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

In order to maximize profits,firms must produce at the lowest possible cost.However when producing at a cost that is higher than necessary:

Accepted Answer

A) a monopoly firm can continue to operate with lower profits but a competitive firm will have to exit the market. 
B) a monopoly firm has the incentive to lower cost and increase profit but a competitive firm will increase price and remain in the market. 
C) a monopoly firm will expand output and increase price while a competitive firm will not change output or price. 
D) a monopoly firm has the incentive to produce at the lowest cost possible while a competitive firm will only earn a lower economic profit. 
A) a monopoly firm can continue to operate with lower profits but a competitive firm will have to exit the market. 
B) a monopoly firm has the incentive to lower cost and increase profit but a competitive firm will increase price and remain in the market. 
C) a monopoly firm will expand output and increase price while a competitive firm will not change output or price. 
D) a monopoly firm has the incentive to produce at the lowest cost possible while a competitive firm will only earn a lower economic profit.

Question 3

Use the following table to answer the question : Table 15-3: 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.
 
-Refer to Table 15-3.What is the highest payoff from Abbott's dominated strategy?

Accepted Answer

A) $100 
B) $115 
C) $107 
D) $60 
A) $100 
B) $115 
C) $107 
D) $60

Question 4

Use the following table to answer the question : Table 15-3: 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.
 
-Refer to Table 15-3.What is Abbott's dominant strategy?

Accepted Answer

A) Abbott does not have a dominant strategy. 
B) Abbott's dominant strategy is selling at a high price. 
C) Abbott's dominant strategy is selling at a low price. 
D) Abbott's dominant strategy is selling at a medium price. 
A) Abbott does not have a dominant strategy. 
B) Abbott's dominant strategy is selling at a high price. 
C) Abbott's dominant strategy is selling at a low price. 
D) Abbott's dominant strategy is selling at a medium price.

Question 5

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 6

Which of the following is true of a natural monopoly?

Accepted Answer

A) The operation of more than one firm reduces the production efficiency of the market. 
B) The good that is sold by a natural monopoly is easily substitutable. 
C) The firm produces at the point where marginal revenue equals price. 
D) The natural monopoly market has no barriers to entry and exit. 
A) The operation of more than one firm reduces the production efficiency of the market. 
B) The good that is sold by a natural monopoly is easily substitutable. 
C) The firm produces at the point where marginal revenue equals price. 
D) The natural monopoly market has no barriers to entry and exit.

Question 7

Which of the following is true of monopolies and their incentive to innovate?

Accepted Answer

A) Monopolies have the incentive to suppress innovation in order to sustain abnormal profits. 
B) Monopolies do not have the incentive to innovate,even in the short run,unless they receive patents for their invention. 
C) Monopolies do not have the incentive to innovate because they will continue to earn zero economic profits even with innovation. 
D) Monopoly firms have the incentive to innovate and introduce new products in order to expand their profit. 
A) Monopolies have the incentive to suppress innovation in order to sustain abnormal profits. 
B) Monopolies do not have the incentive to innovate,even in the short run,unless they receive patents for their invention. 
C) Monopolies do not have the incentive to innovate because they will continue to earn zero economic profits even with innovation. 
D) Monopoly firms have the incentive to innovate and introduce new products in order to expand their profit.

Question 8

Why are the estimates of the deadweight loss of monopoly not large?

Accepted Answer

A) Monopolized sectors of the economy are large relative to the whole economy. 
B) Pure monopolies are not pervasive in market economies. 
C) Monopolies tend to operate in markets with below average prices. 
D) Although consumer surplus falls,total surplus actually increases in a monopoly. 
A) Monopolized sectors of the economy are large relative to the whole economy. 
B) Pure monopolies are not pervasive in market economies. 
C) Monopolies tend to operate in markets with below average prices. 
D) Although consumer surplus falls,total surplus actually increases in a monopoly.

Question 9

Use the following table to answer the question : Table 15-3: 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.
 
-Refer to Table 15-3.When Abbott chooses the high-pricing strategy,Costello's highest possible profit is:

Accepted Answer

A) $115 
B) $100 
C) $107 
D) $21 
A) $115 
B) $100 
C) $107 
D) $21

Question 10

Mike and Bill face the following payoff matrix.   
What is the outcome of the game?

