Question 1

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Accepted Answer

A) True 
 B)False  False

Question 2

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Accepted Answer

A)   government antitrust laws.
B)   the pricing decisions of its suppliers.
C)   the pricing decisions of firms that produce complementary products.
D)   the actions of all other firms.E) A) and D)
F) B) and C)

Question 3

Figure 15-15  Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price

Accepted Answer

A)   equal to average total cost where it intersects the demand curve.
B)   equal to marginal cost where it intersects the demand curve.
C)   equal to average variable cost where it intersects the demand curve.
D)   corresponding to the demand curve where marginal revenue equals zero.E) C) and D)
F) A) and D)

Question 4

Figure 15-15  Figure 15-15 shows the cost and demand curves for the Erickson Power Company.
-Economic efficiency requires that a natural monopoly's price be

Accepted Answer

A)   equal to average total cost where it intersects the demand curve.
B)   equal to marginal cost where it intersects the demand curve.
C)   equal to average variable cost where it intersects the demand curve.
D)   equal to the lowest price the firm can charge and still make a normal profit.E) A) and D)
F) A) and C)

Question 5

Using a broad definition, a firm would have a monopoly if

Accepted Answer

A)   it produced a product that has no close substitutes.
B)   it does not have to collude with any other producer to earn an economic profit.
C)   there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run.
D)   it can make decisions regarding price and output without violating antitrust laws.E) B) and D)
F) None of the above

Question 6

Which of the following statements is true?

Accepted Answer

A)   Monopolists are price makers. All other firms are price takers.
B)   Unlike other industries, monopoly industries have high barriers to entry.
C)   Only monopoly firms are granted patents and copyrights.
D)   Unlike other firms, a monopolist's demand curve is the same as the market demand curve.E) None of the above
F) A) and B)

Question 7

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Accepted Answer

A) True 
 B)False

Question 8

U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Accepted Answer

Patents are designed to encourage creative activity and promote the development of new technologies. Firms can spend years on research and development in the search for new and better production processes and consumer products. Research and development is costly-many potential new ideas are ultimately not technically feasible or never become commercially successful. If research and development results in a successful product, competing firms can easily copy the product and sell it without incurring the research costs of the firm that developed the product, if patent protection is not granted. Most people would object to this form of "free riding" on equity grounds; but patents also encourage firms to conduct research that leads to social benefits: new technologies result in a higher standard of living for all and a more efficient allocation of society's scarce resources.

Question 9

Which two factors make regulating mergers complicated?

Accepted Answer

A)   First, firms may lobby government officials to influence their decision to approve the merger. Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge.
B)   First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and managers. Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports)  on the degree of competition in the markets of the merged firms.
C)   First, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice must both approve mergers. Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed.
D)   First, it is not always clear what market firms are in. Second, the newly merged firm might be more efficient than the merging firms were individually.E) A) and C)
F) C) and D)

Question 10

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

Question 11

Because a monopoly's demand curve is the same as the market demand curve for its product,

Accepted Answer

A)   the monopoly's marginal revenue equals its price.
B)   the monopoly is a price taker.
C)   the monopoly must lower its price to sell more of its product.
D)   the monopoly's average total cost always falls as it increases its output.E) None of the above
F) All of the above C

Question 12

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

Question 13

Figure 15-2  Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2. If the firm's average total cost curve is ATC3, the firm will

Accepted Answer

A)   suffer a loss.
B)   break even.
C)   make a profit.
D)   face competition.E) None of the above
F) All of the above

Question 14

Which of the following is true for a monopolist?

Accepted Answer

A)   Being the only seller in the market, the monopolist faces a perfectly inelastic demand curve.
B)   Being the only seller in the market, the monopolist faces a perfectly elastic demand curve.
C)   Being the only seller in the market, the monopolist faces the market demand curve.
D)   Being the only seller in the market, the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve.E) A) and B)
F) A) and C)

Question 15

In reality, because few markets are perfectly competitive, some loss of economic efficiency occurs in the market for nearly every good or service.

Accepted Answer

A) True 
 B)False

Question 16

The demand curve for the monopoly's product is

Accepted Answer

A)   the market demand for the product.
B)   more elastic than the market demand for the product.
C)   more inelastic than the market demand for the product.
D)   undefined.E) B) and C)
F) C) and D)

Question 17

Figure 15-9  Figure 15-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 15-9. What is the difference between the monopoly's price and perfectly competitive industry's price?

Accepted Answer

A)   The monopoly's price is higher by $9.50.
B)   The monopoly's price is higher by $13.
C)   The monopoly's price is higher by $3.50.
D)   The monopoly's price is higher by $21.E) B) and D)
F) A) and B)

Question 18

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)   $22,000E) A) and D)
F) B) and C)

Question 19

The Aluminum Company of America (Alcoa)  had a monopoly until the 1940s because

Accepted Answer

A)   it was a public enterprise.
B)   it had a patent on the manufacture of aluminum.
C)   the company had a secret technique for making aluminum from bauxite.
D)   it had control of almost all the available supply of bauxite.E) A) and C)
F) B) and C)

Question 20

Figure 15-12  Figure 15-12 shows the cost and demand curves for a monopolist.
-Refer to Figure 15-12. Assume the firm maximizes its profits. What is the amount of consumer surplus?

Accepted Answer

A)   $21
B)   $124
C)   $186
D)   $332E) B) and D)
F) None of the above

Exam 15: Monopoly and Antitrust Policy

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Correct Answer
verified
False

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Correct Answer
verified

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price

Correct Answer
verified

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Economic efficiency requires that a natural monopoly's price be

Correct Answer
verified

Using a broad definition, a firm would have a monopoly if

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Correct Answer
verified

U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Which two factors make regulating mergers complicated?

Correct Answer
verified

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.

Correct Answer
verified

Because a monopoly's demand curve is the same as the market demand curve for its product,

Correct Answer
verified
C

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.

Correct Answer
verified

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2. If the firm's average total cost curve is ATC3, the firm will

Correct Answer
verified

Which of the following is true for a monopolist?

Correct Answer
verified

In reality, because few markets are perfectly competitive, some loss of economic efficiency occurs in the market for nearly every good or service.

Correct Answer
verified

The demand curve for the monopoly's product is

Correct Answer
verified

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9. What is the difference between the monopoly's price and perfectly competitive industry's price?

Correct Answer
verified

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?

Correct Answer
verified

The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because

Correct Answer
verified

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12. Assume the firm maximizes its profits. What is the amount of consumer surplus?

Correct Answer
verified

Exam 15: Monopoly and Antitrust Policy

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Correct AnswerverifiedFalse

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Correct AnswerverifiedShow Answer

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price

Correct AnswerverifiedShow Answer

Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Economic efficiency requires that a natural monopoly's price be

Correct AnswerverifiedShow Answer

Using a broad definition, a firm would have a monopoly if

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Correct AnswerverifiedShow Answer

U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Which two factors make regulating mergers complicated?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Because a monopoly's demand curve is the same as the market demand curve for its product,

Correct AnswerverifiedC

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.

Correct AnswerverifiedShow Answer

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2. If the firm's average total cost curve is ATC3, the firm will

Correct AnswerverifiedShow Answer

Which of the following is true for a monopolist?

Correct AnswerverifiedShow Answer

In reality, because few markets are perfectly competitive, some loss of economic efficiency occurs in the market for nearly every good or service.

Correct AnswerverifiedShow Answer

The demand curve for the monopoly's product is

Correct AnswerverifiedShow Answer

Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9. What is the difference between the monopoly's price and perfectly competitive industry's price?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because

Correct AnswerverifiedShow Answer

Figure 15-12 Figure 15-12 shows the cost and demand curves for a monopolist. -Refer to Figure 15-12. Assume the firm maximizes its profits. What is the amount of consumer surplus?

Correct AnswerverifiedShow Answer

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False

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C

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