Question 1

Figure 10-6  
-Refer to Figure 10-6.What is the area that represents producer surplus under a monopoly?

Accepted Answer

A) the triangle 0P2E 
B) the triangle 0P3H 
C) the trapezium 0P1FH 
D) the rectangle P1P3HF 
A) the triangle 0P2E 
B) the triangle 0P3H 
C) the trapezium 0P1FH 
D) the rectangle P1P3HF

Question 2

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 3

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

Accepted Answer

A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) corresponding to the demand curve where marginal revenue equals zero. 
A) equal to average total cost where it intersects the demand curve. 
B) equal to marginal cost where it intersects the demand curve. 
C) equal to average variable cost where it intersects the demand curve. 
D) corresponding to the demand curve where marginal revenue equals zero.

Question 4

A Herfindahl-Hirschman Index is calculated by

Accepted Answer

A) summing the amount of sales by the four largest firms and dividing by total industry sales. 
B) dividing the number of firms wanting to merge by the total number in the industry. 
C) summing the squares of the market shares of each firm in the industry. 
D) summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures. 
A) summing the amount of sales by the four largest firms and dividing by total industry sales. 
B) dividing the number of firms wanting to merge by the total number in the industry. 
C) summing the squares of the market shares of each firm in the industry. 
D) summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.

Question 5

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.

Question 6

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 7

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

Accepted Answer

A) Safeway is a monopoly all day because it produces a service that has no close substitutes. 
B) Safeway has a monopoly at midnight but not during the day. 
C) Safeway can ignore the pricing decisions of the other two supermarkets. 
D) Safeway probably has a higher markup to compensate for its higher cost of production. 
A) Safeway is a monopoly all day because it produces a service that has no close substitutes. 
B) Safeway has a monopoly at midnight but not during the day. 
C) Safeway can ignore the pricing decisions of the other two supermarkets. 
D) Safeway probably has a higher markup to compensate for its higher cost of production.

Question 8

Figure 10-9   Figure 10-9 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 10-9.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at ________ and the output level is ________.

Accepted Answer

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

Question 9

What is the difference between a public franchise and a public enterprise?

Accepted Answer

A) A public franchise grants a firm the right to be the sole legal provider of a good or service.A public enterprise refers to a service that is provided directly to consumers through the government. 
B) A public enterprise grants a firm the right to be the sole legal provider of a good or service.A public franchise refers to a service that is provided directly to consumers through the government. 
C) A public enterprise is owned by the public through its holdings of shares of stock in the enterprise.A public franchise is a firm owned by the government. 
D) Both refer to a service provided directly to consumers through the government,but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries. 
A) A public franchise grants a firm the right to be the sole legal provider of a good or service.A public enterprise refers to a service that is provided directly to consumers through the government. 
B) A public enterprise grants a firm the right to be the sole legal provider of a good or service.A public franchise refers to a service that is provided directly to consumers through the government. 
C) A public enterprise is owned by the public through its holdings of shares of stock in the enterprise.A public franchise is a firm owned by the government. 
D) Both refer to a service provided directly to consumers through the government,but "public franchise" is a term more commonly used in the United States while "public enterprise" is more commonly used in European countries.

Question 10

Table 10-1
   A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 10-1.
-Refer to Table 10-1.What is the amount of the firm's profit?

Accepted Answer

A) $335 
B) $350 
C) $880 
D) $910 
A) $335 
B) $350 
C) $880 
D) $910

Question 11

A monopoly is a seller of a product

Accepted Answer

A) with many substitutes. 
B) without a close substitute. 
C) with a perfectly inelastic demand. 
D) without a well-defined demand curve. 
A) with many substitutes. 
B) without a close substitute. 
C) with a perfectly inelastic demand. 
D) without a well-defined demand curve.

Question 12

If a monopolist's price is $50 per 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 13

In the short-run,even if a monopoly's total revenue does not cover its variable costs,it should continue to produce because ultimately in the long run,the monopoly will start earning profits.

Accepted Answer

A) True 
 B)False

Question 14

A firm that has the ability to control to some degree the price of the product it sells

Accepted Answer

A) is also able to dictate the quantity purchased. 
B) faces a demand curve that is inelastic throughout the range of market demand. 
C) is a price maker. 
D) faces a perfectly inelastic demand curve. 
A) is also able to dictate the quantity purchased. 
B) faces a demand curve that is inelastic throughout the range of market demand. 
C) is a price maker. 
D) faces a perfectly inelastic demand curve.

Question 15

Figure 10-1   Figure 10-1 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 10-1.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.

