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47)
A merger between U.S. Steel and General Motors would be an example of a
47)
A)
horizontal merger.
B)
vertical merger.
C)
conglomerate merger.
D)
conspiracy in restraint of trade.
Figure 9-3
Figure 9-3 shows the demand and cost curves for a monopolist.
48)
Refer to Figure 9-3. What is the monopoly's profit?
48)
A)
$4,200
B)
$10,400
C)
$12,600
D)
$2,700
49)
A United States government patent lasts
49)
A)
forever.
B)
7 years.
C)
20 years.
D)
50 years.
50)
Microsoft thought that the initial Xbox was sufficiently different from PS2 that it could charge a
significantly higher price for the Xbox than Sony could charge for PS2. Which of the following
statements is implied by Microsoft's product positioning?
50)
A)
Microsoft believed that the PS2 was a distant substitute for the Xbox and therefore the
demand curve for Xbox would be elastic. Charging a higher price would enable it to increase
its profits.
B)
Microsoft recognized that the PS2 was a substitute for the Xbox but believed that the
Microsoft name would be sufficient to draw customers away from the PS2 and that customers
would be willing to pay a premium for Microsoft's product.
C)
Microsoft believed that it had differentiated the Xbox sufficiently to insulate it from
competition. Consequently, it would be able to charge a higher price and increase its profits.
D)
Microsoft believed that the PS2 would soon be phased out by Sony's PS3; therefore, it could
charge a high price for the Xbox because it had no close substitutes.
51)
If a monopolist's marginal revenue is $35 a unit and its marginal cost is $25, then
51)
A)
to maximize profit the firm should continue to produce the output it is producing.
B)
to maximize profit the firm should decrease output.
C)
to maximize profit the firm should increase output.
D)
not enough information is given to say what the firm should do to maximize profit.
52)
The size of a deadweight loss in a market is reduced by
52)
A)
the market price being close to marginal cost.
B)
government legislating a ceiling price.
C)
creative destruction.
D)
government legislating a price floor.
Figure 9-4
Figure 9-4 shows the demand and cost curves for a monopolist.
53)
Refer to Figure 9-4. What is the economically efficient output level?
53)
A)
600 units
B)
800 units
C)
940 units
D)
1160 units
Table 9-2
Price per dose Quantity
Demanded
(Dose)
Total Cost of
Production
(Dollars)
$80 0$80
72 182
64 288
56 3100
48 4124
40 5164
32 6208
24 7268
16 8340
Shakti Inc. has been granted a patent for its toothache balm. Table 9-2 shows the demand and the total cost schedule for the
firm.
54)
Refer to Table 9-2. What is the amount of the deadweight loss generated by Shakti when it
produces the monopoly output?
54)
A)
$124
B)
$42
C)
$24
D)
$36
Figure 9-2
Figure 9-2 above shows the demand and cost curves facing a monopolist.
55)
Refer to Figure 9-2. What happens to the monopolist represented in the diagram in the long run?
55)
A)
It will raise its price until it can break even.
B)
It will be forced out of business by more efficient producers.
C)
The government will subsidize the monopoly to enable it to break even.
D)
If the cost and demand curves remain the same it will exit the market.
Figure 9-8
In 2006 the California government changed its regulatory policy to allow competition into the cable television market. Figure
9-8 shows the cable television market in California.
56)
Refer to Figure 9-8. Following the policy change, the subscription price falls from PM to Pc. What
is the increase in consumer surplus as a result of this change?
56)
A)
the area B+C+D
B)
the area B+C
C)
the area A+B+C
D)
the area D+F
57)
Natural monopolies in the United States are generally regulated by
57)
A)
local or state regulatory commissions.
B)
the Department of Justice.
C)
the Federal Trade Commission.
D)
the Department of Commerce.
Figure 9-3
Figure 9-3 shows the demand and cost curves for a monopolist.
58)
Refer to Figure 9-3. What is the price charged for the profit-maximizing output level?
58)
A)
$27
B)
$13
C)
$34
D)
$21
59)
If a monopolist's price is $50 a unit and its marginal cost is $25 then
59)
A)
to maximize profit the firm should decrease output.
B)
to maximize profit the firm should continue to produce the output it is producing.
C)
to maximize profit the firm should increase output.
D)
not enough information is given to say what the firm should do to maximize profit.
Figure 9-1
Figure 9-1 above shows the demand and cost curves facing a monopolist.
60)
Refer to Figure 9-1. If the firm's average total cost curve is ATC3 the firm will
60)
A)
break even.
B)
face competition.
C)
make a profit.
D)
suffer a loss.
