Question 1

A horizontal merger

Accepted Answer

A) is a merger between firms in the same industry. 
B) results in a trust (for example,the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914. 
A) is a merger between firms in the same industry. 
B) results in a trust (for example,the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.

Question 2

Compared to perfect competition,the consumer surplus in a monopoly

Accepted Answer

A) is unchanged because price and output are the same. 
B) is lower because price is higher and output is lower. 
C) is higher because price is higher and output is the same. 
D) is eliminated. 
A) is unchanged because price and output are the same. 
B) is lower because price is higher and output is lower. 
C) is higher because price is higher and output is the same. 
D) is eliminated.

Question 3

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly,independent of its output.As a result the monopoly's profit will fall.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Accepted Answer

A) Q1 units;P4 
B) Q1 units;P1 
C) Q5 units;P3 
D) Q3 units;P4 
A) Q1 units;P4 
B) Q1 units;P1 
C) Q5 units;P3 
D) Q3 units;P4

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

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 8

What happens to a monopoly's revenue when it sells more units of its product?

Accepted Answer

The monopolist must lower its price to s

Question 9

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

Accepted Answer

A) Spuds McKenzie,a wealthy potato farmer in Idaho 
B) Cheap Gas,one of two gasoline stations in a large rural community 
C) Santos Tacos,the only taqueria in the small town of Santosville 
D) Zippie Rentals,a sports car rental service in the downtown Boston area 
A) Spuds McKenzie,a wealthy potato farmer in Idaho 
B) Cheap Gas,one of two gasoline stations in a large rural community 
C) Santos Tacos,the only taqueria in the small town of Santosville 
D) Zippie Rentals,a sports car rental service in the downtown Boston area

Question 10

Figure 15-19  
-Refer to Figure 15-19 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 11

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

Accepted Answer

A) The monopoly firm has control of a key resource necessary to produce a good. 
B) There are important network externalities in supplying a good or service. 
C) large economies of scale that result in a natural monopoly 
D) a high concentration ratio 
A) The monopoly firm has control of a key resource necessary to produce a good. 
B) There are important network externalities in supplying a good or service. 
C) large economies of scale that result in a natural monopoly 
D) a high concentration ratio

Question 12

Governments grant patents to encourage

Accepted Answer

A) research and development on new products. 
B) competition. 
C) low prices. 
D) firms to form public enterprises. 
A) research and development on new products. 
B) competition. 
C) low prices. 
D) firms to form public enterprises.

Question 13

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 14

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 15

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

Accepted Answer

A) it was a public enterprise. 
B) it had a patent on the manufacture of aluminum. 
C) the company had a secret technique for making aluminum from bauxite. 
D) it had control of almost all the available supply of bauxite. 
A) it was a public enterprise. 
B) it had a patent on the manufacture of aluminum. 
C) the company had a secret technique for making aluminum from bauxite. 
D) it had control of almost all the available supply of bauxite.

Question 16

Figure 15-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-6.The monopolist earns a profit of

Accepted Answer

A) $0. 
B) $170. 
C) $248. 
D) $372. 
A) $0. 
B) $170. 
C) $248. 
D) $372.

Question 17

The reason that the Fisherman's Friend restaurant in Stonington,Maine had a monopoly on selling seafood dinners in that town is most likely due to

Accepted Answer

A) a government-imposed barrier. 
B) occupational licensing. 
C) no competitors apparently found the profit level attractive enough to enter the market. 
D) the restaurant owned all the fresh seafood in the state. 
A) a government-imposed barrier. 
B) occupational licensing. 
C) no competitors apparently found the profit level attractive enough to enter the market. 
D) the restaurant owned all the fresh seafood in the state.

Question 18

Figure 15-17   Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world,whether they are actually enrolled in your college or not.The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 15-17.You are a member of a student government and are asked to recommend a price for the course and you argue: "I think the college should charge a price so that it just breaks even on the course." What price should you recommend?

Accepted Answer

A) $0 
B) $40 
C) $88 
D) $150 
A) $0 
B) $40 
C) $88 
D) $150

Question 19

Figure 15-8   Figure 15-8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time.
-Refer to Figure 15-8.Use the figure above to answer the following questions.
a.Identify the curves labeled A and B.Identify the curve which contains both point Y and point Z.Identify the curve which contains both point V and point W.
b.What is the profit-maximizing quantity and what price will the monopolist charge?
c.What area represents total revenue at the profit-maximizing output level?
d.What area represents total cost at the profit-maximizing output level?
e.What area represents profit?
f.What is the profit per unit (average profit)at the profit-maximizing output level?
g.If this industry was organized as a perfectly competitive industry,what would be the profit-maximizing price and quantity?
h.What area represents the deadweight loss as a result of a monopoly?

Accepted Answer

a.A = Demand curve;B = Marginal revenue

Question 20

A virtuous cycle occurs

Accepted Answer

A) when lobbyists petition members of Congress to grant a public franchise;the lobbyist then raise money for those Congress members who granted the franchise. 
B) when monopoly profits are used to create new products for additional monopoly profits. 
C) when a firm can attract enough buyers initially to increase a product's usefulness to attract even more buyers. 
D) when a firm's sales volume reaches a level where the firm can take advantage of economies of scale;thereby reducing the price of the product to further boost its sales. 
A) when lobbyists petition members of Congress to grant a public franchise;the lobbyist then raise money for those Congress members who granted the franchise. 
B) when monopoly profits are used to create new products for additional monopoly profits. 
C) when a firm can attract enough buyers initially to increase a product's usefulness to attract even more buyers. 
D) when a firm's sales volume reaches a level where the firm can take advantage of economies of scale;thereby reducing the price of the product to further boost its sales.

Exam 15: Monopoly and Antitrust Policy

A horizontal merger

Compared to perfect competition,the consumer surplus in a monopoly

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly,independent of its output.As a result the monopoly's profit will fall.

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

Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

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

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?

What happens to a monopoly's revenue when it sells more units of its product?

Which of following is the best example of a monopoly if we use a broader definition of monopoly?

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

Governments grant patents to encourage

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?

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

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist earns a profit of

The reason that the Fisherman's Friend restaurant in Stonington,Maine had a monopoly on selling seafood dinners in that town is most likely due to

A virtuous cycle occurs

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 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of and charge a price of .