Deck 12: Monopoly and Monopsony

Question 1

If the allowed rate of return falls short of the cost of capital:

A)industry will not grow rapidly enough.
B)the combinations of inputs employed by the industry will be optimal.
C)the cost of capital will fall.
D)industry will shift to capital intensive methods of production.

Answer 1

A

Question 2

The monopoly demand curve for a unique product with no substitutes is:

A)upward sloping.
B)downward sloping.
C)horizontal.
D)vertical.

Answer 2

D

Question 3

A market dominated by few buyers is called:

A)monopoly.
B)oligopsony.
C)monopsony.
D)perfectly competitive.

Answer 3

B

Question 4

Monopoly markets are not always characterized by:

A)unique products.
B)economic profits.
C)imperfect dissemination of information.
D)blockaded entry and/or exit.

Question 5

The dilemma of natural monopoly occurs when:

A)average costs rise as output expands.
B)a group of smaller producers has the potential to produce total industry output more efficiently than a single large firm.
C)demand equals supply at a point where the industry long-run average cost curve is still declining.
D)the profit-maximizing output level occurs at a point where the industry long-run average cost curve is still declining.

Question 6

In the labour market, when a union is the sole representative of labour, the union is a:

A)monopoly seller.
B)monopsony.
C)perfectly competitive supplier.
D)monopoly buyer.

Question 7

For a monopoly in equilibrium:

A)MC AC.
B)MR AC.
C)MR = MC.
D)P AC.

Question 8

The deadweight loss from monopoly problem:

A)reflects the transformation of consumer surplus into producer surplus.
B)stems from the monopoly-induced decline in mutually beneficial trade activity.
C)stems from the fact that, under monopoly, the marginal cost of production is always greater than the marginal social benefit derived.
D)stems from the fact that, under monopoly, the marginal cost of production is greater than the marginal social benefit derived so long as monopoly profits are positive.

Question 9

Under natural monopoly, the market-clearing price occurs at a point where:

A)MC = AC.
B)MC < AC.
C)MR = AR.
D)AR < MC.

Question 10

If Microsoft illegally tied the sale of Internet browser software to the sale of its PC operating system, the company would be in violation of:

A)The Robinson-Patman Act.
B)Section 2 of the Clayton Act.
C)Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act.
D)The Celler-Kefauver Act.