Question 1

A monopolist faces

Accepted Answer

A)  a perfectly elastic demand curve. 
B)  a perfectly inelastic demand curve. 
C)  a horizontal demand curve. 
D)  a downward-sloping demand curve. 
A)  a perfectly elastic demand curve. 
B)  a perfectly inelastic demand curve. 
C)  a horizontal demand curve. 
D)  a downward-sloping demand curve.

Question 2

To maximize profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and charges a price given by the demand curve at that output level.

Accepted Answer

A) True 
 B)False

Question 3

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Accepted Answer

A)  For the first time horizontal mergers were allowed - with government approval - and vertical mergers were allowed without need for approval from the government. 
B)  For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers. 
C)  The Division began to systematically consider the economic consequences of proposed mergers. 
D)  Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system. 
A)  For the first time horizontal mergers were allowed - with government approval - and vertical mergers were allowed without need for approval from the government. 
B)  For the first time concentration ratios were used to evaluate the degree of competition in the industries of firms that proposed mergers. 
C)  The Division began to systematically consider the economic consequences of proposed mergers. 
D)  Proposed mergers no longer needed the approval of the Federal Trade Commission or the court system.

Question 4

Table 15-4
   Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.
-Refer to Table 15-4.What is the amount of Shakti's profit?

Accepted Answer

A)  $68 
B)  $72 
C)  $124 
D)  $192 
A)  $68 
B)  $72 
C)  $124 
D)  $192

Question 5

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 favors 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 favors 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 6

Which of the following statements is true?

Accepted Answer

A)  If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost. 
B)  A monopolist will always charge the highest possible price. 
C)  If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers. 
D)  Because a monopolist faces no competition, the demand for its product is perfectly inelastic. 
A)  If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost. 
B)  A monopolist will always charge the highest possible price. 
C)  If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers. 
D)  Because a monopolist faces no competition, the demand for its product is perfectly inelastic.

Question 7

Figure 15-10  
-Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

Accepted Answer

A)  FHE. 
B)  FGE. 
C)  GEH. 
D)  FQ1Q2E. 
A)  FHE. 
B)  FGE. 
C)  GEH. 
D)  FQ1Q2E.

Question 8

Why does a monopoly cause a deadweight loss?

Accepted Answer

A)  because it does not produce some output for which marginal benefit exceeds marginal cost 
B)  because it appropriates a portion of consumer surplus for itself 
C)  because it increases producer surplus at the expense of consumer surplus 
D)  because it does not produce some output for which demand exceeds supply 
A)  because it does not produce some output for which marginal benefit exceeds marginal cost 
B)  because it appropriates a portion of consumer surplus for itself 
C)  because it increases producer surplus at the expense of consumer surplus 
D)  because it does not produce some output for which demand exceeds supply

Question 9

Figure 15-2   Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.The firm's profit-maximizing price is

Accepted Answer

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

Question 10

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Whenever a firm can charge a price greater than marginal cost

Accepted Answer

A)  the firm must be a monopolist. 
B)  there is some loss of economic efficiency. 
C)  consumers have the ability to choose a close substitute. 
D)  the firm will earn economic profits. 
A)  the firm must be a monopolist. 
B)  there is some loss of economic efficiency. 
C)  consumers have the ability to choose a close substitute. 
D)  the firm will earn economic profits.

Question 13

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

Accepted Answer

A)  The AD decides whether proposed horizontal mergers will be challenged; the FTC decides whether proposed vertical mergers will be challenged. 
B)  Both the AD and the FTC are responsible for merger policy. 
C)  The AD always renders its opinion on any proposed merger first. If the AD approves the merger, the case then goes to the FTC for final approval. If the AD disallows the merger, the decision stands and the FTC does not become involved. 
D)  The AD establishes the guidelines that are used to evaluate proposed mergers; the FTC uses these guidelines to decide whether a proposed merger will be allowed to take place. 
A)  The AD decides whether proposed horizontal mergers will be challenged; the FTC decides whether proposed vertical mergers will be challenged. 
B)  Both the AD and the FTC are responsible for merger policy. 
C)  The AD always renders its opinion on any proposed merger first. If the AD approves the merger, the case then goes to the FTC for final approval. If the AD disallows the merger, the decision stands and the FTC does not become involved. 
D)  The AD establishes the guidelines that are used to evaluate proposed mergers; the FTC uses these guidelines to decide whether a proposed merger will be allowed to take place.

