Question 1

In instances when having a single firm in the market makes sense,governments ________ to minimize negative externalities.

Accepted Answer

A)   will grant a patent or copyright
B)   require licenses
C)   deregulate industries
D)   hand out subsidies
E)   break down barriers to entry

Question 2

Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the following questions. 
-The profit-maximizing price for this firm is

Accepted Answer

A)   $15.
B)   $5.
C)   $7.
D)   $9.
E)   $13.

Question 3

The typical result of monopoly is ________ prices and ________ output than we find in a competitive market.

Accepted Answer

A)   lower; lower
B)   higher; higher
C)   higher; lower
D)   lower; higher
E)   higher; the same

Question 4

Refer to the accompanying figure to answer the following questions. 
-If a firm is producing a quantity of 100 and charging a price of $10,it

Accepted Answer

A)   should continue to produce 100 units but raise the price to $13 to maximize profits.
B)   should increase production to 150 units but raise the price to $25 to maximize profits.
C)   should continue to produce 100 units but raise the price to $25 to maximize profits.
D)   should increase production to 100 units and raise the price to $13 to maximize profits.
E)   is already maximizing profits and should not change the price or quantity produced.

Question 5

Willow Park is a small community in Texas with only one gas station.The price of gasoline in Willow Park most likely

Accepted Answer

A)   never changes.
B)   is lower than in the big cities in Texas.
C)   is determined by competitive market forces.
D)   is higher than in the big cities in Texas.
E)   produces a surplus of gasoline.

Question 6

After a patent on a product expires,

Accepted Answer

A)   other firms must wait to mimic the product.
B)   all negative and positive externalities are internalized.
C)   rivals can start to mimic the product.
D)   no other firms can mimic the product.
E)   no further profits are able to be made by the original producer of the good.

Question 7

Deadweight loss exists in a monopoly because the monopolist

Accepted Answer

A)   charges a price equal to marginal cost,which is higher than the price charged in a competitive market.
B)   produces a quantity that is higher than the quantity produced in a competitive market.
C)   makes a positive economic profit in the short run.
D)   charges a price below marginal cost.
E)   charges a price that is above marginal revenue.

Question 8

The high-speed Internet access technology that raises the greatest concerns about monopoly control of infrastructure is

Accepted Answer

A)   satellite broadband.
B)   fiber optic cable.
C)   DSL.
D)   mobile broadband.
E)   dial-up.

Question 9

To maximize profits,a monopolist chooses the quantity where

Accepted Answer

A)   revenues are maximized.
B)   marginal revenue equals zero.
C)   marginal cost equals zero.
D)   marginal revenue equals marginal cost.
E)   costs are minimized.

Question 10

When resources are used to secure monopoly rights through the political process

Accepted Answer

A)   firms are rent seeking.
B)   consumers are profit maximizing.
C)   total surplus is maximized.
D)   the government is deregulating.
E)   prices decrease.

Question 11

Which of the following is NOT an example of a natural barrier to entry?

Accepted Answer

A)   A software firm cannot get a loan to fund development of a new computer operating system.
B)   A manufacturing firm has to buy a rare metal from the one company that controls most of the worldwide supply.
C)   A small soft-drink company struggles to produce its product as cheaply as its much larger competitor can.
D)   A single utility firm can deliver services to every home in an area more efficiently than a cluster of competing firms could.
E)   A patent gives a pharmaceutical firm the exclusive right to manufacture and sell an anticancer drug.

Question 12

Reginald has developed a new social media site that he feels can compete heavily with Facebook.Unfortunately,he cannot find someone to lend him enough money to market his product to consumers.Reginald is facing which kind of barrier to entry?

Accepted Answer

A)   control of resources
B)   problems raising capital
C)   economies of scale
D)   licensing
E)   patents and copyright law

Question 13

When a monopolist lowers a price from $80 to $70,the quantity that the firm is able to sell increases from 100 to 150.The change in revenue associated with the price effect is equal to

Accepted Answer

A)   $3,500.
B)   -$3,500.
C)   $1,000.
D)   -$1,000.
E)   $4,000.

Question 14

Some economists argue that a government-created monopoly in the medical field can be good for the overall growth of an economy,even though it does create deadweight loss.Support this argument.

Accepted Answer

A government-created monopoly gives mono...

Question 15

Which of the following is NOT a necessary characteristic of monopolies?

Accepted Answer

A)   Prices are set by the seller,not the consumer.
B)   There is just one firm in the role of seller.
C)   The market is for a unique product without close substitutes.
D)   Government plays a role in maintaining barriers to entry.
E)   The seller has a high level of market power.

Question 16

The demand curve for the product of a firm in a competitive market is ________,and the demand curve for the product of a monopolist is ________.

Accepted Answer

A)   horizontal; downward sloping
B)   horizontal; horizontal
C)   downward sloping; upward sloping
D)   downward sloping; horizontal
E)   upward sloping; downward sloping

Question 17

Refer to the accompanying figure to answer the following questions. 
-If a firm is producing a quantity of 100 and charging a price of $25,it

Accepted Answer

A)   should raise production to 150 units but lower the price to $10 to maximize profits.
B)   should raise production to 150 units and continue to charge $25 to maximize profits.
C)   should keep production at 100 units but lower the price to $13 to maximize profits.
D)   should keep production at 100 units and lower the price to $10 to maximize profits.
E)   is already maximizing profits and should not change the price or quantity produced.

Question 18

Explain the price effect and the output effect as it pertains to the marginal revenue of a monopolist.

Accepted Answer

The price effect refers to how lower pri...

Question 19

Refer to the accompanying figure to answer the following questions. 
-When the price changes from $50 to $30,the output effect leads to an increase of ________ in revenue.

Accepted Answer

A)   $20
B)   $15
C)   $900
D)   $600
E)   $450

Question 20

Breaking up a company that has a natural monopoly would

Accepted Answer

A)   result in higher production costs.
B)   result in lower production costs.
C)   benefit society.
D)   result in lower prices for consumers.
E)   increase government tax revenue.

Exam 10: Understanding Monopoly

To maximize profits,a monopolist chooses the quantity where

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Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the following questions. -The profit-maximizing price for this firm is

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Refer to the accompanying figure to answer the following questions. -If a firm is producing a quantity of 100 and charging a price of $25,it

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Refer to the accompanying figure to answer the following questions. -When the price changes from $50 to $30,the output effect leads to an increase of ________ in revenue.

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Willow Park is a small community in Texas with only one gas station.The price of gasoline in Willow Park most likely

Correct AnswerverifiedShow Answer

Deadweight loss exists in a monopoly because the monopolist

Correct AnswerverifiedShow Answer

The high-speed Internet access technology that raises the greatest concerns about monopoly control of infrastructure is

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In instances when having a single firm in the market makes sense,governments ________ to minimize negative externalities.

Correct AnswerverifiedShow Answer

Breaking up a company that has a natural monopoly would

Correct AnswerverifiedShow Answer

Which of the following is NOT a necessary characteristic of monopolies?

Correct AnswerverifiedShow Answer

Reginald has developed a new social media site that he feels can compete heavily with Facebook.Unfortunately,he cannot find someone to lend him enough money to market his product to consumers.Reginald is facing which kind of barrier to entry?

Correct AnswerverifiedShow Answer

Some economists argue that a government-created monopoly in the medical field can be good for the overall growth of an economy,even though it does create deadweight loss.Support this argument.

Correct AnswerverifiedA government-created monopoly gives mono...View AnswerShow Answer

Which of the following is NOT an example of a natural barrier to entry?

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The demand curve for the product of a firm in a competitive market is ________,and the demand curve for the product of a monopolist is ________.

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The typical result of monopoly is ________ prices and ________ output than we find in a competitive market.

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After a patent on a product expires,

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When resources are used to secure monopoly rights through the political process

Correct AnswerverifiedShow Answer

Explain the price effect and the output effect as it pertains to the marginal revenue of a monopolist.

Correct AnswerverifiedThe price effect refers to how lower pri...View AnswerShow Answer

When a monopolist lowers a price from $80 to $70,the quantity that the firm is able to sell increases from 100 to 150.The change in revenue associated with the price effect is equal to

Correct AnswerverifiedShow Answer

Refer to the accompanying figure to answer the following questions. -If a firm is producing a quantity of 100 and charging a price of $10,it

Correct AnswerverifiedShow Answer

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A government-created monopoly gives mono...
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The demand curve for the product of a firm in a competitive market is ,and the demand curve for the product of a monopolist is .

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The typical result of monopoly is prices and output than we find in a competitive market.

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The price effect refers to how lower pri...
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