Question 1

A monopolist's demand curve represents market demand for the good.

Accepted Answer

A) True 
 B)False

Question 2

Stuff-It Corporation is the sole producer of Trindles, a new toy. Stuff-It would be an example of:

Accepted Answer

A)  a cartel. 
B)  a monopoly. 
C)  an oligopoly. 
D)  a competitive firm. 
A)  a cartel. 
B)  a monopoly. 
C)  an oligopoly. 
D)  a competitive firm.

Question 3

To succeed, a cartel must restrict output and prevent entry of new firms. A successful cartel requires an ACE in the hole: agreement, cooperation, and enforcement.

Accepted Answer

A) True 
 B)False

Question 4

According to the marginal principle, a monopoly firm maximizes profits as the point where:

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  marginal revenue equals average cost. 
C)  marginal cost equals price. 
D)  demand price equals supply price. 
A)  marginal revenue equals marginal cost. 
B)  marginal revenue equals average cost. 
C)  marginal cost equals price. 
D)  demand price equals supply price.

Question 5

For a monopolist, marginal revenue is less than demand price because:

Accepted Answer

A)  the firm must take the market price as given. 
B)  the firm must raise price in order to sell additional units of output. 
C)  the firm must lower price in order to sell additional units of output. 
D)  the firm cannot raise price too much or additional firms will be attracted to the industry. 
A)  the firm must take the market price as given. 
B)  the firm must raise price in order to sell additional units of output. 
C)  the firm must lower price in order to sell additional units of output. 
D)  the firm cannot raise price too much or additional firms will be attracted to the industry.

Question 6

Market power can be beneficial to the economy if:

Accepted Answer

A)  it decreases entrepreneurial activity. 
B)  it encourages political rent seeking. 
C)  it encourages economic rent seeking. 
D)  it discourages ruinous competition. 
A)  it decreases entrepreneurial activity. 
B)  it encourages political rent seeking. 
C)  it encourages economic rent seeking. 
D)  it discourages ruinous competition.

Question 7

Cartels are defined as:

Accepted Answer

A)  a single seller of a product. 
B)  oil producers and exporters. 
C)  an organized group of firms that acts like a monopoly. 
D)  a large group of firms that exerts little influence in the market. 
A)  a single seller of a product. 
B)  oil producers and exporters. 
C)  an organized group of firms that acts like a monopoly. 
D)  a large group of firms that exerts little influence in the market.

Question 8

Relative to a competitive industry, a monopolist:

Accepted Answer

A)  produces more output and charges a lower price. 
B)  produces less output and charges a higher price. 
C)  produces the same output and charges a higher price. 
D)  produces less output and charges a lower price. 
A)  produces more output and charges a lower price. 
B)  produces less output and charges a higher price. 
C)  produces the same output and charges a higher price. 
D)  produces less output and charges a lower price.

Question 9

A monopolist's marginal revenue measures the marginal social benefit of selling an additional unit.

Accepted Answer

A) True 
 B)False

Question 10

Because the monopolist must lower price in order to sell more output, marginal revenue will be less than the demand price.

Accepted Answer

A) True 
 B)False

Question 11

Government encourages market power when it:

Accepted Answer

A)  promotes international trade. 
B)  restricts imports. 
C)  enacts antitrust legislation. 
D)  eliminates licensing systems. 
A)  promotes international trade. 
B)  restricts imports. 
C)  enacts antitrust legislation. 
D)  eliminates licensing systems.

Question 12

Which of the following would be least likely to have market power?

Accepted Answer

A)  An industry in which there are a small number of producers and low entry barriers. 
B)  An industry in which there are a small number of producers and significant entry barriers. 
C)  An industry consisting of a single firm that faces little competition from imports. 
D)  An industry with a small number of firms that produce differentiated products. 
A)  An industry in which there are a small number of producers and low entry barriers. 
B)  An industry in which there are a small number of producers and significant entry barriers. 
C)  An industry consisting of a single firm that faces little competition from imports. 
D)  An industry with a small number of firms that produce differentiated products.

Question 13

Use the following information to answer the following questions.
  
-Refer to Pharmaceuticals. The total revenue associated with selling 3 units of pharmaceuticals is:

Accepted Answer

A)  $120. 
B)  $90. 
C)  $50. 
D)  $45. 
A)  $120. 
B)  $90. 
C)  $50. 
D)  $45.

Question 14

In the 1980s Japanese automakers were successful in U.S. markets because:

Accepted Answer

A)  U.S. management and production methods had become obsolete. 
B)  U.S. consumers were unwilling to buy foreign autos. 
C)  The U.S. government placed high tariffs on all foreign imports. 
D)  U.S cars were higher quality. 
A)  U.S. management and production methods had become obsolete. 
B)  U.S. consumers were unwilling to buy foreign autos. 
C)  The U.S. government placed high tariffs on all foreign imports. 
D)  U.S cars were higher quality.

Question 15

A monopoly is an industry with only one seller of a good that has many close substitutes.

Accepted Answer

A) True 
 B)False

Question 16

A firm is said to have market power if:

Accepted Answer

A)  it takes market price as given. 
B)  its actions affect market price. 
C)  its actions cause other firms to enter the industry. 
D)  it does not earn a loss. 
A)  it takes market price as given. 
B)  its actions affect market price. 
C)  its actions cause other firms to enter the industry. 
D)  it does not earn a loss.

Question 17

Government might grant patents in order to:

Accepted Answer

A)  increase private-sector research. 
B)  enhance competition. 
C)  decrease market power. 
D)  ensure that politicians are re-elected to office. 
A)  increase private-sector research. 
B)  enhance competition. 
C)  decrease market power. 
D)  ensure that politicians are re-elected to office.

Question 18

A natural monopoly will exist if demand conditions are such that only one firm can survive in an industry.

Accepted Answer

A) True 
 B)False

Question 19

The desire to increase profits may cause firms to cheat on an agreement reached by a cartel.

Accepted Answer

A) True 
 B)False

Question 20

Suppose marginal revenue currently exceeds marginal cost. In order to maximize profits, the firm should:

Accepted Answer

A)  decrease output. 
B)  increase output. 
C)  advertise less. 
D)  cease production. 
A)  decrease output. 
B)  increase output. 
C)  advertise less. 
D)  cease production.

A monopolist's demand curve represents market demand for the good.

Stuff-It Corporation is the sole producer of Trindles, a new toy. Stuff-It would be an example of:

To succeed, a cartel must restrict output and prevent entry of new firms. A successful cartel requires an ACE in the hole: agreement, cooperation, and enforcement.

According to the marginal principle, a monopoly firm maximizes profits as the point where:

For a monopolist, marginal revenue is less than demand price because:

Market power can be beneficial to the economy if:

Cartels are defined as:

Relative to a competitive industry, a monopolist:

A monopolist's marginal revenue measures the marginal social benefit of selling an additional unit.

Because the monopolist must lower price in order to sell more output, marginal revenue will be less than the demand price.

Government encourages market power when it:

Which of the following would be least likely to have market power?

Use the following information to answer the following questions. -Refer to Pharmaceuticals. The total revenue associated with selling 3 units of pharmaceuticals is:

In the 1980s Japanese automakers were successful in U.S. markets because:

A monopoly is an industry with only one seller of a good that has many close substitutes.

A firm is said to have market power if:

Government might grant patents in order to:

A natural monopoly will exist if demand conditions are such that only one firm can survive in an industry.

The desire to increase profits may cause firms to cheat on an agreement reached by a cartel.

Suppose marginal revenue currently exceeds marginal cost. In order to maximize profits, the firm should:

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Inflation: a Monetary Phenomenon

Sustained Budget Deficits: Is This Any Way to Run a Government

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

Filters

Exam 5: Market Power: Does It Help or Hurt the Economy

A monopolist's demand curve represents market demand for the good.

Stuff-It Corporation is the sole producer of Trindles, a new toy. Stuff-It would be an example of:

To succeed, a cartel must restrict output and prevent entry of new firms. A successful cartel requires an ACE in the hole: agreement, cooperation, and enforcement.

According to the marginal principle, a monopoly firm maximizes profits as the point where:

For a monopolist, marginal revenue is less than demand price because:

Market power can be beneficial to the economy if:

Cartels are defined as:

Relative to a competitive industry, a monopolist:

A monopolist's marginal revenue measures the marginal social benefit of selling an additional unit.

Because the monopolist must lower price in order to sell more output, marginal revenue will be less than the demand price.

Government encourages market power when it:

Which of the following would be least likely to have market power?

Use the following information to answer the following questions. -Refer to Pharmaceuticals. The total revenue associated with selling 3 units of pharmaceuticals is:

In the 1980s Japanese automakers were successful in U.S. markets because:

A monopoly is an industry with only one seller of a good that has many close substitutes.

A firm is said to have market power if:

Government might grant patents in order to:

A natural monopoly will exist if demand conditions are such that only one firm can survive in an industry.

The desire to increase profits may cause firms to cheat on an agreement reached by a cartel.

Suppose marginal revenue currently exceeds marginal cost. In order to maximize profits, the firm should:

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Inflation: a Monetary Phenomenon

Sustained Budget Deficits: Is This Any Way to Run a Government

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

Filters