Question 1

Which of the following is NOT a source of monopoly power?

Accepted Answer

Marketing may enhance a firm's brand recognition and market power, but it is not a direct source of monopoly power. Monopoly power comes from factors such as barriers to entry, exclusive control of a crucial resource, or legal protection through patents or copyrights. Innovation and economies of scale can also give a firm an advantage over competitors and monopoly power. Patents provide legal protection for a certain period, allowing the firm to maintain a monopoly on its invention.

Question 2

California's electricity problems were NOT caused by:

Accepted Answer

The expiration of patent protection on special equipment used to produce hydro-generated electricity did not contribute to California's electricity problems. The other choices are accurate causes of the problem.

Question 3

A natural monopoly occurs when:

Accepted Answer

A natural monopoly occurs when a single firm can produce the entire output of the market at a lower cost than any potential competitor. This usually occurs when there are significant economies of scale in production, meaning that as output increases, the average cost of production decreases. In other words, the firm benefits from being a monopoly and producing a larger quantity because it allows them to spread fixed costs over a larger amount of output, ultimately reducing their average cost per unit.

Question 4

Monopolies may be created when one firm owns an input thatis difficult to duplicate and the:

Accepted Answer

If the demand for the product is inelastic, consumers are less sensitive to price changes and are more likely to continue buying the product even if the monopolist raises the price. Therefore, the monopolist can charge higher prices and still maintain a significant market share, leading to a monopoly. Additionally, if the firm owns an input that is difficult to duplicate, it would be difficult for new firms to enter the market and compete, further strengthening the monopolist's position.

Question 5

Apple enjoys an extensive monopoly power in the market forMP₃ players since Apple's iPod:

Accepted Answer

Apple's iPod is hard to duplicate, which contributes to its monopoly power in the market. This difficulty in replication by competitors helps maintain its unique position and control over the market.

Question 6

One way to take advantage of economies of scale and to avoidthe market power of a natural monopoly is through:

Accepted Answer

The answer of One way to take advantage of economies...

Question 7

Cable deregulation has ________, whereas deregulation ofelectricity has ________.

Accepted Answer

Cable deregulation has generally been considered to have worked well, leading to increased choices and services for consumers. On the other hand, electricity deregulation has faced significant challenges, including reliability issues and price volatility, leading to the perception that it has not worked as well.

Question 8

The primary reason that AIDS drugs are priced well abovecost is monopoly power.

Accepted Answer

The pharmaceutical companies that produce AIDS drugs hold patents that give them exclusive rights to manufacture and sell their products. This lack of competition allows them to set high prices without fear of losing market share to lower-priced alternatives, leading to the exercise of monopoly power.

Question 9

Without competition, there is a tendency for a government-run or regulated monopoly to:

Accepted Answer

Without competition, a government-run or regulated monopoly has no pressure to keep prices low and efficiency high. As a result, it may become inefficient and pass higher costs on to consumers.

Question 10

Which of the following statements is TRUE?
I. Government ownership is a potential solution to the naturalmonopoly problem
II.Regulated monopolies have little incentive to reduce costs,as they simply pass the higher costs on to consumersIII. Government ownership of utilities worked well for severaldecades.

Accepted Answer

I. Government ownership can indeed be a solution to the natural monopoly problem by ensuring that services are provided at a lower cost or more efficiently than would be possible with competing firms. II. Regulated monopolies may have less incentive to reduce costs because they can often pass these costs onto consumers, especially if they are guaranteed a certain rate of return by regulators. III. In many cases, government ownership of utilities has provided stable and reliable services for extended periods, indicating that it can work well.

Question 11

Today anything beyond the most basic tier cable service ispredominantly free of regulation, and cable companies arefree to charge a market rate for their services. As a result:

Accepted Answer

Since deregulation, cable companies are free to charge market rates for their services, resulting in higher prices. However, the competition among cable companies has forced them to improve the number of channels and quality of programming to attract customers. Therefore, prices have risen since deregulation, but so have the number of channels and the quality of programming.

Question 12

The stated reason for resorting to regulation of public utilitiesrather than promoting competition through antitrust is thatthe industry in question is believed to be a:

Accepted Answer

The reason for resorting to regulation of public utilities is that they are believed to be natural monopolies, meaning that it is more efficient and practical for one company to provide the service rather than having multiple companies competing. Antitrust measures may not be effective in promoting competition in this case.

Question 13

Deregulation of cable TV rates led to:

Accepted Answer

Deregulation of cable TV rates led to higher prices for cable TV.

Question 14

California's electricity crisis as illustrated in the chapter ispartially explained by the fact that:

Accepted Answer

As demand for electricity increased in California, generators of electric power gained market power, allowing them to increase prices and take advantage of the high demand. This was exacerbated by a lack of competition and regulatory failures.

Question 15

There are three reasons why HIV drugs are priced above cost:(1) monopoly power, (2) the "people before profits" effect, and(3) the "use it or lose it" effect

Accepted Answer

The primary reason cited for high HIV drug prices is monopoly power, where a single company holds the patent and can set prices without competition. The "people before profits" effect and the "use it or lose it" effect are not commonly cited reasons for high HIV drug pricing. Instead, research and development costs, regulatory approval processes, and market exclusivity are often mentioned as factors contributing to high prices.

