Question 1

Refer to the graph shown.   If suppliers can reduce output from M to L, consumer surplus is reduced by area(s):

Accepted Answer

A) A. 
B) A and B. 
C) B and D. 
D) A, B, and D. 
A) A. 
B) A and B. 
C) B and D. 
D) A, B, and D. C

Question 2

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. B

Question 3

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. C

Question 4

A rise in X-inefficiency:

Accepted Answer

A) shifts the ATC curve up. 
B) shifts the ATC curve down. 
C) shifts the ATC curve down or up, depending on the nature of the inefficiency. 
D) does not affect costs, only the price and quantity. 
A) shifts the ATC curve up. 
B) shifts the ATC curve down. 
C) shifts the ATC curve down or up, depending on the nature of the inefficiency. 
D) does not affect costs, only the price and quantity.

Question 5

Which of the following is not a way in which monopolies fight real-world competition?

Accepted Answer

A) Lobbying 
B) Advertising 
C) Producing products that are difficult to copy 
D) Charging a very high price for their products 
A) Lobbying 
B) Advertising 
C) Producing products that are difficult to copy 
D) Charging a very high price for their products

Question 6

Peter Theil sees monopolies as:

Accepted Answer

A) bad for business. 
B) bad for society. 
C) bad for consumers. 
D) solving a unique problem for consumers. 
A) bad for business. 
B) bad for society. 
C) bad for consumers. 
D) solving a unique problem for consumers.

Question 7

Refer to the following graph.   Suppose this diagram represents a monopolist with a patent. What is the maximum the monopolist would be willing to spend to defend its patent?

Accepted Answer

A) Area A 
B) Area B 
C) Area A and B 
D) Area D 
A) Area A 
B) Area B 
C) Area A and B 
D) Area D

Question 8

If one were to observe the short-run behavior of a typical American business enterprise,you might fail to see the profit-maximizing behavior assumed by economists.Suggest two reasons for this.

Accepted Answer

One reason could be the monitoring probl

Question 9

The text suggests that real-world competition is best seen as:

Accepted Answer

A) a process. 
B) a state. 
C) nonexistent. 
D) existing only if government intervenes. 
A) a process. 
B) a state. 
C) nonexistent. 
D) existing only if government intervenes.

Question 10

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.

Question 11

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 12

Network externalities:

Accepted Answer

A) increase the likelihood that an industry will become a winner-take-all industry. 
B) increase competition among existing firms in a market. 
C) weaken forces that lead to monopoly in an industry. 
D) promote the entry of new firms in a market. 
A) increase the likelihood that an industry will become a winner-take-all industry. 
B) increase competition among existing firms in a market. 
C) weaken forces that lead to monopoly in an industry. 
D) promote the entry of new firms in a market.

Question 13

A firm will buy monopoly power until the marginal cost of having a monopoly:

Accepted Answer

A) equals the marginal benefit. 
B) equals the price of its product. 
C) is more than the marginal benefit. 
D) is less than the marginal benefit. 
A) equals the marginal benefit. 
B) equals the price of its product. 
C) is more than the marginal benefit. 
D) is less than the marginal benefit.

Question 14

Refer to the graph shown.   Suppliers producing L will spend up to area(s)________ to limit output to L.

Accepted Answer

A) A 
B) B 
C) A and B 
D) B and D 
A) A 
B) B 
C) A and B 
D) B and D

Question 15

Having just graduated from college,you accept a position with a large corporation as an entry-level sales manager.After a few weeks on the job,you observe that many of your senior colleagues are not working very hard,but make a lot more money than you do.You remember learning about the "motivating discipline" of corporate takeovers within your Economics courses.Draft a memo to your colleagues explaining how corporate takeovers might impact their lives if they don't alter their behavior.Why might you hesitate to write such a letter?

Accepted Answer

Your memo should read something like thi

Question 16

Consider the following advertisement: "We will pay you $13 to buy a light bulb that pays for itself." The coupon necessary to take advantage of this offer was available only at offices at the local electric company.Why do you think the electric company would make such an offer?

Accepted Answer

The most likely explanation is that the

Question 17

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 18

Refer to the following graph.   The additional profit that might be achieved by monitoring a lazy monopolist with ATC (X-inefficient)is equal to the area of rectangle:

Accepted Answer

A) A minus the cost of monitoring. 
B) B minus the cost of monitoring. 
C) A plus rectangle B minus the cost of monitoring. 
D) A minus rectangle B minus the cost of monitoring. 
A) A minus the cost of monitoring. 
B) B minus the cost of monitoring. 
C) A plus rectangle B minus the cost of monitoring. 
D) A minus rectangle B minus the cost of monitoring.

Question 19

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 20

Refer to the graph shown.   If suppliers can restrict output from M to L, the price will:

Accepted Answer

A) fall from PL to PM. 
B) fall from PM to PL. 
C) rise from PL to PM. 
D) rise from PM to PL. 
A) fall from PL to PM. 
B) fall from PM to PL. 
C) rise from PL to PM. 
D) rise from PM to PL.

Exam 16: Real-World Competition and Technology

Refer to the graph shown. If suppliers can reduce output from M to L, consumer surplus is reduced by area(s):

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:

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

A rise in X-inefficiency:

Which of the following is not a way in which monopolies fight real-world competition?

Peter Theil sees monopolies as:

Refer to the following graph. Suppose this diagram represents a monopolist with a patent. What is the maximum the monopolist would be willing to spend to defend its patent?

If one were to observe the short-run behavior of a typical American business enterprise,you might fail to see the profit-maximizing behavior assumed by economists.Suggest two reasons for this.

The text suggests that real-world competition is best seen as:

The technological lock-in argument suggests that:

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

Network externalities:

A firm will buy monopoly power until the marginal cost of having a monopoly:

Refer to the graph shown. Suppliers producing L will spend up to area(s)________ to limit output to L.

Consider the following advertisement: "We will pay you $13 to buy a light bulb that pays for itself." The coupon necessary to take advantage of this offer was available only at offices at the local electric company.Why do you think the electric company would make such an offer?

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

Refer to the following graph. The additional profit that might be achieved by monitoring a lazy monopolist with ATC (X-inefficient)is equal to the area of rectangle:

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

Refer to the graph shown. If suppliers can restrict output from M to L, the price will:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

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Who Gets What the Distribution of Income

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