微观经济学第十四章习题.doc

Microeconomics - Testbank 1 (Hubbard/OBrien)Chapter 14 Monopoly and Antitrust Policy 1) A monopoly is a seller of a product: A) with many substitutes. B) without a close substitute. C) with a perfectly inelastic demand. D) without a a well-defined demand curve. Answer: B Diff: 1 Page Ref: 444 2) A monopolist is a seller who: A) has to consider the actions of other sellers. B) is small relative to the market. C) can ignore the threat of competition from other firms. D) all of the above. Answer: C Diff: 2 Page Ref: 445 3) The demand curve for the monopolists product is: A) the market demand for the product. B) more elastic than the market demand for the product. C) more inelastic than the market demand for the product. D) undefined. Answer: A Diff: 2 Page Ref: 451 4) To sell more output, the monopolist: A) only has to produce more. B) has to lower the products price. C) must lower production costs. D) has to advertise the product extensively. Answer: B Diff: 2 Page Ref: 452 5) To keep a monopoly a firm must have: A) a perfectly inelastic demand. B) an insurmountable barrier to entry. C) marginal revenue equal to demand. D) all of the above. Answer: B Diff: 2 Page Ref: 445 6) A local electricity-generating company has a monopoly that is protected by a barrier to entry that takes the form of: A) control of a key raw material. B) network externalities. C) economies of scale. D) none of the above. Answer: C Diff: 2 Page Ref: 450 7) A patent or copyright is a barrier to entry based on: A) ownership of a key necessary raw material. B) large economies of scale as output increases. C) government action to protect one producer. D) widespread network externalities in supply of the good or service. Answer: C Diff: 2 Page Ref: 445 8) A public franchise is: A) ownership of a key necessary raw material. B) government ownership and operation of a legal monopoly. C) government designation that a private firm is the only legal producer of a good or service. D) an unregulated monopoly necessary for the public good. Answer: C Diff: 2 Page Ref: 445 9) A public enterprise is: A) any private business that is not-for-profit. B) government ownership and operation of a legal monopoly. C) government designation that a private firm is the only legal producer of a good or service. D) an unregulated monopoly necessary for the public good. Answer: B Diff: 2 Page Ref: 445 10) A United States government patent lasts: A) forever. B) 50 years. C) 20 years. D) 7 years. Answer: C Diff: 2 Page Ref: 446 11) Governments grant patents to encourage: A) research and development on new products. B) competition. C) low prices. D) all of the above. Answer: A Diff: 2 Page Ref: 446 12) Governments grant patents to: A) compensate firms for research and development costs. B) encourage competition. C) encourage low prices. D) all of the above. Answer: A Diff: 2 Page Ref: 446 13) Patent protection is of vital importance for: A) furniture producers. B) software firms. C) pharmaceutical firms. D) auto makers. Answer: C Diff: 2 Page Ref: 446 14) Ownership of a key resource is important in: A) aluminum production. B) nickel production. C) profession sports. D) all of these. Answer: D Diff: 1 Page Ref: 447 15) A network externality is: A) having a network of suppliers and buyers for a good or service. B) having lobbyists to advocate a public franchise. C) a good or service whose usefulness increases with the number of people using it. D) a good or service that requires connection to a network for it to be useful. Answer: C Diff: 2 Page Ref: 448 16) A virtuous cycle is: A) using lobbyists to petition Congress to grant a public franchise. B) using monopoly profits to create new products for additional monopoly profits. C) attracting enough buyers initially to increase a products usefulness to attract more buyers. D) attracting enough sales to gain economies of scale. Answer: C Diff: 2 Page Ref: 449 17) For a natural monopoly to exist: A) a firm must continually buy up rivals. B) a firms long run average cost curve must exhibit diseconomies of scale. C) a firms long run average cost curve must exhibit economies of scale. D) a firm must have a patent. Answer: C Diff: 2 Page Ref: 449 18) A natural monopoly is characterized by: A) large marginal costs relative to fixed costs. B) small fixed costs relative to variable costs. C) large fixed costs relative to variable costs. D) fixed costs that are equal to variable costs. Answer: C Diff: 2 Page Ref: 450 19) A monopolists profit maximizing price and output is: A) where average total cost are smallest. B) where total costs are the smallest relative to price. C) where marginal revenue equals marginal cost and charging the price on market demand for that output. D) where price is as high as possible. Answer: C Diff: 3 Page Ref: 453 20) A monopoly: A) always earns a profit. B) is a price taker. C) must lower price to sell more of its product. D) all of the above. Answer: C Diff: 2 Page Ref: 452 21) If a monopolists price is $50 a unit and its marginal cost is $25, then: A) to