Accepted Answer

Since both Mike and Bill do not have a d

Question 11

Which of the following statements correctly identifies the problem with regulating a natural monopoly?

Accepted Answer

A) It is difficult to identify a natural monopoly. 
B) If a natural monopoly lowers its prices,it will have to shut down to cut losses. 
C) The real cost of serving the market will be higher if there is more than one firm. 
D) The cost of regulating a natural monopoly is lower than the welfare cost. 
A) It is difficult to identify a natural monopoly. 
B) If a natural monopoly lowers its prices,it will have to shut down to cut losses. 
C) The real cost of serving the market will be higher if there is more than one firm. 
D) The cost of regulating a natural monopoly is lower than the welfare cost.

Question 12

Use the following table to answer the question : Table 15-3: 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.
 
-Refer to Table 15-3.What is the highest payoff in Costello's dominated strategy?

Accepted Answer

A) $107 
B) $115 
C) $100 
D) $21 
A) $107 
B) $115 
C) $100 
D) $21

Question 13

Deadweight losses due to monopoly include:

Accepted Answer

A) the transfer of producer surplus to consumers. 
B) costs of acquiring and maintaining the monopoly position. 
C) the redistribution of income in favor of consumers. 
D) the excess of actual output over competitive output. 
A) the transfer of producer surplus to consumers. 
B) costs of acquiring and maintaining the monopoly position. 
C) the redistribution of income in favor of consumers. 
D) the excess of actual output over competitive output.

Question 14

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1  
-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.

Question 15

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

Accepted Answer

A) The natural monopoly will earn positive economic profit. 
B) The natural monopoly will produce less output than an unregulated monopoly. 
C) The equilibrium price of the natural monopoly is now the same as the competitive price. 
D) A part of the deadweight loss from an unregulated monopoly is eliminated. 
A) The natural monopoly will earn positive economic profit. 
B) The natural monopoly will produce less output than an unregulated monopoly. 
C) The equilibrium price of the natural monopoly is now the same as the competitive price. 
D) A part of the deadweight loss from an unregulated monopoly is eliminated.

Question 16

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.  
-In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

Accepted Answer

A) negative economic profit equal to P3CBP2. 
B) positive economic profit equal to P2BQ2O. 
C) negative economic profit equal to FBQ2Q1. 
D) positive economic profit equal to FCQ2Q1. 
A) negative economic profit equal to P3CBP2. 
B) positive economic profit equal to P2BQ2O. 
C) negative economic profit equal to FBQ2Q1. 
D) positive economic profit equal to FCQ2Q1.

Question 17

Which of the following,if true,would be considered a natural monopoly?

Accepted Answer

A) The pharmaceuticals industry where patents form a barrier to entry 
B) The airlines industry that has high fixed costs and high operating costs 
C) The software industry that has very low marginal costs 
D) The utilities industry that has falling average costs over the entire range of output 
A) The pharmaceuticals industry where patents form a barrier to entry 
B) The airlines industry that has high fixed costs and high operating costs 
C) The software industry that has very low marginal costs 
D) The utilities industry that has falling average costs over the entire range of output

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

In order to maximize profits,firms must produce at the lowest possible cost.However when producing at a cost that is higher than necessary:

Which of the following is a consequence of a monopoly?

Which of the following is true of a natural monopoly?

Which of the following is true of monopolies and their incentive to innovate?

Why are the estimates of the deadweight loss of monopoly not large?

Mike and Bill face the following payoff matrix. What is the outcome of the game?

Which of the following statements correctly identifies the problem with regulating a natural monopoly?

Deadweight losses due to monopoly include:

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

Which of the following,if true,would be considered a natural monopoly?

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

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Exam 15: Using Noncompetitive Market Models

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

In order to maximize profits,firms must produce at the lowest possible cost.However when producing at a cost that is higher than necessary:

Which of the following is a consequence of a monopoly?

Which of the following is true of a natural monopoly?

Which of the following is true of monopolies and their incentive to innovate?

Why are the estimates of the deadweight loss of monopoly not large?

Mike and Bill face the following payoff matrix. What is the outcome of the game?

Which of the following statements correctly identifies the problem with regulating a natural monopoly?

Deadweight losses due to monopoly include:

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

Which of the following,if true,would be considered a natural monopoly?

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