Question 1

In order for antitrust laws to raise social welfare, the government must

Accepted Answer

A)   disallow synergy benefits from accruing to monopolists.
B)   disallow any mergers from taking place.
C)   be able to determine which mergers are desirable and which are not.
D)   always attempt to keep markets in their most competitive form.E) A) and B)
F) A) and C)

Question 2

Table 15-4
A monopolist faces the following demand curve:
 
-Refer to Table 15-4. If the monopolist produces 5 units, what is its marginal revenue?

Accepted Answer

A)   $100
B)   $37.5
C)   $15
D)   $2.50E) A) and B)
F) B) and C)

Question 3

The legislation passed by Congress in 1914 to strengthen the government's powers and authorize private lawsuits was the

Accepted Answer

A)   Morgan Act.
B)   Sherman Act.
C)   Clayton Act.
D)   14th Amendment.E) A) and B)
F) C) and D)

Question 4

Figure 15-5 
-Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

Accepted Answer

A)   P1-P6.
B)   P2-P4.
C)   P2-P5.
D)   P2-P3.E) A) and B)
F) None of the above

Question 5

A monopoly firm is a price

Accepted Answer

A)   taker and has no supply curve.
B)   maker and has no supply curve
C)   taker and has an upward-sloping supply curve.
D)   maker and has an upward-sloping supply curve.E) B) and C)
F) All of the above

Question 6

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to

Accepted Answer

A)   reduce prices for all customers.
B)   encourage literacy.
C)   encourage arbitrage.
D)   price discriminate.E) A) and C)
F) A) and B)

Question 7

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Accepted Answer

A) True 
 B)False

Question 8

By offering lower prices to customers who buy a large quantity, a monopoly is price discriminating.

Accepted Answer

A) True 
 B)False

Question 9

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

Accepted Answer

A)   cause the monopolist to operate at a loss.
B)   result in a less than optimal total surplus.
C)   maximize producer surplus.
D)   result in higher profits for the monopoly.E) A) and C)
F) B) and C)

Question 10

The collection of statutes aimed at curbing monopoly power is called

Accepted Answer

A)   the 14th amendment.
B)   the Clayton Act.
C)   the Sherman Act.
D)   antitrust law.E) A) and B)
F) A) and C)

Question 11

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Accepted Answer

A) True 
 B)False

Question 12

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is not correct?

Accepted Answer

A)   Two examples of early antitrust laws are the Sherman and Clayton Antitrust Acts.
B)   Antitrust laws automatically prevent mergers between companies that produce similar products.
C)   Antitrust laws give the government power to increase competition.
D)   Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production.E) A) and B)
F) None of the above

Question 14

In theory, perfect price discrimination

Accepted Answer

A)   decreases the monopolist's profits.
B)   decreases consumer surplus.
C)   increases deadweight loss.
D)   reduces the number of consumers who purchase the monopoly's product.E) A) and D)
F) All of the above

Question 15

A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level.

Accepted Answer

A) True 
 B)False

Question 16

Figure 15-4 
-Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Accepted Answer

A)   remain unchanged.
B)   decrease.
C)   increase as long as the new level of output is at least Q2.
D)   None of the above is correct. The monopolist currently maximizing profits at Q4.E) A) and D)
F) C) and D)

Question 17

When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

Accepted Answer

The answer of When a single firm can supply a...

Question 18

Figure 15-3 
-Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Accepted Answer

A)   Panel A
B)   Panel B
C)   Panel C
D)   Panel DE) A) and B)
F) C) and D)

Question 19

When an industry is a natural monopoly,

Accepted Answer

A)   it is characterized by constant returns to scale.
B)   it is characterized by diseconomies of scale.
C)   a larger number of firms may lead to a lower average cost.
D)   a larger number of firms will lead to a higher average cost.E) None of the above
F) All of the above

Question 20

Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5"x7" color print of the photo for $10. She can also sell the digital file for $20. There are 500 people willing to buy the color print and 2,000 people willing to buy the digital file. Assume the costs to the photographer are zero and that the people who purchase the digital file cannot resell the file itself or any prints made from it. What should she do in order to maximize her profits?

Accepted Answer

A)   earn $5,000 by selling only the color prints
B)   earn $40,000 by selling only the digital files
C)   earn $45,000 by selling both the color prints and the digital files at their respective prices
D)   We do not have enough information with which to answer this question.E) A) and B)
F) A) and C)

Exam 15: Monopoly

When an industry is a natural monopoly,

Correct Answer
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Figure 15-5 -Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

Correct Answer
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In theory, perfect price discrimination

Correct Answer
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The collection of statutes aimed at curbing monopoly power is called

Correct Answer
verified

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. If the monopolist produces 5 units, what is its marginal revenue?

Correct Answer
verified

A monopoly firm is a price

Correct Answer
verified

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Correct Answer
verified

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Correct Answer
verified

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Correct Answer
verified

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

Correct Answer
verified

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Correct Answer
verified

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

Correct Answer
verified

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to

Correct Answer
verified

By offering lower prices to customers who buy a large quantity, a monopoly is price discriminating.

Correct Answer
verified

The legislation passed by Congress in 1914 to strengthen the government's powers and authorize private lawsuits was the

Correct Answer
verified

In order for antitrust laws to raise social welfare, the government must

Correct Answer
verified

Correct Answer
verified

A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level.

Correct Answer
verified

Exam 15: Monopoly

When an industry is a natural monopoly,

Correct AnswerverifiedShow Answer

Figure 15-5 -Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

Correct AnswerverifiedShow Answer

In theory, perfect price discrimination

Correct AnswerverifiedShow Answer

The collection of statutes aimed at curbing monopoly power is called

Correct AnswerverifiedShow Answer

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. If the monopolist produces 5 units, what is its marginal revenue?

Correct AnswerverifiedShow Answer

A monopoly firm is a price

Correct AnswerverifiedShow Answer

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Correct AnswerverifiedShow Answer

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Correct AnswerverifiedShow Answer

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Correct AnswerverifiedShow Answer

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

Correct AnswerverifiedShow Answer

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Correct AnswerverifiedShow Answer

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

Correct AnswerverifiedShow Answer

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to

Correct AnswerverifiedShow Answer

By offering lower prices to customers who buy a large quantity, a monopoly is price discriminating.

Correct AnswerverifiedShow Answer

The legislation passed by Congress in 1914 to strengthen the government's powers and authorize private lawsuits was the

Correct AnswerverifiedShow Answer

In order for antitrust laws to raise social welfare, the government must

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level.

Correct AnswerverifiedShow Answer

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