1. Which of the following is not a characteristic of a monopoly?
a.
barriers to entry
b.
one seller
c.
one buyer
d.
a product without close substitutes
2. Which of the following is not a characteristic of a monopoly?
a.
the seller has market power
b.
one seller
c.
free entry and exit
d.
a product without close substitutes
3. Which of the following is a characteristic of a monopoly?
a.
low fixed costs as a portion of total costs
b.
free entry and exit
c.
barriers to entry
d.
declining marginal cost
4. Which of the following is a characteristic of a monopoly?
a.
rising average total costs
b.
one buyer
c.
rising fixed costs
d.
a product without close substitutes
5. The fundamental source of monopoly power is
a.
b.
c.
d.
6. The fundamental source of monopoly power is
a.
many buyers and sellers.
b.
low fixed costs.
c.
rising average total costs.
d.
barriers to entry.
7. A monopoly market is characterized by
a.
many buyers and sellers.
b.
“natural” products.
c.
barriers to entry.
d.
a Nash equilibrium.
8. A benefit of a monopoly is
a.
lower prices.
b.
a wide variety of similar products.
c.
decreasing long-run average total costs.
d.
greater creativity by authors who can copyright their novels.
9. A benefit of a monopoly is
a.
efficient production.
b.
decreasing long-run marginal costs.
c.
profit that can be invested in research and development.
d.
All of the above are correct.
10. Which of the following are necessary characteristics of a monopoly?
(i)
The firm is the sole seller of its product.
(ii)
The firm’s product does not have close substitutes.
(iii)
The firm generates a large economic profit.
(iv)
The firm is located in a small geographic market.
a.
(i) and (ii) only
b.
(i) and (iii) only
c.
(i), (ii), and (iii) only
d.
(i), (ii), (iii), and (iv)
11. The simplest way for a monopoly to arise is for a single firm to
a.
decrease its price below its competitors’ prices.
b.
decrease production to increase demand for its product.
c.
make pricing decisions jointly with other firms.
d.
own a key resource.
12. Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large
diamond company, has
a.
less incentive to advertise than it would otherwise have.
b.
less market power than it would otherwise have.
c.
more control over the price of diamonds than it would otherwise have.
d.
higher profits than it would otherwise have.
13. Suppose ABC Aluminum Inc. owns 80% of the world’s bauxite, a mineral used in the production of aluminum. Which
of the following reasons describes the fundamental barrier to entry for the aluminum industry?
a.
monopoly resources
b.
government regulation
c.
the production process
d.
Both a and b are correct.
14. Exclusive ownership of a key resource
a.
is the most common cause of a monopoly.
b.
is a potential but rare cause of a monopoly.
c.
explains the monopoly ownership of the US Postal Service.
d.
explains why a single firm distributes water to a community.
15. Which of the following is not a reason for the existence of a monopoly?
a.
sole ownership of a key resource
b.
patents
c.
copyrights
d.
diseconomies of scale
CUSTOM ID:
015.15.1 – MC – MANK08
16. Which of the following is not a reason for the existence of a monopoly?
a.
patents
b.
marginal-cost pricing
c.
economies of scale
d.
trademarks
LEARNING OBJECTIVES:
CUSTOM ID:
016.15.1 – MC – MANK08
17. Which of the following would be most likely to have monopoly power?
a.
a long-distance telephone service provider
b.
a local cable TV provider
c.
a large department store
d.
a gas station
LEARNING OBJECTIVES:
CUSTOM ID:
017.15.1 – MC – MANK08
18. Which of the following would be most likely to have monopoly power?
a.
a national florist
b.
an online bookstore
c.
a local restaurant
d.
a local electrical cooperative
LEARNING OBJECTIVES:
CUSTOM ID:
018.15.1 – MC – MANK08
19. Which of the following would be most likely to have monopoly power?
a.
an online bookstore
b.
a municipal water company
c.
a local restaurant
d.
a grocery store
20. A firm that is the sole seller of a product without close substitutes is
a.
perfectly competitive.
b.
monopolistically competitive.
c.
an oligopolist.
d.
a monopolist.
21. A market structure with barriers to entry is
a.
a monopoly.
b.
oligopolistically competitive.
c.
monopolistically competitive.
d.
perfectly competitive.
22. Most markets are not monopolies in the real world because
a.
firms usually face downward-sloping demand curves.
b.
supply curves slope upward.
c.
firms usually equate price with marginal cost.
d.
there are reasonable substitutes for most goods.
23. Which of the following statements is not correct?
a.
Consumers will likely benefit in the form of lower prices from buying a product made by a natural monopoly
than if the market were served by several firms.
b.
Monopolists typically charge higher prices than competitive firms.
c.
Monopolists typically produce larger quantities of output than competitive firms.
d.
Consumers may benefit from monopolies if the firms invest their higher profits into something that benefits
society such as medical research.
24. Which of the following is not an example of a barrier to entry?
a.
Mighty Mitch’s Mining Company owns a unique plot of land in Tanzania, under which lies the only large
deposit of Tanzanite in the world.
b.
A pharmaceutical company obtains a patent for a specific high blood pressure medication.
c.
A musician obtains a copyright for her original song.
d.
An entrepreneur opens a popular new restaurant.
25. Which of the following is not an example of a barrier to entry?
a.
Mighty Mitch’s Mining Company owns a unique plot of land in Tanzania, under which lies the only large
deposit of Tanzanite in the world.
b.
A college student starts a part-time tutoring business.
c.
A novelist obtains a copyright for her new book.
d.
A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.
26. Which of the following is not an example of a barrier to entry?
a.
Mighty Mitch’s Mining Company owns a unique plot of land in Tanzania, under which lies the only large
deposit of Tanzanite in the world.
b.
A chemist receives a patent for a new skin cream.
c.
An entrepreneur opens a cupcake bakery.
d.
A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.
27. Which of the following is not an example of a barrier to entry?
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.
28. Which of the following is not an example of a barrier to entry?
a.
John owns the only parcel of lakeside property with a beach that is safe for swimming. He charges admission
to neighbors who want to use the beach.
b.
Jackie owns the copyright to a popular song. She receives royalties every time a radio station plays her song.
c.
John Jr. owns the best seafood restaurant in a popular resort area. He charges high prices because the quality
of the food is so good.
d.
Caroline owns the patent for a new running shoe. She receives payments from the company who manufactures
the shoes.
29. Which of the following is an example of a barrier to entry?
a.
Tom charges a higher price than his competitors for his golf lessons.
b.
Dick charges a lower price than his competitors for his lawn-mowing services.
c.
Harry offers free concerts on Sunday afternoons as a form of advertising.
d.
Larry obtains a copyright for the new computer game that he invented.
30. Which of the following is an example of a barrier to entry?
a.
Crystal charges a higher price than her competitors for her hair-styling services.
b.
Dan charges a lower price than his competitors for his dry-walling services.
c.
Jackie offers free samples of her loose–meat sandwiches to attract new customers.
d.
Roseanne obtains a copyright for a short story that she wrote and published.
31. Which of the following is an example of a barrier to entry?
a.
Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup.
b.
Mark charges a lower price to students than to faculty for his tattoo services.
c.
Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring.
d.
John obtained a copyright for the song he wrote and recorded.
32. Which of the following is an example of a barrier to entry?
(i)
A key resource is owned by a single firm.
(ii)
The costs of production make a single producer more efficient than a large number of
producers.
(iii)
The government has given the existing monopolist the exclusive right to produce the
good.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) only
d.
(i), (ii), and (iii)
33. A fundamental source of monopoly market power arises from
a.
perfectly elastic demand.
b.
perfectly inelastic demand.
c.
barriers to entry.
d.
availability of “free” natural resources, such as water or air.
34. The fundamental cause of monopoly is
a.
incompetent management in competitive firms.
b.
the zero-profit feature of long-run equilibrium in competitive markets.
c.
advertising.
d.
barriers to entry.
35. Sizable economic profits can persist over time under monopoly if the monopolist
a.
produces that output where average total cost is at a maximum.
b.
is protected by barriers to entry.
c.
operates as a price taker rather than a price maker.
d.
earns revenues that exceed variable costs.
36. Patents, copyrights, and trademarks
a.
are examples of government-created monopolies.
b.
are examples of barriers to entry.
c.
allow their owners to charge higher prices.
d.
All of the above are correct.
37. Patents, copyrights, and trademarks
a.
are examples of government-created monopolies.
b.
allow their owners to reduce the costs of what they produce.
c.
generate more revenue for the government than they cost consumers in the form of higher prices.
d.
All of the above are correct.
38. Patent and copyright laws are major sources of
a.
natural monopolies.
b.
government-created monopolies.
c.
resource monopolies.
d.
antitrust regulation.
39. Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as
writing novels is one justification for
a.
resource monopolies.
b.
natural monopolies.
c.
government-created monopolies.
d.
breaking up monopolies into smaller firms.
40. A government-created monopoly arises when
a.
government spending in a certain industry gives rise to monopoly power.
b.
the government exercises its market control by encouraging competition among sellers.
c.
the government gives a firm the exclusive right to sell some good or service.
d.
Both a and c are correct.
41. Which of the following statements is true about patents and copyrights?
(i)
They have benefits and costs.
(ii)
They lead to higher prices.
(iii)
They enhance the ability of monopolists to earn above-average profits.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(ii) only
d.
(i), (ii), and (iii)
42. The laws governing patents and copyrights
a.
promote monopolies.
b.
are intended to serve private interests, not the public’s interest.
c.
have costs but not benefits.
d.
eliminate the need for firms to engage in research and development.
43. The laws governing patents and copyrights
a.
eliminate the need for firms to engage in research and development.
b.
are intended to serve private interests, not the public’s interest.
c.
reduce fixed costs for firms that obtain them.
d.
None of the above is correct.
44. A benefit to society of the patent and copyright laws is that those laws
a.
help to keep prices down.
b.
help to prevent a single firm from acquiring ownership of a key resource.
c.
encourage creative activity.
d.
discourage the production of inefficient products.
45. Patent and copyright laws encourage
a.
creative activity.
b.
research and development.
c.
competition among firms.
d.
Both a and b are correct.
46. Patent and copyright laws
a.
encourage creative activity.
b.
promote competition among firms.
c.
discourage creative activity.
d.
Both a and b are correct.
47. Patent and copyright laws encourage
a.
creative activity.
b.
lower prices due to decreasing average total costs.
c.
competition among firms.
d.
All of the above are correct.
48. Allowing an inventor to have the exclusive rights to market her new invention will lead to
(i)
a product that is priced higher than it would be without the exclusive rights.
(ii)
desirable behavior in the sense that inventors are encouraged to invent.
(iii)
higher profits for the inventor.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
49. Granting a pharmaceutical company a patent for a new medicine will lead to
(i)
a product that is priced higher than it would be without the exclusive rights.
(ii)
incentives for pharmaceutical companies to invest in research and development.
(iii)
higher quantities of output than without the patent.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
50. Drug companies are allowed to be monopolists in the drugs they discover in order to
a.
allow drug companies to charge a price that is equal to their marginal cost.
b.
discourage new firms from entering the drug market.
c.
encourage research.
d.
allow the government to earn patent revenue.
51. Drug companies are allowed to be monopolists in the drugs they discover in order to
a.
increase the availability of expensive but useful medications.
b.
increase the overall welfare of society through better health because drug companies continually produce
better medications.
c.
encourage research.
d.
All of the above are correct.