Question 1

A price maker is

Accepted Answer

A) a person who actively seeks out the best price for a product that he or she wishes to buy. 
B) a firm that has some control over the price of the product it sells. 
C) a firm that is able to sell any quantity at the highest possible price. 
D) a consumer who participates in an auction where she announces her willingness to pay for a product. 
A) a person who actively seeks out the best price for a product that he or she wishes to buy. 
B) a firm that has some control over the price of the product it sells. 
C) a firm that is able to sell any quantity at the highest possible price. 
D) a consumer who participates in an auction where she announces her willingness to pay for a product.

Question 2

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 3

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.The dean of the college argues: "I think the course should be priced to maximize the profit the college earns,so these funds can be used to pay some other expenses." How much profit (or loss)will the college make on the course if it charges this price?

Accepted Answer

A) -$2,592,000 
B) -$1,080,000 
C) $0 
D) $450,000 
A) -$2,592,000 
B) -$1,080,000 
C) $0 
D) $450,000

Question 4

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 5

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 6

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost,and average total cost equals $43,then the firm's total profit is

Accepted Answer

A) $3,150. 
B) $2,709. 
C) $441. 
D) $7. 
A) $3,150. 
B) $2,709. 
C) $441. 
D) $7.

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

Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is the amount of the monopoly's profit?

Accepted Answer

A) $2,700 
B) $4,200 
C) $10,400 
D) $12,600 
A) $2,700 
B) $4,200 
C) $10,400 
D) $12,600

Question 9

A public franchise

Accepted Answer

A) is a corporation that is owned by stockholders. 
B) results from ownership of a key raw material. 
C) is a government designation that a private firm is the only legal producer of a good or service. 
D) is an unregulated monopoly necessary for the public good. 
A) is a corporation that is owned by stockholders. 
B) results from ownership of a key raw material. 
C) is a government designation that a private firm is the only legal producer of a good or service. 
D) is an unregulated monopoly necessary for the public good.

Question 10

An example of a monopoly based on control of a key resource is

Accepted Answer

A) Major League Baseball. 
B) NASA. 
C) Microsoft's Windows operating system. 
D) the U.S.Food and Drug Administration. 
A) Major League Baseball. 
B) NASA. 
C) Microsoft's Windows operating system. 
D) the U.S.Food and Drug Administration.

Question 11

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 12

Firms do not have market power in which of the following market structures?

Accepted Answer

A) perfect competition only 
B) perfect competition and monopolistic competition 
C) oligopoly 
D) monopoly 
A) perfect competition only 
B) perfect competition and monopolistic competition 
C) oligopoly 
D) monopoly

Question 13

A monopoly is defined as a firm that has the largest market share in an industry.

Accepted Answer

A) True 
 B)False

Question 14

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.Suppose the local government imposes a $2.50 per month tax on cable companies.What happens to the price charged by the cable company following the imposition of this tax?

Accepted Answer

A) The price rises from PM to (PM + $2.50). 
B) The price rises from PM but it increases by an amount less than $2.50. 
C) The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly's markup. 
D) The price remains at PM. 
A) The price rises from PM to (PM + $2.50). 
B) The price rises from PM but it increases by an amount less than $2.50. 
C) The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly's markup. 
D) The price remains at PM.

Question 15

A natural monopoly is characterized by large fixed costs relative to variable costs.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

Accepted Answer

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

Question 18

Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is the amount of the monopoly's total revenue?

Accepted Answer

A) $21,600 
B) $20,400 
C) $19,740 
D) $7,800 
A) $21,600 
B) $20,400 
C) $19,740 
D) $7,800

Question 19

To be a natural monopoly a firm must

Accepted Answer

A) control a key resource input. 
B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C) have significant network externalities. 
D) be in a government-regulated market. 
A) control a key resource input. 
B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C) have significant network externalities. 
D) be in a government-regulated market.

Question 20

Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.If the firm's average total cost curve is ATC2,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.

Exam 15: Monopoly and Antitrust Policy

A price maker is

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

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?

Why does a monopoly cause a deadweight loss?

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost,and average total cost equals $43,then the firm's total profit is

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?

Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the amount of the monopoly's profit?

A public franchise

An example of a monopoly based on control of a key resource is

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

Firms do not have market power in which of the following market structures?

A monopoly is defined as a firm that has the largest market share in an industry.

A natural monopoly is characterized by large fixed costs relative to variable costs.

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.

Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the amount of the monopoly's total revenue?

To be a natural monopoly a firm must

Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.If the firm's average total cost curve is ATC2,the firm will

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

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