Deck 13: Monopoly and Antitrust Laws

Question 1

_____ is a market structure with one seller of a product that has no close substitutes and has high barriers to entry.

A) A monopoly
B) An oligopoly
C) A monopolistic competition
D) A perfect competition

Answer 1

A

Question 2

In _____ market structure, a firm has no rivals.

A) a monopoly
B) an oligopoly
C) a monopolistic competition
D) a perfect competition

Answer 2

A

Question 3

Obstacles that prevent other firms from coming into an industry are called:

A) sunk costs.
B) barriers to entry.
C) closed-door entrances.
D) competitive pressures.

Answer 3

B

Question 4

Significant barriers to entry exist in _____ market structures.

A) perfect competition and monopolistic competition
B) monopolistic competition and oligopoly
C) oligopoly and monopoly
D) monopoly and perfect competition

Question 5

A temporary exclusive right to sell a product is a:

A) trademark.
B) patent.
C) copyright.
D) tariff.

Question 6

A temporary exclusive right to sell books, film, and music is a:

A) trademark.
B) patent.
C) copyright.
D) tariff.

Question 7

Patents and copyrights are _____ barriers to entry.

A) natural
B) consumer
C) low
D) legal

Question 8

A typical _____ lasts 20 years.

A) trademark
B) patent
C) copyright
D) tariff

Question 9

A typical _____ lasts 70 years.

A) trademark
B) patent
C) copyright
D) tariff

Question 10

The _____ industry benefits a great deal from patents and copyrights.

A) agricultural
B) housing
C) retail
D) biotech

Question 11

The _____ industry benefits a great deal from patents and copyrights.

A) plumbing
B) housing
C) landscape
D) computer technology

Question 12

An example of a _____ monopoly occurs when governments impose licensing requirements on taxis.

A) natural
B) consumer
C) low
D) legal

Question 13

_____ monopoly occurs when a single firm can supply a good at a lower cost than two or more competing firms can.

A) A natural
B) A consumer
C) An extensive
D) A cartel

Question 14

The _____ industry is an example of a natural monopoly.

A) automotive
B) oil
C) tap water
D) restaurant

Question 15

The _____ industry is an example of a natural monopoly.

A) electricity distribution
B) oil
C) bottled water
D) restaurant

Question 16

When a natural monopoly occurs, _____ generally exist.

A) network externalities
B) economies of scale
C) brand loyalty
D) control of a resource

Question 17

_____ is the benefit that customers receive from a good or service when others also are using the good or service.

A) A marginal benefit
B) A total benefit
C) Brand loyalty
D) A network externality

Question 18

The demand curve for a monopoly is always:

A) first horizontal and then vertical.
B) first vertical and then horizontal.
C) upward sloping.
D) the same as the market demand curve.

Question 19

A firm that operates as a monopoly has _____ pricing power.

A) unlimited
B) no
C) considerable
D) very little

Question 20

To sell more goods and services, a monopoly must _____ its price.

A) raise
B) not change
C) lower
D) first lower and then raise

Question 21

(Figure: Demand and Marginal Revenue for a Monopoly 0) In the figure, if this monopoly wants to sell three units, what should the price be?

A) $2.50
B) $4
C) $4.50
D) $6

Question 22

(Figure: Demand and Marginal Revenue for a Monopoly A) In the figure, which is the correct marginal revenue curve for a monopoly?

A) MR₁
B) MR₂
C) MR₃
D) MR₄

Question 23

In a monopoly, the marginal revenue curve _____ the demand curve.

A) lies above
B) lies below
C) is horizontal to
D) is the same as

Question 24

Assuming that all consumers pay the same price for a good or service, in a monopoly, price is _____ than marginal revenue for everything sold after the first one.

A) less than
B) greater than
C) equal to
D) first greater and then less

Question 25

(Figure: Revenue Schedule) Demand and Marginal Schedule
In the figure, what is the marginal revenue for the first unit?
$\begin{array}{|l|l|l|}\hline \text { Price } & \text { Quantity } & \begin{array}{l}\text { Total } \\\text { Revenue }\end{array} \\\hline \$ 9 & 0 & 0 \\\hline 8 & 1 & \$ 8 \\\hline 7 & 2 & 14 \\\hline 6 & 3 & 18 \\\hline 5 & 4 & 20 \\\hline\end{array}$

A) zero
B) $4
C) $6
D) $8

Question 26

(Figure: Revenue Schedule) Demand and Marginal Schedule
In the figure, what is the marginal revenue for the second unit?
$\begin{array}{|l|l|l|}\hline \text { Price } & \text { Quantity } & \begin{array}{l}\text { Total } \\\text { Revenue }\end{array} \\\hline \$ 9 & 0 & 0 \\\hline 8 & 1 & \$ 8 \\\hline 7 & 2 & 14 \\\hline 6 & 3 & 18 \\\hline 5 & 4 & 20 \\\hline\end{array}$

A) zero
B) $4
C) $6
D) $8

Question 27

(Figure: Revenue Schedule) Demand and Marginal Schedule
In the figure, what is the marginal revenue for the third unit?
$\begin{array}{|l|l|l|}\hline \text { Price } & \text { Quantity } & \begin{array}{l}\text { Total } \\\text { Revenue }\end{array} \\\hline \$ 9 & 0 & 0 \\\hline 8 & 1 & \$ 8 \\\hline 7 & 2 & 14 \\\hline 6 & 3 & 18 \\\hline 5 & 4 & 20 \\\hline\end{array}$

A) zero
B) $4
C) $6
D) $8

Question 28

(Figure: Revenue Schedule) Demand and Marginal Schedule
In the figure, marginal revenue is decreasing while total revenue is increasing. This indicates that the demand curve is _____ sloping and the marginal revenue curve is _____ the demand curve.
$\begin{array}{|l|l|l|}\hline \text { Price } & \text { Quantity } & \begin{array}{l}\text { Total } \\\text { Revenue }\end{array} \\\hline \$ 9 & 0 & 0 \\\hline 8 & 1 & \$ 8 \\\hline 7 & 2 & 14 \\\hline 6 & 3 & 18 \\\hline 5 & 4 & 20 \\\hline\end{array}$

A) downward; above
B) upward; above
C) downward; below
D) upward; below

Question 29

(Figure: Revenue Schedule) Demand and Marginal Schedule
In the figure, what is the marginal revenue for the fourth unit?
$\begin{array}{|l|l|l|}\hline \text { Price } & \text { Quantity } & \begin{array}{l}\text { Total } \\\text { Revenue }\end{array} \\\hline \$ 9 & 0 & 0 \\\hline 8 & 1 & \$ 8 \\\hline 7 & 2 & 14 \\\hline 6 & 3 & 18 \\\hline 5 & 4 & 20 \\\hline\end{array}$

A) zero
B) $2
C) $5
D) $20

Question 30

(Figure: Revenue Schedule) Demand and Marginal Schedule
In the figure, the marginal revenue for the fifth unit is 0. What is the total revenue from 5 units?
$\begin{array}{|l|l|l|}\hline \text { Price } & \text { Quantity } & \begin{array}{l}\text { Total } \\\text { Revenue }\end{array} \\\hline \$ 9 & 0 & 0 \\\hline 8 & 1 & \$ 8 \\\hline 7 & 2 & 14 \\\hline 6 & 3 & 18 \\\hline 5 & 4 & 20 \\\hline\end{array}$

A) $0
B) $4
C) $20
D) $22

Question 31

For a monopoly, profit-maximizing quantity occurs where:

A) MR = MC.
B) MR > MC.
C) P < MC.
D) P > MC.

Question 32

For a monopoly, profit is:

A) (P - ATC) × Q.
B) (P + ATC) × Q.
C) (P - ATC) ÷ Q.
D) (P + ATC) ÷ Q.

Question 33

(Figure: Profit-Maximization Decision of a Monopolist 0) In the figure, the profit-maximizing quantity for this monopoly firm is:

A) zero.
B) two.
C) four.
D) six.

Question 34

(Figure: Profit-Maximization Decision of a Monopolist 0) In the figure, the profit-maximizing price for this monopoly firm is:

A) zero.
B) $5.
C) $8.
D) $9.

Question 35

(Figure: Profit-Maximization Decision of a Monopolist 0) In the figure, the cost per unit for this monopoly firm is:

A) zero.
B) $5.
C) $8.
D) $9.

Question 36

(Figure: Profit-Maximization Decision of a Monopolist 0) In the figure, the profit for this monopoly firm is:

A) $4.
B) $16.
C) $32.
D) $36.

