Question 1

A Herfindahl-Hirschman Index is calculated by

Accepted Answer

A) summing the amount of sales by the four largest firms and dividing by total industry sales. 
B) dividing the number of firms wanting to merge by the total number in the industry. 
C) summing the squares of the market shares of each firm in the industry. 
D) dividing the advertising expenditures of the firms that want to merge by total industry advertising expenditures. 
A) summing the amount of sales by the four largest firms and dividing by total industry sales. 
B) dividing the number of firms wanting to merge by the total number in the industry. 
C) summing the squares of the market shares of each firm in the industry. 
D) dividing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.

Question 2

The market demand curve facing a monopolist is more elastic than the market demand curve facing a monopolistic competitor.

Accepted Answer

A) True 
 B)False

Question 3

The Federal Trade Commission (FTC)Act

Accepted Answer

A) gave the FTC full power to regulate mergers. 
B) closed the loopholes in the Sherman and Clayton Acts. 
C) divided authority to police mergers between the FTC and the Department of Justice. 
D) prohibited charging buyers different prices if the result would reduce competition. 
A) gave the FTC full power to regulate mergers. 
B) closed the loopholes in the Sherman and Clayton Acts. 
C) divided authority to police mergers between the FTC and the Department of Justice. 
D) prohibited charging buyers different prices if the result would reduce competition.

Question 4

Equilibrium in a perfectly competitive market results in the greatest amount of economic surplus, or total benefit to society, from the production of a good.Why, then, did Joseph Schumpeter argue that an economy may benefit more from firms that have market power than from firms that are perfectly competitive?

Accepted Answer

Schumpeter did not deny that perfectly c

Question 5

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Accepted Answer

A) the antitrust division of the Department of State and the Securities and Exchange Commission. 
B) the Federal Trade Commission and the Internal Revenue Service. 
C) the Antitrust Division of the U.S. Department of Justice and the Council of Economic Advisors. 
D) the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice. 
A) the antitrust division of the Department of State and the Securities and Exchange Commission. 
B) the Federal Trade Commission and the Internal Revenue Service. 
C) the Antitrust Division of the U.S. Department of Justice and the Council of Economic Advisors. 
D) the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice.

Question 6

Figure 15-16
   
Figure 15-16 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

Accepted Answer

A) Q₁ units; P₄ 
B) Q₁ units; P₁ 
C) Q₅ units; P₃ 
D) Q₃ units; P₄ 
A) Q₁ units; P₄ 
B) Q₁ units; P₁ 
C) Q₅ units; P₃ 
D) Q₃ units; P₄

Question 7

If a monopolist's price is $50 per unit and its marginal cost is $25, then

Accepted Answer

A) to maximize profit the firm should increase output. 
B) to maximize profit the firm should decrease output. 
C) to maximize profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximize profit. 
A) to maximize profit the firm should increase output. 
B) to maximize profit the firm should decrease output. 
C) to maximize profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximize profit.

Question 8

Using a broad definition, a firm would have a monopoly if

Accepted Answer

A) it produced a product that has no close substitutes. 
B) it does not have to collude with any other producer to earn an economic profit. 
C) there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D) it can make decisions regarding price and output without violating antitrust laws. 
A) it produced a product that has no close substitutes. 
B) it does not have to collude with any other producer to earn an economic profit. 
C) there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run. 
D) it can make decisions regarding price and output without violating antitrust laws.

Question 9

Governments grant patents to

Accepted Answer

A) compensate firms for research and development costs. 
B) encourage competition. 
C) encourage low prices. 
D) encourage firms to reveal secret production techniques. 
A) compensate firms for research and development costs. 
B) encourage competition. 
C) encourage low prices. 
D) encourage firms to reveal secret production techniques.

Question 10

Figure 15-10
  
-Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

Accepted Answer

A) FHE. 
B) FGE. 
C) GEH. 
D) FQ₁Q₂E. 
A) FHE. 
B) FGE. 
C) GEH. 
D) FQ₁Q₂E.

Question 11

Consider two industries, industry W and industry X.In industry W there are five companies, each with a market share of 20% of total sales.In industry X, there are six companies.One company has a 50% market share and each of the other five firms has a market share of 10%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

a.The concentration ratio in industry W

Question 12

In the United States, barriers to entry in professional team sports (for example, football and baseball)result from

Accepted Answer

A) the draft of college players, which grants teams exclusive signing rights to individual players. 
B) long-term leases teams sign for stadiums and ballparks in major cities. 
C) television contracts, which give networks the exclusive rights to broadcast games. 
D) the reserve clause, which is a provision in contracts of professional athletes that require them to play for specific teams over the length of their contracts. 
A) the draft of college players, which grants teams exclusive signing rights to individual players. 
B) long-term leases teams sign for stadiums and ballparks in major cities. 
C) television contracts, which give networks the exclusive rights to broadcast games. 
D) the reserve clause, which is a provision in contracts of professional athletes that require them to play for specific teams over the length of their contracts.

Question 13

A monopoly firm is the only seller of a good or service that

Accepted Answer

A) has a perfectly elastic demand. 
B) has no close complements. 
C) does not need to be advertised. 
D) does not have a close substitute. 
A) has a perfectly elastic demand. 
B) has no close complements. 
C) does not need to be advertised. 
D) does not have a close substitute.

Question 14

Figure 15-10
  
-Refer to Figure 15-10.What is the area that represents consumer surplus under a monopoly?

Accepted Answer

A) the triangle P₀P₁F 
B) the triangle P₀P₂E 
C) the area P₁P₂EF 
D) the rectangle P₁P₃HF 
A) the triangle P₀P₁F 
B) the triangle P₀P₂E 
C) the area P₁P₂EF 
D) the rectangle P₁P₃HF

Question 15

A merger between firms at different stages of production of a good

Accepted Answer

A) is a vertical merger. 
B) was made illegal by the Sherman Act. 
C) was made legal by the Clayton Act. 
D) is a horizontal merger. 
A) is a vertical merger. 
B) was made illegal by the Sherman Act. 
C) was made legal by the Clayton Act. 
D) is a horizontal merger.

Question 16

The demand curve for a monopoly's product is

Accepted Answer

A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined. 
A) the market demand for the product. 
B) more elastic than the market demand for the product. 
C) more inelastic than the market demand for the product. 
D) undefined.

Question 17

Figure 15-17
   
Your college decides to offer a psychology course as a MOOC that can be taken by students anywhere in the world, whether they are actually enrolled in your college or not. The demand and cost situation for the MOOC is shown in the figure.
-Refer to Figure 15-17.The faculty member who designed the course argues: "I think the course should be priced so that the maximum number of students enroll." How much profit (or loss)will the college make on the course if it charges this price?

Accepted Answer

A) -$2,592,000 
B) -$1,080,000 
C) $0 
D) $450,000 
A) -$2,592,000 
B) -$1,080,000 
C) $0 
D) $450,000

Question 18

Governments grant patents to encourage

Accepted Answer

A) research and development on new products. 
B) competition. 
C) low prices. 
D) firms to form public enterprises. 
A) research and development on new products. 
B) competition. 
C) low prices. 
D) firms to form public enterprises.

Question 19

Consider an industry that is made up of nine firms, each with a market share (percent of sales)as follows:
A.Firm A: 30%
B.Firm B: 20%
C.Firms C, D, and E: 10% each
D.Firms F, G, H, and J: 5% each
What is the value of the four-firm concentration ratio and how is the industry categorized?

Accepted Answer

A) 50%; monopolistic competition 
B) 70%; oligopoly 
C) 75%; oligopoly 
D) 80%; strongly oligopolistic 
A) 50%; monopolistic competition 
B) 70%; oligopoly 
C) 75%; oligopoly 
D) 80%; strongly oligopolistic

Question 20

Figure 15-6
   
Figure 15-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-6.The profit-maximizing output and price for the monopolist are

Accepted Answer

A) output = 62; price = $24. 
B) output = 62; price = $18. 
C) output = 83; price = $22. 
D) output = 104; price = $20.80. 
A) output = 62; price = $24. 
B) output = 62; price = $18. 
C) output = 83; price = $22. 
D) output = 104; price = $20.80.

A Herfindahl-Hirschman Index is calculated by

The market demand curve facing a monopolist is more elastic than the market demand curve facing a monopolistic competitor.

The Federal Trade Commission (FTC)Act

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of and charge a price of .

If a monopolist's price is $50 per unit and its marginal cost is $25, then

Using a broad definition, a firm would have a monopoly if

Governments grant patents to

Figure 15-10 -Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

In the United States, barriers to entry in professional team sports (for example, football and baseball)result from

A monopoly firm is the only seller of a good or service that

Figure 15-10 -Refer to Figure 15-10.What is the area that represents consumer surplus under a monopoly?

A merger between firms at different stages of production of a good

The demand curve for a monopoly's product is

Governments grant patents to encourage

Consider an industry that is made up of nine firms, each with a market share (percent of sales)as follows: A.Firm A: 30% B.Firm B: 20% C.Firms C, D, and E: 10% each D.Firms F, G, H, and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorized?

Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The profit-maximizing output and price for the monopolist are

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

Exam 15: Monopoly and Antitrust Policy

A Herfindahl-Hirschman Index is calculated by

The market demand curve facing a monopolist is more elastic than the market demand curve facing a monopolistic competitor.

The Federal Trade Commission (FTC)Act

The U.S.Congress has given two government entities the authority to police mergers.These two entities are

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.

If a monopolist's price is $50 per unit and its marginal cost is $25, then

Using a broad definition, a firm would have a monopoly if

Governments grant patents to

Figure 15-10 -Refer to Figure 15-10.The deadweight loss due to a monopoly is represented by the area

In the United States, barriers to entry in professional team sports (for example, football and baseball)result from

A monopoly firm is the only seller of a good or service that

Figure 15-10 -Refer to Figure 15-10.What is the area that represents consumer surplus under a monopoly?

A merger between firms at different stages of production of a good

The demand curve for a monopoly's product is

Governments grant patents to encourage

Consider an industry that is made up of nine firms, each with a market share (percent of sales)as follows: A.Firm A: 30% B.Firm B: 20% C.Firms C, D, and E: 10% each D.Firms F, G, H, and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorized?

Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The profit-maximizing output and price for the monopolist are

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

Figure 15-16 Figure 15-16 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-16.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of and charge a price of .