Question 1

A patent

Accepted Answer

A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D)  gives the firm the exclusive right to a new product during the product inventor's lifetime. 
A)  grants the creator of a book, film, or piece of music the exclusive right to use the creation for 20 years. 
B)  grants the creator of a book, film, or piece of music the exclusive right to use the creation during the creator's lifetime. 
C)  gives a firm the exclusive right to a new product for 20 years from the date the product is invented. 
D)  gives the firm the exclusive right to a new product during the product inventor's lifetime.

Question 2

If a monopolist's price is $50 per 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 3

When the government makes a firm the exclusive legal provider of a good or service,it grants the firm

Accepted Answer

A)  a copyright. 
B)  a network externality. 
C)  a quota. 
D)  a public franchise. 
A)  a copyright. 
B)  a network externality. 
C)  a quota. 
D)  a public franchise.

Question 4

Which antitrust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms?

Accepted Answer

A)  the Clayton Act 
B)  the Securities and Exchange Act 
C)  the Sherman Act 
D)  the Robinson-Patman Act 
A)  the Clayton Act 
B)  the Securities and Exchange Act 
C)  the Sherman Act 
D)  the Robinson-Patman Act

Question 5

Table 15-3
   Assume Table 15-3 gives the monthly demand and costs for subscriptions to basic cable for Comcast, a cable television monopoly in Philadelphia.
-Refer to Table 15-3.If Comcast wants to maximize its profits,what price (P)should it charge and how many cable subscriptions per month (Q)should it sell?

Accepted Answer

A)  P = $12; Q = 8 
B)  P = $14; Q = 6 
C)  P = $16; Q = 4 
D)  P = $15: Q = 5 
A)  P = $12; Q = 8 
B)  P = $14; Q = 6 
C)  P = $16; Q = 4 
D)  P = $15: Q = 5

Question 6

Identify two ways by which the government controls monopolies?

Accepted Answer

The government control monopol

Question 7

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

Accepted Answer

A)  Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. 
B)  Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized. 
C)  Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers. Under monopoly conditions, economic surplus is equal to producer surplus. 
D)  Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss. 
A)  Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions. 
B)  Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized. 
C)  Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers. Under monopoly conditions, economic surplus is equal to producer surplus. 
D)  Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss.

Question 8

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 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

Figure 15-13  
-Refer to Figure 15-13.From the monopoly graph above,identify the area representing the deadweight loss.
Would the deadweight loss be larger if the demand curve was more elastic or less elastic?

Accepted Answer

The deadweight loss = area C + D.The les

Question 11

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Accepted Answer

A)  If a merger would result in an Index value less than 1,000, the merger would not be challenged. 
B)  If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged. 
C)  If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged. 
D)  If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged. 
A)  If a merger would result in an Index value less than 1,000, the merger would not be challenged. 
B)  If a merger would result in an Index value of 1,000 or more, the industry would be considered a monopoly and the merger would be challenged. 
C)  If a merger resulted in an Index of between 1,000 and 1,800, the industry would be considered competitive and the merger would not be challenged. 
D)  If a merger would increase the Index by 100, the industry would be considered a monopoly and the merger would be challenged.

Question 12

Identify four reasons for high entry barriers.Briefly explain each reason.

Accepted Answer

1.Economies of scale.This occurs when a

Question 13

Firms that face downward-sloping demand curves for their output in the product market are called

Accepted Answer

A)  price takers. 
B)  price dictators. 
C)  monopolists. 
D)  price makers. 
A)  price takers. 
B)  price dictators. 
C)  monopolists. 
D)  price makers.

Question 14

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 15

A merger between U.S.Steel and General Motors would be an example of a

Accepted Answer

A)  vertical merger. 
B)  horizontal merger. 
C)  conglomerate merger. 
D)  conspiracy in restraint of trade. 
A)  vertical merger. 
B)  horizontal merger. 
C)  conglomerate merger. 
D)  conspiracy in restraint of trade.

Question 16

A monopoly is a firm that is the only seller of a good or service that does not have

Accepted Answer

A)  a patent. 
B)  a close complement. 
C)  a barrier to entry. 
D)  a close substitute. 
A)  a patent. 
B)  a close complement. 
C)  a barrier to entry. 
D)  a close substitute.

Question 17

Figure 15-15   Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.The profit-maximizing price is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 18

Figure 15-18  
-Refer to Figure 15-18 to answer the following questions.
a.What quantity will this monopoly produce and what price will it charge?
b.Suppose the monopoly is regulated.If the regulatory agency wants to achieve economic efficiency,what price should it require the monopoly to charge?
c.To achieve economic efficiency,what quantity will the regulated monopoly produce?
d.Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency?
e.Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35.What quantity will the monopoly produce and what price will the monopoly charge?
f.With the price ceiling of $35,what profit will the monopoly earn?

Accepted Answer

a.Quantity = 835 units and Price = $59.

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

Although some economists believe network externalities are important barriers to entry,other economists disagree because

Accepted Answer

A)  they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B)  they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C)  network externalities are really negative externalities. 
D)  they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale. 
A)  they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B)  they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C)  network externalities are really negative externalities. 
D)  they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale.

A patent

If a monopolist's price is $50 per unit and its marginal cost is $25,then

When the government makes a firm the exclusive legal provider of a good or service,it grants the firm

Which antitrust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms?

Identify two ways by which the government controls monopolies?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

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

Economic efficiency requires that a natural monopoly's price be

Figure 15-13 -Refer to Figure 15-13.From the monopoly graph above,identify the area representing the deadweight loss. Would the deadweight loss be larger if the demand curve was more elastic or less elastic?

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Identify four reasons for high entry barriers.Briefly explain each reason.

Firms that face downward-sloping demand curves for their output in the product market are called

Network externalities

A merger between U.S.Steel and General Motors would be an example of a

A monopoly is a firm that is the only seller of a good or service that does not have

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.The profit-maximizing price is

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

Although some economists believe network externalities are important barriers to entry,other economists disagree because

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

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Exam 15: Monopoly and Antitrust Policy

A patent

If a monopolist's price is $50 per unit and its marginal cost is $25,then

When the government makes a firm the exclusive legal provider of a good or service,it grants the firm

Which antitrust law prohibited firms from buying stock in competitors and from having directors serve on the boards of competing firms?

Identify two ways by which the government controls monopolies?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements regarding economic surplus in each market structure is true?

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

Economic efficiency requires that a natural monopoly's price be

Figure 15-13 -Refer to Figure 15-13.From the monopoly graph above,identify the area representing the deadweight loss. Would the deadweight loss be larger if the demand curve was more elastic or less elastic?

The Herfindahl-Hirschman Index is one factor used to determine whether a merger between two firms should be allowed.Which of the following statements regarding the value of the Index for a given industry is true?

Identify four reasons for high entry barriers.Briefly explain each reason.

Firms that face downward-sloping demand curves for their output in the product market are called

Network externalities

A merger between U.S.Steel and General Motors would be an example of a

A monopoly is a firm that is the only seller of a good or service that does not have

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.The profit-maximizing price is

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

Although some economists believe network externalities are important barriers to entry,other economists disagree because

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