Test 3
Goods that are rival but not excludable, such as fish in the ocean, qualify as which of the following? A) Natural monopolies B) Common resources C) Public goods
Common resources
The form of legal protection intended to prevent reproduction of original works is referred to as ____________ law. A) Patent B) Trademark C) Copyright D) Trade secret
Copyright
The two primary factors determining monopoly market power are the firm's A) Revenues and size of its customer base B) Demand curve and its cost structure C) Variable cost curve and its fixed cost structure D) Demand curve and level of wealth within its market
Demand curve and its cost structure.
A successful advertising campaign may allow competing monopolists to: A) Sell a greater quantity. B) Charge a higher price. C) Increase its profits. D) Do all of the above.
Do all of the above.
The slope of the demand curve for a monopoly firm is: A) Horizontal, parallel to the x-axis B) Vertical, parallel to the y-axis C) Upward sloping D) Downward sloping
Downward sloping.
The demand curve as perceived by a monopolistic competitor is ____________. A) Upward-sloping B) U-shaped C) Downward-sloping D) Flat
Downward-sloping
In a monopolistic competitive industry, firms can try to differentiate their products by: A) Creating optimal perceptions of the product. B) Choosing optimal locations from which the product is sold. C) Enhancing the intangible aspects of the product. D) Enhancing product's physical aspects and all of the above.
Enhancing product's physical aspects and all of the above.
Market failure describes a situation in which the market itself ____________ in a way that balances social costs and benefits. A) Remains outside the transaction B) Incurs the costs outside the production process C) Fails to allocate resources efficiently D) Avoids externalities
Fails to allocate resources efficiently
If a perfectly competitive firm raises its price, the quantity demanded of its product ____________. A) Diminishes temporarily in the short run B) Falls to zero C) Stays the same D) Falls below marginal cost
Falls to zero
The demand curve as perceived by a perfectly competitive firm is ____________. A) Flat B) Downward sloping C) Upward sloping D) Hump shaped
Flat
An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ____________. A) Tax evader B) Excludable C) Free rider D) Nonexcludable
Free rider
People who do not want to pay for goods and who cannot be excluded from the market are which of the following types of consumers? A) Irrational consumers B) Illegal consumers C) Free riders
Free riders
The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is: A) Oligopoly collusion. B) Prisoner's dilemma. C) Game theory. D) Collusion theory
Game theory.
If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely: A) Have more incentive to innovate to the extent that the whole of society desires. B) Invest significantly more in its research and development activities. C) Have less incentive to innovate to the extent that the whole of society desires. D) Demand more financial capital investment to expand its R&D activities.
Have less incentive to innovate to the extent that the whole of society desires.
If a steel manufacturer considers the costs of labor and materials, as well as the broader costs of environmental injuries resulting from its manufacturing processes, A) Its supply curve will be based on perceived benefits of maximizing utility. B) It is factoring in the social costs of the pollution it generates. C) Its demand curve will be based on production choices relating to marginal costs. D) Its costs will be the same as society's costs and all of the above.
It is factoring in the social costs of the pollution it generates.
A natural monopoly occurs when the quantity demanded is ____________ the minimum quantity it takes to be at the bottom of the long-run average cost curve. A) Greater than B) Less than or equal to C) Equal to D) A or c above
Less than or equal to
Which of the following is most likely to be a monopoly? A) Local fast-food restaurant B) Local electricity distributor C) Local bathroom fixtures shop D) Local television broadcaster
Local electricity distributor
In 2013, the Mall of America in Minnesota, the largest shopping mall in the United States, had 22 stores that sold women's "ready-to-wear" clothing (like Ann Taylor), another 50 stores that sold clothing for both men and women (like Nordstrom's), plus 14 more stores that sold women's specialty clothing (like Victoria's Secret). These many clothing stores, competing in the same shopping mall to sell similar but not identical products, engage in what economists call ____________. A) Oligopolistic competition B) Perfect competition C) Monopolistic competition D) Collusion
Monopolistic competition
The largest cattle rancher in a given region will be unable to have a ____________ when sufficient numbers of smaller cattle ranchers provide sources of competition. A) Oligopoly B) Patent C) Monopoly D) Monopolistic competition
Monopoly
____________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. A) Negative externality B) Positive externality C) A spillover D) A market failure
Negative externality
What does it mean for a good to be non-excludable? A) No one can be excluded from using it. B) An individual may use it, but must pay for it later. C) It is available to most of the population.
No one can be excluded from using it.
A public good is a good that is ____________, and thus is difficult for market producers to sell to individual consumers. A) Excludable or rivalrous B) Nonexcludable and nonrivalrous C) Excludable and rivalrous D) Unexcludable or unrivaled
Nonexcludable and nonrivalrous
Property rights are the legal rights of ownership on which others are: A) Allowed to infringe by paying the property owner's pollution tax. B) Able to enforce use of pollution-control technologies. C) Able to specify allowable quantities of pollution. D) Not allowed to infringe without paying compensation.
Not allowed to infringe without paying compensation.
In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies: A) On the upward-sloping portion of the average cost curve. B) At the very bottom of the AC curve. C) On the downward-sloping portion of the average cost curve. D) At the very top of the AC curve.
On the downward-sloping portion of the average cost curve.
Perfect competition and monopoly stand at ____________ of the spectrum of competition. A) Opposite ends B) The high end C) The low end D) The mid-way point
Opposite ends
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? A) Output will be too small and its price too high. B) Output will be too large and its price too high. C) Output will be too small and its price too low. D) Output will be too large and its price too low.
Output will be too small and its price too high.
What term is used to describe a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time? A) Trademark B) Copyright C) Patent D) Trade secret
Patent
Government ____________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ____________. A) Patent; a limited time B) Trademark; an unlimited time C) Copyright; a limited time D) Trade secret; an unlimited time
Patent; a limited time
A ____________ would lead a large greenhouse gas emitter to reduce emissions by less. A) Flat charge B) Higher pollution subsidy C) Pollution tax D) Low pollution subsidy
Pollution tax
The use of sharp, temporary price cuts as a form of ____________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers. A) Natural monopoly B) Monopolistic competition C) Predatory pricing D) Oligopolistic competition
Predatory pricing
In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means: A) Price is higher than marginal revenue. B) Price is equal to marginal revenue. C) Price is equal to marginal cost. D) Price is lower than marginal revenue.
Price is higher than marginal revenue.
For a positive externality, ____________ than the social benefits. A) Private benefits of an action are more B) Social benefits of an action are more C) Private benefits of an action are less D) Social costs of an action are less
Private benefits of an action are less
For a negative externality, the ____________ than the costs imposed on society as a whole. A) Private costs of an action are less B) Social costs of an action are less C) Private benefits of an action are more D) Social benefits of an action are more
Private costs of an action are less
A monopolist is able to maximize its profits by: A) Setting the price at the level that will maximize its per-unit profit. B) Producing output where MR = MC and charging a price along the demand curve. C) Setting output at MR = MC and setting price at the demand curve's highest point. D) Producing maximum output where price is equal to its marginal cost.
Producing output where MR = MC and charging a price along the demand curve.
Monopolistic competitors can make a ____________ in the short-run, but in the long run, ____________ will drive these firms toward ____________. A) Profit or loss; entry and exit; a zero-profit outcome B) Loss; exit; losses on their earnings C) Profit or loss; exit; economic profits D) Profit; entry; a price that lies at the very bottom of the AC curve
Profit or loss; entry and exit; a zero-profit outcome
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely: A) Have a patent giving it exclusive legal rights to make, use, and sell for a limited time. B) Raise prices, cut production, and realize positive economic profits. C) Have legal protection to prevent copying its methods of production for commercial use. D) Acquire rights for its investors to produce and sell their product.
Raise prices, cut production, and realize positive economic profits.
The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to: A) Determine total revenue, total cost, and profit B) Select the profit maximizing quantity to produce C) Determine what price to charge for the product D) Determine average costs, total revenue, and profit
Select the profit maximizing quantity to produce
____________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. A) Social costs B) Private costs C) Market costs D) External costs
Social costs
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's costs equal? A) The area of rectangle ABGH B) The area of rectangle BDEG C) The area of rectangle ACFH D) The area of rectangle ADEH
The area of rectangle ABGH
When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale, A) The firm is a natural monopoly. B) There are close substitutes for the good the firm produces. C) Firm is a single-price monopoly. D) Firm is well protected from competition by a legal barrier.
The firm is a natural monopoly.
If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then, A) The firm's perceived demand will shift to the left. B) The firm should keep expanding production. C) Each marginal unit adds profit by bringing in less revenue than its cost. D) The firm is now earning zero for profit.
The firm should keep expanding production.
Product differentiation may occur in ____________ because ____________ created strong preferences for certain brands. A) Shaping intangible preferences; predatory pricing B) The minds of buyers; past habits and advertising C) Imperfect competition; the concept of differentiated products D) Imperfect competition; advertising and consumer habits
The minds of buyers; past habits and advertising
If large numbers of individuals choose to behave as free riders, A) More of the public good will be available for paying riders. B) The public good may never be provided. C) Public goods will quickly be privatized. D) Public domain technologies become more difficult to obtain.
The public good may never be provided.
A pollution charge is a form of tax imposed on: A) The quantity of pollution that a firm emits. B) Pollution control technologies. C) Every economy in the world. D) Low-income market-orientated industries.
The quantity of pollution that a firm emits.
If one firm operating in an oligopoly raises its price and other firms do not do so, A) The sales of the firm with the higher price will decline slightly. B) The egos of all the top executives will eventually lead to cooperation at that higher price. C) The sales of the firm that increased its price will decline sharply. D) The firm with the increased price will have its higher profits sustained through cooperation.
The sales of the firm that increased its price will decline sharply.
For a pure monopoly to exist, A) There is a single seller in a particular industry B) There is only one seller, therefore no industry C) There are a few sellers in a given industry D) There are limited sellers in a particular industry
There is a single seller in a particular industry
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms, A) They will be unable to earn higher-than-normal profits in the short run. B) They will wish to cooperate to make decisions about what price to charge. C) They will wish to cooperate to make decisions about what quantity to produce. D) They will be unable to earn higher-than-normal profits in the long run.
They will be unable to earn higher-than-normal profits in the long run.
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is: A) They will both increase market share. B) They will simply neutralize one another's efforts. C) They will both lose market share. D) They will both improve their industrial position.
They will simply neutralize one another's efforts.
What is meant by predatory pricing? A) A firm that faces no competitors. B) Competition that does not fit the definition of perfect competition either because it involves a smaller number of firms or only one firm, or products that aren't identical. C) Removing government controls over setting prices and quantities in certain industries. D) When an existing firm uses sharp but temporary price cuts to discourage new competition.
When an existing firm uses sharp but temporary price cuts to discourage new competition.
If no externalities of pollution exist in a particular industry, the interaction of demand and supply ____________. A) Is based on benefits individuals perceive while maximizing utility B) Is based on choices about production relative to total average costs C) Will coordinate social costs and benefits D) Shifts so supply has no relation to social costs
Will coordinate social costs and benefits
If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is: A) $3.90 or less B) $3.40 or less C) $3.50 or less D) $4.00 or less
$3.40 or less
Refer to the table below. The information pertains to the demand curve and the average cost curve for a natural monopoly firm. What will the price be in this market? Price Quantity Demanded LRAC 50 1 $10.00 35 2 $20.00 20 3 $24.00 5 4 $37.50 A) 20 B) 50 C) 35 D) 5
50
In economic terms, what is a product that individuals cannot be excluded from using? A) A public good B) The internet C) A commercial utility
A public good
The marginal revenue curve for a single price monopolist ____________ the market demand curve. A) Always rises above B) Always lies beneath C) Always runs parallel D) Always is the same
Always lies beneath
General Motors, Ford, and Honda all manufacture automobiles and exemplify which of the following? A) An oligopoly B) A monopoly C) A cartel
An oligopoly
____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. A) Collusion B) A monopoly C) An oligopoly D) A cartel
An oligopoly
How is a pure public good best described? A) As a good that is non-rival and non-excludable B) As a good that is rival and non-excludable C) As a good that is non-rival and excludable
As a good that is non-rival and non-excludable
What name is given to the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market? A) Barriers to entry B) Intellectual property C) Trade secrets D) Copyright
Barriers to entry
A positive externality arises in a situation where a third party, outside the transaction, A) Fails to allocate resources efficiently. B) Suffers from a market transaction by others. C) Benefits from a market transaction by others. D) Pays a pollution tax to balance social costs.
Benefits from a market transaction by others.
Oligopoly firms acting individually may seek to gain profits ____________. A) By expanding levels of output and cutting prices B) By selling products that are distinctive in some way C) By having a mini-monopoly on a particular brand name D) By having a mini-monopoly or through tough competition
By expanding levels of output and cutting prices
