Econ chapter 12
Which of the following does the monopolist not have? Multiple choice question. A demand curve A marginal cost curve A marginal revenue curve A supply curve
A supply curve
With a fixed downward sloping demand curve, the pure monopolist can only increase sales by charging a ______ price. Multiple choice question. variable lower higher fixed
lower
Patents, economies of scale, and resource ownership are all assumptions of the pure ________ model.
monopolist
The strongest barriers to entry effectively block all ______. Multiple choice question. marketing efforts monopolistic situations economies of scale potential competition
potential competition
At a pure monopolist's profit-maximizing output (Qm), its _____ exceeds marginal cost, resulting in allocative inefficiency.
price
Which of the following describes what "no close substitutes" means as it relates to consumers and a pure monopoly? Multiple choice question. A consumer must either buy the monopolized product in large quantities or find another product that is different but meets similar needs. A consumer must completely reject the monopolized product. A consumer must either buy the monopolized product or do without it entirely. A consumer may choose to buy the monopolized product or purchase something quite similar.
A consumer must either buy the monopolized product or do without it entirely.
Why do costs differ between a purely competitive firm and a pure monopoly? Multiple select question. Access to different natural resources Different skill levels of labor A factor called "X-inefficiency" Economies of scale
A factor called "X-inefficiency" Economies of scale
Why might a monopolist accept a less-than-maximum per-unit profit? Multiple choice question. Additional sales more than compensate for the lower profit per unit. Maximum per-unit profit always maximizes per-unit cost as well. The maximum per-unit profit is not possible. Maximum per-unit profit is strongly tied to lower total profit.
Additional sales more than compensate for the lower profit per unit.
Monopoly yields neither productive nor _________ efficiency.
Allocative
What is the term for factors that prohibit firms from entering an industry? Multiple choice question. Barriers to business Barriers to entry Reduction of entry Lack of entry
Barriers to entry
Which of the following describes why marginal revenue is less than price for monopolists? Multiple choice question. Because the lower price of the extra unit of output also applies to all prior units of output Because total revenue is greater than price Because the lower price of the extra unit of output only applies to subsequent units of output Because marginal revenue is greater than marginal cost which is less than price
Because the lower price of the extra unit of output only applies to all prior units of output
How does a monopolist change the price of its product? Multiple choice question. It is unable to change the price of its product. By changing the quantity of the product it produces. By changing the input costs of the product it produces. By changing the quality of the product it produces.
By changing the quantity of the product it produces.
It is difficult to start up a major league sports team because existing professional teams have contracts with the best players and long-term leases on stadiums. Which barrier to entry does this illustrate? Multiple choice question. Possession of a patent Ownership of technology Control of a key resource The need for a license
Control of a key resource
What term is used to describe declining average total costs with added firm size? Multiple choice question. Economies of scale Diseconomies of scale Barriers to entry Pure monopoly
Economies of scale
True or false: A firm is producing 24 units of output. At the 24th unit of output, marginal revenue is $5, and marginal cost is $4; at the 25th unit of output, marginal revenue is $4.50, and marginal cost is $4.50; at the 26th unit of output, marginal revenue is $4, and marginal cost is $5. This firm made the correct choice by producing only 24 units of output and then stopping. True false question. True False
False
True or false: Price discrimination is not practiced very often in the US economy. True false question. True False
False
Which of the following two terms are synonymous in a pure monopoly? Multiple choice question. Firm and industry Firm and partnership Corporation and sole proprietorship Industry and economy
Firm and industry
How does a monopoly generally transfer income? Multiple choice question. From the owners of the monopoly to consumers From consumers to the owners of the monopoly From competitive firms to the owners of the monopoly From the owners of the monopoly to the government
From consumers to the owners of the monopoly
______ create(s) legal barriers to entry. Multiple choice question. Firms The market Government Competitors
Government
Which of the following are entry barriers created by monopolists? Multiple select question. Increased advertising Collaboration with government Imposition of tariffs and quotas Price reductions
Increased advertising Price reductions
What are the two legal barriers to entry created by the government? Multiple select question. Licenses Patents Unions Marginal cost
Licenses Patents
How do economies of scale affect long-run average total costs for a firm? Multiple choice question. Not enough information is provided to determine the answer. Long-run average total costs rise over a wide range of output. Long-run average total costs remain the same over a wide range of output. Long-run average total costs decline over a wide range of output.
Long-run average total costs decline over a wide range of output.
If producing is preferable to shutting down, a profit-seeking monopolist will produce up to the output at which _______. Multiple choice question. P = ATC P = MC MR = MC MR > MC
MR=MC
Which of the following can cause X-inefficiency? Multiple select question. Maintaining a poorly motivated work force Employing highly effective supervision Avoiding business risk Hiring incompetent relatives
Maintaining a poorly motivated work force Avoiding business risk Hiring incompetent relatives
Which of the following are conditions necessary for price discrimination? Multiple select question. Market segregation No resale Homogeneous market Advertising Monopoly power
Market segregation No resale Monopoly power
Which of the following can be a cause of extensive economies of scale? Multiple choice question. Barriers to entry Creative destruction Modern technology Reduced production inputs
Modern technology
Which of the following are characteristics of public utilities? Multiple select question. Low barriers to entry Monopolies or near monopolies Government has little control over price Government owned or regulated
Monopolies or near monopolies Government owned or regulated
Which are reasons that costs differ between a purely competitive firm and a pure monopoly? Multiple select question. Access to different natural resources Different skill levels of labor Monopoly-preserving expenditures The "very long run" perspective
Monopoly-preserving expenditures The "very long run" perspective
Which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without it entirely? Multiple choice question. Charges a price greater than MC Decreasing marginal revenues No close substitutes Blocked entry
No close substitutes
If the objective of government is to achieve allocative efficiency, what kind of price should government establish for the monopolist? Multiple choice question. One that is equal to its marginal cost. One that is fair to all consumers. One that is below its marginal cost. One that is above its marginal cost.
One that is equal to its marginal cost.
Which of the following are the main characteristics of a pure monopoly? Multiple select question. Presence of a single seller Availability of multiple substitutes of its products Blocked entry for other firms Unavailability of close substitutes for its products Ease of entry for other firms Control over the price Presence of at least two sellers
Presence of a single seller Blocked entry for other firms Unavailability of close substitutes for its products Control over the price
A firm's manager is given the following information: To sell 4 units of output, a price of $132 must be charged; this level of output reflects marginal revenue of $102 and marginal costs of $60. If the firm wants to sell 5 units of output, a price of $122 must be charged; this reflects marginal revenue of $82 and marginal costs of $70. To sell 6 units of output, a price of $112 must be charged; at this level of output, marginal revenue will be $62 and marginal costs $80. What should the manager do? Multiple choice question. Produce an amount less than 4 units. Produce 4 units of output and charge $132. Produce 6 units of output and charge $112. Produce an amount greater than 6 units. Produce 5 units of output and charge $122.
Produce 5 units of output and charge $122.
Which of the following are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing? Multiple select question. Production quotas Public subsidies Tariffs Price discrimination
Public subsidies Price discrimination
Which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes? Multiple choice question. Price taker Deregulated monopoly Pure monopoly Oligopoly
Pure monopoly
Which of the following add nothing to the firm's output, but increase the firm's costs? Multiple choice question. Economies of scale Technological advances Rent-seeking expenditures Network effects
Rent-seeking expenditures
What leads to most patentable inventions and products? Multiple choice question. Financial expertise Marketing Research and development New technology
Research and development
Why does an inventor need to have her or his invention protected from rivals? Multiple choice question. Rivals will use the invention without having shared in the effort and expense of developing it. Rivals will not know the direction they should take their research when developing a competitive product. Rivals won't use the invention if it is not protected. Without protection, rivals may not see the value of the invention.
Rivals will use the invention without having shared in the effort and expense of developing it.
What is the term used to refer to a product's ability to satisfy a large number of consumers at the same time? Multiple choice question. Conspicuous consumption Rival consumption Aggregate consumption Simultaneous consumption
Simultaneous consumption
Which of the following are assumptions made in the model of pure monopoly? Multiple select question. The firm is a single-price monopolist and charges the same price for all units of output. The firm is a multi-price monopolist and charges different prices for all units of output. The government regulates the firm. No unit of government regulates the firm. Patents, economies of scale, and resource ownership secure the firm's monopoly.
The firm is a single-price monopolist and charges the same price for all units of output. No unit of government regulates the firm. Patents, economies of scale, and resource ownership secure the firm's monopoly.
If a firm is found guilty of achieving a monopoly through anticompetitive actions, then which of the following may occur? Multiple select question. The firm may be required to testify before Congress. The firm may be forced into filing for bankruptcy. The firm may be expressly prohibited from engaging in certain business activities. The firm may be broken into two or more competing firms.
The firm may be expressly prohibited from engaging in certain business activities. The firm may be broken into two or more competing firms.
Which of the following are reasons that a monopolist is considered a price maker? Multiple select question. The monopolist controls the total quantity supplied. The monopolist controls marketing. The monopolist controls demand. The monopolist exerts control over the price.
The monopolist controls the total quantity supplied. The monopolist exerts control over the price.
Which of the following explains why a pure monopolist is able to maintain an economic profit in the long run? Multiple choice question. There are no new entrants to increase supply, drive up price, and eliminate profit. There are no new entrants to decrease supply, drive up price, and eliminate profit. There are no new entrants to increase supply, drive down price, and eliminate profit. There are no new entrants to decrease supply, drive down price, and eliminate profit.
There are no new entrants to increase supply, drive down price, and eliminate profit.
How much will a profit-seeking monopolist produce if producing is preferable to shutting down? Multiple choice question. Up to the output at which marginal revenue is less than marginal cost Up to the output at which marginal revenue equals marginal cost As much as possible, since more production means more revenue Up to the output at which marginal revenue exceeds marginal cost
Up to the output at which marginal revenue equals marginal cost
Hiring incompetent relatives and poor supervision of workers can result in ______. Multiple choice question. rent-seeking expenditures allocative efficiency simultaneous consumption X-inefficiency
X-inefficiency
When a firm produces a specific output level at a higher cost than the necessary cost for that level of output, it is called ______. Multiple choice question. X-inefficiency rent-seeking expenditures simultaneous consumption economies of scale
X-inefficiency
A monopolist will never choose a price-quantity combination where price reductions cause: Multiple choice question. marginal revenue to rise a decrease in marginal revenue an increase in total revenue a decrease in total revenue
a decrease in total revenue
The exclusive right of an inventor to use, or to allow another to use, her or his invention is called: Multiple choice question. a patent a creative license a trademark a copyright
a patent
If the objective of government is to achieve _______ efficiency, it should establish a legal price for the monopolist that is equal to its marginal cost.
allocative
The government broke up Standard Oil in 1911 due to its breach of ______ (one word) laws.
antitrust
A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the ______ _______ cost curve. (Enter only one word per blank.)
average total
The monopolist's level of output is not at the minimum point of ______, meaning it will not be productively efficient. Multiple choice question. average profit average variable cost average total cost marginal revenue
average total cost
Simultaneous ________ is a product's ability to satisfy a large number of consumers at the same time.
consumption
______ of essential property is a barrier to entry into an industry. Multiple choice question. Control Mergers Sale Deterioration
control
Marginal revenue is less than price at every unit of output because the monopolist Multiple choice question. could have sold these prior units at a lower price if it had not produced and sold the extra output. could have sold these prior units at a price higher than demand could have sold these prior units at a higher price if it had not produced and sold the extra output. could have sold these prior units at a price equal to marginal cost
could have sold these prior units at a higher price if it had not produced and sold the extra output.
Economies of scale refer to ______ average total costs with added firm size. Multiple choice question. declining constant marginal rising
declining
The practice of charging different prices to different buyers for a specific product is known as price _______.
discrimination
Price makers are firms with: Multiple choice question. vertical demand curves upward-sloping demand curves downward-sloping demand curves horizontal demand curves
downward-sloping demand curves
A firm's long-run average total costs may decline over a wide range of output due to _______ of scale.
economies
Modern technology can be a cause of extensive ______. Multiple choice question. capital depreciation economies of scale constant returns to scale returns to scale
economies of scale
The demand curve intersects the natural monopolist's long-run average total cost curve at a point where long-run average total costs are still falling, due to ______. Multiple choice question. the minimum efficient scale economies of scale limited capital diseconomies of scale
economies of scale
When productive efficiency and allocative efficiency are not achieved in a market, it is called a(n) ______. Multiple choice question. efficiency loss revenue loss productivity loss bad business
efficiency loss
The monopolist wants a price-quantity combination to fall in the _____ section of its demand curve, where a lower price means _____ total revenue. Multiple choice question. inelastic; greater lower; greater mid; greater elastic; greater unit-elastic; greater
elastic; greater
With a natural monopoly the demand curve intersects the long-run average total cost curve where the long-run average total cost curve is still _______
falling
X-inefficiency occurs when a firm operates at a cost that is ________ (higher/lower) than the lowest cost for a particular level of output.
higher
As an example of price discrimination, airlines charge higher fares to business travelers whose demand for travel is ________ and offer lower, more restricted fares to vacationers and others with more _________ demand.
inelastic; elastic
Government creates__________ barriers to entry.
legal
When a monopolist charges a higher price than a purely competitive firm would, the monopolist essentially ______. Multiple choice question. robs the government of tax income mitigates the effects of income equality eliminates the need for simultaneous consumption levies a "private tax" on consumers
levies a "private tax" on consumers
Monopolists use economies of scale to block the entry of new firms into an industry by ______. Multiple choice question. lowering prices so that another firm cannot compete developing innovative technologies that make it difficult for another firm to compete producing a surplus of goods and flooding the market raising prices because a monopolist's cost per unit is very high
lowering prices so that another firm cannot compete
Firms with downward-sloping product demand curves are called price_______
makers
The change in total revenue associated with a one-unit change in output is called _______ revenue.
marginal
A(n) ______ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit. Multiple choice question. perfectly competitive firm monopoly monopolistically competitive firm oligopolistic firm
monopoly
Network effects may drive a market toward _______ , because consumers tend to choose standard products that everyone else is using.
monopoly
Slashing prices is an example of an entry barrier created by a(n) ___________
monopoly
The main characteristics of a pure _______ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.
monopoly
A ___________ ____________may occur when only a single firm might be able to achieve the lowest long-run average total cost. (Enter one word in each blank.)
natural monopoly
What may occur when only a single firm can achieve the economies of scale necessary to compete in an industry? Multiple choice question. Oligopoly Purely competitive firm Natural monopoly
natural monopoly
________effects exist if the value of a product to each user increases as the total number of users increase.
network
In general, as shown in the figure, a fair return price will lead to ______ and a socially optimal price will lead to ______. Multiple choice question. normal profit; economic profit economic profit; normal loss economic loss; normal profit normal profit; economic loss
normal profit; economic loss
A ____________ (one word) is the exclusive right of an inventor to use, or allow another to use, her or his invention.
patent
At the profit-maximizing output (Qm), a monopolist's ______ is higher than marginal cost; therefore, a monopolist has allocative inefficiency. Multiple choice question. price (Pm) average variable cost (AVC) average total cost (ATC) marginal revenue (MR)
price (Pm)
Market segregation must exist in order for a monopolist to ______. Multiple choice question. price discriminate prevent entry of new firms be a natural monopoly improve technologies
price discriminate
Baseball ticket sellers charge a different price for adults and children. Ballpark concession stands charge the same prices for products sold to any customer. The baseball ticket sellers are providing a successful example of Multiple choice question. marketing. price discrimination. near-monopoly. the law of one price.
price discrimination.
A regulated monopoly is likely to suffer losses when ______. Multiple select question. it produces where marginal revenue equals marginal cost price is set to marginal cost (P = MC) price is set to achieve the most efficient allocation of resources price is set to achieve productive efficiency
price is set to marginal cost (P = MC) price is set to achieve the most efficient allocation of resources
Monopolists use economies of scale to block the entry of new firms into an industry by reducing ______ so that other firms cannot compete. Multiple choice question. average variable costs barriers to entry prices marginal costs
prices
When ________ efficiency and allocative efficiency are not achieved in a market, it is known as an efficiency loss.
productive
_________utilities are government owned or regulated.
public
What is it called when a firm spends significant money to maintain a monopoly through government legislation? Multiple choice question. technological advance rent-seeking expenditures X-inefficiency network effects
rent-seeking expenditures
Two solutions to the economic losses caused by socially optimal pricing are providing public __________ and condoning price discrimination.
subsidies
A pure monopoly exists when a single firm is the sole producer of a product for which there are no close ___. Multiple choice question. complements price takers substitutes patents
substitutes
The monopolist seeks maximum _______ profit, not maximum unit profit.
total
A natural monopoly's economies of scale refers to one firm's ability to achieve the lowest long-run average total cost, also known as Multiple choice question. the maximum efficient scale at a low level of output. the maximum efficient scale at a high level of output. the minimum efficient scale at a low level of output. the minimum efficient scale at a high level of output.
the minimum efficient scale at a high level of output.
A monopolist does not have a supply curve because: Multiple select question. there is no single, unique price associated with each level of output it does not equate marginal revenue with marginal cost it does not produce at the minimum average total cost it does not equate price with marginal cost
there is no single, unique price associated with each level of output it does not equate price with marginal cost
Marginal revenue is the change in ______ revenue associated with a single-unit change in output. Multiple choice question. incremental hypothetical average total
total
