Question 1

To maximize profit a monopolist will produce where

Accepted Answer

A) marginal revenue is equal to marginal cost. 
B) demand for its product is unit-elastic. 
C) revenue per unit is maximized. 
D) average total cost is equal to average revenue. 
A) marginal revenue is equal to marginal cost. 
B) demand for its product is unit-elastic. 
C) revenue per unit is maximized. 
D) average total cost is equal to average revenue.

Question 2

In discussions of barriers to entry,what is meant by the term "virtuous cycle"?

Accepted Answer

A) A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. 
B) A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market. 
C) A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the "invisible hand"). 
D) A virtuous cycle refers to a situation where if a firm can attract enough customers initially,it can attract additional customers because its product's value has been increased by other customers using it,which attracts even more customers. 
A) A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. 
B) A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market. 
C) A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the "invisible hand"). 
D) A virtuous cycle refers to a situation where if a firm can attract enough customers initially,it can attract additional customers because its product's value has been increased by other customers using it,which attracts even more customers.

Question 3

What is a public franchise? Are all public franchises natural monopolies?

Accepted Answer

A public franchise is a firm which the g

Question 4

Figure 15-1  
-Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

Accepted Answer

A) The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B) The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits. 
A) The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B) The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits.

Question 5

A monopolist's demand curve is the same as the marginal revenue curve for the product.

Accepted Answer

A) True 
 B)False

Question 6

Table 15-2
   Assume Table 15-2 gives the monthly demand and costs for subscriptions to basic cable for Comcast,a cable television monopoly in Philadelphia.
-Refer to Table 15-2.If Comcast wants to maximize its profits,what price (P)should it charge and how many cable subscriptions per month (Q)should it sell?

Accepted Answer

A) P = $12; Q = 8 
B) P = $14; Q = 6 
C) P = $16; Q = 4 
D) P = $15: Q = 5 
A) P = $12; Q = 8 
B) P = $14; Q = 6 
C) P = $16; Q = 4 
D) P = $15: Q = 5

Question 7

Wendell can sell five motor homes per week at a price of $22,000.If he lowers the price of motor homes to $20,000 per week he will sell six motor homes.What is the marginal revenue of the sixth motor home?

Accepted Answer

A) $10,000 
B) $12,000 
C) $20,000 
D) $22,000 
A) $10,000 
B) $12,000 
C) $20,000 
D) $22,000

Question 8

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Accepted Answer

A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favors to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities. 
A) Patents encourage firms to spend money on research necessary to create new products. 
B) Politicians sometimes succumb to pressure from lobbyists to grant favors to businesses for political reasons. 
C) Patents are an important source of government revenue. 
D) Patents are justified because they are an important means for creating network externalities.

Question 9

Natural monopolies are most likely to occur in markets where fixed costs are very large relative to variable costs.

Accepted Answer

A) True 
 B)False

Question 10

The only firms that do not have market power are

Accepted Answer

A) firms in industries with low barriers to entry. 
B) firms that do not advertise their products. 
C) firms in perfectly competitive markets. 
D) firms that sell identical products. 
A) firms in industries with low barriers to entry. 
B) firms that do not advertise their products. 
C) firms in perfectly competitive markets. 
D) firms that sell identical products.

Question 11

A firm that is the only seller of a good or service that does not have a close substitute is called

Accepted Answer

A) a monopoly. 
B) an oligopolist. 
C) a market maker. 
D) a price maker. 
A) a monopoly. 
B) an oligopolist. 
C) a market maker. 
D) a price maker.

Question 12

Figure 15-7   Figure 15-7 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 15-7.Suppose the government regulates this industry in order to remove the inefficiency implied by the behavior of the profit maximizing owners.If regulators require that the firm produces the economically efficient output level,what is this level and what price will be charged?

Accepted Answer

A) Q4 units; P4 
B) Q1 units; P4 
C) Q1 units; P1 
D) Q3 units; P3 
A) Q4 units; P4 
B) Q1 units; P4 
C) Q1 units; P1 
D) Q3 units; P3

Question 13

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25,then

Accepted Answer

A) to maximize profit the firm should increase output. 
B) to maximize profit the firm should decrease output. 
C) to maximize profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximize profit. 
A) to maximize profit the firm should increase output. 
B) to maximize profit the firm should decrease output. 
C) to maximize profit the firm should continue to produce the output it is producing. 
D) Not enough information is given to say what the firm should do to maximize profit.

