Question 1

Producers in perfect competition receive a smaller producer surplus than a producer in a monopoly.

Accepted Answer

A) True 
 B)False

Question 2

What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?

Accepted Answer

A monopoly is the only seller

Question 3

Table 15-3
   
Assume Table 15-3 gives the monthly demand and costs for subscriptions to basic cable for Comcast, a cable television monopoly in Philadelphia.
-Refer to Table 15-3.If Comcast wants to maximize its profits, what price (P)should it charge and how many cable subscriptions per month (Q)should it sell?

Accepted Answer

A) P = $12; Q = 8 
B) P = $14; Q = 6 
C) P = $16; Q = 4 
D) P = $15; Q = 5 
A) P = $12; Q = 8 
B) P = $14; Q = 6 
C) P = $16; Q = 4 
D) P = $15; Q = 5

Question 4

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

Accepted Answer

A) It was a public enterprise; therefore, the Canadian government blocked entry into the market for nickel. 
B) There were important network externalities in the production of nickel. 
C) Economies of scale resulted in the company becoming a natural monopoly. 
D) It had control of a key resource. 
A) It was a public enterprise; therefore, the Canadian government blocked entry into the market for nickel. 
B) There were important network externalities in the production of nickel. 
C) Economies of scale resulted in the company becoming a natural monopoly. 
D) It had control of a key resource.

Question 5

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 monopoly's profit will fall.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true?

Accepted Answer

A) If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost. 
B) A monopolist will always charge the highest possible price. 
C) If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers. 
D) Because a monopolist faces no competition, the demand for its product is perfectly inelastic. 
A) If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost. 
B) A monopolist will always charge the highest possible price. 
C) If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers. 
D) Because a monopolist faces no competition, the demand for its product is perfectly inelastic.

Question 7

Whenever a firm can charge a price greater than marginal cost,

Accepted Answer

A) the firm must be a monopolist. 
B) there is some loss of economic efficiency. 
C) consumers have the ability to choose a close substitute. 
D) the firm will earn economic profits. 
A) the firm must be a monopolist. 
B) there is some loss of economic efficiency. 
C) consumers have the ability to choose a close substitute. 
D) the firm will earn economic profits.

Question 8

A firm that has the ability to control to some degree the price of the product it sells

Accepted Answer

A) is also able to dictate the quantity purchased. 
B) faces a demand curve that is inelastic throughout the entire range of market demand. 
C) is a price maker. 
D) faces a perfectly inelastic demand curve. 
A) is also able to dictate the quantity purchased. 
B) faces a demand curve that is inelastic throughout the entire range of market demand. 
C) is a price maker. 
D) faces a perfectly inelastic demand curve.

Question 9

In 2017, the Department of Justice was investigating pharmaceutical companies regarding the pricing of generic drugs.This is an example of attempts by the government

Accepted Answer

A) to prevent vertical mergers which would significantly reduce competition and raise prices. 
B) to prevent horizontal mergers which would significantly reduce competition and raise prices. 
C) to regulate a natural monopoly by establishing government-regulated prices. 
D) to keep firms from colluding to raise prices. 
A) to prevent vertical mergers which would significantly reduce competition and raise prices. 
B) to prevent horizontal mergers which would significantly reduce competition and raise prices. 
C) to regulate a natural monopoly by establishing government-regulated prices. 
D) to keep firms from colluding to raise prices.

Question 10

In the United States, government policies with respect to monopolies and collusion are embodied in

Accepted Answer

A) the U.S. Constitution. 
B) common law, which the United States adopted from English law. 
C) the Supreme Court. 
D) antitrust laws. 
A) the U.S. Constitution. 
B) common law, which the United States adopted from English law. 
C) the Supreme Court. 
D) antitrust laws.

Question 11

Figure 15-5
  
-Refer to Figure 15-5.If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Accepted Answer

A) continue to produce because the price is greater than average variable cost. 
B) shut down because the price is greater than marginal cost. 
C) shut down because the price is less than average total cost. 
D) continue to produce because a monopolist always earns a profit. 
A) continue to produce because the price is greater than average variable cost. 
B) shut down because the price is greater than marginal cost. 
C) shut down because the price is less than average total cost. 
D) continue to produce because a monopolist always earns a profit.

Question 12

Which of the following statements is consistent with the views of Joseph Schumpeter?

Accepted Answer

A) Research and development by competitive firms is responsible for most technological changes. 
B) An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. 
C) Enforcement of antitrust laws is necessary to promote competition among firms. 
D) A lack of competition discourages firms from developing new technologies. 
A) Research and development by competitive firms is responsible for most technological changes. 
B) An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development. 
C) Enforcement of antitrust laws is necessary to promote competition among firms. 
D) A lack of competition discourages firms from developing new technologies.

Question 13

Assume a hypothetical case where an industry begins as perfect competition and then becomes a monopoly.As a result of this change

Accepted Answer

A) price will be higher, output will be lower, and the deadweight loss will be eliminated. 
B) consumer surplus will be smaller, producer surplus will be greater, and there will be a reduction in economic efficiency. 
C) price will be higher, consumer surplus will be greater, and output will be greater. 
D) consumer surplus will be smaller and producer surplus will be greater. There will be a net increase in economic surplus. 
A) price will be higher, output will be lower, and the deadweight loss will be eliminated. 
B) consumer surplus will be smaller, producer surplus will be greater, and there will be a reduction in economic efficiency. 
C) price will be higher, consumer surplus will be greater, and output will be greater. 
D) consumer surplus will be smaller and producer surplus will be greater. There will be a net increase in economic surplus.

