Question 1

Briefly describe the monitoring problem as it applies to the managers of corporations.Why is this problem so severe in large corporations?

Accepted Answer

The monitoring problem arises whenever t

Question 2

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 3

The profit-maximization assumption of economic theory does not fit reality because:

Accepted Answer

A) all real firms want to maximize long-term profits rather than short-run profits. 
B) all real firms want to maximize their share of the market. 
C) real-world firms have a single goal, but this goal has nothing to do with profits. 
D) real-world firms have many goals, which depend on the incentive structure incorporated into the firm's organization. 
A) all real firms want to maximize long-term profits rather than short-run profits. 
B) all real firms want to maximize their share of the market. 
C) real-world firms have a single goal, but this goal has nothing to do with profits. 
D) real-world firms have many goals, which depend on the incentive structure incorporated into the firm's organization.

Question 4

What is the monitoring problem,and how does it relate to the standard economic model of the firm?

Accepted Answer

The monitoring problem refers to the nee

Question 5

-Refer to the graphs shown.   The maximum profits that an efficient monopolist that produces a profit-maximizing quantity could 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 6

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 7

An agreement in which the incentives of both parties match their goals as closely as possible is:

Accepted Answer

A) an X-inefficiency contract. 
B) a public good. 
C) an incentive-compatible contract. 
D) a corporate takeover contract. 
A) an X-inefficiency contract. 
B) a public good. 
C) an incentive-compatible contract. 
D) a corporate takeover contract.

Question 8

A monitoring problem most likely will occur when:

Accepted Answer

A) employees' self-interest is the same as the firm's interest. 
B) employees' self-interest differs from the firm's interest. 
C) the owner makes all the decisions for the business. 
D) a company is employee-owned. 
A) employees' self-interest is the same as the firm's interest. 
B) employees' self-interest differs from the firm's interest. 
C) the owner makes all the decisions for the business. 
D) a company is employee-owned.

Question 9

Describe two things firms do to try to break up a monopoly.Give an example of each.What can monopolists do to try to keep other firms from taking away some of their markets?

Accepted Answer

Firms may attack the monopoly position o

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Often,if a monopoly exists,other firms try to figure out how to break it up - to get a share of the monopolist's profit.Describe two things firms do to try to enter a monopolized industry.Give an example of each.

Accepted Answer

One thing firms do is to create a produc

Question 12

Real-world competition should not be viewed as a static condition but rather as a fight between the forces of monopolization and the forces of competition.

Accepted Answer

A) True 
 B)False

Question 13

In the United States, lobbying is:

Accepted Answer

A) not important to most monopolies. 
B) a way of protecting monopolies. 
C) illegal. 
D) important to firms in perfectly competitive markets. 
A) not important to most monopolies. 
B) a way of protecting monopolies. 
C) illegal. 
D) important to firms in perfectly competitive markets.

Question 14

It is not uncommon for businesses to pay contingent bonuses that depend on performance. Contingent bonuses are an example of what the text calls:

Accepted Answer

A) X-inefficiency. 
B) an incentive-compatible contract. 
C) a winner-take-all contract. 
D) a network externality. 
A) X-inefficiency. 
B) an incentive-compatible contract. 
C) a winner-take-all contract. 
D) a network externality.

Question 15

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

Accepted Answer

A) the demand for CEOs has decreased. 
B) the supply of CEOs has decreased. 
C) there are no government controls on CEOs' earnings in the United States. 
D) there are more natural monopolies in the United States. 
A) the demand for CEOs has decreased. 
B) the supply of CEOs has decreased. 
C) there are no government controls on CEOs' earnings in the United States. 
D) there are more natural monopolies in the United States.

Question 16

Once a firm has a monopoly it often has to worry about other firms trying to get a piece of its action.Describe three things monopolists do to try to keep other firms from getting a share of their markets.Discuss how much a monopolist would spend on any of these tactics.

Accepted Answer

Monopolists can try to prevent other fir

Question 17

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) It charges a higher price than the monopolist producing efficiently. 
B) It charges a lower price than the monopolist producing efficiently. 
C) It produces fewer goods than the monopolist producing efficiently. 
D) It sets price and quantity the same as 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) It produces fewer goods than the monopolist producing efficiently. 
D) It sets price and quantity the same as the monopolist producing efficiently.

Question 18

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 19

The general monitoring problem implies that:

Accepted Answer

A) profit maximization should always be a firm's goal. 
B) there is a cost of supervising employees so that they work toward the owner's goals rather than their own. 
C) government must intervene to protect national goals. 
D) competition will ensure common goals among the owners and managers of a firm. 
A) profit maximization should always be a firm's goal. 
B) there is a cost of supervising employees so that they work toward the owner's goals rather than their own. 
C) government must intervene to protect national goals. 
D) competition will ensure common goals among the owners and managers of a firm.

Question 20

In natural and platform monopolies, economists argue that regulation:

Accepted Answer

A) is not explicitly desirable, and society should rather rely on direct competitive forces. 
B) should be heavily enforced by government. 
C) is desirable, and should involve strict enforcement. 
D) is irrelevant. 
A) is not explicitly desirable, and society should rather rely on direct competitive forces. 
B) should be heavily enforced by government. 
C) is desirable, and should involve strict enforcement. 
D) is irrelevant.

Exam 16: Real-World Competition and Technology

Briefly describe the monitoring problem as it applies to the managers of corporations.Why is this problem so severe in large corporations?

Why is the perfect competition model unrealistic?

The profit-maximization assumption of economic theory does not fit reality because:

What is the monitoring problem,and how does it relate to the standard economic model of the firm?

-Refer to the graphs shown. The maximum profits that an efficient monopolist that produces a profit-maximizing quantity could earn is best shown by the area:

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

An agreement in which the incentives of both parties match their goals as closely as possible is:

A monitoring problem most likely will occur when:

Describe two things firms do to try to break up a monopoly.Give an example of each.What can monopolists do to try to keep other firms from taking away some of their markets?

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

Often,if a monopoly exists,other firms try to figure out how to break it up - to get a share of the monopolist's profit.Describe two things firms do to try to enter a monopolized industry.Give an example of each.

Real-world competition should not be viewed as a static condition but rather as a fight between the forces of monopolization and the forces of competition.

In the United States, lobbying is:

It is not uncommon for businesses to pay contingent bonuses that depend on performance. Contingent bonuses are an example of what the text calls:

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

Once a firm has a monopoly it often has to worry about other firms trying to get a piece of its action.Describe three things monopolists do to try to keep other firms from getting a share of their markets.Discuss how much a monopolist would spend on any of these tactics.

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?

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

The general monitoring problem implies that:

In natural and platform monopolies, economists argue that regulation:

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters