Question 1

A price maker is

Accepted Answer

A) a person who actively seeks out the best price for a product that he or she wishes to buy. 
B) a firm that has some control over the price of the product it sells. 
C) a firm that is able to sell any quantity at the highest possible price. 
D) a consumer who participates in an auction where she announces her willingness to pay for a product. 
A) a person who actively seeks out the best price for a product that he or she wishes to buy. 
B) a firm that has some control over the price of the product it sells. 
C) a firm that is able to sell any quantity at the highest possible price. 
D) a consumer who participates in an auction where she announces her willingness to pay for a product.

Question 2

Network externalities

Accepted Answer

A) can only exist when there are economies of scale. 
B) prevent the dominance of a market by one firm. 
C) exist when the usefulness of a product increases with the number of consumers who use it. 
D) are created when celebrity endorsements of products lead to a surge in the demand for those products. 
A) can only exist when there are economies of scale. 
B) prevent the dominance of a market by one firm. 
C) exist when the usefulness of a product increases with the number of consumers who use it. 
D) are created when celebrity endorsements of products lead to a surge in the demand for those products.

Question 3

Which of the following statements is true?

Accepted Answer

A) Monopolists are price makers. All other firms are price takers. 
B) Unlike other industries, monopoly industries have high barriers to entry. 
C) Only monopoly firms are granted patents and copyrights. 
D) Unlike other firms, a monopolist's demand curve is the same as the market demand curve. 
A) Monopolists are price makers. All other firms are price takers. 
B) Unlike other industries, monopoly industries have high barriers to entry. 
C) Only monopoly firms are granted patents and copyrights. 
D) Unlike other firms, a monopolist's demand curve is the same as the market demand curve.

Question 4

Why are laws aimed at regulating monopolies called "antitrust" laws?

Accepted Answer

A) The rise of large firms (e.g., Standard Oil)in the late 1800s in the United States caused consumers to lose trust in private business. 
B) "Trust" was a word in Old English that meant monopoly in the Middle Ages. Therefore, "antitrust" is a term that means "against monopoly." 
C) In the late 1800s, firms in several industries formed trusts; the firms were independent but gave voting control to a board of trustees. Antitrust laws were passed to regulate these trusts. 
D) In the late 1800s, firms in several industries formed trusts; they were called "trusts" because when corporate officials were questioned about their business they would claim that business was good for the country and that they should trusted. 
A) The rise of large firms (e.g., Standard Oil)in the late 1800s in the United States caused consumers to lose trust in private business. 
B) "Trust" was a word in Old English that meant monopoly in the Middle Ages. Therefore, "antitrust" is a term that means "against monopoly." 
C) In the late 1800s, firms in several industries formed trusts; the firms were independent but gave voting control to a board of trustees. Antitrust laws were passed to regulate these trusts. 
D) In the late 1800s, firms in several industries formed trusts; they were called "trusts" because when corporate officials were questioned about their business they would claim that business was good for the country and that they should trusted.

Question 5

In a natural monopoly, throughout the range of market demand,

Accepted Answer

A) the marginal cost is above average total cost and pulls average total cost upward. 
B) average total cost is above the marginal cost and pulls the marginal cost upward. 
C) the marginal cost is below average total cost and pulls average total cost downward. 
D) there are diseconomies of scale. 
A) the marginal cost is above average total cost and pulls average total cost upward. 
B) average total cost is above the marginal cost and pulls the marginal cost upward. 
C) the marginal cost is below average total cost and pulls average total cost downward. 
D) there are diseconomies of scale.

Question 6

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Accepted Answer

A) True 
 B)False

Question 7

In Walnut Creek, California, there are three very popular supermarkets: Safeway, Whole Foods, and Lunardi's.While Safeway remains open twenty-four hours a day, Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

Accepted Answer

A) Safeway is a monopoly all day because it produces a service that has no close substitutes. 
B) Safeway has a monopoly at midnight but not during the day. 
C) Safeway can ignore the pricing decisions of the other two supermarkets. 
D) Safeway probably has a higher markup to compensate for its higher cost of production. 
A) Safeway is a monopoly all day because it produces a service that has no close substitutes. 
B) Safeway has a monopoly at midnight but not during the day. 
C) Safeway can ignore the pricing decisions of the other two supermarkets. 
D) Safeway probably has a higher markup to compensate for its higher cost of production.

Question 8

In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller

Accepted Answer

A) the greater the difference between marginal cost and price. 
B) the smaller the difference between marginal cost and average total cost. 
C) the smaller the difference between marginal cost and price. 
D) the greater the difference between marginal cost and average revenue. 
A) the greater the difference between marginal cost and price. 
B) the smaller the difference between marginal cost and average total cost. 
C) the smaller the difference between marginal cost and price. 
D) the greater the difference between marginal cost and average revenue.

Question 9

A horizontal merger

Accepted Answer

A) is a merger between firms in the same industry. 
B) results in a trust (for example, the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914. 
A) is a merger between firms in the same industry. 
B) results in a trust (for example, the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.

Question 10

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Accepted Answer

A) True 
 B)False

Question 11

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?