61)
The demand curve for a monopoly firm's product is
61)
A)
more elastic than the market demand for the product.
B)
undefined.
C)
more inelastic than the market demand for the product.
D)
the market demand for the product.
Figure 9-7
Figure 9-7 shows the cost and demand curves for the Erickson Power Company.
62)
Refer to Figure 9-7. Erickson Power is a natural monopoly because
62)
A)
of its declining marginal revenue as output rises.
B)
its marginal cost is less than long-run average cost as it increases output.
C)
of its declining long-run average total cost as output rises.
D)
it is a power company and all power companies are natural monopolies.
63)
A market economy benefits from market power
63)
A)
if the majority of the population are entrepreneurs.
B)
under no circumstances.
C)
if firms with market power do research and development with the profits earned.
D)
if market power gets so bad the government creates public enterprises.
64)
An example of a monopoly based on control of a key resource is
64)
A)
Major League Baseball.
B)
Microsoft's Windows operating system.
C)
The U.S. Food and Drug Administration.
D)
the Paul Ecke Ranch monopoly on poinsettias.
65)
A possible advantage of a horizontal merger for the economy is that
65)
A)
the degree of competition in the industry will be intensified.
B)
the merged firm might reap economies of scale which could translate into lower prices.
C)
the government stands to collect more corporate income tax revenue.
D)
the merging firms could avoid losses.
Figure 9-3
Figure 9-3 shows the demand and cost curves for a monopolist.
66)
Refer to Figure 9-3. What is the monopoly's total revenue?
66)
A)
$20,400
B)
$19,740
C)
$7,800
D)
$21,600
Figure 9-7
Figure 9-7 shows the cost and demand curves for the Erickson Power Company.
67)
Refer to Figure 9-7. The profit-maximizing price is
67)
A)
P1.
B)
P2.
C)
P3.
D)
P4.
68)
Economic efficiency requires that a natural monopoly's price be
68)
A)
equal to average total cost (ATC) where the ATC curve intersects the demand curve.
B)
equal to average variable cost (AVC) where the AVC curve intersects the demand curve.
C)
equal to marginal cost (MC) where the MC curve intersects the demand curve.
D)
equal to the lowest price the firm can charge and still make a normal profit.
69)
A local electricity-generating company has a monopoly that is protected by an entry barrier that
takes the form of
69)
A)
network externalities.
B)
control of a key raw material.
C)
economies of scale.
D)
a perfectly inelastic demand curve.
Table 9-1
Price per unit
Quantity
demanded
(Units)
Total cost of
production
$200 1$200
180 2300
160 3350
140 4360
120 5375
100 6395
80 7425
A monopoly producer of a foreign language translation software package faces the demand and cost structure given in Table
9-1.
70)
Refer to Table 9-1. What is the amount of the firm's profit?
70)
A)
$225
B)
$130
C)
$200
D)
$205
71)
Because a monopoly's demand curve is the same as the market demand curve for its product,
71)
A)
the monopoly is a price taker.
B)
the monopoly must lower its price to sell more of its product.
C)
the monopoly's average total cost always falls as it increases its output.
D)
the monopoly's marginal revenue equals its price.
Table 9-2
Price per dose Quantity
Demanded
(Dose)
Total Cost of
Production
(Dollars)
$80 0$80
72 182
64 288
56 3100
48 4124
40 5164
32 6208
24 7268
16 8340
Shakti Inc. has been granted a patent for its toothache balm. Table 9-2 shows the demand and the total cost schedule for the
firm.
72)
Refer to Table 9-2. What is the economically efficient output level?
72)
A)
8 units
B)
7 units
C)
6 units
D)
5 units
Figure 9-1
Figure 9-1 above shows the demand and cost curves facing a monopolist.
73)
Refer to Figure 9-1. If the firm's average total cost curve is ATC1 the firm will
73)
A)
face competition.
B)
make a profit.
C)
break even.
D)
suffer a loss.
74)
Compared to a perfectly competitive market, a monopoly results in
74)
A)
a gain in producer surplus equal to the loss in consumer surplus.
B)
a gain in producer surplus equal to the gain in consumer surplus.
C)
a gain in producer surplus less than the loss in consumer surplus.
D)
greater economic efficiency.
Figure 9-2
Figure 9-2 above shows the demand and cost curves facing a monopolist.
75)
Refer to Figure 9-2. Suppose the monopolist represented in the diagram above produces some
output. What is the profit/loss per unit?
75)
A)
a loss of $21 per unit
B)
a profit of $30 per unit
C)
a profit of $14 per unit
D)
a loss of $7 per unit
