Deck 13: Monopoly and Antitrust Policy

Question 1

In an imperfectly competitive industry,

A) a single firm has no control over the price of its output.
B) a single firm has some control over the price of its output.
C) a single firm will be able to sell all of its output at whatever price it wants to charge.
D) the government will always regulate the output price.

Answer 1

B

Question 2

The demand for food will likely be price ________ while the demand for Brand X Burger will likely be price ________.

A) elastic; elastic
B) elastic; inelastic
C) inelastic; elastic
D) inelastic; inelastic

Answer 2

C

Question 3

Monopolies, oligopolies, and monopolistic competitive industries all

A) earn positive profits in the long run.
B) have market power.
C) are completely unconstrained in their pricing.
D) raise price and quantity over what would occur in perfect competition in order to maximize their profits.

Answer 3

B

Question 4

Monopolistic competition is an industry market structure with

A) a single firm in which the entry of new firms is blocked.
B) a small number of firms each large enough to impact the market price of its output.
C) many firms each able to differentiate their product.
D) many firms each too small to impact the market price of its output.

Question 5

Refer to the information provided in Figure 13.1 below to answer the question that follows. Figure 13.1
Refer to Figure 13.1. The demand curve facing an electric company is most likely represented by

A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Question 6

The ________ broadly a market is defined; the more difficult it becomes to find ________.

A) more; substitutes
B) more; complements
C) less; substitutes
D) less; goods independent of each other

Question 7

In imperfectly competitive markets,

A) there is no competition in the markets.
B) some competition may exist in the markets.
C) some competition may exist but only on price and not in other ways.
D) some competition may exist but only in other ways and not on price.

Question 8

When ________ substitutes exist, a firm in an imperfectly competitive industry has ________ power to raise price.

A) more; more
B) more; less
C) fewer; less
D) no; infinite

Question 9

In a monopolistic industry there is(are) ________ firm(s) and ________.

A) many; free entry of new firms
B) many; entry of new firms is blocked
C) a single; free entry of new firms
D) a single; entry of new firms is blocked

Question 10

Imperfect competition

A) means there is no competition in the market.
B) results in less efficient market outcomes.
C) should always be regulated by the government
D) is a major cause of externalities in the market.

Question 11

A coffee manufacturer raises the price of its coffee by 10%, and the quantity demanded of its coffee falls by only 12%. This firm has

A) no monopoly power in the output market.
B) some market power.
C) some output power.
D) not been able to prevent its competitors from competing with it on price.

Question 12

The demand for Ben & Jerry's ice cream will likely be ________ the demand for dessert.

A) more price elastic than
B) less price elastic than
C) equally price elastic as
D) indeterminate from the given information.

Question 13

An oligopoly is an industry market structure with

A) a single firm in which the entry of new firms is blocked.
B) a small number of firms each large enough to impact the market price of its output.
C) many firms each able to differentiate their product.
D) many firms each too small to impact the market price.

Question 14

A monopoly is an industry with

A) a single firm in which the entry of new firms is blocked.
B) a small number of firms each large enough to impact the market price of its output.
C) many firms each able to differentiate their product.
D) many firms each too small to impact the market price of its output.

Question 15

Market power refers to a firm's ability to

A) raise price without losing all sales of its product.
B) charge any price it likes.
C) sell any amount of output it desires at the market-determined price.
D) monopolize a market completely.

Question 16

Which of the following is LEAST likely to be considered a firm in an imperfectly competitive industry?

A) a Burger King in Pittsburgh, Pa.
B) Ohio Bell Telephone Company
C) a wheat farmer in Kansas
D) the only locally owned and operated bank in Severn, MD.

Question 17

Imperfect competition and market power

A) are major sources of inefficiency.
B) result in higher output than in perfect competition.
C) are always the result of product differentiation.
D) result from diseconomies of scale.

Question 18

A firm must be able to ________ competition if it is to exercise control over the price of its product.

A) maximize
B) increase
C) not change
D) limit

Question 19

Refer to the information provided in Figure 13.1 below to answer the question that follows. Figure 13.1
Refer to Figure 13.1. The demand curve facing an individual producer of wheat is most likely represented by

A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Question 20

Refer to the information provided in Figure 13.1 below to answer the question that follows. Figure 13.1
Refer to Figure 13.1. The demand curve facing Microsoft is most likely represented by

A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Question 21

There are a few firms selling differentiated products in a monopolistically competitive industry.

