Question 1

The demand curve for a monopoly's product is

Accepted Answer

A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined. 
A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined.

Question 2

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 ATC1,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.

Question 3

If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 4

Article Summary
In an attempt to get approval for a $6.3 billion merger with Office Depot,Staples met with FTC regulators to discuss the possible sale of assets so the merger can proceed.The Competition Bureau of the FTC had previously indicated that it would not approve the merger as initially structured,but Staples expressed optimism that it would be able to reach a settlement with the FTC.Critics have argued that a merger of Staples and Office Depot will result in higher prices for office supplies.
-Refer to the Article Summary.The standards used by the Department of Justice and the FTC to evaluate a potential merger such as the one between Staples and Office Depot are based on market concentration as determined by the

Accepted Answer

A) Herfindahl-Hirschman Index. 
B) Clayton Antitrust Act. 
C) Anti-Collusion Task Force. 
D) Robinson-Patman Act. 
A) Herfindahl-Hirschman Index. 
B) Clayton Antitrust Act. 
C) Anti-Collusion Task Force. 
D) Robinson-Patman Act.

Question 5

The size of a deadweight loss in a market is reduced by

Accepted Answer

A) government legislating a ceiling price. 
B) government legislating a price floor. 
C) market price being close to marginal cost. 
D) creative destruction. 
A) government legislating a ceiling price. 
B) government legislating a price floor. 
C) market price being close to marginal cost. 
D) creative destruction.

Question 6

BHP Billiton is a Canadian company that owns mines in Canada that

Accepted Answer

A) produce nickel.After World War II,BHP Billiton began to compete with another Canadian firm,the International Nickel Company.This competition eventually ended International Nickel's monopoly in this market. 
B) produce bauxite,the mineral needed to produce aluminum.BHP Billiton began to mine bauxite after World War II.This competition eventually ended the Aluminum Company of America (ALCO
A) 's monopoly in this market. 
C) produce coal.Until World War II,BHP Billiton had a monopoly on coal in Canada. 
D) produce diamonds. 
A) produce nickel.After World War II,BHP Billiton began to compete with another Canadian firm,the International Nickel Company.This competition eventually ended International Nickel's monopoly in this market. 
B) produce bauxite,the mineral needed to produce aluminum.BHP Billiton began to mine bauxite after World War II.This competition eventually ended the Aluminum Company of America (ALCO
A) 's monopoly in this market. 
C) produce coal.Until World War II,BHP Billiton had a monopoly on coal in Canada. 
D) produce diamonds.

Question 7

Figure 15-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-6.The monopolist's total revenue is

Accepted Answer

A) $1,116. 
B) $1,488. 
C) $1,726.40 
D) $1,826. 
A) $1,116. 
B) $1,488. 
C) $1,726.40 
D) $1,826.

Question 8

Figure 15-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-6.The monopolist's total cost is

Accepted Answer

A) $1,116. 
B) $1,240. 
C) $1,660. 
D) $1,726.40. 
A) $1,116. 
B) $1,240. 
C) $1,660. 
D) $1,726.40.

Question 9

Figure 15-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-9.What is the difference between the monopoly output and the perfectly competitive output?

Accepted Answer

A) 140 units 
B) 240 units 
C) 340 units 
D) 560 units 
A) 140 units 
B) 240 units 
C) 340 units 
D) 560 units

Question 10

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

Accepted Answer

A natural monopoly arises when the produ

Question 11

Why are laws aimed at regulating monopolies called "antitrust" laws?

Accepted Answer

A) The rise of large firms (e.g. ,Standard Oil)in the late 1800s in the United States caused consumers to lose trust in private business. 
B) "Trust" was a word in Old English that meant monopoly in the Middle Ages.Therefore,"antitrust" is a term that means "against monopoly." 
C) In the late 1800s,firms in several industries formed trusts;the firms were independent but gave voting control to a board of trustees.Antitrust laws were passed to regulate these trusts. 
D) In the late 1800s,firms in several industries formed trusts;they were called "trusts" because when corporate officials were questioned about their business they would clam that business was good for the country and that they should trusted. 
A) The rise of large firms (e.g. ,Standard Oil)in the late 1800s in the United States caused consumers to lose trust in private business. 
B) "Trust" was a word in Old English that meant monopoly in the Middle Ages.Therefore,"antitrust" is a term that means "against monopoly." 
C) In the late 1800s,firms in several industries formed trusts;the firms were independent but gave voting control to a board of trustees.Antitrust laws were passed to regulate these trusts. 
D) In the late 1800s,firms in several industries formed trusts;they were called "trusts" because when corporate officials were questioned about their business they would clam that business was good for the country and that they should trusted.

Question 12

The possibility that the economy may benefit from having market power,rather than being very competitive,is closely identified with which famous economist?

Accepted Answer

A) Arnold Harberger 
B) Joseph Schumpeter 
C) Sergey Brin 
D) Donald Turner 
A) Arnold Harberger 
B) Joseph Schumpeter 
C) Sergey Brin 
D) Donald Turner

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

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

Accepted Answer

1.Economies of scale.This occurs when a

Question 15

Some economists argue that Microsoft become a monopoly in the market for computer software by developing MS-DOS,an operating system used for the first IBM personal computers.The more people who used MS-DOS-based programs,the greater the usefulness of a using a computer with an MS-DOS operating system.The explanation for Microsoft's monopoly is

Accepted Answer

A) the development of new technology that other firms could not copy. 
B) control of a key resource which,in this case,is the MS-DOS operating system. 
C) network externalities. 
D) patents Microsoft obtained when it developed the MS-DOS operating system. 
A) the development of new technology that other firms could not copy. 
B) control of a key resource which,in this case,is the MS-DOS operating system. 
C) network externalities. 
D) patents Microsoft obtained when it developed the MS-DOS operating system.

Question 16

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

A profit-maximizing monopoly produces a lower output level than would be produced if the
industry was perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 20

The only firms that do not have market power are

Accepted Answer

A) firms in industries with low barriers to entry. 
B) firms that do not advertise their products. 
C) firms in perfectly competitive markets. 
D) firms that sell identical products. 
A) firms in industries with low barriers to entry. 
B) firms that do not advertise their products. 
C) firms in perfectly competitive markets. 
D) firms that sell identical products.

Exam 15: Monopoly and Antitrust Policy

The demand curve for a monopoly's product is

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 ATC1,the firm will

If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

The size of a deadweight loss in a market is reduced by

BHP Billiton is a Canadian company that owns mines in Canada that

Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist's total revenue is

Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist's total cost is

Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the difference between the monopoly output and the perfectly competitive output?

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

Why are laws aimed at regulating monopolies called "antitrust" laws?

The possibility that the economy may benefit from having market power,rather than being very competitive,is closely identified with which famous economist?

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?

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

Economic efficiency requires that a natural monopoly's price be set corresponding to the quantity where marginal revenue equals marginal cost.

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

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

A profit-maximizing monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

The only firms that do not have market power are

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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