Question 1

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

Accepted Answer

A)   A soybean farmer is the first in her county to use a new brand of fertilizer.
B)   Microsoft obtains a copyright for its Windows operating system.
C)   A pharmaceutical company obtains a patent for a new medication to treat migraine headaches.
D)   A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.E) All of the above
F) A) and D)

Question 2

Microsoft's government­granted exclusive right to make and sell the Windows operating system is called a

Accepted Answer

The answer of Microsoft's government­granted exclusive right to make and...

Question 3

Figure 15-17 
-Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?

Accepted Answer

A)   ABE
B)   BCFE
C)   EFG
D)   ACGE) B) and C)
F) A) and B)

Question 4

Figure 15-22 
-Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much deadweight loss results?

Accepted Answer

The answer of Figure 15-22 
-Refer to Figure 15-22. If...

Question 5

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC)  in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. If Black Box Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate?

Accepted Answer

A)   $500,000
B)   $600,000
C)   $850,000
D)   $925,000E) A) and B)
F) A) and C)

Question 6

Perfect price discrimination

Accepted Answer

A)   increases profits to the firm.
B)   increases total surplus.
C)   decreases consumer surplus.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 7

Antitrust laws

Accepted Answer

A)   prevent firms from maximizing profits.
B)   allow the government to prevent mergers, even ones that would benefit consumers.
C)   require the government to measure both the benefits and costs of a potential merger.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 8

Marginal revenue can become negative for

Accepted Answer

A)   both competitive and monopoly firms.
B)   competitive firms but not for monopoly firms.
C)   monopoly firms but not for competitive firms.
D)   neither competitive nor monopoly firms.E) C) and D)
F) B) and C)

Question 9

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

Accepted Answer

A)   earn zero profits.
B)   earn positive profits, causing other firms to enter the industry.
C)   earn negative profits, causing the firm to exit the industry.
D)   minimize costs in order to lower the price that it charges.E) A) and D)
F) A) and B)

Question 10

Monopolies are socially inefficient because the price they charge is

Accepted Answer

A)   equal to marginal revenue.
B)   above marginal cost.
C)   equal to demand.
D)   above demand.E) A) and B)
F) B) and C)

Question 11

Table 15-21
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is
able to engage in perfect price discrimination.
 
-Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the quantity that maximizes economic profit?

Accepted Answer

A)   5 ties
B)   6 ties
C)   7 ties
D)   8 tiesE) All of the above
F) A) and B)

Question 12

Which of the following statements is correct?

Accepted Answer

A)   The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist.
B)   The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal.
C)   The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping.
D)   The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist.E) A) and D)
F) A) and C)

Question 13

Figure 15-18 
-Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

Accepted Answer

A)   $0.
B)   $1,000.
C)   $2,000.
D)   $4,000.E) A) and B)
F) None of the above

Question 14

Reduced competition through merging of companies will raise social welfare

Accepted Answer

A)   if the social cost from the synergies exceeds the benefit of increased market power.
B)   if the benefit from the synergies exceeds the social cost of increased market power.
C)   always.
D)   never.E) B) and D)
F) A) and C)

Question 15

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

Accepted Answer

A)   always remains a competitive market.
B)   always remains a monopolistic market.
C)   switches from competitive to monopolistic once the firm's patent runs out.
D)   switches from monopolistic to competitive once the firm's patent runs out.E) None of the above
F) All of the above

Question 16

Table 15-9
Consider the following demand and cost information for a monopoly.
 
-Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn?

Accepted Answer

A)   $8
B)   $10
C)   $12
D)   $14E) C) and D)
F) B) and D)

Question 17

Figure 15-25 
-Refer to Figure 15-25. If this firm profit maximizes, which letter represents the quantity it will produce?

Accepted Answer

The answer of Figure 15-25 
-Refer to Figure 15-25. If...

Question 18

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Accepted Answer

A)   demand effect and the supply effect.
B)   competition effect and the cost effect.
C)   competitive effect and the monopoly effect.
D)   output effect and the price effect.E) All of the above
F) C) and D)

Question 19

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC)  in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. If Black Box Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)   price = $20; profit = $400,000
B)   price = $20; profit = $330,000
C)   price = $150; profit = $450,000
D)   price = $150; profit = $600,000E) All of the above
F) A) and B)

Question 20

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Accepted Answer

The defining characteristic of...

Exam 15: Monopoly

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

Correct Answer
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Microsoft's governmentgranted exclusive right to make and sell the Windows operating system is called a

Correct Answer
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Figure 15-17 -Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Perfect price discrimination

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When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Correct Answer
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Antitrust laws

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What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Correct Answer
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The defining characteristic of...
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Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn?

Correct Answer
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Reduced competition through merging of companies will raise social welfare

Correct Answer
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Monopolies are socially inefficient because the price they charge is

Correct Answer
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If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

Correct Answer
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Which of the following is not an example of a barrier to entry?

Correct Answer
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Figure 15-22 -Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much deadweight loss results?

Correct Answer
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Marginal revenue can become negative for

Correct Answer
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Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

Correct Answer
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Figure 15-25 -Refer to Figure 15-25. If this firm profit maximizes, which letter represents the quantity it will produce?

Correct Answer
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Exam 15: Monopoly

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

Correct AnswerverifiedShow Answer

Microsoft's government­granted exclusive right to make and sell the Windows operating system is called a

Correct AnswerverifiedShow Answer

Figure 15-17 -Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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Perfect price discrimination

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When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

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Antitrust laws

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Correct AnswerverifiedShow Answer

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Correct AnswerverifiedThe defining characteristic of...View AnswerShow Answer

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Reduced competition through merging of companies will raise social welfare

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Monopolies are socially inefficient because the price they charge is

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Correct AnswerverifiedShow Answer

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

Correct AnswerverifiedShow Answer

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

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Figure 15-22 -Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much deadweight loss results?

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Marginal revenue can become negative for

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Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

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Figure 15-25 -Refer to Figure 15-25. If this firm profit maximizes, which letter represents the quantity it will produce?

Correct AnswerverifiedShow Answer

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Microsoft's governmentgranted exclusive right to make and sell the Windows operating system is called a

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The defining characteristic of...
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