Question 1

The excess of price over marginal cost is not the best measure of profit per unit because:

Accepted Answer

A) marginal cost is not always equal to average cost. 
B) it shows the accounting profit of a firm and not the economic profit. 
C) it does not take into account the variable costs of the firm. 
D) profitable firms produce at a level where price is less than marginal cost. 
A) marginal cost is not always equal to average cost. 
B) it shows the accounting profit of a firm and not the economic profit. 
C) it does not take into account the variable costs of the firm. 
D) profitable firms produce at a level where price is less than marginal cost.

Question 2

Assume that Costco Chemicals is a chemical manufacturer located in the U.S.that serves almost the entire market.Based on Costco's market share,antitrust enforcement authorities allege that Costco has monopoly power and is exploiting this monopoly power at the cost of buyers.Assume that Costco hires you as a lawyer to present their case.How would you argue in favor of Costco?

Accepted Answer

It can be argued that Costco is a natura

Question 3

Which of the following is true of a Nash equilibrium?

Accepted Answer

A) At least one of the players need to have a dominant strategy to arrive at a Nash equilibrium. 
B) In a Nash equilibrium,one player has an incentive to change his strategy in order to increase his profit. 
C) Each player's strategy in a Nash equilibrium is the best possible strategy given the strategy of the other player. 
D) In order to arrive at a Nash equilibrium,it is necessary for both players to credibly commit to a course of action. 
A) At least one of the players need to have a dominant strategy to arrive at a Nash equilibrium. 
B) In a Nash equilibrium,one player has an incentive to change his strategy in order to increase his profit. 
C) Each player's strategy in a Nash equilibrium is the best possible strategy given the strategy of the other player. 
D) In order to arrive at a Nash equilibrium,it is necessary for both players to credibly commit to a course of action.

Question 4

Which of the following is a consequence of a monopoly?

Accepted Answer

A) An expansion of output beyond the efficient level 
B) A redistribution of income from consumers to producers 
C) A fall in price below the efficient level 
D) An increase in the total surplus in the market 
A) An expansion of output beyond the efficient level 
B) A redistribution of income from consumers to producers 
C) A fall in price below the efficient level 
D) An increase in the total surplus in the market

Question 5

Intellectual property rights are protected by patents.One of the controversial aspects of the patent system is the patents that are granted to pharmaceutical companies.Critics of the patent system claim that these increase the price of life-saving drugs and make them unaffordable to the poor.For example,patents restrict the availability of AIDS medicine in developing countries that require them the most.What would happen if drugs were not allowed to be patented in the interests of increasing their availability at a lower price? How do the long-run and short-run effects differ?

Accepted Answer

Patents allow pharmaceutical companies t

Question 6

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2  
-Refer to Table 15-2.Suppose that company A makes a credible commitment not to be undersold by company B.Then it is most likely that the companies A and B will:

Accepted Answer

A) both choose the high-price strategy. 
B) both choose the medium-price strategy. 
C) both choose the low-price strategy. 
D) choose the low price strategy and high price strategy respectively. 
A) both choose the high-price strategy. 
B) both choose the medium-price strategy. 
C) both choose the low-price strategy. 
D) choose the low price strategy and high price strategy respectively.

Question 7

Which of the following cannot directly be measured when calculating the deadweight loss from a monopoly?

Accepted Answer

A) The excess of price over marginal cost 
B) The number of industries that are monopolistic in nature 
C) The magnitude of output restriction 
D) The actual output of monopolistic industries 
A) The excess of price over marginal cost 
B) The number of industries that are monopolistic in nature 
C) The magnitude of output restriction 
D) The actual output of monopolistic industries

Question 8

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2  
-Based on Figure 15-2,it can be concluded that the change in consumer surplus due to the shift from perfect competition to monopoly is _____.

Accepted Answer

A) $150 
B) -$300 
C) -$450 
D) $600 
A) $150 
B) -$300 
C) -$450 
D) $600

Question 9

Figure 15-4 shows the profit-maximizing output and price of monopolist.  
-Refer to Figure 15.4.Given that the monopolist is producing the profit-maximizing level of output,what is the maximum amount of revenue that the monopolist can give up and still remain in business?

Accepted Answer

A) ABCD 
B) ABFE 
C) BGF 
D) EFQ20 
A) ABCD 
B) ABFE 
C) BGF 
D) EFQ20

Question 10

When a company practices planned obsolescence,it _____.

Accepted Answer

A) produces a product that is of a higher quality at a much lower cost 
B) does not produce goods that are expected to last for a long period of time 
C) recalls goods for which demand has fallen significantly in the market 
D) differentiates its product slightly and sells the product at a much higher price 
A) produces a product that is of a higher quality at a much lower cost 
B) does not produce goods that are expected to last for a long period of time 
C) recalls goods for which demand has fallen significantly in the market 
D) differentiates its product slightly and sells the product at a much higher price

Question 11

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3  
-Refer to Table 15-3.Using the method of iterated dominance it can be concluded that the outcome of the given payoff matrix is:

Accepted Answer

A) a dominant-strategy equilibrium. 
B) indeterminate as there are no dominant strategies. 
C) both players choosing a low pricing strategy. 
D) both players choosing a high pricing strategy. 
A) a dominant-strategy equilibrium. 
B) indeterminate as there are no dominant strategies. 
C) both players choosing a low pricing strategy. 
D) both players choosing a high pricing strategy.

Question 12

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2  
-Based on Figure 15-2,one can conclude that the deadweight loss due to the monopoly is _____.

Accepted Answer

A) $150 
B) $300 
C) $450 
D) $600 
A) $150 
B) $300 
C) $450 
D) $600

Question 13

Assume that Bosch is a company that manufactures printers for home computers.The printers are designed such that they do not work as effectively after a certain number of prints have been taken.Bosch also offers a warranty on the printer equal to the average time it takes to print that many pages.This is an example of _____.

Accepted Answer

A) iterated dominance 
B) planned obsolescence 
C) a commitment strategy 
D) a natural monopoly 
A) iterated dominance 
B) planned obsolescence 
C) a commitment strategy 
D) a natural monopoly

Question 14

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2  
-Based on Figure 15-2,it can be concluded that the change in producer surplus due to the shift from perfect competition to monopoly is _____.

Accepted Answer

A) -$150 
B) -$300 
C) $150 
D) $300 
A) -$150 
B) -$300 
C) $150 
D) $300

Question 15

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

Accepted Answer

A) 67 
B) 1.5 
C) 15 
D) 0.67 
A) 67 
B) 1.5 
C) 15 
D) 0.67

Question 16

Which of the following,if true,is the best example of a natural monopoly?

Accepted Answer

A) The oil distribution industry where one distribution network serves the whole market 
B) The pharmaceutical industry where patents form a barrier to entry 
C) The beverages industry where the cost of capital is high and variable costs are low 
D) The hospitality industry where variable costs are higher than fixed costs 
A) The oil distribution industry where one distribution network serves the whole market 
B) The pharmaceutical industry where patents form a barrier to entry 
C) The beverages industry where the cost of capital is high and variable costs are low 
D) The hospitality industry where variable costs are higher than fixed costs

Question 17

Which of the following is not likely to be a social loss due to monopoly power?

Accepted Answer

A) The welfare loss from the suppression of innovative products by monopolists 
B) The higher production costs incurred by a monopolist due to the lack of competition 
C) The resources spent by monopolists to secure their monopoly privilege 
D) The loss incurred due to marginal-cost pricing by the monopolist 
A) The welfare loss from the suppression of innovative products by monopolists 
B) The higher production costs incurred by a monopolist due to the lack of competition 
C) The resources spent by monopolists to secure their monopoly privilege 
D) The loss incurred due to marginal-cost pricing by the monopolist

Question 18

Refer to Figure 15-1.What is most likely to happen if the market is oligopolistic as compared to a monopolistic market structure?

Accepted Answer

A) The deadweight loss in the market will be greater. 
B) The equilibrium output will be lower. 
C) The equilibrium price in the market will be lower. 
D) The price and output will remain unchanged. 
A) The deadweight loss in the market will be greater. 
B) The equilibrium output will be lower. 
C) The equilibrium price in the market will be lower. 
D) The price and output will remain unchanged.

The excess of price over marginal cost is not the best measure of profit per unit because:

Which of the following is true of a Nash equilibrium?

Which of the following is a consequence of a monopoly?

Which of the following cannot directly be measured when calculating the deadweight loss from a monopoly?

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs. Figure 15-2 -Based on Figure 15-2,it can be concluded that the change in consumer surplus due to the shift from perfect competition to monopoly is _____.

Figure 15-4 shows the profit-maximizing output and price of monopolist. -Refer to Figure 15.4.Given that the monopolist is producing the profit-maximizing level of output,what is the maximum amount of revenue that the monopolist can give up and still remain in business?

When a company practices planned obsolescence,it _____.

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs. Figure 15-2 -Based on Figure 15-2,one can conclude that the deadweight loss due to the monopoly is _____.

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs. Figure 15-2 -Based on Figure 15-2,it can be concluded that the change in producer surplus due to the shift from perfect competition to monopoly is _____.

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

Which of the following,if true,is the best example of a natural monopoly?

Which of the following is not likely to be a social loss due to monopoly power?

Refer to Figure 15-1.What is most likely to happen if the market is oligopolistic as compared to a monopolistic market structure?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 15: Using Noncompetitive Market Models

The excess of price over marginal cost is not the best measure of profit per unit because:

Which of the following is true of a Nash equilibrium?

Which of the following is a consequence of a monopoly?

Which of the following cannot directly be measured when calculating the deadweight loss from a monopoly?

Figure 15-4 shows the profit-maximizing output and price of monopolist. -Refer to Figure 15.4.Given that the monopolist is producing the profit-maximizing level of output,what is the maximum amount of revenue that the monopolist can give up and still remain in business?

When a company practices planned obsolescence,it _____.

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs. Figure 15-2 -Based on Figure 15-2,one can conclude that the deadweight loss due to the monopoly is _____.

Suppose that at the competitive equilibrium,the elasticity of demand is 1.50.If the price under monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,it can be concluded that the monopoly output is _____ percent below the competitive output.

Which of the following,if true,is the best example of a natural monopoly?

Which of the following is not likely to be a social loss due to monopoly power?

Refer to Figure 15-1.What is most likely to happen if the market is oligopolistic as compared to a monopolistic market structure?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters