Question 1

Figure 15-1  
-Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

Accepted Answer

A)  The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B)  The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C)  The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D)  The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits. 
A)  The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B)  The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C)  The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D)  The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits.

Question 2

Figure 15-16   Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit maximizing owners.If regulators require that the firm produces the economically efficient output level,what is this level and what price will be charged?

Accepted Answer

A)  Q4 units; P4 
B)  Q1 units; P4 
C)  Q1 units; P1 
D)  Q3 units; P3 
A)  Q4 units; P4 
B)  Q1 units; P4 
C)  Q1 units; P1 
D)  Q3 units; P3

Question 3

Figure 15-3   Figure 15-3 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-3.What happens to the monopolist represented in the diagram in the long run?

Accepted Answer

A)  It will raise its price at least until it breaks even. 
B)  If the cost and demand curves remain the same, it will exit the market. 
C)  The government will subsidize the monopoly to enable it to break even. 
D)  It will be forced out of business by more efficient producers. 
A)  It will raise its price at least until it breaks even. 
B)  If the cost and demand curves remain the same, it will exit the market. 
C)  The government will subsidize the monopoly to enable it to break even. 
D)  It will be forced out of business by more efficient producers.

Question 4

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 5

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 6

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.

Question 7

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

Question 8

Because a monopoly's demand curve is the same as the market demand curve for its product

Accepted Answer

A)  the monopoly's marginal revenue equals its price. 
B)  the monopoly is a price taker. 
C)  the monopoly must lower its price to sell more of its product. 
D)  the monopoly's average total cost always falls as it increases its output. 
A)  the monopoly's marginal revenue equals its price. 
B)  the monopoly is a price taker. 
C)  the monopoly must lower its price to sell more of its product. 
D)  the monopoly's average total cost always falls as it increases its output.

Question 9

Figure 15-16   Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.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 10

If a restaurant was a natural monopoly,its

Accepted Answer

A)  marginal cost curve would still be declining when it crossed the demand curve. 
B)  average total cost curve would still be declining when it crossed the demand curve. 
C)  marginal revenue curve wold be the same as its demand curve. 
D)  marginal revenue curve would be horizontal. 
A)  marginal cost curve would still be declining when it crossed the demand curve. 
B)  average total cost curve would still be declining when it crossed the demand curve. 
C)  marginal revenue curve wold be the same as its demand curve. 
D)  marginal revenue curve would be horizontal.

Question 11

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 12

When a proposed merger between two companies is reviewed by the government,the relevant market is defined by

Accepted Answer

A)  whether or not there are close substitutes for the products of the two firms. 
B)  how elastic the demand is for each firm's product. 
C)  counting the number of firms that produce the same product. 
D)  how much advertising is done in the industry. 
A)  whether or not there are close substitutes for the products of the two firms. 
B)  how elastic the demand is for each firm's product. 
C)  counting the number of firms that produce the same product. 
D)  how much advertising is done in the industry.

Question 13

The Federal Trade Commission (FTC)Act

Accepted Answer

A)  gave the FTC full power to regulate mergers. 
B)  closed the loopholes in the Sherman and Clayton Acts. 
C)  divided authority to police mergers between the FTC and the Department of Justice. 
D)  prohibited charging buyers different prices if the result would reduce competition. 
A)  gave the FTC full power to regulate mergers. 
B)  closed the loopholes in the Sherman and Clayton Acts. 
C)  divided authority to police mergers between the FTC and the Department of Justice. 
D)  prohibited charging buyers different prices if the result would reduce competition.

Question 14

The Google search engine has a market share of ________ in the United States and ________ in Europe.

Accepted Answer

A)  90 percent; 25 percent 
B)  50 percent; 50 percent 
C)  70 percent; 90 percent 
D)  45 percent; 15 percent 
A)  90 percent; 25 percent 
B)  50 percent; 50 percent 
C)  70 percent; 90 percent 
D)  45 percent; 15 percent

Question 15

Figure 15-15   Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at ________ and the output level is ________.

Accepted Answer

A)  P1, Q4 
B)  P2, Q3 
C)  P2, Q2 
D)  P3, Q2 
A)  P1, Q4 
B)  P2, Q3 
C)  P2, Q2 
D)  P3, Q2

Question 16

Figure 15-16   Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to figure 15-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Accepted Answer

A)  Q0 units; P0 
B)  Q1 units; P1 
C)  Q1 units; P4 
D)  Q3 units; P3 
A)  Q0 units; P0 
B)  Q1 units; P1 
C)  Q1 units; P4 
D)  Q3 units; P3

Question 17

Using a broad definition,a firm would have a monopoly if

Accepted Answer

A)  it produced a product that has no close substitutes. 
B)  it does not have to collude with any other producer to earn an economic profit. 
C)  there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D)  it can make decisions regarding price and output without violating antitrust laws. 
A)  it produced a product that has no close substitutes. 
B)  it does not have to collude with any other producer to earn an economic profit. 
C)  there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D)  it can make decisions regarding price and output without violating antitrust laws.

Question 18

Figure 15-11   In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable television market in Upstate New York.
-Refer to Figure 15-11.What is the size of the deadweight loss prior to Verizon entering the market and what happens to this deadweight loss after Verizon does enter the market?

Accepted Answer

A)  The deadweight loss of area D is converted to consumer surplus. 
B)  The deadweight loss of area C+D is converted to consumer surplus 
C)  The deadweight loss of area D is converted to producer surplus. 
D)  The total deadweight loss is the area D+F; D is converted to consumer surplus and F to producer surplus. 
A)  The deadweight loss of area D is converted to consumer surplus. 
B)  The deadweight loss of area C+D is converted to consumer surplus 
C)  The deadweight loss of area D is converted to producer surplus. 
D)  The total deadweight loss is the area D+F; D is converted to consumer surplus and F to producer surplus.

Question 19

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Accepted Answer

A network externality exists where the u

Question 20

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

Accepted Answer

A)  decrease marginal cost. 
B)  raise average total cost. 
C)  increase total revenue. 
D)  make marginal revenue less elastic. 
A)  decrease marginal cost. 
B)  raise average total cost. 
C)  increase total revenue. 
D)  make marginal revenue less elastic.

Figure 15-1 -Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.What happens to the monopolist represented in the diagram in the long run?

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

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

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?

Because a monopoly's demand curve is the same as the market demand curve for its product

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

If a restaurant was a natural monopoly,its

When a proposed merger between two companies is reviewed by the government,the relevant market is defined by

The Federal Trade Commission (FTC)Act

The Google search engine has a market share of in the United States and in Europe.

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at and the output level is .

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 15-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce units and charge a price of .

Using a broad definition,a firm would have a monopoly if

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

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

Filters

Exam 15: Monopoly and Antitrust Policy

Figure 15-1 -Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.What happens to the monopolist represented in the diagram in the long run?

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

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

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?

Because a monopoly's demand curve is the same as the market demand curve for its product

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

If a restaurant was a natural monopoly,its

When a proposed merger between two companies is reviewed by the government,the relevant market is defined by

The Federal Trade Commission (FTC)Act

The Google search engine has a market share of ________ in the United States and ________ in Europe.

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at ________ and the output level is ________.

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 15-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.

Using a broad definition,a firm would have a monopoly if

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

If a restaurant was a natural monopoly,dividing the restaurant equally into two separate restaurants would

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

Filters

The Google search engine has a market share of in the United States and in Europe.

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at and the output level is .

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 15-16.In the absence of any government regulation,the profit-maximizing owners of this firm will produce units and charge a price of .