Question 22

Firms with market power must decide all of the following EXCEPT

A) how much to supply in each input market.
B) how much to produce.
C) how to produce it.
D) what price to charge for their output.

Question 23

When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $630. When the monopolist sells three units of output, the price per unit is

A) $210.
B) $230.
C) $300.
D) $630.

Question 24

Stereo Sound Unlimited has a monopoly over the installation of surround sound systems. If Stereo Sound Unlimited's total revenue from installing 10 sound systems is $20,000 and its total revenue from installing 11 sound systems is $18,000, what is the marginal revenue of the eleventh sound system?

A) -$2,000
B) -$1,000
C) $2,000
D) $3,800

Question 25

Voss Calculator Company has a monopoly on the sale of graphing calculators. If it sells two of these calculators its total revenue is $600, and if it sells three calculators its total revenue is $750. The marginal revenue of the third calculator sold is

A) $50.
B) $75.
C) $150.
D) $250.

Question 26

For a perfectly competitive firm, the marginal revenue curve has ________ point(s) in common with the firm's demand curve.

A) one
B) no
C) all
D) Indeterminate from the given information.

Question 27

The demand for Tyson chicken is more elastic than the demand for meat.

Question 28

Refer to the information provided in Figure 13.1 below to answer the question that follows. Figure 13.1
Refer to Figure 13.1. The demand curve for insulin is most likely represented by

A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Question 29

XYZ Computer Company has a monopoly on the sale of a specialized color printer. If it sells two of these printers its total revenue is $1,000, and if it sells three color printers its total revenue is $1,600. The marginal revenue of the third color printer sold is

A) $200.
B) $300.
C) $600.
D) $1,300.

Question 30

In imperfect competition, competition may take place in more levels than in perfect competition.

Question 31

An important distinction between perfect competition and monopoly is that in

A) perfect competition, there is no distinction between the firm and the industry.
B) perfect competition, the firm is the industry.
C) monopoly, the firm faces the market demand curve.
D) monopoly, the firm produces less than the total quantity supplied.

Question 32

For a monopolist to sell more units of output,

A) the price must be increased.
B) the price must be reduced.
C) demand must become more elastic.
D) the other competing firms must sell fewer units.

Question 33

Monopolists differ from perfectly competitive firms

A) on the cost and demand sides of the profit equation.
B) on the cost side of the profit equation alone.
C) on the demand side of the profit equation alone.
D) on neither the cost nor demand sides of the profit equation.

Question 34

A market where there is only one buyer for a good or service is called a monopoly.

Question 35

Imperfect competition results in inefficiency but greater equity than pure competition.

Question 36

In a monopoly, the market demand curve is

A) the same as the demand curve facing the firm.
B) the summation of all the individual firm's cost curves.
C) nonexistent.
D) the marginal cost curve above minimum average variable cost.

Question 37

When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $630. In order to sell three units of output instead of only two, the monopolist must

A) increase its price by $30 per unit.
B) decrease its price by $90 per unit.
C) make no change in price and increase output by one unit.
D) decrease its price by $30 per unit.

Question 38

A firm with market power will be able to sell all of their output at any price they desire.

Question 39

When a monopolist sells two units of output its total revenue is $150. When a monopolist sells three units of output its total revenue, is $210. When the monopolist sells three units of output, the price per unit is

A) $50.
B) $60.
C) $70.
D) $75.

Question 40

For a monopoly, the marginal revenue curve has ________ point(s) in common with the firm's linear demand curve.

A) one
B) no
C) all
D) Indeterminate from the given information.

Question 41

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3
Refer to Figure 13.3. The marginal revenue of the sixth pound of cheese is

A) -$4.
B) -$1.
C) $1.
D) $4.

Question 42

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. If Hi Phi Unlimited's total revenue from installing 15 sound systems is $30,000 and its total revenue from installing 18 sound systems is $33,000, what is the marginal revenue of the eighteenth sound system?

A) -$3,000
B) $1,000
C) $1,500
D) $3,000

Question 43

When the demand curve is a downward sloping straight line, the quantity at which the demand curve intersects the horizontal (quantity) axis is ________ the quantity at which the marginal revenue curve intersects the horizontal (quantity) axis.

