Question 1

If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

Accepted Answer

A) True 
 B)False  True

Question 2

A monopoly is a firm that is the only seller of a good or service that does not have

Accepted Answer

A) a patent. 
B) a close complement. 
C) a barrier to entry. 
D) a close substitute. 
A) a patent. 
B) a close complement. 
C) a barrier to entry. 
D) a close substitute. D

Question 3

Figure 15-7   Figure 15-7 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-7.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Accepted Answer

A) This results in a misallocation of resources. 
B) The marginal cost of producing the last unit sold exceeds the marginal benefit. 
C) The firm will sustain persistent losses and will not continue in business in the long run. 
D) The firm will break even. 
A) This results in a misallocation of resources. 
B) The marginal cost of producing the last unit sold exceeds the marginal benefit. 
C) The firm will sustain persistent losses and will not continue in business in the long run. 
D) The firm will break even. C

Question 4

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Accepted Answer

A) a conglomerate merger. 
B) a horizontal merger. 
C) a vertical merger. 
D) a two-dimensional merger. 
A) a conglomerate merger. 
B) a horizontal merger. 
C) a vertical merger. 
D) a two-dimensional merger.

Question 5

Unlike a perfect competitor,a monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 6

What type of protection does U.S.law grant the creator of a book,film or piece of music?

Accepted Answer

A) A public franchise,which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death. 
B) A copyright,which grants exclusive rights to the creation's author for 20 years after the work is created. 
C) A patent,which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death. 
D) A copyright,which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death. 
A) A public franchise,which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death. 
B) A copyright,which grants exclusive rights to the creation's author for 20 years after the work is created. 
C) A patent,which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death. 
D) A copyright,which grants the exclusive right to use the creation during the author's lifetime and to his or her heirs for 70 years after the author's death.

Question 7

According to the Department of Justice merger guidelines,a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Accepted Answer

A) lies between 1,000 and 1,800 and the merger raises the Index by 50 points. 
B) lies between 1,000 and 1,800 and the merger raises the Index by more than 100 points. 
C) lies above 1,800 and the merger raises the Index by less than 50 points. 
D) lies below 1,000 and the merger raises the Index by 100 points. 
A) lies between 1,000 and 1,800 and the merger raises the Index by 50 points. 
B) lies between 1,000 and 1,800 and the merger raises the Index by more than 100 points. 
C) lies above 1,800 and the merger raises the Index by less than 50 points. 
D) lies below 1,000 and the merger raises the Index by 100 points.

Question 8

Collusion is

Accepted Answer

A) common among monopoly firms. 
B) an agreement among firms to charge the same price or otherwise not to compete. 
C) necessary for firms to raise money by borrowing from investors or from banks in order to fund research and development required to develop new products. 
D) legal under U.S.antitrust laws if the intent is to increase competition. 
A) common among monopoly firms. 
B) an agreement among firms to charge the same price or otherwise not to compete. 
C) necessary for firms to raise money by borrowing from investors or from banks in order to fund research and development required to develop new products. 
D) legal under U.S.antitrust laws if the intent is to increase competition.

Question 9

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Accepted Answer

A) network externalities 
B) public franchise 
C) economies of scale 
D) control of a key resource 
A) network externalities 
B) public franchise 
C) economies of scale 
D) control of a key resource

Question 10

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

Accepted Answer

A) The AD decides whether proposed horizontal mergers will be challenged; the FTC decides whether proposed vertical mergers will be challenged. 
B) Both the AD and the FTC are responsible for merger policy. 
C) The AD always renders its opinion on any proposed merger first.If the AD approves the merger,the case then goes to the FTC for final approval.If the AD disallows the merger,the decision stands and the FTC does not become involved. 
D) The AD establishes the guidelines that are used to evaluate proposed mergers; the FTC uses these guidelines to decide whether a proposed merger will be allowed to take place. 
A) The AD decides whether proposed horizontal mergers will be challenged; the FTC decides whether proposed vertical mergers will be challenged. 
B) Both the AD and the FTC are responsible for merger policy. 
C) The AD always renders its opinion on any proposed merger first.If the AD approves the merger,the case then goes to the FTC for final approval.If the AD disallows the merger,the decision stands and the FTC does not become involved. 
D) The AD establishes the guidelines that are used to evaluate proposed mergers; the FTC uses these guidelines to decide whether a proposed merger will be allowed to take place.

Question 11

As more cities allow competition in the market for cable television,

Accepted Answer

A) more cable television providers will exit the market. 
B) producer surplus in the market will increase. 
C) deadweight loss in the market will be reduced. 
D) economic profits in the market will increase. 
A) more cable television providers will exit the market. 
B) producer surplus in the market will increase. 
C) deadweight loss in the market will be reduced. 
D) economic profits in the market will increase.