Question 16

Joe Santos owns the only pizza parlor in a small town that is also home to a McDonald's,a Taco Bell and a Kentucky Fried Chicken.Using a broad definition of a monopoly,Joe has a monopoly.

Accepted Answer

A) True 
 B)False

Question 17

Consider two industries,industry Q and industry Z.In industry Q there are 10 companies,each with a market share of 10% of total sales.In industry Z,there are eight companies.One company has a 65% market share and each of the other seven firms has a market share of 5%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

a.The concentration ratio in industry Q

Question 18

a.What is the difference between a horizontal merger and a vertical merger?
b.Give an example of each type of merger.
c.Could a horizontal merger be welfare improving?

Accepted Answer

a.A horizontal merger is a merger betwee

Question 19

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 20

Table 10-2
   Shakti Inc.has been granted a patent for its Arnica toothache balm.Table 10-2 shows the demand and the total cost schedule for the firm.
-Refer to Table 10-2.What is Shakti's profit-maximizing output?

Accepted Answer

A) 4 units 
B) 5 units 
C) 6 units 
D) 7 units 
A) 4 units 
B) 5 units 
C) 6 units 
D) 7 units

Figure 10-6 -Refer to Figure 10-6.What is the area that represents producer surplus under a monopoly?

To maintain a monopoly,a firm must have

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

A Herfindahl-Hirschman Index is calculated by

A virtuous cycle occurs

Governments grant patents to encourage

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

Figure 10-9 Figure 10-9 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-9.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at and the output level is .

What is the difference between a public franchise and a public enterprise?

Table 10-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 10-1. -Refer to Table 10-1.What is the amount of the firm's profit?

A monopoly is a seller of a product

If a monopolist's price is $50 per unit and its marginal cost is $25,then

In the short-run,even if a monopoly's total revenue does not cover its variable costs,it should continue to produce because ultimately in the long run,the monopoly will start earning profits.

A firm that has the ability to control to some degree the price of the product it sells

Figure 10-1 Figure 10-1 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-1.If the firm's average total cost curve is ATC2,the firm will

Joe Santos owns the only pizza parlor in a small town that is also home to a McDonald's,a Taco Bell and a Kentucky Fried Chicken.Using a broad definition of a monopoly,Joe has a monopoly.

a.What is the difference between a horizontal merger and a vertical merger? b.Give an example of each type of merger. c.Could a horizontal merger be welfare improving?

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

Table 10-2 Shakti Inc.has been granted a patent for its Arnica toothache balm.Table 10-2 shows the demand and the total cost schedule for the firm. -Refer to Table 10-2.What is Shakti's profit-maximizing output?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 10: Monopoly and Antitrust Policy

Figure 10-6 -Refer to Figure 10-6.What is the area that represents producer surplus under a monopoly?

To maintain a monopoly,a firm must have

In regulating a natural monopoly,the price strategy that ensures the highest possible output and zero profit is one that sets price

A Herfindahl-Hirschman Index is calculated by

A virtuous cycle occurs

Governments grant patents to encourage

In Walnut Creek,California,there are three very popular supermarkets: Safeway,Whole Foods and Lunardi's.While Safeway remains open twenty-four hours a day,Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

Figure 10-9 Figure 10-9 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-9.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at ________ and the output level is ________.

What is the difference between a public franchise and a public enterprise?

Table 10-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 10-1. -Refer to Table 10-1.What is the amount of the firm's profit?

A monopoly is a seller of a product

If a monopolist's price is $50 per unit and its marginal cost is $25,then

In the short-run,even if a monopoly's total revenue does not cover its variable costs,it should continue to produce because ultimately in the long run,the monopoly will start earning profits.

A firm that has the ability to control to some degree the price of the product it sells

Figure 10-1 Figure 10-1 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-1.If the firm's average total cost curve is ATC2,the firm will

Joe Santos owns the only pizza parlor in a small town that is also home to a McDonald's,a Taco Bell and a Kentucky Fried Chicken.Using a broad definition of a monopoly,Joe has a monopoly.

a.What is the difference between a horizontal merger and a vertical merger? b.Give an example of each type of merger. c.Could a horizontal merger be welfare improving?

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

Table 10-2 Shakti Inc.has been granted a patent for its Arnica toothache balm.Table 10-2 shows the demand and the total cost schedule for the firm. -Refer to Table 10-2.What is Shakti's profit-maximizing output?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Figure 10-9 Figure 10-9 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 10-9.If the government regulates Erickson Power Company so that the firm can earn a normal profit,the price would be set at and the output level is .