Question 1

Which of the following is most likely to contribute to the presence of monopoly in an industry?

Accepted Answer

A)  economies of scale 
B)  an elastic market demand for the product produced by the industry 
C)  inefficiency due to bureaucratic decision-making procedures in the industry 
D)  controlling over 50 percent of the market

Question 2

The burning of fossil fuels may cause global warming. Considering both the science and the reactions of crops, human health, and other factors across differing climates, economists generally agree that

Accepted Answer

A)  to protect the interests of future generations, the buildup of carbon dioxide must soon be stopped. 
B)  any climate change, if it actually occurs, will be extremely costly. 
C)  there will be both costs and benefits if the climate warms. 
D)  all people will be worse off if the climate warms.

Question 3

A firm that is a "pure monopoly" is

Accepted Answer

A)  a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. 
B)  the only seller of a good for which there are no good substitutes in a market with high barriers to entry. 
C)  the only buyer of a unique raw material. 
D)  the producer of a product subsidized by the government.

Question 4

When a park is funded by visitors, but not by taxpayers in general,

Accepted Answer

A)  there will be too few parks because most people simply will not pay to use a park. 
B)  visitors will be better served because poor service would lead to reductions in revenues. 
C)  maintenance in the park will suffer because budgets will decline. 
D)  we cannot predict what will happen because park funding by visitors has not been tried before.

Question 5

Figure 11-5 
-Indicate the maximum profit (or minimum loss) a pure monopolist with the cost and demand conditions depicted in Figure 11-5 would be able to achieve.

Accepted Answer

A)  profit of AIHE 
B)  profit of BKJC 
C)  losses of BKJC 
D)  losses of EHGF

Question 6

Which of the following indicates the major difference between monopolists and competitive price searchers?

Accepted Answer

A)  Monopolists will always be able to make economic profit; competitive price searchers will not. 
B)  Barriers to entry are high under monopoly but low in competitive price-searcher markets. 
C)  Monopolists will face a downward-sloping demand curve; competitive price searchers will not. 
D)  Unregulated monopolists will charge prices that exceed marginal cost; competitive price searchers will not.

Question 7

The current empirical evidence indicates that

Accepted Answer

A)  changes in the earth's cloud cover will clearly enhance the warming effects of carbon dioxide. 
B)  the increase in carbon dioxide, over thousands of years, is definitely the cause of global warming. 
C)  if global warming continues as most models predict, then in the next 100 years the sea levels clearly will rise by more than 10 feet. 
D)  none of the above is true.

Question 8

Patent laws that allow the inventor to maintain monopoly rights to an invention increase the price of the product and

Accepted Answer

A)  increase the profitability of inventive activities, thereby speeding up technological developments. 
B)  increase the profitability of inventive activities, thereby slowing down technological developments. 
C)  decrease the profitability of inventive activities, thereby speeding up technological developments. 
D)  decrease the profitability of inventive activities, thereby slowing down technological developments.

Question 9

Which of the following is true?

Accepted Answer

A)  Competitive forces are present even in markets with high barriers to entry. 
B)  Quality competition is an unimportant element of the competitive process. 
C)  Profitability and high prices discourage technological change and the development of substitute products. 
D)  Government regulations have substantially increased the quality of American manufacturing products in recent years.

Question 10

In markets characterized by oligopoly,

Accepted Answer

A)  the oligopolists earn the highest profit when they cooperate and behave like a monopolist. 
B)  collusive agreements will always prevail. 
C)  collective profits are always lower with cartel arrangements than they are without cartel arrangements. 
D)  pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market.

Question 11

Figure 11-20 
-At the profit-maximizing level of production, the monopoly in Figure 11-20 will have a

Accepted Answer

A)  profit per unit of output of $2. 
B)  loss per unit of output of $2. 
C)  loss per unit of output of $5. 
D)  profit per unit of output of $5. 
E)  loss per unit of output of $4.

Question 12

A monopolist will maximize profits by

Accepted Answer

A)  setting the price at the level that will maximize per-unit profit. 
B)  producing the output where marginal revenue equals total cost and charging a price along the demand curve. 
C)  selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost. 
D)  producing at the output rate where price equals marginal cost.

Question 13

If a local ready-mix cement company is the only producer of cement in the local market, the monopoly power of the firm will

Accepted Answer

A)  be small if entry barriers into the local market are high. 
B)  depend on how many other sellers of similar products there are in the national market. 
C)  be total since there are not any other sellers of the same product in the local market. 
D)  be minimal if the entry barriers restricting competition from other firms are low.

Question 14

Figure 11-17 
-Refer to Figure 11-17. The marginal revenue curve for a monopoly firm is depicted by curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 15

If government officials break a natural monopoly up into several smaller firms, then

Accepted Answer

A)  competition will force firms to attain economic profits rather than accounting profits. 
B)  competition will force firms to produce surplus output, which drives up price. 
C)  the average costs of production will increase. 
D)  the average costs of production will decrease.

Question 16

"Market power" is an expression used to indicate that a firm has

Accepted Answer

A)  the power to sell a given output at whatever price it chooses. 
B)  no freedom from the rigors of intense competition. 
C)  a monopoly over the product it produces. 
D)  enough market share to be somewhat insulated from competition.

Question 17

As a group, oligopolists would always earn the highest profit if they would

Accepted Answer

A)  produce the competitive quantity of output. 
B)  produce more than the competitive quantity of output. 
C)  charge the same price that a monopolist would charge if the market were a monopoly. 
D)  operate according to their own individual self-interests.

Question 18

In which of the following industries would we expect collusion to be most effective?

Accepted Answer

A)  retail gasoline, where most gas is sold by a large number of small dealers 
B)  crude oil production, where most oil is sold by a small number of large sellers 
C)  housing construction, an industry dominated by local firms that produce unique products 
D)  soybean production, where there are large numbers of farmers in many countries

Question 19

Use the figure to answer the following question(s).
Figure 11-1 
-If a regulatory agency were using the "normal return" (zero economic profit) criteria to impose a price on a monopolist with the cost and demand conditions depicted in Figure 11-1, what price would the regulators set, and what output would the monopolist produce?

Accepted Answer

A)  price A and output T 
B)  price B and output S 
C)  price B and output R 
D)  price C and output R

Question 20

Monopoly is a word derived from Greek origins that means, roughly, single seller. Why is the definition of monopoly as single seller inadequate in economic terms?

Accepted Answer

The answer of Monopoly is a word derived from Greek...

Exam 11: Price-Searcher Markets With High Entry Barriers