Question 1

A patent or copyright is a barrier to entry based on

Accepted Answer

A)  ownership of a key necessary raw material. 
B)  large economies of scale as output increases. 
C)  government action to protect a producer. 
D)  widespread network externalities. 
A)  ownership of a key necessary raw material. 
B)  large economies of scale as output increases. 
C)  government action to protect a producer. 
D)  widespread network externalities.

Question 2

Figure 15-9   
Figure 15-9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-9.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 3

A monopoly differs from monopolistic competition in that

Accepted Answer

A)  a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  a monopoly can never make a loss but a firm in monopolistic competition can. 
C)  in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. 
D)  a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve. 
A)  a monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  a monopoly can never make a loss but a firm in monopolistic competition can. 
C)  in a monopoly there are significant entry barriers but there are low barriers to entry in a monopolistically competitive market structure. 
D)  a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

Question 4

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximizing outputs?

Accepted Answer

A)  Marginal revenue is less than price. 
B)  Marginal revenue equals marginal cost. 
C)  Price equals marginal cost. 
D)  Average revenue equals average cost. 
A)  Marginal revenue is less than price. 
B)  Marginal revenue equals marginal cost. 
C)  Price equals marginal cost. 
D)  Average revenue equals average cost.

Question 5

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 6

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 7

What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?

Accepted Answer

A monopoly is the only seller

Question 8

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

Accepted Answer

The answer of Consider an industry that is made up...

Question 9

Economic efficiency requires that a natural monopoly's price be

Accepted Answer

A)  equal to average total cost where it intersects the demand curve. 
B)  equal to marginal cost where it intersects the demand curve. 
C)  equal to average variable cost where it intersects the demand curve. 
D)  equal to the lowest price the firm can charge and still make a normal profit. 
A)  equal to average total cost where it intersects the demand curve. 
B)  equal to marginal cost where it intersects the demand curve. 
C)  equal to average variable cost where it intersects the demand curve. 
D)  equal to the lowest price the firm can charge and still make a normal profit.

Question 10

The Sherman Act prohibited

Accepted Answer

A)  marginal cost pricing. 
B)  setting price above marginal cost. 
C)  collusive price agreements among rival sellers. 
D)  selling below average total cost. 
A)  marginal cost pricing. 
B)  setting price above marginal cost. 
C)  collusive price agreements among rival sellers. 
D)  selling below average total cost.

Question 11

Natural monopolies in the United States are generally regulated by

Accepted Answer

A)  the Federal Trade Commission. 
B)  the Department of Justice. 
C)  local or state regulatory commissions. 
D)  the Department of Commerce. 
A)  the Federal Trade Commission. 
B)  the Department of Justice. 
C)  local or state regulatory commissions. 
D)  the Department of Commerce.

Question 12

For a natural monopoly to exist,

Accepted Answer

A)  a firm must continually buy up its rivals. 
B)  a firm's long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level. 
C)  a firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand. 
D)  a firm must have a government-imposed barrier. 
A)  a firm must continually buy up its rivals. 
B)  a firm's long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level. 
C)  a firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand. 
D)  a firm must have a government-imposed barrier.

Question 13

If a firm's average total cost is less than price where MR=MC,

Accepted Answer

A)  the firm should shut down. 
B)  the firm should raise its price. 
C)  the firm should continue to produce the output it is producing. 
D)  the firm should cut back on its output to lower its cost. 
A)  the firm should shut down. 
B)  the firm should raise its price. 
C)  the firm should continue to produce the output it is producing. 
D)  the firm should cut back on its output to lower its cost.

Question 14

Figure 15-4  
-Refer to Figure 15-4.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 reve

Question 15

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

Question 16

Figure 15-1   Figure 15-1 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-1.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

If a natural monopoly regulatory commission sets a price where marginal cost is equal to demand

Accepted Answer

A)  the firm would earn monopoly profits. 
B)  economic efficiency would not be achieved. 
C)  the firm would incur a loss. 
D)  the firm would break even. 
A)  the firm would earn monopoly profits. 
B)  economic efficiency would not be achieved. 
C)  the firm would incur a loss. 
D)  the firm would break even.

Question 18

A product's price approaches its marginal cost as market concentration increases.

Accepted Answer

A) True 
 B)False

Question 19

The first important federal law passed to regulate monopolies in the United States was the

Accepted Answer

A)  Cellar-Kefauver Act. 
B)  Clayton Act. 
C)  Federal Trade Commission Act. 
D)  Sherman Act. 
A)  Cellar-Kefauver Act. 
B)  Clayton Act. 
C)  Federal Trade Commission Act. 
D)  Sherman Act.

Question 20

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

Exam 15: Monopoly and Antitrust Policy

A patent or copyright is a barrier to entry based on

Figure 15-9 Figure 15-9 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-9.The firm would maximize profit by producing

A monopoly differs from monopolistic competition in that

Which of the following statements applies to a monopolist but not to a perfectly competitive firm at their profit maximizing outputs?

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

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

What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?

Economic efficiency requires that a natural monopoly's price be

The Sherman Act prohibited

Natural monopolies in the United States are generally regulated by

For a natural monopoly to exist,

If a firm's average total cost is less than price where MR=MC,

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

Figure 15-1 Figure 15-1 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-1.If the firm's average total cost curve is ATC3,the firm will

If a natural monopoly regulatory commission sets a price where marginal cost is equal to demand

A product's price approaches its marginal cost as market concentration increases.

The first important federal law passed to regulate monopolies in the United States was the

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.

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 15-1 Figure 15-1 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-1.If the firm's average total cost curve is ATC₃,the firm will