Question 1

Reverse engineering is the process of a firm buying other firms' products and:

Accepted Answer

A)  selling them in the market for a cheaper price than those firms do. 
B)  selling them in the black market for an exorbitant price. 
C)  copying them within the limits of law. 
D)  copying them unlawfully. 
A)  selling them in the market for a cheaper price than those firms do. 
B)  selling them in the black market for an exorbitant price. 
C)  copying them within the limits of law. 
D)  copying them unlawfully.

Question 2

Across the United States, fire departments are fighting with private companies over the right to respond to medical emergencies. Each side will fight harder the:

Accepted Answer

A)  more inelastic the demand. 
B)  more elastic the demand. 
C)  less inelastic the demand. 
D)  more elastic the supply. 
A)  more inelastic the demand. 
B)  more elastic the demand. 
C)  less inelastic the demand. 
D)  more elastic the supply.

Question 3

According to the phrase, "competition is for losers," a goal of all firms is to:

Accepted Answer

A)  monopolize a market. 
B)  be perfect competitors. 
C)  provide social goods. 
D)  provide public goods. 
A)  monopolize a market. 
B)  be perfect competitors. 
C)  provide social goods. 
D)  provide public goods.

Question 4

Competitive pressure places a limit on firms' laziness.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  Its total profit is lower than that of the monopolist producing efficiently. 
B)  Its total profit is the same as that of the monopolist producing efficiently. 
C)  Its total revenue is less than that of the monopolist producing efficiently. 
D)  It produces less than does the monopolist producing efficiently. 
A)  Its total profit is lower than that of the monopolist producing efficiently. 
B)  Its total profit is the same as that of the monopolist producing efficiently. 
C)  Its total revenue is less than that of the monopolist producing efficiently. 
D)  It produces less than does the monopolist producing efficiently.

Question 6

A firm will spend money on a program to develop or protect its monopoly position until the:

Accepted Answer

A) marginal costs > the marginal benefits. B) marginal costs < the marginal benefits. C) marginal benefits = the marginal costs. D) total costs = the total benefits. A) marginal costs > the marginal benefits. B) marginal costs < the marginal benefits. C) marginal benefits = the marginal costs. D) total costs = the total benefits.

Question 7

Government has:

Accepted Answer

A)  deregulated the electricity industry because domestic producers are facing fierce international competition. 
B)  deregulated the entire electricity industry because the bureaucratic costs of maintaining the regulations became too high. 
C)  broken the electricity industry into subindustries and deregulated the portions that do not exhibit economies of scale. 
D)  broken the electricity industry into subindustries and deregulated the portions that exhibit economies of scale. 
A)  deregulated the electricity industry because domestic producers are facing fierce international competition. 
B)  deregulated the entire electricity industry because the bureaucratic costs of maintaining the regulations became too high. 
C)  broken the electricity industry into subindustries and deregulated the portions that do not exhibit economies of scale. 
D)  broken the electricity industry into subindustries and deregulated the portions that exhibit economies of scale.

Question 8

Suppliers would be less eager to organize to restrict output if they faced a:

Accepted Answer

A)  less elastic demand. 
B)  more elastic demand. 
C)  perfectly inelastic demand. 
D)  unit-elastic demand curve. 
A)  less elastic demand. 
B)  more elastic demand. 
C)  perfectly inelastic demand. 
D)  unit-elastic demand curve.

Question 9

Economic reasoning predicts that there will be strong pressures to make real-world markets perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of the monitoring problem?

Accepted Answer

A)  Government fails to stop firms hiring child labor to produce goods. 
B)  Two firms collude to set the market price, but the government cannot prove this conclusively. 
C)  The managers of a firm maximize their own salaries to the detriment of maximizing profit for the owner of the firm. 
D)  A firm does not take into account the air pollution caused by a coal factory when pricing its product. 
A)  Government fails to stop firms hiring child labor to produce goods. 
B)  Two firms collude to set the market price, but the government cannot prove this conclusively. 
C)  The managers of a firm maximize their own salaries to the detriment of maximizing profit for the owner of the firm. 
D)  A firm does not take into account the air pollution caused by a coal factory when pricing its product.

Question 11

Which of the following is a legal right to control who may produce a good?

Accepted Answer

A)  A proxy 
B)  A patent 
C)  A controller 
D)  A legal controller 
A)  A proxy 
B)  A patent 
C)  A controller 
D)  A legal controller

Question 12

In practice, regulatory boards try to set the price of a natural monopoly so that price covers a normal return on capital investment. As a result:

Accepted Answer

A)  there is an incentive to use less equipment. 
B)  there is an incentive to use more equipment. 
C)  the incentive to use equipment stays the same. 
D)  the price of equipment should decrease. 
A)  there is an incentive to use less equipment. 
B)  there is an incentive to use more equipment. 
C)  the incentive to use equipment stays the same. 
D)  the price of equipment should decrease.

Question 13

In practice, regulatory boards try to set the price of a natural monopoly so that price:

Accepted Answer

A)  equals marginal cost. 
B)  covers all explicit costs. 
C)  includes all costs plus a normal return on capital investment. 
D)  is constant over time. 
A)  equals marginal cost. 
B)  covers all explicit costs. 
C)  includes all costs plus a normal return on capital investment. 
D)  is constant over time.