Question 14

To be a natural monopoly a firm must

Accepted Answer

A) control a key resource input. 
B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C) have significant network externalities. 
D) be very large relative to the total market. 
A) control a key resource input. 
B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C) have significant network externalities. 
D) be very large relative to the total market.

Question 15

Consider two industries,industry W and industry X.In industry W there are five companies,each with a market share of 20% of total sales.In industry X,there are six companies.One company has a 50% market share and each of the other five firms has a market share of 10%.
a.Calculate the four-firm concentration ratio for each industry.
b.Calculate the Herfindahl-Hirschman Index (HHI)for each industry.
c.What do the values of the two concentration measures imply about the degree of market power in the two industries?

Accepted Answer

a.The concentration ratio in industry W

Question 16

Figure 15-5   Figure 15-5 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-5.If this industry was organized as a perfectly competitive industry,the market output and market price would be

Accepted Answer

A) output = 62; price = $24. 
B) output = 83; price = $22. 
C) output = 62; price = $18. 
D) output = 104; price = $20.80. 
A) output = 62; price = $24. 
B) output = 83; price = $22. 
C) output = 62; price = $18. 
D) output = 104; price = $20.80.

Question 17

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43,then the firm's total profit is

Accepted Answer

A) $3,150. 
B) $2,709. 
C) $441. 
D) $7. 
A) $3,150. 
B) $2,709. 
C) $441. 
D) $7.

Question 18

The most profitable price for a monopolist is

Accepted Answer

A) the highest price a consumer is willing to pay for the monopolist's product. 
B) the price at which demand is unit-elastic. 
C) a price that maximizes the quantity sold. 
D) the price for which marginal revenue equals marginal cost. 
A) the highest price a consumer is willing to pay for the monopolist's product. 
B) the price at which demand is unit-elastic. 
C) a price that maximizes the quantity sold. 
D) the price for which marginal revenue equals marginal cost.

Question 19

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

To maximize profit a monopolist will produce where

In discussions of barriers to entry,what is meant by the term "virtuous cycle"?

What is a public franchise? Are all public franchises natural monopolies?

Figure 15-1 -Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

A monopolist's demand curve is the same as the marginal revenue curve for the product.

Wendell can sell five motor homes per week at a price of $22,000.If he lowers the price of motor homes to $20,000 per week he will sell six motor homes.What is the marginal revenue of the sixth motor home?

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Natural monopolies are most likely to occur in markets where fixed costs are very large relative to variable costs.

The only firms that do not have market power are

A firm that is the only seller of a good or service that does not have a close substitute is called

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25,then

To be a natural monopoly a firm must

Figure 15-5 Figure 15-5 shows the cost and demand curves for a monopolist. -Refer to Figure 15-5.If this industry was organized as a perfectly competitive industry,the market output and market price would be

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43,then the firm's total profit is

The most profitable price for a monopolist is

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

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

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

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Exam 15: Monopoly and Antitrust Policy

To maximize profit a monopolist will produce where

In discussions of barriers to entry,what is meant by the term "virtuous cycle"?

What is a public franchise? Are all public franchises natural monopolies?

Figure 15-1 -Refer to Figure 15-1.Which of the following statements about the firm depicted in the diagram is true?

A monopolist's demand curve is the same as the marginal revenue curve for the product.

Wendell can sell five motor homes per week at a price of $22,000.If he lowers the price of motor homes to $20,000 per week he will sell six motor homes.What is the marginal revenue of the sixth motor home?

Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?

Natural monopolies are most likely to occur in markets where fixed costs are very large relative to variable costs.

The only firms that do not have market power are

A firm that is the only seller of a good or service that does not have a close substitute is called

If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25,then

To be a natural monopoly a firm must

Figure 15-5 Figure 15-5 shows the cost and demand curves for a monopolist. -Refer to Figure 15-5.If this industry was organized as a perfectly competitive industry,the market output and market price would be

If a monopolist's price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43,then the firm's total profit is

The most profitable price for a monopolist is

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.

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

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