Question 14

The International Nickel Company of Canada is often cited as an example of monopoly, but International Nickel eventually lost its monopoly.What event was responsible for this?

Accepted Answer

A) New technology allowed other firms to achieve network externalities after World War II. 
B) The Canadian government, which had owned International Nickel, sold the company after World War II. The government no longer blocked entry into the market for nickel. 
C) Competition in the market for nickel increased after nickel fields were developed in Russia after World War II. 
D) Competition in the market for nickel increased after Canada signed the North American Free Trade Agreement with the United States and Mexico in 1994. 
A) New technology allowed other firms to achieve network externalities after World War II. 
B) The Canadian government, which had owned International Nickel, sold the company after World War II. The government no longer blocked entry into the market for nickel. 
C) Competition in the market for nickel increased after nickel fields were developed in Russia after World War II. 
D) Competition in the market for nickel increased after Canada signed the North American Free Trade Agreement with the United States and Mexico in 1994.

Question 15

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

Accepted Answer

A) Each natural monopoly is made a public franchise. The public franchise is then required to set its price equal to its marginal cost. 
B) Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C) Natural monopolies are privately owned and are allowed to set their own prices. Government regulation of the firms would result in greater deadweight losses. 
D) Local or state regulatory commissions usually set prices for natural monopolies. 
A) Each natural monopoly is made a public franchise. The public franchise is then required to set its price equal to its marginal cost. 
B) Natural monopolies are privately owned, but prices proposed by the firms must be approved by the Antitrust Division of the Department of Justice. 
C) Natural monopolies are privately owned and are allowed to set their own prices. Government regulation of the firms would result in greater deadweight losses. 
D) Local or state regulatory commissions usually set prices for natural monopolies.

Question 16

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Accepted Answer

A monopoly's marginal revenue curve lies

Question 17

Unlike a perfect competitor, a monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 18

If a firm's average total cost is less than price where MR = MC

Accepted Answer

A) the firm should shut down. 
B) the firm should raise its price. 
C) the firm should continue to produce the output it is producing. 
D) the firm should cut back on its output to lower its cost. 
A) the firm should shut down. 
B) the firm should raise its price. 
C) the firm should continue to produce the output it is producing. 
D) the firm should cut back on its output to lower its cost.

Question 19

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Accepted Answer

A) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. 
B) prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents. 
C) other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents. 
D) firms will find ways to obtain additional patent protection-often by making cosmetic changes in drugs that were patented-so that they can continue charging high prices. 
A) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. 
B) prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents. 
C) other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents. 
D) firms will find ways to obtain additional patent protection-often by making cosmetic changes in drugs that were patented-so that they can continue charging high prices.

Question 20

Market power refers to

Accepted Answer

A) the ability of consumers to dictate what products should be produced. 
B) the ability of a firm to advertise its product and succeed in selling more output. 
C) the ability of a firm to sell at a lower price than rival sellers. 
D) the ability of a firm to charge a price higher than the marginal cost of production. 
A) the ability of consumers to dictate what products should be produced. 
B) the ability of a firm to advertise its product and succeed in selling more output. 
C) the ability of a firm to sell at a lower price than rival sellers. 
D) the ability of a firm to charge a price higher than the marginal cost of production.

Producers in perfect competition receive a smaller producer surplus than a producer in a monopoly.

What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

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 monopoly's profit will fall.

Which of the following statements is true?

Whenever a firm can charge a price greater than marginal cost,

A firm that has the ability to control to some degree the price of the product it sells

In 2017, the Department of Justice was investigating pharmaceutical companies regarding the pricing of generic drugs.This is an example of attempts by the government

In the United States, government policies with respect to monopolies and collusion are embodied in

Figure 15-5 -Refer to Figure 15-5.If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Which of the following statements is consistent with the views of Joseph Schumpeter?

Assume a hypothetical case where an industry begins as perfect competition and then becomes a monopoly.As a result of this change

The International Nickel Company of Canada is often cited as an example of monopoly, but International Nickel eventually lost its monopoly.What event was responsible for this?

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Unlike a perfect competitor, a monopolist faces the market demand curve.

If a firm's average total cost is less than price where MR = MC

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Market power refers 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

Producers in perfect competition receive a smaller producer surplus than a producer in a monopoly.

What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists?

The International Nickel Company of Canada is often cited as an example of monopoly.What was the source of the barrier to entry that gave this firm monopoly power?

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 monopoly's profit will fall.

Which of the following statements is true?

Whenever a firm can charge a price greater than marginal cost,

A firm that has the ability to control to some degree the price of the product it sells

In 2017, the Department of Justice was investigating pharmaceutical companies regarding the pricing of generic drugs.This is an example of attempts by the government

In the United States, government policies with respect to monopolies and collusion are embodied in

Figure 15-5 -Refer to Figure 15-5.If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

Which of the following statements is consistent with the views of Joseph Schumpeter?

Assume a hypothetical case where an industry begins as perfect competition and then becomes a monopoly.As a result of this change

The International Nickel Company of Canada is often cited as an example of monopoly, but International Nickel eventually lost its monopoly.What event was responsible for this?

If a firm is a natural monopoly, competition from other firms cannot be counted on to force price down to the level where the company earns zero economic profit.How are prices usually set in natural monopoly markets in the United States?

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Unlike a perfect competitor, a monopolist faces the market demand curve.

If a firm's average total cost is less than price where MR = MC

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Market power refers 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