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1. Which characteristic led to Microsoft exercising monopoly power?

 

A.copyright protection for the Windows operating system
 

B .no close substitutes
 

C.economies of scale
 

D.government franchise

 

2. The goal of antitrust law is to:

 

A. prevent monopolies and monopoly power from arising.
 

B.protect monopolies from the competition.
 

C. make sure consumers pay high prices.
 

D. preserve allocative inefficiencies of monopolies.

 

3. Which of the following is not a characteristic of a monopoly?

 

A. The market has just one seller.
 

B.There exist significant barriers to entry.
 

C. Substitutes for the monopolist's products are available to buyers.
 

D. No close substitutes exist for the monopolist's products.

 

4. A constantly declining long-run average cost curve is a characteristic of what type of industrial structure:

 

A. Monopoly
 

B. Natural monopoly
 

C. Oligopoly
 

D. Perfect competition

 

5. An industry that has large economies of scale operates most efficiently as a(n):

 

A.competitive industry.
 

B.monopoly
 

C.regulated natural monopoly.
 

D.anarchic industry.

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019
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Related questions

1. Which of the following is a characteristic of pure monopoly?

A. close substitute products

B. barriers to entry

C. the absence of market power

D. "price taking"

 

2. An example of a monopoly would be

A. one of many U.S. wheat farmers

B. one of the few U.S. automakers

C. AT&T cell phone service

D. the local water company

 

3. In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

A. monopoly

B. oligopoly

C. only perfect competition

D. only monopolistic competition

E. both perfect competition and monopolistic competition

 

4. Which of the following is the best example of a perfectly competitive market?

A. farming

B. diamonds

C. athletic shoes

D. soft drinks

E. electricity distribution

1) Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B:

Dear Owner of Firm B,

I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it.

Sincerely,

Owner of Firm A

If this letter were sent in the year 1944, the:

a) Owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 contained exceptions for certain nationally important industries like the steel industry.

b) Owners of both Firm A and Firm B would not be guilty of anything because there were no antitrust laws in existence in 1944.

c) Owner of Firm A would be guilty of violating antitrust laws only if she met with the owner of Firm B and signed the contract, but she would not be guilty if the attempt to monopolize the market failed because the owner of Firm B never responded to the letter.

d) Owner of Firm A would be guilty of violating antitrust laws because she merely attempted to monopolize the steel industry.

e) Owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 applied only to industries made up of three or more firms.

 

2) Entry of new firms will continue in a monopolistically competitive industry until:

a) Marginal cost = 0 (zero).

b) Economic profit is negative.

c) Marginal revenue = marginal cost.

d) Economic profit equals zero.

e) Marginal Revenue = 0 (zero).

 

3) A monopolistically competitive firm usually charges less than a monopoly firm because:

a) It is part of a group of firms that have formally agreed to control the price and the output of a product.

b) Its primary goal is to reap monopoly profits by replacing competition with cooperation.

c) It has a monopoly, but potential entrants exist in the form of contestable markets.

d) It faces some degree of competition due to low barriers to entry.

e) Producing homogenous output is more expensive than producing differentiated output.

 

4) An example of price discrimination is when:

a) A single box of Froot Loops costs $3.50, but when purchased in a case of six, it costs only $3.00 per box.

b) You can purchase a new PC for half the price of a new Mac, even though they are both computers.

c) Procter & Gamble charges $9 for a bottle of Tide laundry detergent, while the store brand costs the consumer significantly less, despite being somewhat similar products.

d) Out-of-state students pay more for the same education as in-state students.

e)Movie theaters do not allow children into R-rated movies without a parent or guardian.

 

5) The Varsity, located in downtown Atlanta, is the world's largest drive-in restaurant. Located near the Georgia Tech campus, the drive-in attracts two distinct types of customers: college students and visitors to Atlanta. The owners are considering offering a student discount of $1 off their combo meal, which is regularly priced at $9. There are 5,000 students interested in purchasing a combo meal, with a maximum willingness to pay of $8. There are 5,000 visiting customers interested in purchasing the combo meal, with a maximum willingness to pay of $9. Assume that each customer, at most, will purchase a single meal and the marginal cost is $5. What will be the amount of total revenue for the Varsity if the owners offer a single price of $8 per combo meal?

a) $65,000

b) $85,000

c) $40,000

d) $80,000

e) $90,000

 

6) A competitive firm would have:

a) More elastic demand than a monopolistically competitive firm.

b) More inelastic demand than a monopolistically competitive firm.

c) A horizontal demand curve.

d) Bowed-in or bowed-out demand.

e) An upward-sloping demand curve.

