Question 1

What would be the impact if the government forced the breakup of a natural monopoly to promote greater competition in an industry?

Accepted Answer

A)   Smaller firms would have a cost advantage over larger firms.
B)   The price paid by consumers would be unchanged.
C)   The average cost of producing the good would increase.
D)   The average cost of producing the good would decrease.E) C) and D)
F) B) and D) C

Question 2

If a regulatory commission wishes to allow a firm to earn a normal rate of return,it should set price equal to:

Accepted Answer

A)   marginal revenue.
B)   marginal cost.
C)   average total cost.
D)   average variable cost.E) A) and D)
F) A) and C)

Question 3

Which of the following need not be true of a monopoly?

Accepted Answer

A)   The firm must be the only producer of the product.
B)   The product must have no close substitutes.
C)   There must be high barriers to entry.
D)   The firm must earn an economic profit in the short run..E) None of the above
F) All of the above

Question 4

Monopolies will tend to produce a greater quantity and charge higher prices than perfectly competitive industries.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 13-4 The following diagram contains information on cost and revenue curves facing a regulated monopoly. 2 and Q2 B)  P3 and Q1 C)  P4 and Q3 D)  P6 and Q4" class="answers-bank-image d-inline" rel="preload" > Refer to Exhibit 13-4.Given this information,the monopoly would prefer which of the following price and output combinations?

Accepted Answer

A)   P2 and Q2
B)   P3 and Q1
C)   P4 and Q3
D)   P6 and Q4E) All of the above
F) B) and C)

Question 6

Exhibit 13-6  Refer to Exhibit 13-6.In single price monopoly,producer surplus is area:

Accepted Answer

A)   d
B)   d + e
C)   b + d
D)   b + c + d + eE) B) and D)
F) A) and B)

Question 7

Which of the following gives consumers an incentive to reduce the consumption of a service when the cost of providing the service is the highest?

Accepted Answer

A)   average cost pricing
B)   constant pricing
C)   peak load pricing
D)   regulated pricingE) B) and C)
F) A) and D)

Question 8

Many communities have granted monopoly rights to cable companies.This is an example of a monopoly created through:

Accepted Answer

A)   government licensing.
B)   ownership of the cable resources.
C)   patent protection.
D)   smart business practices by shrewd entrepreneurs.E) All of the above
F) C) and D) A

Question 9

Which of the following is a problem with government regulation of natural monopolies?

Accepted Answer

A)   creation of excessive profits levels
B)   reduced incentives to cut costs
C)   decreased number of firms in the market
D)   lack of influence from special interest groupsE) A) and B)
F) A) and C)

Question 10

Which of the following is false?

Accepted Answer

A)   A true or pure monopoly exists where there is only one seller of a product for which no close substitute is available.
B)   The situation in which one large firm can provide the output of the market at a lower cost than two or more smaller firms is called a natural monopoly.
C)   In monopoly, the market demand curve may be regarded as the demand curve for the firm because it is the market for that particular product.
D)   A monopoly firm is a price maker, and it will pick a price that is the highest point on its demand curve.E) None of the above
F) C) and D)

Question 11

Which of the following accurately describes a major difference between a monopolist and firms in perfectly competitive markets?

Accepted Answer

A)   The monopolist maximizes profit; firms in perfectly competitive markets maximize sales.
B)   The monopolist may earn long-run economic profit; firms in perfectly competitive markets cannot.
C)   The monopolist is a price taker; firms in other markets are price searchers.
D)   The monopolist may earn short-run profit; firms in perfectly competitive markets cannot.E) All of the above
F) C) and D)

Question 12

Which piece of legislation forbids most forms of price discrimination?

Accepted Answer

A)   Sherman Act
B)   Robinson-Patman Act
C)   Cellar-Kefauver Act
D)   Clayton ActE) None of the above
F) All of the above

Question 13

Why does the government allow some markets to be monopolized by granting patents?

Accepted Answer

A)   to promote a more equal distribution of income
B)   to correct for negative externalities
C)   to promote technological progress
D)   to ensure lower prices for consumers in the short runE) B) and D)
F) All of the above

Question 14

Which of the following would likely be an example of a monopolistic industry?

Accepted Answer

A)   fast-food restaurants
B)   wireless phone service
C)   auto manufacturing
D)   none of the aboveE) C) and D)
F) None of the above

Question 15

A monopoly industry:

Accepted Answer

A)   has very significant barriers to entry.
B)   faces a downward sloping demand curve.
C)   may earn economic profits or losses in the short run.
D)   has all of the above characteristics.E) C) and D)
F) A) and B)

Question 16

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return,it should set price which is equal to:

Accepted Answer

A)   marginal cost.
B)   average fixed cost.
C)   average variable cost.
D)   average total cost.E) C) and D)
F) B) and C)

Question 17

If a public utility is subject to average-cost pricing regulation,it will:

Accepted Answer

A)   earn a normal rate of return.
B)   produce the socially efficient level of output.
C)   suffer economic losses without a subsidy.
D)   earn an above-normal rate of return.E) A) and B)
F) None of the above

Question 18

Exhibit 13-1 2Q1. D)  EGQ3Q1." class="answers-bank-image d-inline" rel="preload" > Refer to Exhibit 13-1.The welfare loss due to monopoly is indicated in the diagram as area:

Accepted Answer

A)   DGE.
B)   DFH.
C)   DFQ2Q1.
D)   EGQ3Q1.E) A) and B)
F) A) and C)

Question 19

Profit-maximizing monopolists choose a level of output such that:

Accepted Answer

A)   average total cost is minimized.
B)   price equals marginal revenue but exceeds average variable cost.
C)   price equals marginal cost but exceeds average variable cost.
D)   marginal revenue equals marginal cost.E) All of the above
F) B) and C)

Question 20

Which of the following best explains why a monopolist's marginal revenue is less than the sale price?

Accepted Answer

A)   To sell more units, a monopolist must increase the price on all units sold.
B)   As a monopolist expands output, its average total cost declines.
C)   When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.
D)   When a monopolist reduces price in order to sell more units, it must lower the price of some units that could otherwise have been sold at a higher price.E) All of the above
F) None of the above D

Exam 13: Monopoly and Antitrust

What would be the impact if the government forced the breakup of a natural monopoly to promote greater competition in an industry?

Correct AnswerverifiedC

If a regulatory commission wishes to allow a firm to earn a normal rate of return,it should set price equal to:

Correct AnswerverifiedShow Answer

Which of the following need not be true of a monopoly?

Correct AnswerverifiedShow Answer

Monopolies will tend to produce a greater quantity and charge higher prices than perfectly competitive industries.

Correct AnswerverifiedShow Answer

Exhibit 13-4 The following diagram contains information on cost and revenue curves facing a regulated monopoly. Refer to Exhibit 13-4.Given this information,the monopoly would prefer which of the following price and output combinations?

Correct AnswerverifiedShow Answer

Exhibit 13-6 Refer to Exhibit 13-6.In single price monopoly,producer surplus is area:

Correct AnswerverifiedShow Answer

Which of the following gives consumers an incentive to reduce the consumption of a service when the cost of providing the service is the highest?

Correct AnswerverifiedShow Answer

Many communities have granted monopoly rights to cable companies.This is an example of a monopoly created through:

Correct AnswerverifiedA

Which of the following is a problem with government regulation of natural monopolies?

Correct AnswerverifiedShow Answer

Which of the following is false?

Correct AnswerverifiedShow Answer

Which of the following accurately describes a major difference between a monopolist and firms in perfectly competitive markets?

Correct AnswerverifiedShow Answer

Which piece of legislation forbids most forms of price discrimination?

Correct AnswerverifiedShow Answer

Why does the government allow some markets to be monopolized by granting patents?

Correct AnswerverifiedShow Answer

Which of the following would likely be an example of a monopolistic industry?

Correct AnswerverifiedShow Answer

A monopoly industry:

Correct AnswerverifiedShow Answer

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return,it should set price which is equal to:

Correct AnswerverifiedShow Answer

If a public utility is subject to average-cost pricing regulation,it will:

Correct AnswerverifiedShow Answer

Exhibit 13-1 Refer to Exhibit 13-1.The welfare loss due to monopoly is indicated in the diagram as area:

Correct AnswerverifiedShow Answer

Profit-maximizing monopolists choose a level of output such that:

Correct AnswerverifiedShow Answer

Which of the following best explains why a monopolist's marginal revenue is less than the sale price?

Correct AnswerverifiedD

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C

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A

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D