Question 1

Use the following diagram to answer the following questions.
  
-Refer to Diagram 5-2. Efficiency occurs at:

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  because points A and B both lie on the demand curve, they are both efficient. 
A)  point A. 
B)  point B. 
C)  point C. 
D)  because points A and B both lie on the demand curve, they are both efficient.

Question 2

Use the following diagram to answer the following questions.
  
-Refer to Diagram 5-1. If a competitive firm were currently producing output at Q₃, we know that:

Accepted Answer

A)  profits are being maximized. 
B)  increasing output would increase profits. 
C)  decreasing output would increase profits. 
D)  there should be no change in output. 
A)  profits are being maximized. 
B)  increasing output would increase profits. 
C)  decreasing output would increase profits. 
D)  there should be no change in output.

Question 3

A monopoly may be able to earn profits greater than a competitive firm because:

Accepted Answer

A)  entry by new firms may be prevented. 
B)  government policies often ensure that certain industries such as utilities earn a guaranteed rate of return on their investment. 
C)  consumers are unaware of the existence of such profits and unwittingly pay the higher price. 
D)  The above statement is False. In the long run a monopoly earns the same profit as a competitive firm. 
A)  entry by new firms may be prevented. 
B)  government policies often ensure that certain industries such as utilities earn a guaranteed rate of return on their investment. 
C)  consumers are unaware of the existence of such profits and unwittingly pay the higher price. 
D)  The above statement is False. In the long run a monopoly earns the same profit as a competitive firm.

Question 4

Use the following diagram to answer the following questions.
  
-Refer to Diagram 5-1. What level of output should the monopolist produce?

Accepted Answer

A)  Q₁. 
B)  Q₂. 
C)  Q3. 
D)  Output should be between Q₂ and Q3, depending upon the level of market power the firm has. 
A)  Q₁. 
B)  Q₂. 
C)  Q3. 
D)  Output should be between Q₂ and Q3, depending upon the level of market power the firm has.

Question 5

The efficient level of output occurs when:

Accepted Answer

A)  a monopolist is maximizing profits. 
B)  marginal social benefit exceeds marginal social cost. 
C)  marginal social cost exceeds marginal social benefit. 
D)  marginal social benefit equals marginal social cost. 
A)  a monopolist is maximizing profits. 
B)  marginal social benefit exceeds marginal social cost. 
C)  marginal social cost exceeds marginal social benefit. 
D)  marginal social benefit equals marginal social cost.

Question 6

Use the following diagram to answer the following questions.
  
-Refer to Diagram 5-1. If the firm were currently producing output level Q₁, we know that:

Accepted Answer

A)  marginal revenue would exceed marginal cost. 
B)  marginal cost would exceed marginal revenue. 
C)  marginal revenue and marginal cost would be equal. 
D)  demand price and marginal revenue would be equal. 
A)  marginal revenue would exceed marginal cost. 
B)  marginal cost would exceed marginal revenue. 
C)  marginal revenue and marginal cost would be equal. 
D)  demand price and marginal revenue would be equal.

Question 7

Economists argue that government should not pass policies that would impede economic rent seeking.

Accepted Answer

A) True 
 B)False

Question 8

Suppose Ms. Rich owns several gasoline stations. In Smalltown she owns the only station while in Biggington she owns one of several stations. Compare and contrast the price that Ms. Rich will charge at her stations.

Accepted Answer

The discussion should center on the fact

Question 9

Use the following diagram to find:
a.the price and quantity that would prevail if the industry were competitive.
b.the price and quantity that would prevail if the industry were a monopoly.
c.the profits earned by the monopolist.

Accepted Answer

a.A competitive industry produces at the

Question 10

Market power in the U. S. has decreased as a result of increased foreign competition, deregulation, and the information revolution.

Accepted Answer

A) True 
 B)False

Question 11

Government may allow monopolies to exist in knowledge-based industries because:

Accepted Answer

A)  of relatively low up-front costs. 
B)  of relatively high up-front costs. 
C)  of the fear of inferior products. 
D)  too much competition will result in allocative inefficiency. 
A)  of relatively low up-front costs. 
B)  of relatively high up-front costs. 
C)  of the fear of inferior products. 
D)  too much competition will result in allocative inefficiency.

Question 12

Suppose the Ding-Dong Doorbell Co., a monopoly, finds that at current production levels marginal revenue is $15 while marginal cost is $10. This company should:

Accepted Answer

A)  make no change in present production level. 
B)  without further information on average production cost there is no way to determine what actions the company should take. 
C)  decrease production, as this will allow price and marginal revenue to increase, thereby increasing profits. 
D)  increase output as this will result in higher profits. 
A)  make no change in present production level. 
B)  without further information on average production cost there is no way to determine what actions the company should take. 
C)  decrease production, as this will allow price and marginal revenue to increase, thereby increasing profits. 
D)  increase output as this will result in higher profits.

Question 13

Evaluate the following statement. "When a regulatory agency such as a public utilities commission is established, it will ultimately be controlled by the people it was intended to regulate."

Accepted Answer

In this case, the student should recogni

Use the following diagram to answer the following questions. -Refer to Diagram 5-2. Efficiency occurs at:

Use the following diagram to answer the following questions. -Refer to Diagram 5-1. If a competitive firm were currently producing output at Q₃, we know that:

A monopoly may be able to earn profits greater than a competitive firm because:

Use the following diagram to answer the following questions. -Refer to Diagram 5-1. What level of output should the monopolist produce?

The efficient level of output occurs when:

Use the following diagram to answer the following questions. -Refer to Diagram 5-1. If the firm were currently producing output level Q₁, we know that:

Economists argue that government should not pass policies that would impede economic rent seeking.

Suppose Ms. Rich owns several gasoline stations. In Smalltown she owns the only station while in Biggington she owns one of several stations. Compare and contrast the price that Ms. Rich will charge at her stations.

Use the following diagram to find: a.the price and quantity that would prevail if the industry were competitive. b.the price and quantity that would prevail if the industry were a monopoly. c.the profits earned by the monopolist.

Market power in the U. S. has decreased as a result of increased foreign competition, deregulation, and the information revolution.

Government may allow monopolies to exist in knowledge-based industries because:

Suppose the Ding-Dong Doorbell Co., a monopoly, finds that at current production levels marginal revenue is $15 while marginal cost is $10. This company should:

Evaluate the following statement. "When a regulatory agency such as a public utilities commission is established, it will ultimately be controlled by the people it was intended to regulate."

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

Use the following diagram to answer the following questions. -Refer to Diagram 5-2. Efficiency occurs at:

Use the following diagram to answer the following questions. -Refer to Diagram 5-1. If a competitive firm were currently producing output at Q₃, we know that:

A monopoly may be able to earn profits greater than a competitive firm because:

Use the following diagram to answer the following questions. -Refer to Diagram 5-1. What level of output should the monopolist produce?

The efficient level of output occurs when:

Use the following diagram to answer the following questions. -Refer to Diagram 5-1. If the firm were currently producing output level Q₁, we know that:

Economists argue that government should not pass policies that would impede economic rent seeking.

Suppose Ms. Rich owns several gasoline stations. In Smalltown she owns the only station while in Biggington she owns one of several stations. Compare and contrast the price that Ms. Rich will charge at her stations.

Use the following diagram to find: a.the price and quantity that would prevail if the industry were competitive. b.the price and quantity that would prevail if the industry were a monopoly. c.the profits earned by the monopolist.

Market power in the U. S. has decreased as a result of increased foreign competition, deregulation, and the information revolution.

Government may allow monopolies to exist in knowledge-based industries because:

Suppose the Ding-Dong Doorbell Co., a monopoly, finds that at current production levels marginal revenue is $15 while marginal cost is $10. This company should:

Evaluate the following statement. "When a regulatory agency such as a public utilities commission is established, it will ultimately be controlled by the people it was intended to regulate."

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