 

7) It is unrealistic to regulate a natural monopoly at marginal cost pricing because:

a) The government is not allowed to regulate markets.

b) With this type of regulation, the firm will want to shut down, and that outcome is not desirable for society.

c) Firms do not need to follow regulations from the government.

d) Regulating a market causes more deadweight loss.

e) Marginal cost pricing ends up having the natural monopoly firm earn zero economic profits.

 

8) Price discrimination allows businesses to make additional profits and allows markets to work more:

a) Efficiently

b) Unfairly

c) Realistically

d) Equitably

e) Independently

 

9) Antitrust laws are designed to:

a) Increase prices.

b) Promote monopoly practices.

c) Promote awareness of government programs.

d) Promote competition.

e) Decrease output.

 

10) Barriers to entry:

a) Do not exist for monopolies.

b) Exist for perfectly competitive firms.

c) Restrict the entry of new firms into the market.

d) Always lead to profits.

e) Measure the ability of firms to set the price for a good.

Q5. Table 5.5

Total Output Total Costs

0 10

1 18

2 21

3 23

4 24

5 26

6 29

7 33

8 38

9 44

10 51

In Table 5.5, the marginal cost of the third unit is

a. 2.

b. 4.

c. 3.

d. 1.

Q6. When marginal physical product begins to decline, marginal cost begins to increase.

a. true

b. false

Q7. It is possible for a firm to have positive fixed cost and zero total cost.

a. true

b. false

Q8. Which one of the following is TRUE?

a. Marginal cost increases as marginal physical product decreases.

b. Marginal cost decreases as marginal product decreases.

c. Total cost is the difference between marginal cost and total variable cost.

d. Total cost is the sum of marginal cost plus total variable cost.

Q9. The slope of the production function becomes negative when diminishing returns set in.

a. true

b. false

Q10. Table 5.7

Q Total Variable Cost Average Variable Cost Total Cost Average Total Cost

1 10 50

2 50 90

3 40

Refer to Table 5.7. What is the firm's total fixed cost?

a. 20

b. 40

c. 10

d. 30

Q11. When there are economic profits in a perfectly competitive industry

a. firms have no incentive to exit or enter the industry.

b. firms exit the industry.

c. firms enter the industry.

d. the high barriers to entry prevent further competition.

Q12. The market structure of perfect competition is defined by hundreds of firms producing an essential product, with barriers to the entry of new firms.

a. true

b. false

Q13. A single supplier of a good or service for which there is no close substitute is referred to as a(n)

a. monopolistic competitor.

b. strategic competitor.

c. monopoly.

d. oligopoly.

Q14. For the perfectly competitive firm the selling price of its product is determined by

a. the length of time it has been in business.

b. the amount it chooses to spend on marketing.

c. the interaction of market supply and demand.

d. the number of competing firms.

Q15. A company finds that at the MR = MC output level, its total cost is $500, total variable cost is $400, and total revenue is $450. Your advice to the firm is to

a. reduce output to reduce the cost of production.

b. continue to produce, as total revenue covers total variable cost.

c. increase output to reduce the per unit cost of production.

d. shut down immediately.

Q16. For a monopolist

a. P > MR.

b. P = MC.

c. P = ATC.

d. P = MR.

Q17. The perfect competitor

a. chooses the profit-maximizing quantity.

b. chooses the profit-maximizing price.

c. chooses a quantity that will make the most efficient use of his labor and capital resources.

d. produces what he thinks can be sold, regardless of cost.

Q18. In perfect competition, the larger firms will be able to charge a higher price than the smaller firms.

a. true

b. false

Q19. For the perfectly competitive firm, price equals marginal revenue.

a. true

b. false

Q20. For a monopolist, selling more units requires

a. allowing more firms to enter the industry.

b. hiring a more productive labor force.

c. forming a cartel.

d. lowering the selling price.

Q21. Monopolistic competition means

a. monopolies from several countries compete in the global market.

b. a large number of firms producing differentiated products.

c. a large number of firms producing homogeneous products.

d. few firms producing differentiated products.

Q22. Opportunistic behavior is discouraged by the desire to have repeat transactions.

a. true

b. false

Q23. By saying that firms in an oligopoly are interdependent, we mean that

a. actions by one will prompt reactions by others.

b. if one increases its profits, all others will increase profits as well.

c. all firms sell identical products.

d. if one increases its profits, all others will lose profits.

Q24. Price leadership is a form of

a. barrier to entry.

b. tacit collusion.

c. opportunistic behavior.

d. noncooperative behavior.

Q25. A monopolistically competitive firm in the long run

a. earns positive economic profits.

b. earns negative economic profits.

c. earns zero economic profits.

d. suffers economic losses.

Q26. Monopolistically competitive firms produce a product that is homogeneous.

a. true

b. false

Q27. Which of the following is a characteristic of both perfect competition and monopolistic competition?

a. In the long run, the firm will produce the output which minimizes average total cost.

b. Firms sell a homogeneous product.

c. In the long run, the firm will earn zero economic profit.

d. The firm seeks to differentiate its product from those of its competitors.

Q28. A monopolistically competitive firm uses advertising to

a. lower its costs.

b. differentiate its product.

c. signal its competitors that it is serious about staying in business.

d. motivate its work force.

Q29. For the monopolistic competitor, which is INCORRECT?

a. The profit maximizing rate of output is where the marginal cost curve intersects the marginal revenue curve.

b. The marginal revenue curve is downward sloping and lies below the demand curve.

c. Because the firm has some control over price, its demand curve slopes downward.

d. If the firm in a monopolistically competitive industry were making economic losses, firms would enter the industry.

Q30. Which of the following is TRUE?

a. In the model of price leadership, the dominant firm consistently charges the lowest price.

b. Opportunistic behavior is discouraged by the desire to have repeat transactions.

c. The strategic dependence that characterizes oligopoly means that no firms can earn positive accounting profits.

d. Price wars are most common in perfect competition.

Q31. Antitrust legislation seeks to correct market failure by ensuring that all firms in the industry earn an economic profit.

a. true

b. false

Q32. Market failures arise when

a. people look out for their own best interests.

b. there is a gap between the social and private costs of producing or consuming a good.

c. firms look out for their own best interests.

d. society seeks to operate at a point on the production possibilities curve.

Q33. Cases prosecuted under the Sherman Antitrust Act are intended to correct market failure arising from negative externalities.

a. true

b. false

Q34.

Figure 8.2

Refer to Figure 8.2. The market equilibrium is Q1. Point Q2 represents the optimal point of production. To reach Q2,

a. consumption of the good could be taxed.

b. a subsidy could be given to consumers.

c. production of the good could be taxed.

d. the industry producing the good should operate as a cartel.

Q35. What would happen in a free market system when production of a good generates negative externalities?

a. There would be a shortage of the good.

b. The equilibrium quantity of the good would be more than the efficient amount.

c. The equilibrium quantity of the good would be less than the efficient amount.

d. There would be a surplus of the good.

Q36. If providing a service results in negative external costs, then

a. the market price is below the true opportunity cost of resources used to provide the service.

b. the market price is above the true opportunity cost of resources used to provide the service.

c. the market quantity is too low.

d. market forces will always correct the problem.

Q37. The problem of positive externalities can be addressed by having some firms exit the industry.

a. true

b. false

Q38. The first case prosecuted under the Sherman Act was the antitrust case against Microsoft.

a. true

b. false

Q39. If your marginal tax rate is always higher than your average tax rate, then the tax system is a

a. proportional tax system.

b. regressive tax system.

c. fair tax system.

d. progressive tax system.

Q40. Private goods are characterized by the principle of rival consumption.

a. true

b. false

Q41. Collective bargaining is the process by which unions and employers negotiate the conditions of employment and wages.

a. true

b. false

Q42. The marginal physical product of labor is the addition to total revenue a firm experiences when it hires one additional worker.

a. true

b. false

Q43. A firm's marginal revenue product of labor curve is also

a. its labor demand curve.

b. its total revenue line.

c. its long-run input cost function.

d. its marginal cost curve.

Q44. An increase in the selling price of a product

a. increases the supply of labor to the industry.

b. increases the productivity of labor.

c. raises the firm's demand for labor.

d. decreases the supply of labor to the industry.

Q45. If unions succeed at restricting the supply of labor in any one area of the economy, wages in that sector will increase.

a. true

b. false

Q46. The fact that the labor supply curve slopes upward indicates that

a. workers seek to work more hours when the wage rises.

b. the income effect of a wage increases outweighs the substitution effect.

c. workers seek to work more hours when the wage decreases.

d. firms want to hire more workers when the wage rises.

Q47. The upward slope of the labor supply curve suggests that the income effect of a wage increase outweighs the substitution effect.

a. true

b. false

Q48. The number of strikes occurring in U. S. firms has steadily increased over the past 25 years.

a. true

b. false

Q49. Suppose a perfectly competitive firm faces a labor market in which the going wage rate is $480 per week. If the last worker hired has a marginal physical product of 12 units of output per week, what is the selling price of the firm's output?

a. $40 per unit

b. $480 per unit

c. $240 per unit

d. $12 per unit

Q50. If workers in an industry become less productive due to low employee morale, we would expect the

a. demand for workers to decrease.

b. wages in the industry to increase.

c. supply of workers to increase.

d. demand for workers to increase.

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