Question 1

Figure 15-15
   
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.Erickson Power is a natural monopoly because

Accepted Answer

A) it is a power company and all power companies are natural monopolies. 
B) average total cost is still declining when it intersects demand. 
C) of its continually declining marginal revenue curve as output rises. 
D) its marginal cost lies entirely below its long-run average cost. 
A) it is a power company and all power companies are natural monopolies. 
B) average total cost is still declining when it intersects demand. 
C) of its continually declining marginal revenue curve as output rises. 
D) its marginal cost lies entirely below its long-run average cost.

Question 2

A natural monopoly is most likely to occur in which of the following industries?

Accepted Answer

A) the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years 
B) the diamond mining and marketing industry because one firm can control a key resource 
C) the software industry because of the importance of network externalities 
D) an industry where fixed costs are very large relative to variable costs 
A) the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years 
B) the diamond mining and marketing industry because one firm can control a key resource 
C) the software industry because of the importance of network externalities 
D) an industry where fixed costs are very large relative to variable costs

Question 3

One reason patent protection is vitally important to pharmaceutical firms is

Accepted Answer

A) successful new drugs are not profitable. If firms are not granted patents many would go out of business and health care would be severely diminished. 
B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process. 
C) that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D) the high salaries pharmaceutical firms pay to scientists and doctors make their labor costs higher than for any other business. Profits from patents are needed to pay these labor costs. 
A) successful new drugs are not profitable. If firms are not granted patents many would go out of business and health care would be severely diminished. 
B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process. 
C) that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D) the high salaries pharmaceutical firms pay to scientists and doctors make their labor costs higher than for any other business. Profits from patents are needed to pay these labor costs.

Question 4

Figure 15-4
   
Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is the amount of the monopoly's total cost of production?

Accepted Answer

A) $21,600 
B) $17,700 
C) $9,340 
D) $7,800 
A) $21,600 
B) $17,700 
C) $9,340 
D) $7,800

Question 5

A firm that is the only seller of a good or service that does not have a close substitute is called

Accepted Answer

A) a monopoly. 
B) an oligopolist. 
C) a market maker. 
D) a price maker. 
A) a monopoly. 
B) an oligopolist. 
C) a market maker. 
D) a price maker.

Question 6

Figure 15-19
  
-Refer to Figure 15-19 to answer the following questions.
a.What quantity will this monopoly produce and what price will it charge?
b.Suppose the monopoly is regulated.If the regulatory agency wants to achieve economic efficiency, what price should it require the monopoly to charge?
c.To achieve economic efficiency, what quantity will the regulated monopoly produce?
d.Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency?
e.Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35.What quantity will the monopoly produce and what price will the monopoly charge?
f.With the price ceiling of $35, what profit will the monopoly earn?

Accepted Answer

a.Quantity = 835 units and Price = $59.

Question 7

Figure 15-9
   
Figure 15-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-9.At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production?

Accepted Answer

A) $8 
B) $11.50 
C) $21 
D) There is no difference. 
A) $8 
B) $11.50 
C) $21 
D) There is no difference.

Question 8

Figure 15-3
   
Figure 15-3 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit/loss per unit?

Accepted Answer

A) loss of $7 per unit 
B) profit of $30 per unit 
C) loss of $21 per unit 
D) profit of $14 per unit 
A) loss of $7 per unit 
B) profit of $30 per unit 
C) loss of $21 per unit 
D) profit of $14 per unit

Question 9

Market power in the United States causes a huge loss of economic efficiency.

Accepted Answer

A) True 
 B)False

Question 10

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result, the monopolist will increase the price of its product to cover its higher cost.

Accepted Answer

A) True 
 B)False

Question 11

Merger guidelines developed by the Antitrust Division of the U.S.Department of Justice use four-firm concentration ratios as measures of concentration.

Accepted Answer

A) True 
 B)False

Question 12

What type of protection does U.S.law grant the creator of a book, film, or piece of music?

Accepted Answer

A) A public franchise, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death. 
B) A copyright, which grants exclusive rights to the creator for 20 years after the work is created. 
C) A patent, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death. 
D) A copyright, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death. 
A) A public franchise, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death. 
B) A copyright, which grants exclusive rights to the creator for 20 years after the work is created. 
C) A patent, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death. 
D) A copyright, which grants the exclusive right to use the creation during the creator's lifetime and to his or her heirs for 70 years after the creator's death.

Question 13

Figure 15-15
   
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

Accepted Answer

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

Question 14

Table 15-4
   
Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm.
-Refer to Table 15-4.What is the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Accepted Answer

A) $124 
B) $42 
C) $36 
D) $12 
A) $124 
B) $42 
C) $36 
D) $12

Question 15

Table 15-1
   
A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1.
-Refer to Table 15-1.When producing the profit-maximizing output, 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 16

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Accepted Answer

Patents are designed to encourage creati

Question 17

Figure 15-15
   
Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Refer to Figure 15-15.Why won't regulators require that Erickson Power produce the economically efficient output level?