Question 14

A profit maximizing monopoly's price is

Accepted Answer

A)  the same as the price that would prevail if the industry was perfectly competitive. 
B)  less than the price that would prevail if the industry was perfectly competitive. 
C)  greater than the price that would prevail if the industry was perfectly competitive. 
D)  not consistently related to price that would prevail if the market was perfectly competitive. 
A)  the same as the price that would prevail if the industry was perfectly competitive. 
B)  less than the price that would prevail if the industry was perfectly competitive. 
C)  greater than the price that would prevail if the industry was perfectly competitive. 
D)  not consistently related to price that would prevail if the market was perfectly competitive.

Question 15

In a natural monopoly,throughout the range of market demand

Accepted Answer

A)  marginal cost is above average total cost and pulls average total cost upward. 
B)  average total cost is above marginal cost and pulls marginal cost upward. 
C)  marginal cost is below average total cost and pulls average total cost downward. 
D)  there are diseconomies of scale. 
A)  marginal cost is above average total cost and pulls average total cost upward. 
B)  average total cost is above marginal cost and pulls marginal cost upward. 
C)  marginal cost is below average total cost and pulls average total cost downward. 
D)  there are diseconomies of scale.

Question 16

Table 15-4
   Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.
-Refer to Table 15-4.What is the economically efficient output level?

Accepted Answer

A)  5 units 
B)  6 units 
C)  7 units 
D)  8 units 
A)  5 units 
B)  6 units 
C)  7 units 
D)  8 units

Question 17

To maintain a monopoly,a firm must have

Accepted Answer

A)  a perfectly inelastic demand. 
B)  an insurmountable barrier to entry. 
C)  marginal revenue equal to demand. 
D)  few competitors. 
A)  a perfectly inelastic demand. 
B)  an insurmountable barrier to entry. 
C)  marginal revenue equal to demand. 
D)  few competitors.

Question 18

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25,then to maximize profit the firm should decrease output.

Accepted Answer

A) True 
 B)False

Question 19

Figure 15-7  
-Refer to Figure 15-7.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 20

The De Beers Company,one of the longest-lived monopolies,is facing increasing competition.One source of competition comes from people who might resell their previously owned diamonds.Why is De Beers worried that people might resell their previously owned diamonds?

Accepted Answer

A)  because De Beers will not be able to guarantee the quality of previously owned diamonds and fears that its reputation might be harmed 
B)  because the availability of previously owned diamonds would increase the market demand for diamonds and dilute De Beers' monopoly 
C)  because previously owned diamonds would be a close substitute to newly mined diamonds and therefore reduce De Beers' market power 
D)  because the availability of previously owned diamonds would make the market demand curve for diamonds more inelastic and force De Beers to lower its price 
A)  because De Beers will not be able to guarantee the quality of previously owned diamonds and fears that its reputation might be harmed 
B)  because the availability of previously owned diamonds would increase the market demand for diamonds and dilute De Beers' monopoly 
C)  because previously owned diamonds would be a close substitute to newly mined diamonds and therefore reduce De Beers' market power 
D)  because the availability of previously owned diamonds would make the market demand curve for diamonds more inelastic and force De Beers to lower its price

A monopolist faces

To maximize profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and charges a price given by the demand curve at that output level.

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is the amount of Shakti's profit?

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

Which of the following statements is true?

Figure 15-10 -Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

Why does a monopoly cause a deadweight loss?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.The firm's profit-maximizing price is

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

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.

Whenever a firm can charge a price greater than marginal cost

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

A profit maximizing monopoly's price is

In a natural monopoly,throughout the range of market demand

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is the economically efficient output level?

To maintain a monopoly,a firm must have

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25,then to maximize profit the firm should decrease output.

The De Beers Company,one of the longest-lived monopolies,is facing increasing competition.One source of competition comes from people who might resell their previously owned diamonds.Why is De Beers worried that people might resell their previously owned diamonds?

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

A monopolist faces

To maximize profit,a monopolist will produce and sell a quantity such that for the last unit sold,marginal revenue equals marginal cost,and charges a price given by the demand curve at that output level.

Beginning in 1965,the head of the Antitrust Division of the U.S.Department of Justice began to change antitrust policy.How did antitrust policy change?

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is the amount of Shakti's profit?

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

Which of the following statements is true?

Figure 15-10 -Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

Why does a monopoly cause a deadweight loss?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.The firm's profit-maximizing price is

The National Football League has long-term leases with the stadiums in major cities.Control of these stadiums is an entry barrier to a potential new football league.

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.

Whenever a firm can charge a price greater than marginal cost

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

A profit maximizing monopoly's price is

In a natural monopoly,throughout the range of market demand

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is the economically efficient output level?

To maintain a monopoly,a firm must have

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25,then to maximize profit the firm should decrease output.

The De Beers Company,one of the longest-lived monopolies,is facing increasing competition.One source of competition comes from people who might resell their previously owned diamonds.Why is De Beers worried that people might resell their previously owned diamonds?

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