Question 16

California's "perfect storm," following the deregulation of itselectricity industry, eventually resulted in an incredible rise inelectricity prices. Which of the following is NOT a reason whythis occurred?

Accepted Answer

Innovations in production leading to lower costs would actually lead to lower electricity prices, not higher ones. The other options are all valid reasons for the rise in electricity prices.

Question 17

Economic theory suggests that a natural monopoly should be:

Accepted Answer

Regulating a natural monopoly allows it to take advantage of economies of scale while still preventing it from controlling the market and charging excessive prices. Eliminating a natural monopoly could result in higher costs for consumers and decreased efficiency in the industry. Leaving it alone to operate with excess capacity may lead to inefficient use of resources, and taking it over by the government may lead to inefficiency due to lack of competition.

Question 18

Saudi Arabia has market power in the world's oil marketsbecause:

Accepted Answer

Saudi Arabia is one of the largest oil producers in the world, with an estimated 18% of the world's total oil reserves. This gives it significant market power as it controls a significant fraction of the world's oil supply. It has the ability to influence the global oil prices by adjusting its oil output. Other oil producing countries may try to compete with its oil output, but Saudi Arabia has the advantage of having large reserves and being able to produce oil at a low cost.

Question 19

A monopoly can be defined as a single firm in a given market.

Accepted Answer

A monopoly is a market structure in which a single firm dominates the market and controls the price of goods or services.

Question 20

Which of the following is NOT a source of monopoly power?

Accepted Answer

Monopoly power is derived from factors that restrict competition or entry into a market, such as laws preventing entry (A), economies of scale that make it difficult for new entrants to compete (B), and innovation that gives a company a competitive advantage (C). Inelastic demand (D) refers to a situation where the quantity demanded of a product changes little when its price changes. While inelastic demand can allow monopolies to charge higher prices without losing many sales, it is not a source of monopoly power itself but rather a characteristic of the market that a monopoly can exploit.

Quiz 13: Positive Externalities and Public Goods

Which of the following is NOT a source of monopoly power?

California's electricity problems were NOT caused by:

A natural monopoly occurs when:

Monopolies may be created when one firm owns an input thatis difficult to duplicate and the:

Apple enjoys an extensive monopoly power in the market forMP₃ players since Apple's iPod:

One way to take advantage of economies of scale and to avoidthe market power of a natural monopoly is through:

Cable deregulation has , whereas deregulation ofelectricity has .

The primary reason that AIDS drugs are priced well abovecost is monopoly power.

Without competition, there is a tendency for a government-run or regulated monopoly to:

Today anything beyond the most basic tier cable service ispredominantly free of regulation, and cable companies arefree to charge a market rate for their services. As a result:

The stated reason for resorting to regulation of public utilitiesrather than promoting competition through antitrust is thatthe industry in question is believed to be a:

Deregulation of cable TV rates led to:

California's electricity crisis as illustrated in the chapter ispartially explained by the fact that:

There are three reasons why HIV drugs are priced above cost:(1) monopoly power, (2) the "people before profits" effect, and(3) the "use it or lose it" effect

California's "perfect storm," following the deregulation of itselectricity industry, eventually resulted in an incredible rise inelectricity prices. Which of the following is NOT a reason whythis occurred?

Economic theory suggests that a natural monopoly should be:

Saudi Arabia has market power in the world's oil marketsbecause:

A monopoly can be defined as a single firm in a given market.

Which of the following is NOT a source of monopoly power?

Quiz 13: Positive Externalities and Public Goods

Which of the following is NOT a source of monopoly power?

California's electricity problems were NOT caused by:

A natural monopoly occurs when:

Monopolies may be created when one firm owns an input thatis difficult to duplicate and the:

Apple enjoys an extensive monopoly power in the market forMP3 players since Apple's iPod:

One way to take advantage of economies of scale and to avoidthe market power of a natural monopoly is through:

Cable deregulation has ________, whereas deregulation ofelectricity has ________.

The primary reason that AIDS drugs are priced well abovecost is monopoly power.

Without competition, there is a tendency for a government-run or regulated monopoly to:

Today anything beyond the most basic tier cable service ispredominantly free of regulation, and cable companies arefree to charge a market rate for their services. As a result:

The stated reason for resorting to regulation of public utilitiesrather than promoting competition through antitrust is thatthe industry in question is believed to be a:

Deregulation of cable TV rates led to:

California's electricity crisis as illustrated in the chapter ispartially explained by the fact that:

There are three reasons why HIV drugs are priced above cost:(1) monopoly power, (2) the "people before profits" effect, and(3) the "use it or lose it" effect

California's "perfect storm," following the deregulation of itselectricity industry, eventually resulted in an incredible rise inelectricity prices. Which of the following is NOT a reason whythis occurred?

Economic theory suggests that a natural monopoly should be:

Saudi Arabia has market power in the world's oil marketsbecause:

A monopoly can be defined as a single firm in a given market.

Which of the following is NOT a source of monopoly power?

Apple enjoys an extensive monopoly power in the market forMP₃ players since Apple's iPod:

Cable deregulation has , whereas deregulation ofelectricity has .