Question 1

Refer to the graph shown.   If suppliers can reduce output from M to L, the suppliers excluded from the market will lose the producer surplus shown by area:

Accepted Answer

A)  F. 
B)  D. 
C)  E. 
D)  E and F. 
A)  F. 
B)  D. 
C)  E. 
D)  E and F. C

Question 2

A contract that makes a manager's salary dependent on total profit would be a type of incentive-compatible contract.

Accepted Answer

A) True 
 B)False  True

Question 3

The technological lock-in argument suggests that:

Accepted Answer

A)  it is inefficient to try and adapt to new technology. 
B)  more efficient technologies always immediately replace less efficient technologies. 
C)  many of our institutions and technologies may be inefficient but are ingrained regardless. 
D)  existing institutions and technologies are always the most efficient. 
A)  it is inefficient to try and adapt to new technology. 
B)  more efficient technologies always immediately replace less efficient technologies. 
C)  many of our institutions and technologies may be inefficient but are ingrained regardless. 
D)  existing institutions and technologies are always the most efficient. C

Question 4

The net effect of restricting entry into a market is to decrease the income of the remaining suppliers.

Accepted Answer

A) True 
 B)False

Question 5

Perfect competition is more conducive to technological change than any of the other market structures.

Accepted Answer

A) True 
 B)False

Question 6

The adoption of the QWERTY keyboard in the early days of mechanical typewriters, with its continued use today, has been suggested as a metaphor for:

Accepted Answer

A)  technological lock-in. 
B)  a lazy monopoly. 
C)  reverse engineering. 
D)  X-inefficiency. 
A)  technological lock-in. 
B)  a lazy monopoly. 
C)  reverse engineering. 
D)  X-inefficiency.

Question 7

Suppliers would be the most eager to organize to restrict output if they faced:

Accepted Answer

A)  an inelastic demand. 
B)  an elastic demand. 
C)  a unit-elastic demand. 
D)  a perfectly elastic demand. 
A)  an inelastic demand. 
B)  an elastic demand. 
C)  a unit-elastic demand. 
D)  a perfectly elastic demand.

Question 8

Refer to the following graph.   A lazy monopolist is best described by earning area A and B in profits.

Accepted Answer

A) True 
 B)False

Question 9

Entrepreneurs care about:

Accepted Answer

A)  only profits. 
B)  profits and solving problems. 
C)  only themselves. 
D)  profits and prices. 
A)  only profits. 
B)  profits and solving problems. 
C)  only themselves. 
D)  profits and prices.

Question 10

According to the author of your textbook, competition is best understood:

Accepted Answer

A)  as a dynamic process. 
B)  within a structural framework. 
C)  as price-driven. 
D)  as technology driven. 
A)  as a dynamic process. 
B)  within a structural framework. 
C)  as price-driven. 
D)  as technology driven.

Question 11

What controls the price that natural monopolies charge so that it will be a "fair price"?

Accepted Answer

A)  Patents 
B)  Regulatory boards 
C)  Consumers 
D)  Competition 
A)  Patents 
B)  Regulatory boards 
C)  Consumers 
D)  Competition

Question 12

The fact that U.S. managers' salaries are substantially greater than those of comparable managers in Japan may be related to:

Accepted Answer

A)  an increase in the demand for CEOs. 
B)  an increase in the supply of CEOs. 
C)  the comparatively greater competitive markets in Japan. 
D)  the greater number of public goods provided in the United States. 
A)  an increase in the demand for CEOs. 
B)  an increase in the supply of CEOs. 
C)  the comparatively greater competitive markets in Japan. 
D)  the greater number of public goods provided in the United States.

Question 13

Consumers tend to accept the market restrictions imposed by suppliers because:

Accepted Answer

A)  government prevents them from organizing. 
B)  they see themselves as laborers and therefore benefit from restrictions. 
C)  their costs of organizing are higher than the cost of the collusion by the suppliers. 
D)  when combined, their losses are small for the group as a whole. 
A)  government prevents them from organizing. 
B)  they see themselves as laborers and therefore benefit from restrictions. 
C)  their costs of organizing are higher than the cost of the collusion by the suppliers. 
D)  when combined, their losses are small for the group as a whole.