A) equal to
B) less than
C) twice
D) four times

Question 44

For a monopolist, price

A) equals marginal revenue at all output levels.
B) is less than marginal revenue.
C) is greater than marginal revenue.
D) can be greater than or less than marginal revenue.

Question 45

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. Hi Phi Unlimited's total revenue from installing 15 sound systems is $30,000 and its total revenue from installing 18 sound systems is $33,000. The marginal revenue received from selling the 18th sound system is

A) equal to the price of the 16th sound system.
B) greater than the price of the 16th sound system.
C) less than the price of the 16th sound system.
D) Indeterminate from the given information.

Question 46

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3
Refer to Figure 13.3. This firm's total revenue will be maximized at a price of

A) $8.
B) $6.
C) $5.
D) $4.

Question 47

When the demand curve is a downward sloping straight line, the slope of the marginal revenue curve is

A) always equal to one.
B) the same as the slope of the demand curve.
C) half as steep as the demand curve.
D) twice as steep as the demand curve.

Question 48

A non-discriminating monopolist maximizes total revenue when its marginal revenue is ________.

A) positive
B) zero
C) negative
D) equal to price

Question 49

Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4
Refer to Figure 13.4. This firm's marginal revenue will be positive at

A) prices above $20.
B) prices above $10.
C) all prices.
D) prices between $4 and $8.

Question 50

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3
Refer to Figure 13.3. The marginal revenue of the fourth pound of cheese is

A) $1.
B) $3.
C) $6.
D) $24.

Question 51

For a non-discriminating monopolist to sell one more unit, it must ________.

A) raise the price of only the last unit produced
B) lower the price of only the last unit produced
C) raise the price of the last as well as all previous units produced
D) lower the price of the last as well as all previous units produced

Question 52

Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4
Refer to Figure 13.4. This firm's marginal revenue will be negative at

A) prices below $10.
B) prices above $12.
C) all prices.
D) prices between $4 and $18.

Question 53

Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4
Refer to Figure 13.4. The marginal revenue of the eighth pound of burritos is

A) $3.
B) $5.
C) $12.
D) $96.

Question 54

A non-discriminating monopolist's price equals its marginal revenue only when

A) output is zero.
B) total revenue is a maximum.
C) marginal revenue is zero.
D) the monopolist's demand schedule intersects the horizontal (quantity) axis..

Question 55

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3
Refer to Figure 13.3. This firm's marginal revenue will be positive at

A) prices above $5.
B) prices below $5.
C) all prices.
D) prices between $4 and $8.

Question 56

Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4
Refer to Figure 13.4. The marginal revenue of the 12th pound of burritos is

A) -$4.
B) -$3.
C) $2.
D) $8.

Question 57

The demand curve facing a monopolistic firm is ________.

A) upward‐sloping
B) downward‐sloping
C) horizontal
D) vertical

Question 58

Assuming demand is linear, the shape of a monopolist's total revenue schedule is a

A) straight line passing through the origin.
B) straight line with negative slope.
C) curve from the origin with increasing slope.
D) curve from the origin with decreasing slope.

Question 59

Refer to the information provided in Figure 13.3 below to answer the questions that follow. Figure 13.3
Refer to Figure 13.3. This firm's marginal revenue will be negative at

A) prices above $5.
B) prices below $5.
C) all prices.
D) prices between $4 and $8.

Question 60

Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4
Refer to Figure 13.4. This firm's total revenue will be maximized at a price of

A) $12.
B) $10.
C) $8.
D) $6.

Question 61

Refer to the information provided in Figure 13.5 below to answer the questions that follow. Figure 13.5
Refer to Figure 13.5. The profit-maximizing level of output for this monopolist is ________ units of output.

A) 20
B) 22
C) 24
D) 26

Question 62

The Rare Bird Company has a monopoly in the sale of macaws in Iowa. When the Rare Bird Company sells three macaws, its marginal revenue is $30. When the Rare Bird Company sells four macaws, its marginal revenue will be

A) less than $30.
B) greater than $30.
C) equal to $30.
D) greater than $30 if demand is elastic and less than $30 if demand is inelastic.

Question 63

Ameritech® has a monopoly over local telephone service. If Ameritech® is producing where marginal revenue is less than marginal cost, the firm

A) could increase profits by reducing output.
B) could increase profits by increasing output.
C) is maximizing profits.
D) must be earning a zero profit.