Question 12

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

Accepted Answer

Market power allows a firm to set its pr

Question 13

BHP Billiton is a Canadian company that owns mines in Canada that

Accepted Answer

A) produce nickel.After World War II,BHP Billiton began to compete with another Canadian firm,the International Nickel Company.This competition eventually ended International Nickel's monopoly in this market. 
B) produces bauxite,the mineral needed to produce aluminum.BHP Billiton began to mine bauxite after World War II.This competition eventually ended the Aluminum Company of America (ALCO
A) 's monopoly in this market. 
C) produces coal.Until World War II,BHP Billiton had a monopoly on coal in Canada. 
D) produce diamonds. 
A) produce nickel.After World War II,BHP Billiton began to compete with another Canadian firm,the International Nickel Company.This competition eventually ended International Nickel's monopoly in this market. 
B) produces bauxite,the mineral needed to produce aluminum.BHP Billiton began to mine bauxite after World War II.This competition eventually ended the Aluminum Company of America (ALCO
A) 's monopoly in this market. 
C) produces coal.Until World War II,BHP Billiton had a monopoly on coal in Canada. 
D) produce diamonds.

Question 14

A horizontal merger

Accepted Answer

A) is a merger between firms in the same industry. 
B) results in a trust (for example,the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914. 
A) is a merger between firms in the same industry. 
B) results in a trust (for example,the Standard Oil Company). 
C) is a merger between firms at different stages of production of a good. 
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.

Question 15

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Accepted Answer

A monopoly's marginal revenue curve lies

Question 16

Network externalities

Accepted Answer

A) can only exist when there are economies of scale. 
B) prevent the dominance of a market by one firm. 
C) exist when the usefulness of a product increases with the number of consumers who use it. 
D) are created when celebrity endorsements of products lead to a surge in the demand for those products. 
A) can only exist when there are economies of scale. 
B) prevent the dominance of a market by one firm. 
C) exist when the usefulness of a product increases with the number of consumers who use it. 
D) are created when celebrity endorsements of products lead to a surge in the demand for those products.

Question 17

Identify the type of merger in each of the following situations and indicate how the post-merger concentration ratio for the industry is affected.
a.A steel company merges with a coal and iron ore mining company.b.Staples,a retailer of office supplies,acquires Office Depot,another retailer of office supplies.c.An oil company merges with pipeline,shipping,and railroad companies as well as refineries and gas stations.

Accepted Answer

a.This would be a vertical merger; the c

Question 18

Although some economists believe network externalities are important barriers to entry,other economists disagree because

Accepted Answer

A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C) network externalities are really negative externalities. 
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale. 
A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences. 
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource. 
C) network externalities are really negative externalities. 
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale.

Question 19

The demand curve for a monopoly firm

Accepted Answer

A) is perfectly inelastic. 
B) lies below its marginal revenue curve. 
C) is the same as the market demand curve. 
D) is horizontal. 
A) is perfectly inelastic. 
B) lies below its marginal revenue curve. 
C) is the same as the market demand curve. 
D) is horizontal.

Question 20

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43,then the incremental profit from the last unit sold is $7.

Accepted Answer

A) True 
 B)False

If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

A monopoly is a firm that is the only seller of a good or service that does not have

Figure 15-7 Figure 15-7 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-7.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Unlike a perfect competitor,a monopolist faces the market demand curve.

What type of protection does U.S.law grant the creator of a book,film or piece of music?

According to the Department of Justice merger guidelines,a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Collusion is

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

As more cities allow competition in the market for cable television,

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

BHP Billiton is a Canadian company that owns mines in Canada that

A horizontal merger

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Network externalities

Although some economists believe network externalities are important barriers to entry,other economists disagree because

The demand curve for a monopoly firm

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43,then the incremental profit from the last unit sold is $7.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Exam 15: Monopoly and Antitrust Policy

If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

A monopoly is a firm that is the only seller of a good or service that does not have

Figure 15-7 Figure 15-7 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 15-7.Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

Baxter International,a manufacturer of hospital supplies,acquired American Hospital Supply,a distributor of hospital supplies.This is an example of

Unlike a perfect competitor,a monopolist faces the market demand curve.

What type of protection does U.S.law grant the creator of a book,film or piece of music?

According to the Department of Justice merger guidelines,a proposed merger between two firms may be challenged if the post-merger Herfindahl-Hirschman Index

Collusion is

There are several types of barriers to entry that can create a monopoly.Which of the following barriers is the result of government action?

Congress has divided the authority to police mergers between the Antitrust Division of the U.S.Department of Justice (AD)and the Federal Trade Commission (FTC).How is this authority divided?

As more cities allow competition in the market for cable television,

Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?

BHP Billiton is a Canadian company that owns mines in Canada that

A horizontal merger

What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?

Network externalities

Although some economists believe network externalities are important barriers to entry,other economists disagree because

The demand curve for a monopoly firm

If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43,then the incremental profit from the last unit sold is $7.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters