Question 1

Which of the following is true for a firm that is a monopolist?

Accepted Answer

A)   the firm will make an economic profit in the short run.
B)   the firm will produce a smaller quantity of output than what would be best from the viewpoint of ideal economic efficiency.
C)   the additional revenue that can be generated from an increase in output will exceed the firm's price.
D)   the firm can charge whatever it wants for its product since consumers have no alternatives.E) All of the above
F) A) and B)

Question 2

The oil industry is dominated by a cartel known as OPEC, and the cocaine industry is dominated by the Columbian cocaine cartel. If these cartels are being successful,

Accepted Answer

A)   the price of oil is higher than if the cartel did not exist, but the price of cocaine is lower.
B)   the price of cocaine is higher than if the cartel did not exist, but the price of oil is lower.
C)   both goods have higher prices than if the cartels did not exist, and both have lower levels of total output.
D)   both goods have higher prices than if the cartels did not exist, and both also have higher levels of total output.E) A) and B)
F) None of the above

Question 3

Suppose all automobile manufacturers have collusively agreed to sell their cars at a uniform price. If a firm wanted to break this agreement and not be detected, what would be one way to do this?

Accepted Answer

One answer might be secret price cuts to...

Question 4

Which of the following firms best fits the definition of a monopoly?

Accepted Answer

A)   McDonald's, because it is the only firm who produces the Big Mac
B)   a local cable company that has been granted the only license to sell cable in a city by the town council
C)   Ford Motor Company, because there are significant economies of scale in the production of automobiles
D)   Harvard University, because it has a reputation as being one of the top universities in the countryE) C) and D)
F) A) and B)

Question 5

Collusion among sellers will be less attractive when

Accepted Answer

A)   it is difficult to determine if some firms are providing secret price cuts.
B)   there are a small number of firms in the industry that are easily monitored.
C)   the demand for the product is relatively stable.
D)   the demand for the product is highly inelastic.E) B) and D)
F) A) and B)

Question 6

Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion?

Accepted Answer

A)   the presence of a large number of firms in the industry
B)   intense quality competition among firms
C)   low barriers to entry into the industry
D)   a stable demand for the productE) A) and B)
F) A) and C)

Question 7

A profit-maximizing monopolist will continue expanding output as long as

Accepted Answer

A)   marginal revenue exceeds marginal cost.
B)   marginal revenue is positive.
C)   the cost of producing an additional unit exceeds the marginal revenue derived from the unit.
D)   economic profit is more than zero.E) B) and C)
F) All of the above

Question 8

A profit-maximizing monopolist that produces in the short run will

Accepted Answer

A)   produce the level of output where marginal revenue exceeds marginal cost by the largest amount.
B)   increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.
C)   produce the level of output where average total cost is at a minimum.
D)   increase price as long as the average revenue exceeds the average total cost.
E)   produce the level of output where average revenue exceeds average total cost by the largest amount.F) C) and E)
G) A) and D)

Question 9

Which of the following is true?

Accepted Answer

A)   A monopolist is always guaranteed to earn positive economic profits regardless of their cost of production or the price they charge.
B)   A monopolist will charge the highest price possible for their product because no matter what price they charge, people will still have to buy it.
C)   A monopolist has no incentive to find more cost-efficient methods of production because they are protected from competition from other sellers.
D)   None of the above are correct.E) A) and C)
F) A) and D)

Question 10

When significant economies of scale are present in the production process, an industry will tend naturally toward monopoly because

Accepted Answer

A)   one firm will be able to produce the entire market output at a lower cost than several smaller firms.
B)   marginal revenue will be less than market price, giving firms the incentive to equate marginal cost with price instead of equating marginal cost and marginal revenue.
C)   economies of scale can only be present when firms produce identical products and there is no reason to have more than one firm producing the same exact product.
D)   consumers will be unwilling to compare the prices charged by several different firms.E) A) and C)
F) B) and D)

Question 11

The difficulty in analyzing oligopolistic behavior arises from the

Accepted Answer

A)   degree of government regulation of the market structure.
B)   interdependent nature of oligopolistic decisions.
C)   large number of firms in the industry.
D)   market power of consumers.E) None of the above
F) C) and D)

Question 12

Which of the following is true under natural monopoly?

Accepted Answer

A)   the monopolist will ignore consumers' desires.
B)   the marginal cost curve will lie below the average total cost curve.
C)   the monopolist will set price equal to marginal cost and will earn economic profits.
D)   output is produced under conditions of constant cost.E) A) and B)
F) B) and C)

Question 13

The demand curve of a monopolist is

Accepted Answer

A)   identical to the marginal cost curve.
B)   downward sloping and above the marginal revenue curve.
C)   downward sloping and below the marginal revenue.
D)   elastic because of a recognized interdependence with other firms.E) None of the above
F) A) and B)

Question 14

In an oligopolistic market, if rival sellers act independently, each will have a strong incentive to

Accepted Answer

A)   reduce price in order to increase sales and gain a larger share of the total market.
B)   increase price in order to get a larger share of the market and make larger profits.
C)   restrict output and raise price in order to achieve higher profits.
D)   maintain agreements to lower price and decrease product quality in order to earn higher profits.E) None of the above
F) B) and C)

Question 15

To maximize profit, the monopolist, whose cost and demand conditions are shown below, should charge a price of

Accepted Answer

A)   $4.
B)   $5.
C)   $6.
D)   $7.E) B) and C)
F) None of the above

Question 16

When natural monopoly is present in an industry, the per-unit costs of production will be

Accepted Answer

A)   lowest when there are a large number of producers in the industry.
B)   lowest when a single firm generates the entire output of the industry.
C)   lower for small firms than for large firms.
D)   minimized at the output that maximizes the industry's profitability.E) None of the above
F) All of the above

Question 17

The figure below illustrates the cost and revenue structure for a monopoly firm.
Figure 11-17

Refer to Figure 11-17. The average total cost curve for a monopoly firm is depicted by curve

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and B)
F) All of the above

Question 18

What problem does the government have that makes price regulation less than an ideal solution?

Accepted Answer

A)   There is no effective way to enforce price regulation.
B)   The government cannot tell what price a firm is charging.
C)   Regulators frequently will not have the information they need to set prices.
D)   Regulation often will lead to lower costs.E) A) and B)
F) C) and D)

Question 19

Use the figure to answer the following question(s) .
Figure 11-13

If the firms in the industry depicted in Figure 11-13 compete with each other, what would the industry's price and output be?

Accepted Answer

A)   price, $10; output, 600
B)   price, $15; output, 500
C)   price, $20; output, 400
D)   price, $25; output, 300E) A) and D)
F) None of the above

Question 20

Which of the following statements is true for a monopolist?

Accepted Answer

A)   a monopolist will charge the highest price for which he can sell units of his product.
B)   unregulated monopolists can gain by producing their chosen output at a low cost.
C)   if a firm has a monopoly, it will always be able to earn economic profit.
D)   none of the above statements are true.E) A) and B)
F) All of the above

Exam 11: Price-Searcher Markets With High Entry Barriers

When natural monopoly is present in an industry, the per-unit costs of production will be

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Suppose all automobile manufacturers have collusively agreed to sell their cars at a uniform price. If a firm wanted to break this agreement and not be detected, what would be one way to do this?

Correct AnswerverifiedOne answer might be secret price cuts to...View AnswerShow Answer

The demand curve of a monopolist is

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Which of the following is true under natural monopoly?

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What problem does the government have that makes price regulation less than an ideal solution?

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The figure below illustrates the cost and revenue structure for a monopoly firm. Figure 11-17 Refer to Figure 11-17. The average total cost curve for a monopoly firm is depicted by curve

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Which of the following firms best fits the definition of a monopoly?

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A profit-maximizing monopolist will continue expanding output as long as

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Which of the following is true?

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To maximize profit, the monopolist, whose cost and demand conditions are shown below, should charge a price of

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Which of the following is true for a firm that is a monopolist?

Correct AnswerverifiedShow Answer

When significant economies of scale are present in the production process, an industry will tend naturally toward monopoly because

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Which of the following statements is true for a monopolist?

Correct AnswerverifiedShow Answer

The oil industry is dominated by a cartel known as OPEC, and the cocaine industry is dominated by the Columbian cocaine cartel. If these cartels are being successful,

Correct AnswerverifiedShow Answer

In an oligopolistic market, if rival sellers act independently, each will have a strong incentive to

Correct AnswerverifiedShow Answer

A profit-maximizing monopolist that produces in the short run will

Correct AnswerverifiedShow Answer

The difficulty in analyzing oligopolistic behavior arises from the

Correct AnswerverifiedShow Answer

Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion?

Correct AnswerverifiedShow Answer

Collusion among sellers will be less attractive when

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 11-13 If the firms in the industry depicted in Figure 11-13 compete with each other, what would the industry's price and output be?

Correct AnswerverifiedShow Answer

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