Question 14

Network externalities can:

Accepted Answer

A)  create diffuse profits for producers. 
B)  decrease the benefits of a winner-take-all industry. 
C)  lead to the adoption of inefficient technologies. 
D)  increase the value of new technologies. 
A)  create diffuse profits for producers. 
B)  decrease the benefits of a winner-take-all industry. 
C)  lead to the adoption of inefficient technologies. 
D)  increase the value of new technologies.

Question 15

If firms have to spend money on creating and protecting their monopoly power, they're going to buy:

Accepted Answer

A)  more monopoly power than if it were free. 
B)  the same monopoly power as if it were free. 
C)  less monopoly power than if it were free. 
D)  no monopoly power. 
A)  more monopoly power than if it were free. 
B)  the same monopoly power as if it were free. 
C)  less monopoly power than if it were free. 
D)  no monopoly power.

Question 16

Refer to the graphs shown.   The maximum profits that a lazy monopolist whose average total costs are given by the ATC (X-inefficient) curve but who still produces the profit-maximizing quantity might earn is best shown by the area:

Accepted Answer

A)  A+ B in graph (1). 
B)  A in graph (1). 
C)  C + D in graph (2). 
D)  C in graph (2). 
A)  A+ B in graph (1). 
B)  A in graph (1). 
C)  C + D in graph (2). 
D)  C in graph (2).

Question 17

Soda companies pay universities for the exclusive right to sell their products on campus. For example, the University of Buffalo agreed to sell only Pepsi on campus in exchange for $220,000 per year. This agreement:

Accepted Answer

A)  is beneficial for students because they no longer have to make a choice about which soda to purchase. 
B)  is beneficial for students if Pepsi charges a monopoly price on campus. 
C)  may be beneficial for students, depending on how the university uses the $220,000. 
D)  is harmful to students because the extra money gained by the university cannot be used for their benefit. 
A)  is beneficial for students because they no longer have to make a choice about which soda to purchase. 
B)  is beneficial for students if Pepsi charges a monopoly price on campus. 
C)  may be beneficial for students, depending on how the university uses the $220,000. 
D)  is harmful to students because the extra money gained by the university cannot be used for their benefit.

Question 18

What do economists mean by "reverse engineering"?

Accepted Answer

A)  Taking a product apart in order to copy its design 
B)  A modification of old technology 
C)  A decision to adopt an old technology rather than a new one 
D)  Modification of existing machines so that they can be run by handicapped persons 
A)  Taking a product apart in order to copy its design 
B)  A modification of old technology 
C)  A decision to adopt an old technology rather than a new one 
D)  Modification of existing machines so that they can be run by handicapped persons

Question 19

Why is the perfect competition model unrealistic?

Accepted Answer

A)  Self-seeking individuals actively seek out ways to limit competition to increase personal gains. 
B)  Monopoly is more prevalent in the economy than is perfect competition. 
C)  Homogeneous products are numerous in the economy. 
D)  The model assumes that market structures are dynamic. 
A)  Self-seeking individuals actively seek out ways to limit competition to increase personal gains. 
B)  Monopoly is more prevalent in the economy than is perfect competition. 
C)  Homogeneous products are numerous in the economy. 
D)  The model assumes that market structures are dynamic.

Question 20

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

Accepted Answer

A)  an example of the monitoring problem in the United States. 
B)  an example of X-inefficiency in Japan. 
C)  due to the fact that the U.S. economy is much less competitive. 
D)  due to the fact that there are more natural monopolies in the United States. 
A)  an example of the monitoring problem in the United States. 
B)  an example of X-inefficiency in Japan. 
C)  due to the fact that the U.S. economy is much less competitive. 
D)  due to the fact that there are more natural monopolies in the United States.

Exam 16: Real-World Competition and Technology

Reverse engineering is the process of a firm buying other firms' products and:

Across the United States, fire departments are fighting with private companies over the right to respond to medical emergencies. Each side will fight harder the:

According to the phrase, "competition is for losers," a goal of all firms is to:

Competitive pressure places a limit on firms' laziness.

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

A firm will spend money on a program to develop or protect its monopoly position until the:

Government has:

Suppliers would be less eager to organize to restrict output if they faced a:

Economic reasoning predicts that there will be strong pressures to make real-world markets perfectly competitive.

Which of the following is an example of the monitoring problem?

Which of the following is a legal right to control who may produce a good?

In practice, regulatory boards try to set the price of a natural monopoly so that price covers a normal return on capital investment. As a result:

In practice, regulatory boards try to set the price of a natural monopoly so that price:

Network externalities can:

If firms have to spend money on creating and protecting their monopoly power, they're going to buy:

Refer to the graphs shown. The maximum profits that a lazy monopolist whose average total costs are given by the ATC (X-inefficient) curve but who still produces the profit-maximizing quantity might earn is best shown by the area:

Soda companies pay universities for the exclusive right to sell their products on campus. For example, the University of Buffalo agreed to sell only Pepsi on campus in exchange for $220,000 per year. This agreement:

What do economists mean by "reverse engineering"?

Why is the perfect competition model unrealistic?

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

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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