Question 1

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

Accepted Answer

Saudi Arabia is one of the largest producers and exporters of oil in the world, with significant control over the world's oil supply. This gives them market power, as they can influence the price of oil by adjusting their output levels.

Question 2

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

Accepted Answer

Decreasing marginal costs are not a source of monopoly power. In fact, decreasing marginal costs often lead to competition as firms can lower their prices and still make a profit. The other options (A, C, and D) are all potential sources of monopoly power, as they can prevent or limit the entry of new competitors and make it difficult for existing firms to compete.

Question 3

Counterfeit brands carry labels from companies that did not actually make the product in question (for example, a purse not made by Gucci but carrying a Gucci label). With what kind of monopoly are the makers of these items trying to compete?

Accepted Answer

Counterfeit brands are trying to compete with a monopoly that has hard to duplicate products, as they mimic the branding and appearance of high-end, unique products to deceive consumers.

Question 4

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

Accepted Answer

The high prices of AIDS drugs are mostly due to the monopolistic power of pharmaceutical companies that hold patents on these drugs, which allows them to charge prices that are well above the marginal cost of producing them. This monopoly power allows companies to set prices without fear of competition, even if it means that those who need the drugs may not be able to afford them.

Question 5

Apple's iPod provides an example that market power may arise from:

Accepted Answer

Apple's iPod gained market power through innovation - it was the first successful portable digital music player, providing a new and unique experience for consumers.

Question 6

Monopolies will have more market power when one firm owns an input that is difficult to duplicate and the:

Accepted Answer

Monopolies with inelastic demand have more market power because they can increase the price without affecting the quantity demanded significantly. When the monopolist owns an input that is difficult to duplicate, it has an advantage over potential competitors, further increasing its market power.

Question 7

California's "perfect storm," following the deregulation of its electricity industry, eventually resulted in an incredible rise in electricity prices. Which of the following is NOT a reason why this occurred?

Accepted Answer

Innovations in production that lead to lower average costs of producing electricity would actually result in lower prices, not higher prices. Therefore, this cannot be a reason for the rise in electricity prices.

Question 8

A monopoly that is unregulated always causes deadweight loss.

Accepted Answer

A monopoly operates with market power, allowing it to set higher prices and lower output levels than would be seen in a competitive market. This results in a deadweight loss, where the total surplus is lowered because some potential consumers may be priced out of the market and some potential producers will decide not to produce due to the lower quantity demanded. Without regulation, the monopoly has no incentive to reduce its market power and will continue to generate deadweight loss.

Question 9

California's electricity crisis as illustrated in the chapter is partially explained by the fact that generators of electric power:

Accepted Answer

As demand for electricity increased in California, the generators of electric power were able to gain market power and increase prices. This is due to the fact that there was not enough supply to meet the increasing demand, and therefore the generators had increased bargaining power.

Question 10

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

Accepted Answer

Marketing can contribute to a firm's market power, but it is not considered a source of monopoly power on its own. Innovation, patents, and economies of scale are all factors that can lead to a firm holding a monopoly or near-monopoly position in a market.

Question 11

Which of the following firms most likely possesses the most monopoly power?

Accepted Answer

Rolex is a luxury brand with a very distinct and recognizable product, giving it a significant amount of market power. Furthermore, there are few substitutes for a Rolex watch, which further strengthens Rolex's monopoly power within the market. The other companies listed have numerous competitors and their products are not as unique or exclusive as Rolex's.

Question 12

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

Accepted Answer

A monopoly is a situation where a single firm controls the entire market, giving it complete control over the supply and pricing of products or services. Therefore, a monopoly is defined as a single firm in a given market.

Question 13

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

Accepted Answer

Inelastic demand for the product is not a source of monopoly power; it describes consumer behavior rather than a barrier or advantage that creates a monopoly.

Question 14

An example of a monopoly would be:

Accepted Answer

A sole provider of electrical power in a city is an example of a monopoly because there are no competing companies offering the same service. This gives the monopoly company control over the pricing and quality of their service, as well as limiting consumer choice.

Question 15

The rising demand for electricity in California during the year 2000:

Accepted Answer

The decreased elasticity of demand meant that consumers were less responsive to price changes, allowing generating companies to manipulate supply and prices, leading to high electricity prices and blackouts.

Question 16

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 "people before profits" effect would suggest prioritizing access over pricing, which contradicts the idea of pricing above cost.

Question 17

California's electricity problems were NOT caused by:

Accepted Answer

The expiration of patent protection on special equipment used to produce hydro-generated electricity was not a cause of California's electricity problems. The other options (A, B, and D) were factors that contributed to the crisis.

Question 18

A monopolistic industry will have lower output and higher prices than a competitive industry.

Accepted Answer

In a monopolistic industry, there is only one supplier or producer, and therefore they have greater control over output and prices. The lack of competition allows them to charge higher prices and produce less output than in a competitive industry where multiple firms would be competing with each other, which would lead to lower prices and higher output.

Question 19

A monopoly is a firm with market power, and market power may arise from economies of scale, patent protection, and innovation.

Accepted Answer

A monopoly is a market structure where a single firm dominates the market and has the ability to influence the market price. This could be due to various reasons such as economies of scale, patent protection or innovation, or government regulation. Therefore, the statement is true.

Question 20

Apple enjoys an extensive monopoly power in the market for MP3 players since Apple's i-Phone:

Accepted Answer

The statement points out that Apple enjoys a monopoly power in the market for MP3 players due to the i-Phone, and the reason for this monopoly power is that it is hard to duplicate. This means that other companies face significant barriers to entry in this market, giving Apple an advantage. The other options are not relevant to the explanation of why Apple has a monopoly.

Quiz 13: Monopoly

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

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

Counterfeit brands carry labels from companies that did not actually make the product in question (for example, a purse not made by Gucci but carrying a Gucci label) . With what kind of monopoly are the makers of these items trying to compete?

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

Apple's iPod provides an example that market power may arise from:

Monopolies will have more market power when one firm owns an input that is difficult to duplicate and the:

California's "perfect storm," following the deregulation of its electricity industry, eventually resulted in an incredible rise in electricity prices. Which of the following is NOT a reason why this occurred?

A monopoly that is unregulated always causes deadweight loss.

California's electricity crisis as illustrated in the chapter is partially explained by the fact that generators of electric power:

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

Which of the following firms most likely possesses the most monopoly power?

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

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

An example of a monopoly would be:

The rising demand for electricity in California during the year 2000:

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 electricity problems were NOT caused by:

A monopolistic industry will have lower output and higher prices than a competitive industry.

A monopoly is a firm with market power, and market power may arise from economies of scale, patent protection, and innovation.

Apple enjoys an extensive monopoly power in the market for MP3 players since Apple's i-Phone: