only exist when there are economies of scale. 
B)  prevent the dominance of a market by one firm. 
C)  exist when the usefulness of a product increases with the number of consumers who use it. 
D)  are created when celebrity endorsements of products lead to a surge in the demand for those products. 
A)  can only exist when there are economies of scale. 
B)  prevent the dominance of a market by one firm. 
C)  exist when the usefulness of a product increases with the number of consumers who use it. 
D)  are created when celebrity endorsements of products lead to a surge in the demand for those products.

Question 2

Figure 8-13   Figure 8-13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8-13.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Accepted Answer

A)  This results in a misallocation of resources. 
B)  The marginal cost of producing the last unit sold exceeds the marginal benefit. 
C)  The firm will sustain persistent losses and will not continue in business in the long run. 
D)  The firm will break even. 
A)  This results in a misallocation of resources. 
B)  The marginal cost of producing the last unit sold exceeds the marginal benefit. 
C)  The firm will sustain persistent losses and will not continue in business in the long run. 
D)  The firm will break even.

Question 3

Table 8-3
   Julie plans to start a pet-sitting service. She surveyed her neighbourhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 8-3 above shows a portion of her survey results.
-Refer to Table 8-3.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 4

What is a network externality?

Accepted Answer

A)  It refers to having a network of suppliers and buyers for a good or service. 
B)  It refers to lobbying to form a public enterprise. 
C)  It refers to a situation in which a product's usefulness increases with the number of people using it. 
D)  It refers to a product that requires connection to a network for it to be useful. 
A)  It refers to having a network of suppliers and buyers for a good or service. 
B)  It refers to lobbying to form a public enterprise. 
C)  It refers to a situation in which a product's usefulness increases with the number of people using it. 
D)  It refers to a product that requires connection to a network for it to be useful.

Question 5

Figure 8-2   Figure 8-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 8-2.To maximise profit,the firm will produce

Accepted Answer

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

Question 6

If a monopolist practices perfect price discrimination,

Accepted Answer

A)  the firm will break even in the long run. 
B)  consumer surplus will be equal to the deadweight loss. 
C)  producer surplus will equal consumer surplus. 
D)  consumer surplus will be zero. 
A)  the firm will break even in the long run. 
B)  consumer surplus will be equal to the deadweight loss. 
C)  producer surplus will equal consumer surplus. 
D)  consumer surplus will be zero.

Question 7

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 8

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Accepted Answer

A) True 
 B)False

Question 9

Firms do not have market power in which of the following market structures?

Accepted Answer

A)  Perfect competition only 
B)  Perfect competition and monopolistic competition 
C)  Oligopoly 
D)  Monopoly 
A)  Perfect competition only 
B)  Perfect competition and monopolistic competition 
C)  Oligopoly 
D)  Monopoly

Question 10

Economic efficiency in a free market occurs when

Accepted Answer

A)  consumer surplus is maximised. 
B)  producer surplus is maximised. 
C)  the sum of consumer surplus and producer surplus is maximised. 
D)  price is as low as possible. 
A)  consumer surplus is maximised. 
B)  producer surplus is maximised. 
C)  the sum of consumer surplus and producer surplus is maximised. 
D)  price is as low as possible.

Question 11

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 12

Figure 8-6   Figure 8-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 8-6.The profit-maximising output and price for the monopolist are

Accepted Answer

A)  Output = 62; price = $24. 
B)  Output = 62; price = $18. 
C)  Output = 83; price = $22. 
D)  Output = 104; price = $20.80. 
A)  Output = 62; price = $24. 
B)  Output = 62; price = $18. 
C)  Output = 83; price = $22. 
D)  Output = 104; price = $20.80.

Question 13

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 14

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Accepted Answer

A)  control of a key raw material. 
B)  network externalities. 
C)  economies of scale. 
D)  a perfectly inelastic demand curve. 
A)  control of a key raw material. 
B)  network externalities. 
C)  economies of scale. 
D)  a perfectly inelastic demand curve.

Question 15

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-2   Figure 8-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 8-2.If the firm's average total cost curve is ATC3,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 17

Governments grant patents to

Accepted Answer

A)  compensate firms for research and development costs. 
B)  encourage competition. 
C)  encourage low prices. 
D)  encourage firms to reveal secret production techniques. 
A)  compensate firms for research and development costs. 
B)  encourage competition. 
C)  encourage low prices. 
D)  encourage firms to reveal secret production techniques.

Question 18

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 19

Suppose a restaurant is trying to determine how much to charge for a bowl of chili,and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item.
a.Is charging a customer the price he or she is willing to pay for the bowl of chili an example of price discrimination? Briefly explain.
b.What is it called when a firm knows every consumer's willingness to pay,and can charge every consumer a different price? What happens to consumer surplus in this situation?

Accepted Answer

a.This is an example of price discrimina

Question 20

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1200.Assume that Iris and Daphne do not know each other.If the price is $500 per copy,

Accepted Answer

A)  only Iris will purchase Joss's services, and Joss will undertake the job for her. 
B)  only Daphne will purchase Joss's services, and Joss will undertake the job for her. 
C)  both Iris and Daphne will purchase Joss's services, and Joss will undertake the job. 
D)  both Iris and Daphne will want to purchase Joss's services, but Joss will not be willing to undertake the job. 
A)  only Iris will purchase Joss's services, and Joss will undertake the job for her. 
B)  only Daphne will purchase Joss's services, and Joss will undertake the job for her. 
C)  both Iris and Daphne will purchase Joss's services, and Joss will undertake the job. 
D)  both Iris and Daphne will want to purchase Joss's services, but Joss will not be willing to undertake the job.

Network externalities

Figure 8-13 Figure 8-13 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 8-13.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

What is a network externality?

Figure 8-2 Figure 8-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8-2.To maximise profit,the firm will produce

If a monopolist practices perfect price discrimination,

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

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Firms do not have market power in which of the following market structures?

Economic efficiency in a free market occurs when

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

Figure 8-6 Figure 8-6 shows the cost and demand curves for a monopolist. -Refer to Figure 8-6.The profit-maximising output and price for the monopolist are

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

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Figure 8-2 Figure 8-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8-2.If the firm's average total cost curve is ATC3,the firm will

Governments grant patents to

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 8: Technology, production, and Costs

Network externalities

Figure 8-13 Figure 8-13 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 8-13.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

What is a network externality?

Figure 8-2 Figure 8-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8-2.To maximise profit,the firm will produce

If a monopolist practices perfect price discrimination,

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

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Firms do not have market power in which of the following market structures?

Economic efficiency in a free market occurs when

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

Figure 8-6 Figure 8-6 shows the cost and demand curves for a monopolist. -Refer to Figure 8-6.The profit-maximising output and price for the monopolist are

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

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Figure 8-2 Figure 8-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8-2.If the firm's average total cost curve is ATC3,the firm will

Governments grant patents to

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters