Question 1

A monopolist's demand curve is the same as the marginal revenue curve for the product.

Accepted Answer

A) True 
 B)False

Question 2

Figure 15-11
   
In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable television market in Upstate New York.
-Refer to Figure 15-11.Following the entry of Verizon, the subscription price falls from PM to PC.What is the increase in consumer surplus as a result of this change?

Accepted Answer

A) the area A + B + C 
B) the area B + C 
C) the area D + F 
D) the area B + C + D 
A) the area A + B + C 
B) the area B + C 
C) the area D + F 
D) the area B + C + D

Question 3

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

Accepted Answer

A) True 
 B)False

Question 4

a.What is the difference between a horizontal merger and a vertical merger?
b.Which type of merger, horizontal or vertical, would the government be most concerned with? Why?
c.Could a horizontal merger be welfare improving?

Accepted Answer

a.A horizontal merger is a merger betwee

Question 5

If a restaurant was a natural monopoly, dividing the restaurant equally into two separate restaurants would

Accepted Answer

A) decrease marginal cost. 
B) raise average total cost. 
C) increase total revenue. 
D) make marginal revenue less elastic. 
A) decrease marginal cost. 
B) raise average total cost. 
C) increase total revenue. 
D) make marginal revenue less elastic.

Question 6

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Accepted Answer

A) True 
 B)False

Question 7

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

Accepted Answer

A) True 
 B)False

Question 8

A monopolist's profit-maximizing price and output correspond to the point on a graph

Accepted Answer

A) where average total cost is minimized. 
B) where total costs are the smallest relative to price. 
C) where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. 
D) where price is as high as possible. 
A) where average total cost is minimized. 
B) where total costs are the smallest relative to price. 
C) where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. 
D) where price is as high as possible.

Question 9

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

Accepted Answer

A) The monopoly firm has control of a key resource necessary to produce a good. 
B) There are important network externalities in supplying a good or service. 
C) large economies of scale that result in a natural monopoly 
D) a high concentration ratio 
A) The monopoly firm has control of a key resource necessary to produce a good. 
B) There are important network externalities in supplying a good or service. 
C) large economies of scale that result in a natural monopoly 
D) a high concentration ratio

Question 10

A market economy benefits from market power

Accepted Answer

A) if the majority of the population are entrepreneurs. 
B) if firms with market power do research and development with the profits earned. 
C) if market power gets so bad the government creates public enterprises. 
D) under no circumstances. 
A) if the majority of the population are entrepreneurs. 
B) if firms with market power do research and development with the profits earned. 
C) if market power gets so bad the government creates public enterprises. 
D) under no circumstances.

Question 11

A monopoly is a firm that is the only seller of a good or service that does not have

Accepted Answer

A) a patent. 
B) a close complement. 
C) a barrier to entry. 
D) a close substitute. 
A) a patent. 
B) a close complement. 
C) a barrier to entry. 
D) a close substitute.

Question 12

A profit-maximizing monopoly's price is

Accepted Answer

A) the same as the price that would prevail if the industry was perfectly competitive. 
B) less than the price that would prevail if the industry was perfectly competitive. 
C) greater than the price that would prevail if the industry was perfectly competitive. 
D) not consistently related to price that would prevail if the market was perfectly competitive. 
A) the same as the price that would prevail if the industry was perfectly competitive. 
B) less than the price that would prevail if the industry was perfectly competitive. 
C) greater than the price that would prevail if the industry was perfectly competitive. 
D) not consistently related to price that would prevail if the market was perfectly competitive.

Question 13

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

Accepted Answer

A) it was a public enterprise. 
B) it had a patent on the manufacture of aluminum. 
C) the company had a secret technique for making aluminum from bauxite. 
D) it had control of almost all the available supply of bauxite. 
A) it was a public enterprise. 
B) it had a patent on the manufacture of aluminum. 
C) the company had a secret technique for making aluminum from bauxite. 
D) it had control of almost all the available supply of bauxite.