Question 64

The XYZ Computer Company has a monopoly over the production of a specialized color printer. The XYZ Computer Company will find it profitable to increase the production of specialized color printers as long as marginal cost

A) is less than marginal revenue.
B) equals marginal revenue.
C) is greater than marginal revenue.
D) is positive.

Question 65

Because of a patent, Alcoa is the only manufacturer of soda cans with a stay-put tab. Alcoa can earn a profit on the sale of soda cans with stay-put tabs

A) in the short run but not in the long run because new firms will enter the industry in the long run.
B) only in the long run because government regulations prevent monopolists from earning profits in the short run.
C) in the long run but not the short run because the monopolist will face competition in the short run.
D) in the long run because entry into the industry by new firms is blocked until the patent expires.

Question 66

If a monopolist earns positive economic profits in the long run,

A) new firms will enter the market.
B) the monopolist expands production.
C) the industry supply curve shifts to the right.
D) the monopolist will not change its behavior.

Question 67

A monopolist is currently maximizing profits. In addition, if P > ATC > MC, then the monopolist

A) just breaks even.
B) earns positive economic profits.
C) is covering total variable costs but not total fixed costs.
D) is covering total fixed costs but not total variable costs.

Question 68

A monopolist will not produce

A) a positive level of output when its marginal revenue is declining.
B) a positive level of output when its price is less than average total cost but greater than average variable cost.
C) in the inelastic portion of its demand curve, where marginal revenue is negative.
D) in the perfectly competitive level of output when it engages in perfect price discrimination.

Question 69

A monopolist's supply of a good is

A) dependent on the monopolist's demand curve and its marginal cost curve.
B) given by the portion of the monopolist's marginal cost curve that lies above the average variable cost curve.
C) independent of the monopolist's demand curve.
D) given by the portion of the monopolist's average variable cost curve that lies above the marginal cost curve.

Question 70

A monopolist suffers a loss if its ________ schedule is everywhere above its ________ schedule.

A) ATC; MC
B) MC; AVC
C) ATC; Demand
D) Demand; ATC

Question 71

A profit-maximizing monopolist will produce the level of output where

A) marginal revenue is zero.
B) marginal cost is minimized.
C) price equals marginal cost.
D) marginal revenue equals marginal cost.

Question 72

In the short run, when a monopolist incurs a loss, it will

A) always shut down.
B) always produce where marginal cost equals marginal revenue.
C) produce as long as total revenue is sufficient to cover variable costs.
D) produce as long as total revenue is sufficient to cover fixed costs.

Question 73

Refer to the information provided in Figure 13.5 below to answer the questions that follow. Figure 13.5
Refer to Figure 13.5. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be

A) $0.
B) $88.
C) $154.
D) $242.

Question 74

The XYZ Computer Company has a monopoly over the production of a specialized color printer. The XYZ Computer Company will find it profitable to reduce output as long as marginal revenue

A) is greater than marginal cost.
B) equals marginal cost.
C) is less than marginal cost.
D) is positive.

Question 75

When the addition to a monopolist's total profit is negative from selling another unit, then it follows that

A) MR > ATC.
B) MR = MC.
C) MR > MC.
D) MR < MC.

Question 76

Refer to the information provided in Figure 13.5 below to answer the questions that follow. Figure 13.5
Refer to Figure 13.5. The profit-maximizing price for this firm is

A) $5.
B) $7.
C) $9.
D) $11.

Question 77

In the long run, a monopoly

A) will always earn zero economic profits.
B) may earn positive economic profits due to entry barriers.
C) will never exit the industry.
D) will yield an efficient outcome.

Question 78

Suppose we know that a monopolist is maximizing its profits. Which of the following is a correct inference? The monopolist has

A) maximized its total revenue.
B) set price equal to its average cost.
C) maximized the difference between marginal revenue and marginal cost.
D) equated marginal revenue and marginal cost.

Question 79

A monopolist sets both price and quantity simultaneously, and the amount of output that it supplies depends

A) only on the marginal cost curve.
B) only on the demand curve.
C) on both its marginal cost curve and the demand curve that it faces.
D) on both its average cost curve and the demand curve that it faces.

Question 80

For a monopolist, if total revenue increases as output decreases, then marginal revenue is

A) equal to price.
B) zero.
C) positive.
D) negative.