Question 37

(Figure: Profit-Maximization Decision of a Monopolist 0) In the figure, total revenue for this monopoly firm is:

A) $4.
B) $20.
C) $32.
D) $36.

Question 38

(Figure: Profit-Maximization Decision of a Monopolist 0) In the figure, total cost for this monopoly firm is:

A) $4.
B) $20.
C) $32.
D) $36.

Question 39

(Figure: Profit-Maximization Decision of a Monopolist A) In the figure, the profit-maximizing quantity for this monopoly firm is:

A) zero.
B) five.
C) ten.
D) fifteen.

Question 40

(Figure: Profit-Maximization Decision of a Monopolist A) In the figure, the profit-maximizing price for this monopoly firm is:

A) $10.
B) $16.
C) $18.
D) $20.

Question 41

(Figure: Profit-Maximization Decision of a Monopolist A) In the figure, the cost per unit for this monopoly firm is:

A) $10.
B) $16.
C) $18.
D) $20.

Question 42

(Figure: Profit-Maximization Decision of a Monopolist A) In the figure, the profit for this monopoly firm is:

A) $20.
B) $80.
C) $100.
D) $180.

Question 43

(Figure: Profit-Maximization Decision of a Monopolist A) In the figure, total revenue for this monopoly firm is:

A) $20.
B) $100.
C) $160.
D) $180.

Question 44

(Figure: Profit-Maximization Decision of a Monopolist A) In the figure, total cost for this monopoly firm is:

A) $20.
B) $100.
C) $160.
D) $180.

Question 45

(Figure: Profit-Maximization Decision of a Monopolist I) In the figure, the profit-maximizing quantity for this monopoly firm is:

A) zero.
B) eleven.
C) thirteen.
D) sixteen.

Question 46

(Figure: Profit-Maximization Decision of a Monopolist I) In the figure, the profit-maximizing price for this monopoly firm is:

A) $6.
B) $10.
C) $11.
D) $15.

Question 47

(Figure: Profit-Maximization Decision of a Monopolist I) In the figure, the cost per unit for this monopoly firm is:

A) $6.
B) $10.
C) $11.
D) $15.

Question 48

(Figure: Profit-Maximization Decision of a Monopolist I) In the figure, the profit for this monopoly firm is:

A) -$121,000.
B) -$44,000.
C) $0.
D) $66,000.

Question 49

(Figure: Profit-Maximization Decision of a Monopolist I) In the figure, total revenue for this monopoly firm is:

A) $0.
B) $66,000.
C) $121,000.
D) $165,000.

Question 50

(Figure: Profit-Maximization Decision of a Monopolist I) In the figure, total cost for this monopoly firm is:

A) $0.
B) $66,000.
C) $121,000.
D) $165,000.

Question 51

The demand curve for a monopolist is _____ sloping, so to sell more goods and services, the monopolist must _____ price.

A) downward; increase
B) upward; reduce
C) downward; reduce
D) upward; increase

Question 52

Firms that are in perfect competition and in a constant cost industry will have a _____ curve.

A) horizontal long-run demand
B) horizontal long-run supply
C) vertical long-run demand
D) vertical long-run supply

Question 53

Generally, monopolists charge a _____ price and sell _____ quantity than a firm in a perfect competition market does.

A) lower; a higher
B) lower; an equal
C) higher; a lower
D) higher; an equal

Question 54

In a monopoly, _____ always results from higher prices and lower quantity.

A) economic profit
B) deadweight loss
C) accounting profit
D) lightweight loss

Question 55

In a monopoly, consumer surplus is _____, and producer surplus is:

A) reduced; reduced.
B) reduced; increased.
C) increased; reduced.
D) increased; increased.

Question 56

_____ is an activity that is done with the goal of obtaining special privileges from the government.

A) Profit maximization
B) Rent seeking
C) Deadweight gain
D) Allocative efficiency

Question 57

_____ is an example of rent seeking.

A) Lobbying government officials for special privileges
B) Becoming a landlord
C) Advertising
D) Achieving economies of scale

Question 58

The automobile replaced the horse and buggy for everyday transportation. Electronic downloads of music replaced compact discs. Both situations are examples of:

A) rent seeking.
B) creative destruction.
C) productive efficiency.
D) allocative efficiency.

Question 59

A natural monopolist generally has _____ costs and substantial _____ of scale.

A) low fixed; diseconomies
B) high fixed; economies
C) low variable; diseconomies
D) high variable; economies

Question 60

If a government does not regulate a natural monopoly, it may be because the government:

A) does not feel that natural monopolies are very important.
B) is too busy.
C) believes that there may be competition from potential substitutes.
D) thinks that the monopoly is behaving itself.

Question 61

______ is a method that is used by governments to regulate natural monopolies.

A) Price regulation
B) Diversification
C) Creating competition
D) Takeover

Question 62

______ is a method that governments use to regulate natural monopolies.

A) Price regulation
B) Diversification
C) Creating competition
D) Allowing companies to charge a high price

Question 63

_____ regulation is the most common form of price regulation that governments use to regulate natural monopolies.

A) Average cost pricing
B) Antitrust
C) Marginal cost pricing
D) Monopoly pricing

Question 64

_____ regulations result in zero economic profit for a regulated natural monopoly.

A) Average cost pricing
B) Antitrust
C) Marginal cost pricing
D) Total cost pricing

Question 65

A disadvantage of requiring a monopoly to set a price equal to average total cost is that firms may:

A) lose money.
B) not have an incentive to minimize cost.
C) find that costs are too high.
D) find that its profits will escalate.

Question 66

A disadvantage of a government-owned monopoly is that the firm:

A) has access to subsidies.
B) will most likely produce the optimal amount.
C) will be well run.
D) has no profit motive and therefore may become inefficient.

Question 67

An advantage of a government-owned monopoly is that the firm:

A) may have access to subsidies if losses occur.
B) will most likely not produce the optimal amount.
C) will not be well run.
D) has no a profit motive and therefore may become inefficient.

Question 68

_____ are designed to limit behavior that substantially decreases competition.

A) Monopolies
B) Trusts
C) Antitrust laws
D) Average cost pricing regulations

Question 69

_____ require the monopolist to set price equal to average total cost.

A) Regulations of the Federal Communications Commission (FCC)
B) Trusts
C) Antitrust laws
D) Average cost pricing regulations

Question 70

Organizations of rival firms that conspire to acquire monopoly power in an industry are called:

A) regulations of the Federal Communications Commission (FCC).
B) trusts.
C) antitrust laws.
D) average cost pricing regulations.

Question 71

_____ is an individual who becomes wealthy through unscrupulous and unfair business practices.

A) A monopolist
B) An oligopolist
C) A trust builder
D) A robber baron

Question 72

Passed in 1890, the _____ Act was the first antitrust law in the United States.

A) Sherman
B) Clayton
C) Robinson-Patman
D) Celler-Kefauver Act

Question 73

Prohibited by the Sherman Act, _____ occurs when firms come together and agree to charge the same price.

A) price discrimination
B) monopolizing an industry
C) price fixing
D) exclusive dealing

Question 74

The _____ Act prohibits actions that restrain trade or encourage monopolies.

A) Sherman
B) Clayton
C) Robinson-Patman
D) Celler-Kefauver

Question 75

In 1914, the _____ Act closed loopholes and strengthened the Sherman Act.

A) Hart-Scott-Rodino
B) Clayton
C) Robinson-Patman
D) Celler-Kefauver

Question 76

The _____ Act makes price discrimination illegal if it substantially lessens competition.

A) Hart-Scott-Rodino
B) Clayton
C) Robinson-Patman
D) Celler-Kefauver

Question 77

_____, which occur when a company forces buyers or sellers not to do business with the company's rivals, are prohibited by the Clayton Act when they lessen competition.

A) Acts of price discrimination
B) Stock mergers and acquisitions
C) Exclusive dealings
D) Tying sales

Question 78

_____, which occur when a customer is forced to purchase an additional product, often from the same firm, are prohibited by the Clayton Act when they lessen competition.

A) Acts of price discrimination
B) Stock mergers and acquisitions
C) Exclusive dealings
D) Tying sales

Question 79

The _____ Act makes stock mergers and acquisitions illegal if they substantially lessen competition.

A) Hart-Scott-Rodino
B) Clayton
C) Robinson-Patman
D) Celler-Kefauver

Question 80

The _____ Act prohibits any person from being a director of two or more competing corporations.

A) Hart-Scott-Rodino
B) Clayton
C) Robinson-Patman
D) Celler-Kefauver