Question 14

A monopoly is characterized by all of the following except

Accepted Answer

A) there are only a few sellers, each selling a unique product. 
B) entry barriers are high. 
C) there are no close substitutes to the firm's product. 
D) the firm has market power. 
A) there are only a few sellers, each selling a unique product. 
B) entry barriers are high. 
C) there are no close substitutes to the firm's product. 
D) the firm has market power.

Question 15

Figure 15-4
   
Figure 15-4 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-4.What is the profit-maximizing/loss-minimizing output level?

Accepted Answer

A) 600 units 
B) 800 units 
C) 940 units 
D) 1,160 units 
A) 600 units 
B) 800 units 
C) 940 units 
D) 1,160 units

Question 16

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.

Accepted Answer

A) True 
 B)False

Question 17

Consider two industries, industry Q and industry Z.In industry Q there are 10 companies, each with a market share of 10% of total sales.In industry Z, there are eight companies.One company has a 65% market share and each of the other seven firms has a market share of 5%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.

Accepted Answer

a.The concentration ratio in industry Q

Question 18

A possible advantage of a horizontal merger for the economy is that

Accepted Answer

A) the merging firms could avoid losses. 
B) the merged firm might reap economies of scale which could translate into lower prices. 
C) the degree of competition in the industry will be intensified. 
D) the government stands to collect more corporate income tax revenue. 
A) the merging firms could avoid losses. 
B) the merged firm might reap economies of scale which could translate into lower prices. 
C) the degree of competition in the industry will be intensified. 
D) the government stands to collect more corporate income tax revenue.

Question 19

Figure 15-10
  
-Refer to Figure 15-10.Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

Accepted Answer

A) area FHE. 
B) area FGE. 
C) area P₁P₂EF. 
D) area P₁P₂GF. 
A) area FHE. 
B) area FGE. 
C) area P₁P₂EF. 
D) area P₁P₂GF.

Question 20

To maximize profit a monopolist will produce where

Accepted Answer

A) marginal revenue is equal to marginal cost. 
B) demand for its product is unit elastic. 
C) revenue per unit is maximized. 
D) average total cost is equal to average revenue. 
A) marginal revenue is equal to marginal cost. 
B) demand for its product is unit elastic. 
C) revenue per unit is maximized. 
D) average total cost is equal to average revenue.

A monopolist's demand curve is the same as the marginal revenue curve for the product.

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

a.What is the difference between a horizontal merger and a vertical merger? b.Which type of merger, horizontal or vertical, would the government be most concerned with? Why? c.Could a horizontal merger be welfare improving?

If a restaurant was a natural monopoly, dividing the restaurant equally into two separate restaurants would

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

A monopolist's profit-maximizing price and output correspond to the point on a graph

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

A market economy benefits from market power

A monopoly is a firm that is the only seller of a good or service that does not have

A profit-maximizing monopoly's price is

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

A monopoly is characterized by all of the following except

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the profit-maximizing/loss-minimizing output level?

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.

A possible advantage of a horizontal merger for the economy is that

Figure 15-10 -Refer to Figure 15-10.Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

To maximize profit a monopolist will produce where

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 monopolist's demand curve is the same as the marginal revenue curve for the product.

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

a.What is the difference between a horizontal merger and a vertical merger? b.Which type of merger, horizontal or vertical, would the government be most concerned with? Why? c.Could a horizontal merger be welfare improving?

If a restaurant was a natural monopoly, dividing the restaurant equally into two separate restaurants would

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

A monopolist's profit-maximizing price and output correspond to the point on a graph

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

A market economy benefits from market power

A monopoly is a firm that is the only seller of a good or service that does not have

A profit-maximizing monopoly's price is

The Aluminum Company of America (Alcoa)had a monopoly until the 1940s because

A monopoly is characterized by all of the following except

Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the profit-maximizing/loss-minimizing output level?

For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.

A possible advantage of a horizontal merger for the economy is that

Figure 15-10 -Refer to Figure 15-10.Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the

To maximize profit a monopolist will produce where

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