Accepted Answer

A) 2,500 
B) 3,150 
C) 8,100 
D) 10,000 
A) 2,500 
B) 3,150 
C) 8,100 
D) 10,000

Question 12

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

Accepted Answer

A) after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat. 
B) firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses. 
C) the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls. 
D) after 20 years patent protection is ended and other firms can produce less-expensive generic versions of the drug. 
A) after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat. 
B) firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses. 
C) the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls. 
D) after 20 years patent protection is ended and other firms can produce less-expensive generic versions of the drug.

Question 13

The first important federal law passed to regulate monopolies in the United States was the

Accepted Answer

A) Cellar-Kefauver Act. 
B) Clayton Act. 
C) Federal Trade Commission Act. 
D) Sherman Act. 
A) Cellar-Kefauver Act. 
B) Clayton Act. 
C) Federal Trade Commission Act. 
D) Sherman Act.

Question 14

Consider the following characteristics:
A.a market structure with barriers to entry
B.demand curves that are easily identified
C.firm cannot make zero profits in the long run
D.firm can reap long-run profits.
Which of the characteristics in the list above is shared by an oligopolist and a monopolist?

Accepted Answer

A) a, b, c, and d 
B) a, b, and d 
C) a, c, and d 
D) a and d 
A) a, b, c, and d 
B) a, b, and d 
C) a, c, and d 
D) a and d

Question 15

A monopolist faces

Accepted Answer

A) a perfectly elastic demand curve. 
B) a perfectly inelastic demand curve. 
C) a horizontal demand curve. 
D) a downward-sloping demand curve. 
A) a perfectly elastic demand curve. 
B) a perfectly inelastic demand curve. 
C) a horizontal demand curve. 
D) a downward-sloping demand curve.

Question 16

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly?

Accepted Answer

A) Each must lower its price to sell more output. 
B) Each sets a price for its product that will maximize its revenue. 
C) Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. 
D) Each maximizes profits by producing a quantity for which price equals marginal cost. 
A) Each must lower its price to sell more output. 
B) Each sets a price for its product that will maximize its revenue. 
C) Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. 
D) Each maximizes profits by producing a quantity for which price equals marginal cost.

Question 17

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Accepted Answer

A) True 
 B)False

Question 18

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published, other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

Accepted Answer

A) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States. 
B) The other researchers reached conclusions different from Harberger's; namely, they found that the loss of economic efficiency due to market power is only about 1 percent of the value of production in the United States, much less than Harberger's estimate. 
C) The other researchers reached conclusions different from Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States, significantly greater than Harberger's estimate. 
D) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 1 percent of the value of production in the United States. 
A) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States. 
B) The other researchers reached conclusions different from Harberger's; namely, they found that the loss of economic efficiency due to market power is only about 1 percent of the value of production in the United States, much less than Harberger's estimate. 
C) The other researchers reached conclusions different from Harberger's; namely, the loss of economic efficiency due to market power is about 10 percent of the value of production in the United States, significantly greater than Harberger's estimate. 
D) The other researchers reached conclusions similar to Harberger's; namely, the loss of economic efficiency due to market power is about 1 percent of the value of production in the United States.

Question 19

A monopoly is defined as a firm that has the largest market share in an industry.

Accepted Answer

A) True 
 B)False

Question 20

Suppose an industry is made up of 25 firms, all with equal market share.The four-firm concentration ratio of this industry is

Accepted Answer

A) 16%. 
B) 20%. 
C) 25%. 
D) It cannot be determined from the information given. 
A) 16%. 
B) 20%. 
C) 25%. 
D) It cannot be determined from the information given.

A price maker is

Network externalities

Which of the following statements is true?

Why are laws aimed at regulating monopolies called "antitrust" laws?

In a natural monopoly, throughout the range of market demand,

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

In Walnut Creek, California, there are three very popular supermarkets: Safeway, Whole Foods, and Lunardi's.While Safeway remains open twenty-four hours a day, Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller

A horizontal merger

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

The first important federal law passed to regulate monopolies in the United States was the

A monopolist faces

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly?

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published, other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

A monopoly is defined as a firm that has the largest market share in an industry.

Suppose an industry is made up of 25 firms, all with equal market share.The four-firm concentration ratio of this industry is

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

A price maker is

Network externalities

Which of the following statements is true?

Why are laws aimed at regulating monopolies called "antitrust" laws?

In a natural monopoly, throughout the range of market demand,

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

In Walnut Creek, California, there are three very popular supermarkets: Safeway, Whole Foods, and Lunardi's.While Safeway remains open twenty-four hours a day, Whole Foods and Lunardi's close at 9 pm.Which of the following statements is true?

In evaluating the degree of economic efficiency in a market, we can state that the size of the deadweight loss in a market will be smaller

A horizontal merger

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Consider an industry that is made up of six firms with the following market shares: Firm A - 50%, Firm B - 20%, Firms C and D - 10% each, and Firms E and F - 5% each.What is the value of the Herfindahl-Hirschman Index?

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

The first important federal law passed to regulate monopolies in the United States was the

A monopolist faces

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly?

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the "market" that firms are in are broadly defined rather than narrowly defined.

Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power.Since Harberger's findings were published, other researchers have studied this same issue.How do the results of these researchers compare to Harberger's results?

A monopoly is defined as a firm that has the largest market share in an industry.

Suppose an industry is made up of 25 firms, all with equal market share.The four-firm concentration ratio of this industry is

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