Deck 11: Monopoly and Antitrust Policy

Question 1

In most towns and cities you are likely to only find one provider of fixed -line telecoms. This is an example of

A) a government -imposed barrier.
B) occupational licensing.
C) a monopoly.
D) the government maintaining consistent standards in the telecoms industry.

Answer 1

a monopoly.

Question 2

Popular and classic movies are shown on some channels like Orbit, Showtime, and ART Cable Networks. These networks are available on basic tiers through satellite providers but several major cable companies make these networks available only to customers who want to pay extra each month to watch them. If Tamer chooses to pay the additional fee and Hussein does not, then

A) Hussein has gained some consumer surplus by not having to pay the additional fee.
B) Tamer's demand for classic movies is more price elastic than Hussein's demand.
C) Tamer has lost some consumer surplus by paying the additional fee.
D) Hussein's demand for classic movies is more price elastic than Tamer's demand.

Answer 2

Hussein's demand for classic movies is more price elastic than Tamer's demand.

Question 3

In Dubai there are three very popular supermarkets: Spenies, Carrefour, and LuLu hypermarket. While Spenies remains open twenty -four hours a day; Carrefour and LuLu close at midnight. Which of the following statements is true?

A) Spenies has a monopoly at midnight but not during the day.
B) Spenies is a monopoly all day because it produces a service that has no close substitutes.
C) Spenies probably has a higher markup to compensate for its higher cost of production.
D) Spenies can ignore the pricing decisions of the other two supermarkets.

Answer 3

Spenies has a monopoly at midnight but not during the day.

Question 4

Niro Coffee and Teas produces some flavorful varieties of Niro's brand coffee. Is Niro's a monopoly?

A) Yes, there are no substitutes to Niro's coffee.
B) No, Niro's is not a monopoly because there are many branches of Niro's.
C) No, although Niro's coffee is a unique product, there are many different brands of coffee that are very close substitutes.
D) Yes, Niro's is the only supplier of Niro's coffee in a market where there are high barriers to entry.

Question 5

Microsoft thought that the initial Xbox was sufficiently different from PS2 that it could charge a significantly higher price for the Xbox than Sony could charge for PS2. Which of the following statements is implied by Microsoft's product positioning?

A) Microsoft believed that the PS2 was a distant substitute for the Xbox and therefore the demand curve for Xbox would be elastic. Charging a higher price would enable it to increase its profits.
B) Microsoft believed that it had differentiated the Xbox sufficiently to insulate it from competition and to cater to a unique niche. Consequently, it would be able to charge a higher price and increase its profits.
C) Microsoft recognized that the PS2 was a substitute for the Xbox but it believed that the Microsoft name would be sufficient to draw customers away from the PS2 and that customers would be willing to pay a premium for Microsoft's product.
D) Microsoft believed that the PS2 was poor substitute for the Xbox and therefore the demand curve for Xbox would be inelastic. Charging a higher price would enable it to increase its profits.

Question 6

Governments grant patents to encourage

A) low prices.
B) firms to form public enterprises.
C) research and development on new products.
D) competition.

Question 7

The last mobile monopoly in the Arab world ended when the British Vodafone started operating as a second mobile telecom provider in Qatar in 2009, ending a 20 -year -long monopoly by Qtel. What's the reason for the end of these monopolies?

A) The Arab World's mobile telecom market didn't seem profitable until 2009.
B) Arab governments set up independent agencies to regulate the telecommunications market and increase competition, effectively removing the barrier to entry.
C) The companies were - exploiting consumers, so the government wanted to - increase competition.
D) None of the above.

Question 8

The De Beers Company, one of the longest -lived monopolies, is facing increasing competition. One source of competition comes from people who might resell their previously owned diamonds. Why is De Beers worried that people might resell their previously owned diamonds?

A) because the availability of previously owned diamonds would increase the market demand for diamonds and dilute De Beers' monopoly
B) because De Beers will not be able to guarantee the quality of previously owned diamonds and fears that its reputation might be harmed
C) because previously owned diamonds would be a close substitute to newly mined diamonds and therefore reduce De Beers' market power
D) because the availability of previously owned diamonds would make the market demand curve for diamonds more inelastic and force De Beers to lower its price

Question 9

A virtuous cycle occurs

A) when monopoly profits are used to create new products for additional monopoly profits.
B) when lobbyists petition the government to grant a public franchise; the lobbyist then raise money for the government who granted the franchise.
C) when a firm's sales volume reaches a level where the firm can take advantage of economies of scale; thereby reducing the price of the product to further boost its sales.
D) when a firm can attract enough buyers initially to increase a product's usefulness to attract even more buyers.

Question 10

Some economists argue that the existence of network externalities is a surmountable barrier if a competing firm can offer a product that better satisfies consumer preferences.

Question 11

Many Arab countries have devised anti -monopoly policies and in some cases taken the further step of passing antitrust laws in order to

A) transform their economies into a more competitive and business friendly markets.
B) cope with the global trend of becoming market economies.
C) ensure social justice and control the markets by the government.
D) to limit the control of large international companies.

Question 12

In the late 1990s, what did the anti -monopoly polices in Egypt aim to achieve?

A) marginal cost pricing.
B) selling below average total cost.
C) collusive price agreements among rival sellers.
D) reduce market barriers.

Question 13

A merger between Eiz Steel and Alexandia Steel in Egypt was an example of a

A) conspiracy in restraint of trade.
B) conglomerate merger.
C) horizontal merger.
D) vertical merger.

Question 14

De Beers is one of the oldest and most profitable monopolies in the world. By controlling diamond deposits in South Africa, the company was able to erect a barrier of entry represented in exclusive control of a natural resource. However, in the year 2000, more diamond deposits were discovered and that brought competition to the diamonds market. De Beers adapted by marking each of its products with a "Forever Mark" to assure quality and authenticity of the product. What was De Beers trying to achieve with this strategy?

A) Erect another barrier to entry by improving the quality of its product.
B) Gloat about the quality of its products in comparison to other producers.
C) Differentiating and branding its product to maintain its market share.
D) None of the above.

Question 15

In 2000, the Hirschman -Herfindahl Index (HHI) was calculated to find the market concentration in the Egyptian steel industry and was found to be 3,822. This number means

A) the number has no indication of market power concentration in the Egyptian steel industry.
B) the calculated monopolistic performance from the HHI of the entire Egyptian steel industry appears to exceed one -third the scale of monopoly power.
C) the Egyptian steel industry is perfectly competitive.
D) the Egyptian steel industry is dominated by a single complete monopoly.