Question 1

Using a broad definition,a firm would have a monopoly if

Accepted Answer

A) it produced a product that has no close substitutes. 
B) it does not have to collude with any other producer to earn an economic profit. 
C) there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D) it can make decisions regarding price and output without violating antitrust laws. 
A) it produced a product that has no close substitutes. 
B) it does not have to collude with any other producer to earn an economic profit. 
C) there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D) it can make decisions regarding price and output without violating antitrust laws.

Question 2

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Accepted Answer

A) the antitrust division of the Department of State and the Securities and Exchange Commission. 
B) the Federal Trade Commission and the Internal Revenue Service. 
C) the Antitrust Division of the U.S.Department of Justice and the Council of Economic Advisors. 
D) the Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice. 
A) the antitrust division of the Department of State and the Securities and Exchange Commission. 
B) the Federal Trade Commission and the Internal Revenue Service. 
C) the Antitrust Division of the U.S.Department of Justice and the Council of Economic Advisors. 
D) the Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice.

Question 3

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

Accepted Answer

A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good. 
B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good. 
C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good. 
D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good. 
A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good. 
B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good. 
C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good. 
D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good.

Question 4

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: Is it true or false? Explain your answer.

Accepted Answer

The statement is false.The monopolist ca

Question 5

The ability of a firm to charge a price greater than marginal cost is called

Accepted Answer

A) monopoly power. 
B) price-making power. 
C) cost-plus pricing. 
D) market power. 
A) monopoly power. 
B) price-making power. 
C) cost-plus pricing. 
D) market power.

Question 6

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Accepted Answer

A) True 
 B)False

Question 7

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?

Accepted Answer

Average revenue is equal to price for an

Question 8

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Accepted Answer

A network externality exists where the u

Question 9

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Accepted Answer

A) True 
 B)False

Question 10

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Accepted Answer

A) government antitrust laws. 
B) the pricing decisions of its suppliers. 
C) the pricing decisions of firms that produce complementary products. 
D) the actions of all other firms. 
A) government antitrust laws. 
B) the pricing decisions of its suppliers. 
C) the pricing decisions of firms that produce complementary products. 
D) the actions of all other firms.

Question 11

Explain why the monopolist has no supply curve?

Accepted Answer

A supply curve shows the relationship be

Question 12

Natural monopolies in the United States are generally regulated by

Accepted Answer

A) the Federal Trade Commission. 
B) the Department of Justice. 
C) local or state regulatory commissions. 
D) the Department of Commerce. 
A) the Federal Trade Commission. 
B) the Department of Justice. 
C) local or state regulatory commissions. 
D) the Department of Commerce.

Question 13

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change

Accepted Answer

A) price will be higher,output will be lower,and the deadweight loss will be eliminated. 
B) consumer surplus will be smaller,producer surplus will be greater,and there will be a reduction in economic efficiency. 
C) price will be higher,consumer surplus will be greater,and output will be greater. 
D) consumer surplus will be smaller and producer surplus will be greater.There will be a net increase in economic surplus. 
A) price will be higher,output will be lower,and the deadweight loss will be eliminated. 
B) consumer surplus will be smaller,producer surplus will be greater,and there will be a reduction in economic efficiency. 
C) price will be higher,consumer surplus will be greater,and output will be greater. 
D) consumer surplus will be smaller and producer surplus will be greater.There will be a net increase in economic surplus.

Question 14

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 ATC3,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 15

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 16

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Accepted Answer

A) True 
 B)False

Question 17

A monopoly is characterized by all of the following except

Accepted Answer

A) there are only a few sellers,each selling a unique product. 
B) entry barriers are high. 
C) there are no close substitutes to the firm's product. 
D) the firm has market power. 
A) there are only a few sellers,each selling a unique product. 
B) entry barriers are high. 
C) there are no close substitutes to the firm's product. 
D) the firm has market power.

Question 18

Microsoft hires marketing and sales specialists to decide what prices it should set for its products,whereas a wealthy corn farmer in Iowa,who sells his output in the world commodity market,does not.Why is this so?

Accepted Answer

A) because Microsoft is large enough to hire the best people in the field 
B) because Microsoft could potentially lose sales if it sets prices indiscriminately 
C) because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects 
D) because unlike Microsoft,the wealthy corn farmer is probably a monopolist 
A) because Microsoft is large enough to hire the best people in the field 
B) because Microsoft could potentially lose sales if it sets prices indiscriminately 
C) because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects 
D) because unlike Microsoft,the wealthy corn farmer is probably a monopolist

Question 19

After having a monopoly in the diamond market for many years,by 2000 the De Beers company faced competition from other companies.To maintain its market share,De Beers

Accepted Answer

A) began buying so-called "blood diamonds" in order to keep these diamonds out of the control of other diamond companies. 
B) adopted a strategy of differentiating its diamonds.Each of its diamonds is now marked with a microscopic brand. 
C) bought diamond mines in Canada and Russia that had been its competitors. 
D) lowered the prices of its diamonds to make the market appear less profitable to potential competitors. 
A) began buying so-called "blood diamonds" in order to keep these diamonds out of the control of other diamond companies. 
B) adopted a strategy of differentiating its diamonds.Each of its diamonds is now marked with a microscopic brand. 
C) bought diamond mines in Canada and Russia that had been its competitors. 
D) lowered the prices of its diamonds to make the market appear less profitable to potential competitors.

Question 20

A market economy benefits from market power

Accepted Answer

A) if the majority of the population are entrepreneurs. 
B) if firms with market power do research and development with the profits earned. 
C) if market power gets so bad the government creates public enterprises. 
D) under no circumstances. 
A) if the majority of the population are entrepreneurs. 
B) if firms with market power do research and development with the profits earned. 
C) if market power gets so bad the government creates public enterprises. 
D) under no circumstances.

Exam 15: Monopoly and Antitrust Policy

Using a broad definition,a firm would have a monopoly if

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: Is it true or false? Explain your answer.

The ability of a firm to charge a price greater than marginal cost is called

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Explain why the monopolist has no supply curve?

Natural monopolies in the United States are generally regulated by

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.As a result of this change

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 ATC3,the firm will

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.

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

A monopoly is characterized by all of the following except

Microsoft hires marketing and sales specialists to decide what prices it should set for its products,whereas a wealthy corn farmer in Iowa,who sells his output in the world commodity market,does not.Why is this so?

After having a monopoly in the diamond market for many years,by 2000 the De Beers company faced competition from other companies.To maintain its market share,De Beers

A market economy benefits from market power

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