Question 1

Cartel members have an incentive to cheat by:

Accepted Answer

A)  lowering price and selling less output. 
B)  lowering price and selling more output. 
C)  raising price and selling less output. 
D)  raising price and selling more output. 
A)  lowering price and selling less output. 
B)  lowering price and selling more output. 
C)  raising price and selling less output. 
D)  raising price and selling more output.

Question 2

The increased competitiveness of the U.S. economy can be explained by:

Accepted Answer

A)  competition from imports. 
B)  government deregulation. 
C)  the information revolution. 
D)  All of the above. 
A)  competition from imports. 
B)  government deregulation. 
C)  the information revolution. 
D)  All of the above.

Question 3

Suppose a monopolist is currently producing at a point where marginal revenue is $20 and marginal cost is $25. This monopolist should:

Accepted Answer

A)  decrease output in order to increase profits. 
B)  increase output in order to increase profits. 
C)  make no change in output. It is maximizing profits at its current level of production. 
D)  advertise less. This would cut its costs and bring it to a profit maximizing position. 
A)  decrease output in order to increase profits. 
B)  increase output in order to increase profits. 
C)  make no change in output. It is maximizing profits at its current level of production. 
D)  advertise less. This would cut its costs and bring it to a profit maximizing position.

Question 4

A monopolist will produce a greater level of output than a competitive industry.

Accepted Answer

A) True 
 B)False

Question 5

Economists object to monopoly because of the profits earned.

Accepted Answer

A) True 
 B)False

Question 6

Because the monopolist must lower price in order to sell additional units of output:

Accepted Answer

A)  marginal cost exceeds marginal revenue. 
B)  demand price exceeds marginal revenue. 
C)  marginal cost exceeds demand price. 
D)  marginal revenue exceeds demand price. 
A)  marginal cost exceeds marginal revenue. 
B)  demand price exceeds marginal revenue. 
C)  marginal cost exceeds demand price. 
D)  marginal revenue exceeds demand price.

Question 7

The existence of market power:

Accepted Answer

A)  makes markets impersonal because the firms are so large. 
B)  gives consumers greater choice. 
C)  makes firms more responsive to consumer demand. 
D)  give consumers less choice. 
A)  makes markets impersonal because the firms are so large. 
B)  gives consumers greater choice. 
C)  makes firms more responsive to consumer demand. 
D)  give consumers less choice.

Question 8

Which of the following methods does the U.S. government use to reduce market power?

Accepted Answer

A)  The provision of patents 
B)  Anti-trust law 
C)  The requirement of licensing in various occupational areas 
D)  The provision of monopoly grants 
A)  The provision of patents 
B)  Anti-trust law 
C)  The requirement of licensing in various occupational areas 
D)  The provision of monopoly grants

Question 9

Use the following information to answer the following questions.
  
-Refer to Pharmaceuticals. The marginal revenue associated with the second unit of pharmaceuticals is:

Accepted Answer

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

Question 10

The larger the number of firms, the easier it will be for an industry to form a cartel.

Accepted Answer

A) True 
 B)False

Question 11

According to the marginal principle, a monopolist should increase output if marginal cost exceeds marginal revenue.

Accepted Answer

A) True 
 B)False

Question 12

Most U.S. industries with market power are oligopolies.

Accepted Answer

A) True 
 B)False

Question 13

Market power in the U. S. economy has decreased over the last 50 years.

Accepted Answer

A) True 
 B)False

Question 14

A likely source of market power in the United States is:

Accepted Answer

A)  the explicit cooperation of firms on price and output decisions. 
B)  government licensing and regulations. 
C)  multiple firms having control over a vital input. 
D)  voluntary export restrictions. 
A)  the explicit cooperation of firms on price and output decisions. 
B)  government licensing and regulations. 
C)  multiple firms having control over a vital input. 
D)  voluntary export restrictions.

Question 15

We should not tax windfall profits of U.S. oil refineries because

Accepted Answer

A)  taxes would discourage future investment in capacity. 
B)  monopoly profits are necessary to motivate continued adaptation in production to an ever changing industry. 
C)  political decisions on taxation are driven by political benefits rather than market outcomes. 
D)  All of the above are possible explanations. 
A)  taxes would discourage future investment in capacity. 
B)  monopoly profits are necessary to motivate continued adaptation in production to an ever changing industry. 
C)  political decisions on taxation are driven by political benefits rather than market outcomes. 
D)  All of the above are possible explanations.

Question 16

When firms have high up-front costs, they can recover development costs only if they can price their successful products at monopoly levels.

Accepted Answer

A) True 
 B)False

Question 17

Use the following diagram to answer the following questions.
  
-Refer to Diagram 5-2. The price and output that maximize the monopolist's profits are:

Accepted Answer

A)  P₁ and Q₁, respectively. 
B)  P₁ and Q₂, respectively. 
C)  P₂ and Q₁, respectively. 
D)  P₂ and Q₂, respectively. 
A)  P₁ and Q₁, respectively. 
B)  P₁ and Q₂, respectively. 
C)  P₂ and Q₁, respectively. 
D)  P₂ and Q₂, respectively.

Question 18

Given the information in the following table find:
a.Total revenue for each quantity sold.
b.Marginal revenue for each quantity sold.
c.Total cost of producing each quantity.
d.Profit associated with each quantity.

Accepted Answer

a.Total revenue is price times quantity.

Question 19

A monopolist's profits will fall if output is increased when marginal revenue exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

One of the reasons OPEC has lost market power since the 1960s is

Accepted Answer

A)  there were high barriers to entry. 
B)  there were not high barriers to entry. 
C)  the search for knowledge is costly. 
D)  refinery production in the United States has declined. 
A)  there were high barriers to entry. 
B)  there were not high barriers to entry. 
C)  the search for knowledge is costly. 
D)  refinery production in the United States has declined.

Cartel members have an incentive to cheat by:

The increased competitiveness of the U.S. economy can be explained by:

Suppose a monopolist is currently producing at a point where marginal revenue is $20 and marginal cost is $25. This monopolist should:

A monopolist will produce a greater level of output than a competitive industry.

Economists object to monopoly because of the profits earned.

Because the monopolist must lower price in order to sell additional units of output:

The existence of market power:

Which of the following methods does the U.S. government use to reduce market power?

Use the following information to answer the following questions. -Refer to Pharmaceuticals. The marginal revenue associated with the second unit of pharmaceuticals is:

The larger the number of firms, the easier it will be for an industry to form a cartel.

According to the marginal principle, a monopolist should increase output if marginal cost exceeds marginal revenue.

Most U.S. industries with market power are oligopolies.

Market power in the U. S. economy has decreased over the last 50 years.

A likely source of market power in the United States is:

We should not tax windfall profits of U.S. oil refineries because

When firms have high up-front costs, they can recover development costs only if they can price their successful products at monopoly levels.

Use the following diagram to answer the following questions. -Refer to Diagram 5-2. The price and output that maximize the monopolist's profits are:

Given the information in the following table find: a.Total revenue for each quantity sold. b.Marginal revenue for each quantity sold. c.Total cost of producing each quantity. d.Profit associated with each quantity.

A monopolist's profits will fall if output is increased when marginal revenue exceeds marginal cost.

One of the reasons OPEC has lost market power since the 1960s is

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

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

Cartel members have an incentive to cheat by:

The increased competitiveness of the U.S. economy can be explained by:

Suppose a monopolist is currently producing at a point where marginal revenue is $20 and marginal cost is $25. This monopolist should:

A monopolist will produce a greater level of output than a competitive industry.

Economists object to monopoly because of the profits earned.

Because the monopolist must lower price in order to sell additional units of output:

The existence of market power:

Which of the following methods does the U.S. government use to reduce market power?

Use the following information to answer the following questions. -Refer to Pharmaceuticals. The marginal revenue associated with the second unit of pharmaceuticals is:

The larger the number of firms, the easier it will be for an industry to form a cartel.

According to the marginal principle, a monopolist should increase output if marginal cost exceeds marginal revenue.

Most U.S. industries with market power are oligopolies.

Market power in the U. S. economy has decreased over the last 50 years.

A likely source of market power in the United States is:

We should not tax windfall profits of U.S. oil refineries because

When firms have high up-front costs, they can recover development costs only if they can price their successful products at monopoly levels.

Use the following diagram to answer the following questions. -Refer to Diagram 5-2. The price and output that maximize the monopolist's profits are:

Given the information in the following table find: a.Total revenue for each quantity sold. b.Marginal revenue for each quantity sold. c.Total cost of producing each quantity. d.Profit associated with each quantity.

A monopolist's profits will fall if output is increased when marginal revenue exceeds marginal cost.

One of the reasons OPEC has lost market power since the 1960s is

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