maximize profit the firm should increase output. B) to maximize profit the firm should decrease output. C) to maximize profit the firm should continue to produce the output it is producing. D) not enough information is given to say say what the firm should do to maximize profit. Answer: D Diff: 3 Page Ref: 453 22) If a monopolists marginal revenue is $35 a unit and its marginal cost is $25, then: A) to maximize profit the firm should increase output. B) to maximize profit the firm should decrease output. C) to maximize profit the firm should continue to produce the output it is producing. D) not enough information is given to say say what the firm should do to maximize profit. Answer: A Diff: 2 Page Ref: 453 23) If a monopolists marginal revenue is $15 a unit and its marginal cost is $25, then: A) to maximize profit the firm should increase output. B) to maximize profit the firm should decrease output. C) to maximize profit the firm should continue to produce the output it is producing. D) not enough information is given to say say what the firm should do to maximize profit. Answer: B Diff: 2 Page Ref: 453 24) If a monopolists marginal revenue is $25 a unit and its marginal cost is $25, then: A) to maximize profit the firm should increase output. B) to maximize profit the firm should decrease output. C) to maximize profit the firm should continue to produce the output it is producing. D) not enough information is given to say say what the firm should do to maximize profit. Answer: C Diff: 2 Page Ref: 453 25) If a monopolists price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43, then: A) the firms average profit is $50. B) the firms average profit is $43. C) the firms average profit is $7. D) Not enough information is given to answer the question. Answer: C Diff: 2 Page Ref: 454 26) If a monopolists price is $50 at 63 units of output and marginal revenue equals marginal cost and average total cost equals $43, then the firms total profit is: A) $3,150. B) $2,709. C) $441. D) $7. Answer: C Diff: 3 Page Ref: 454 Refer to Figure 14.1 for the questions above. Figure 14.1 27) To profit maximize the firm in figure 14.1 will produce: A) Q1. B) Q2. C) Q3. D) Q4. Answer: B Diff: 3 Page Ref: 453 28) The profit maximize price for the firm in figure 14.1 is: A) P1. B) P2. C) P3. D) P4. Answer: C Diff: 3 Page Ref: 453 29) If average total costs are ATC1, the firm in figure 14.1 will: A) suffer a loss. B) break even. C) make a profit. D) face competition. Answer: C Diff: 3 Page Ref: 453 30) If average total costs are ATC2, the firm in figure 14.1 will: A) suffer a loss. B) break even. C) make a profit. D) face competition. Answer: B Diff: 3 Page Ref: 453 31) If average total costs are ATC3, the firm in figure 14.1 will: A) suffer a loss. B) break even. C) make a profit. D) face competition. Answer: A Diff: 3 Page Ref: 453 32) In figure 14.1, the difference between the monopoly output and the competitive output is: A) Q2-Q1. B) Q3-Q1. C) Q3-Q2. D) Q4-Q2. Answer: C Diff: 3 Page Ref: 456 33) Economic efficiency in a market occurs when: A) consumer surplus is maximized. B) producer surplus is maximized. C) consumer surplus plus producer surplus is maximized. D) price is as low as possible. Answer: C Diff: 2 Page Ref: 457 34) A profit maximizing monopolists price is: A) equal to what the price would be if the mononoplists industry were competitive. B) less than what the price would be if the mononoplists industry were competitive. C) greater than what the price would be if the mononoplists industry were competitive. D) not consistently related to price if the market were competitive. Answer: C Diff: 2 Page Ref: 456 35) Output under a monopoly is: A) equal to what output would be if the industry were competitive. B) less than what output would be if the industry were competitive. C) greater than what output would be if the industry were competitive. D) has no consistent relationship to what output would be if the industry were competitive. Answer: B Diff: 2 Page Ref: 456 36) Compared to perfect competition, under monopoly: A) consumer surplus is unchanged because price and output is the same. B) consumer surplus is decreased because price is higher and output is lower. C) consumer surplus is increased because price is higher and output is the same. D) consumer surplus is eliminated. Answer: B Diff: 2 Page Ref: 457 37) Compared to perfect competition, a monopoly: A) increases consumer surplus. B) causes a deadweight welfare loss. C) increases total surplus. D) all of the above. Answer: B Diff: 2 Page Ref: 457 38) Compared to perfect competition, with monopoly: A) consumer surplus is reduced. B) output is reduced. C) total surplus is reduced. D) all of the above. Answer: D Diff: 2 Page Ref: 457 39) Relative to a perfectly competitive market, monopoly result in: A) a gain in producer surplus is equal to the gain in consumer surplus. B) a gain in producer surplus is equal to the loss in consumer surplus. C) a gain in producer surplus is less than the loss in consumer surplus. D) None of these occur. Answer: C Diff: 2 Page Ref: 457 40) Market power is: A) consumers ability to determine what is produced or consumer sovereignty. B) a firm being able to advertise its product and succeed in selling more output. C) the ability of a firm to sell at a lower price than rival sellers. D) the ability of a firm to charge a price higher than marginal cost. Answer: D Diff: 2 Page Ref: 457 41) The type of firms that do not have market power are: A) perfectly competitive. B) monopolistically competitive. C) oligopoly. D) monopolies. Answer: A Diff: 1 Page Ref: 457 42) Market power in the U.S. causes: A) many people to be poor. B) a small loss of economic efficiency. C) greater pollution than there otherwise would be. D) many firms to be driven out of business. Answer: B Diff: 2 Page Ref: 458 43) The size of a deadweight loss in a market is reduced by: A) government legislating a ceiling price. B) government legislating a price floor. C) market price being close to marginal cost. D) all of the above. Answer: C Diff: 2 Page Ref: 458 44) A market economy benefits from market power: A) if the majority of the population are entrepreneurs. B) if firms with market power do research and development with the profits earned. C) if market power gets so bad the government creates public enterprises. D) under no circumstances. Answer: B Diff: 2 Page Ref: 458 45) If a firm has market power and has earned monopoly profits for some time, Joseph Schumpeter would predict: A) the government will eventually have to control these firms. B) the public will get fed up and refuse to buy those products. C) new products will drive older products and firms with market power out of the market. D) all of the above. Answer: C Diff: 2 Page Ref: 458 46) The first federal law passed to control monopolies was the: A) Cellar-Kefauver Act. B) Clayton Act. C) Federal Trade Commission Act. D) Sherman Act. Answer: D Diff: 1 Page Ref: 459 47) Thetrust in antitrust refers to: A) citizens who do not trust the government to deal with market power. B) a board of trustees that had collusive control over different companies. C) the type of governmental control in antitrust laws. D) the trust collusive firms have that each member will live by the agreement. Answer: B Diff: 2 Page Ref: 459 48) The Sherman Act prohibited: A) marginal cost pricing. B) setting price above marginal cost. C) collusive price agreements among rival sellers. D) selling below average total cost. Answer: C Diff: 1 Page Ref: 459 49) Shortly after the passage of the Sherman Act and a narrow Supreme Court interpretation of the Act: A) setting price equal to marginal cost became the only way to avoid prosecution. B) all industries became perfectly competitive. C) a wave of mergers took place. D) technological change slowed. Answer: C Diff: 2 Page Ref: 459 50) The Clayton Act prohibited: A) all vertical mergers. B) all horizontal mergers. C) any merger if its effect was to substantially lessen competition or create a monopoly. D) all conglomerate mergers. Answer: C Diff: 1 Page Ref: 459 51) The Federal Trade Commission Act: A) gave the FTC full power to regulate mergers. B) closed the loopholes in the Sherman and Clayton Acts. C) divided enforcement of antitrust laws between the FTC and the Department of Justice. D) prohibited charging buyers different prices if the result would reduce competition. Answer: C Diff: 2 Page Ref: 459 52) If Ford Motor Company and General Motors were to merge, it would be an example of a: A) vertical merger. B) horizontal merger. C) conglomerate merger. D) none of the above. Answer: B Diff: 1 Page Ref: 460 53) If U.S. Steel and General Motors merged, this would be an example of a: A) vertical merger. B) horizontal merger. C) conglomerate merger. D) none of the above. Answer: A Diff: 1 Page Ref: 460 54) When a proposed merger between two companies is being reviewed by the government, the relevant market is defined by: A) whether or not there are close substitutes for the products of the two firms. B) how elastic the demand is for each firms product. C) counting the number of firms that are producing the same product. D) how much advertising is done in the industry. Answer: A Diff: 2 Page Ref: 462 55) A Herfindahl-Hirschman Index is calculated by: A) summing the amount of sales by the four largest firms and dividing by total industry sales. B) dividing the number of firms wanting to merge by the total number in the industry. C) summing the squares of the market shares of each firm in the industry. D) summing the advertising expenditure of the firms that want to merge by total industry advertising expenditures. Answer: C Diff: 2 Page Ref: 462 56) Natural monopolies in the United States are generally regulated by: A) Federal Trade Commission. B) Department of Justice. C) local or state regulatory commissions. D) the Department of Commerce. Answer: C Diff: 1 Page Ref: 464 57) If a natural monopoly regulatory commission set a price where marginal cost is equal to demand: A) the firm would earn monopoly profits. B) Economic efficien