Question 14

Competition is best seen as a process.

Accepted Answer

A) True 
 B)False

Question 15

How do you know that firms benefit society?

Accepted Answer

A)  Entrepreneurs start businesses. 
B)  Firms earn profits and produce goods. 
C)  Firms pay taxes and employ people. 
D)  Customers voluntarily pay for their products. 
A)  Entrepreneurs start businesses. 
B)  Firms earn profits and produce goods. 
C)  Firms pay taxes and employ people. 
D)  Customers voluntarily pay for their products.

Question 16

The majority of large corporations are directly controlled by the owners of the corporation.

Accepted Answer

A) True 
 B)False

Question 17

Potential profits encourage new firms to try to figure out ways to break down methods of protecting monopolies.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a lazy monopolist's fixed costs are lower than the fixed costs of an efficient monopolist. In all other respects, the monopolists are the same. Which of the following statements about this monopolist is true?

Accepted Answer

A)  It charges a higher price than the monopolist producing efficiently. 
B)  It charges a lower price than the monopolist producing efficiently. 
C)  Its total revenue is the same as the monopolist producing efficiently. 
D)  It produces less than the monopolist producing efficiently. 
A)  It charges a higher price than the monopolist producing efficiently. 
B)  It charges a lower price than the monopolist producing efficiently. 
C)  Its total revenue is the same as the monopolist producing efficiently. 
D)  It produces less than the monopolist producing efficiently.

Question 19

Opening an industry to international competition tends to:

Accepted Answer

A)  increase X-inefficiency. 
B)  force lazy monopolists to increase efficiency. 
C)  increase the incidence of lazy monopolists. 
D)  raise a monopolist's profit as the price is driven up. 
A)  increase X-inefficiency. 
B)  force lazy monopolists to increase efficiency. 
C)  increase the incidence of lazy monopolists. 
D)  raise a monopolist's profit as the price is driven up.

Question 20

The cost of dispensing fluoxetine (the generic for Prozac) is about $5 to $10 per prescription, but the consumer's price at most pharmacies is about $85. This suggests that the market for prescription drugs is:

Accepted Answer

A)  perfectly competitive. 
B)  a pure monopoly. 
C)  something that cannot be explained by economic theory. 
D)  not very competitive. 
A)  perfectly competitive. 
B)  a pure monopoly. 
C)  something that cannot be explained by economic theory. 
D)  not very competitive.

Exam 16: Real-World Competition and Technology

Refer to the graph shown. If suppliers can reduce output from M to L, the suppliers excluded from the market will lose the producer surplus shown by area:

A contract that makes a manager's salary dependent on total profit would be a type of incentive-compatible contract.

The technological lock-in argument suggests that:

The net effect of restricting entry into a market is to decrease the income of the remaining suppliers.

Perfect competition is more conducive to technological change than any of the other market structures.

The adoption of the QWERTY keyboard in the early days of mechanical typewriters, with its continued use today, has been suggested as a metaphor for:

Suppliers would be the most eager to organize to restrict output if they faced:

Refer to the following graph. A lazy monopolist is best described by earning area A and B in profits.

Entrepreneurs care about:

According to the author of your textbook, competition is best understood:

What controls the price that natural monopolies charge so that it will be a "fair price"?

The fact that U.S. managers' salaries are substantially greater than those of comparable managers in Japan may be related to:

Consumers tend to accept the market restrictions imposed by suppliers because:

Competition is best seen as a process.

How do you know that firms benefit society?

The majority of large corporations are directly controlled by the owners of the corporation.

Potential profits encourage new firms to try to figure out ways to break down methods of protecting monopolies.

Suppose a lazy monopolist's fixed costs are lower than the fixed costs of an efficient monopolist. In all other respects, the monopolists are the same. Which of the following statements about this monopolist is true?

Opening an industry to international competition tends to:

The cost of dispensing fluoxetine (the generic for Prozac) is about $5 to $10 per prescription, but the consumer's price at most pharmacies is about $85. This suggests that the market for prescription drugs is:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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