Accepted Answer

A) because there is insufficient demand at that output level 
B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit 
C) because Erickson Power will earn zero profit 
D) because Erickson Power will sustain persistent losses and will not continue in business in the long run 
A) because there is insufficient demand at that output level 
B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit 
C) because Erickson Power will earn zero profit 
D) because Erickson Power will sustain persistent losses and will not continue in business in the long run

Question 18

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Harberger found that

Accepted Answer

A) the loss of economic efficiency in the U.S. economy due to market power was less than 1 percent of the value of production. 
B) because of the increase in the average size of firms since World War II, the loss of economic efficiency has been relatively large, about 10 percent of the value of total production in the United States. 
C) although the number of monopolies was small, the large number of other non-competitive firms in the United States resulted in a large loss of economic efficiency, about 20 percent of the value of total production. 
D) the loss of economic efficiency in the U.S. economy due to market power was small around 1973, about 1 percent of the value of production, but has since grown to about 10 percent. 
A) the loss of economic efficiency in the U.S. economy due to market power was less than 1 percent of the value of production. 
B) because of the increase in the average size of firms since World War II, the loss of economic efficiency has been relatively large, about 10 percent of the value of total production in the United States. 
C) although the number of monopolies was small, the large number of other non-competitive firms in the United States resulted in a large loss of economic efficiency, about 20 percent of the value of total production. 
D) the loss of economic efficiency in the U.S. economy due to market power was small around 1973, about 1 percent of the value of production, but has since grown to about 10 percent.

Question 19

An example of a monopoly based on control of a key resource is

Accepted Answer

A) Major League Baseball. 
B) NASA. 
C) Microsoft's Windows operating system. 
D) the U.S. Food and Drug Administration. 
A) Major League Baseball. 
B) NASA. 
C) Microsoft's Windows operating system. 
D) the U.S. Food and Drug Administration.

Question 20

The reason that the Fisherman's Friend restaurant in Stonington, Maine had a monopoly on selling seafood dinners in that town is most likely due to

Accepted Answer

A) a government-imposed barrier. 
B) occupational licensing. 
C) no competitors apparently found the profit level attractive enough to enter the market. 
D) the restaurant owned all the fresh seafood in the state. 
A) a government-imposed barrier. 
B) occupational licensing. 
C) no competitors apparently found the profit level attractive enough to enter the market. 
D) the restaurant owned all the fresh seafood in the state.

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Erickson Power is a natural monopoly because

A natural monopoly is most likely to occur in which of the following industries?

One reason patent protection is vitally important to pharmaceutical firms is

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the amount of the monopoly's total cost of production?

A firm that is the only seller of a good or service that does not have a close substitute is called

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production?

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit/loss per unit?

Market power in the United States causes a huge loss of economic efficiency.

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result, the monopolist will increase the price of its product to cover its higher cost.

Merger guidelines developed by the Antitrust Division of the U.S.Department of Justice use four-firm concentration ratios as measures of concentration.

What type of protection does U.S.law grant the creator of a book, film, or piece of music?

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Table 15-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1. -Refer to Table 15-1.When producing the profit-maximizing output, what is the amount of the firm's profit?

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Why won't regulators require that Erickson Power produce the economically efficient output level?

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Harberger found that

An example of a monopoly based on control of a key resource is

The reason that the Fisherman's Friend restaurant in Stonington, Maine had a monopoly on selling seafood dinners in that town is most likely due to

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 15: Monopoly and Antitrust Policy

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Erickson Power is a natural monopoly because

A natural monopoly is most likely to occur in which of the following industries?

One reason patent protection is vitally important to pharmaceutical firms is

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the amount of the monopoly's total cost of production?

A firm that is the only seller of a good or service that does not have a close substitute is called

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production?

Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit/loss per unit?

Market power in the United States causes a huge loss of economic efficiency.

Suppose a monopoly is producing its profit-maximizing output level.Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output.As a result, the monopolist will increase the price of its product to cover its higher cost.

Merger guidelines developed by the Antitrust Division of the U.S.Department of Justice use four-firm concentration ratios as measures of concentration.

What type of protection does U.S.law grant the creator of a book, film, or piece of music?

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.What is the economically efficient output level and what is the price at that level?

Table 15-4 Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows the demand and the total cost schedule for the firm. -Refer to Table 15-4.What is the amount of the deadweight loss generated by Shakti when it produces the monopoly output?

Table 15-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1. -Refer to Table 15-1.When producing the profit-maximizing output, what is the amount of the firm's profit?

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Why won't regulators require that Erickson Power produce the economically efficient output level?

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Harberger found that

An example of a monopoly based on control of a key resource is

The reason that the Fisherman's Friend restaurant in Stonington, Maine had a monopoly on selling seafood dinners in that town is most likely due to

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters