Chapter 11
When economists talk about a barrier to entry, they are referring to...
A factor that makes it difficult for potential competitors to enter a market.
Which one of the following is the best description of a monopolist?
A firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry
Which of the following terms best fit the definition of a monopoly?
A local cable company that has been granted the only license to sell cable in a city by the town council
A monopoly is best defined as...
A single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry.
Oligopolistic agreements on price tend to be unstable because...
Although the monopoly price maximizes the joint profits of the firms, a secret price cut by any individual firm will increase the profits of that firm; hence, collusive agreements tend to break down.
Which of the following is not a barrier that limits the entry of potential competitors into a market?
An elastic demand for a product.
True of False ? Oligopolistic firms have an incentive to collude to increase profits. Oligopolistic firms have an incentive to cheat on collusive agreements to increase profits.
Both are true.
The oil industry is dominated by a cartel known as OPEC, and the cocaine industry is dominated by the Columbian cocaine cartel. If these cartels are being successful...
Both goods have higher prices than if the cartels did not exist, and both have lower levels of total output.
The price charged by oligopolists will...
Generally fall between the monopoly and competitive market equilibrium prices.
Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is in a competitive price-searcher market?
In the long run, a competitive price searcher will earn zero economic profit because of low entry barriers, while a monopolist may earn positive economic profits in the long run.
When natural monopoly is present in a industry, the per-unit cost of production will be...
Lowest when the single firm generate the entire output of the industry.
When significant economies of scale are present in the production process, a firm will tend naturally toward monopoly because....
One firm will be able to produce the entire market output at a lower cost than several smaller firms.
How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached fi the market was competitive?
Output of the monopolist will be smaller and price higher.
When firms use resources in an attempt to secure and maintain grants of market protection from the government, it is called...
Rent-seeking.
To increase joint profits, a cartel will attempt to...
Restrict output in order to increase the market price of the good produced.
A monopolist will maximize profits by...
Selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost.
Assuming that firms maximize profit, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
The output of the monopolist will be too low and its price too high.
