Q&A Hero

Q: Refer to the accompanying figure to answer the following questions.The total revenue when a firm is profit maximizing isa. $70,000. b. $50,000. c. $67,500.d. $60,000.e. $25,000.

Q: Refer to the accompanying figure to answer the following questions.The profit-maximizing price and quantity are ________, respectively.a. $25 and 1,000 b. $40 and 1,500 c. $45 and 1,500d. $50 and 1,000e. $70 and 1,000

Q: Refer to the accompanying figure to answer the following questions. If a firm is producing a quantity of 100 and charging a price of $25, ita. should raise production to 150 units but lower the price to $10 to maximize profits.b. should raise production to 150 units and continue to charge $25 to maximize profits.c. should keep production at 100 units but lower the price to $13 to maximize profits.d. should keep production at 100 units and lower the price to $10 to maximize profits.e. is already maximizing profits and should not change the price or quantity produced.

Q: Refer to the accompanying figure to answer the following questions. When this firm is producing at the profit-maximizing price and quantity, its total revenue isa. $1,000. b. $1,950. c. $2,500.d. $3,750.e. $5,000.

Q: Refer to the accompanying figure to answer the following questions. The profit-maximizing price and quantity are ________, respectively.a. $25 and 100 b. $25 and 150 c. $13 and 100d. $10 and 100e. $10 and 150

Q: A big difference between a competitive firm and a monopolist is that a monopolista. does not charge a price equal to marginal revenue.b. does not set marginal revenue equal to marginal cost to maximize profits.c. does not try to maximize profits.d. can always make positive economic profits.e. cannot set its price at the market price.

Q: Which of the following is a characteristic of a monopoly but not of a competitive market? a. A monopoly contains many firms. b. price > marginal cost c. price < marginal cost d. price = marginal cost e. A firm in a monopoly is a price taker.

Q: To maximize profits, a monopolist chooses the quantity where a. revenues are maximized. b. marginal revenue equals zero. c. marginal cost equals zero. d. marginal revenue equals marginal cost. e. costs are minimized.

Q: The equation of a firms marginal revenue curve is estimated to be P = 50 - Q (quantity), and the equation of its marginal cost curve is estimated to be P = 10 + 3Q. The profit-maximizing price for this firm is a. $5. d. $50. b. $10. e. $40. c. $15.

Q: Refer to the accompanying figure to answer the following questions.At the profit-maximizing output in a monopoly controlled market, the price a monopolist charges is ________ cost.a. below marginal b. above marginal c. above average totald. below average totale. equal to marginal

Q: Refer to the accompanying figure to answer the following questions.When the price changes from $50 to $30, the output effect leads to an increase of ________ in revenue.a. $20 b. $15 c. $900d. $600e. $450

Q: When marginal revenue is positive, the a. lost revenues associated with the price effect outweigh the revenue gains created by the output effect. b. lost revenues associated with the price effect are outweighed by the revenue gains created by the output effect. c. output effect is relatively small compared to the price effect. d. firm is maximizing revenues. e. firm cannot be maximizing profits.

Q: When a monopolist lowers a price from $80 to $70, the quantity that the firm is able to sell increases from 100 to 150. The change in revenue associated with the price effect is equal toa. $3,500. b. -$3,500. c. $1,000.d. -$1,000.e. $4,000.

Q: Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the following questions.PriceQuantityFixed CostVariable Cost$150$5 $0$131$5 $4$112$5 $9 $93$5$14 $74$5$20 $55$5$29When a monopolist lowers its price from $80 to $70, the quantity it is able to sell increases from 100 to 150. The change in revenue associated with the output effect is equal toa. $3,500. b. -$3,500. c. $500.d. -$500.e. $4,000.

Q: The demand curve for Arnolds Airport Shuttle is downward sloping. With only this information, it can be concluded that Arnolds Airport Shuttle a. is the only firm in the market for airport shuttles. b. is currently maximizing profits. c. is a price maker. d. makes economic profits. e. should produce where the demand curve crosses marginal cost.

Q: Refer to the accompanying figure to answer the following questions.This profit-maximizing firms total profit is equal toa. $160. b. -$160. c. $320.d. -$320.e. $100.

Q: Refer to the accompanying figure to answer the following questions.This firma. is in a competitive market.b. can make a profit.c. does not want to maximize profit.d. cannot make a profit.e. is not a monopolist because it is incurring a loss.

Q: If a monopolist is producing a quantity where marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should ________ to maximize profits. a. increase production and lower the price b. decrease production and increase the price c. continue producing at the current price d. increase production and increase the price e. decrease production and decrease the price

Q: Clarices Campground is the only campground located in Abilene, Texas. Clarices Campgrounds demand curve isa. perfectly elastic. b. perfectly inelastic. c. horizontal.d. the market demand curve.e. upward sloping.

Q: At low price levels, demand tends to be ________ and the price effect is ________, relative to the output effect. a. inelastic; small d. elastic; large b. inelastic; large e. elastic; insignificant c. elastic; small

Q: At high price levels, demand tends to be ________ and the price effect is ________, relative to the output effect.a. inelastic; small b. inelastic; large c. elastic; smalld. elastic; largee. inelastic; insignificant

Q: When marginal revenue is negative, the a. lost revenues associated with the price effect outweigh the revenue gains created by the output effect. b. lost revenues associated with the price effect are outweighed by the revenue gains created by the output effect. c. output effect is negative. d. firm is maximizing revenues. e. firm cannot be maximizing profits.

Q: The marginal revenue lies ________ the demand curve because there is a(n) ________ effect whenever the price is lowered.a. above; price b. below; price c. below; outputd. above; outpute. on; price

Q: Because the demand curve for a monopolist is downward sloping, a. there is no limit on the monopolists ability to make a profit. b. the monopolist can sell its product at any price it wants. c. the monopolist can sell as many units of its product as it wants. d. the monopolist is a price taker. e. the monopolist is a price maker.

Q: The demand curve for the product of a firm in a competitive market is ________, and the demand curve for the product of a monopolist is ________. a. perfectly inelastic; downward sloping b. horizontal; perfectly inelastic c. downward sloping; perfectly elastic d. downward sloping; horizontal e. perfectly elastic; downward sloping

Q: Which of the following can fall below the x axis when graphing price and cost against quantity?a. demand curve b. marginal cost curve c. total cost curved. fixed cost curvee. marginal revenue curve

Q: The profit-maximizing rule for a monopolist is a. marginal revenue = marginal cost. b. price = marginal cost. c. price = marginal revenue. d. average total cost = marginal revenue. e. average total cost = marginal cost.

Q: The output effect refers to howa. lower prices affect the quantity sold. b. firms can set their prices. c. firms choose their quantities.d. lower prices affect revenue.e. lower output affects the price.

Q: The price effect refers to howa. lower prices affect the quantity sold. b. firms can set their prices. c. firms choose their quantities.d. lower prices affect revenue.e. lower output affects the price.

Q: A price maker a. is a characteristic held by a perfectly competitive firm. b. must set the price at the market price. c. has some control over the price it charges. d. can sell its product at any price. e. will always make economic profits.

Q: Both monopolies and competitive firmsa. are price takers. b. are price makers. c. face barriers to entry.d. make long-run economic profits.e. try to maximize profits.

Q: Why do copyrights expire after a set period of time?a. so that creative industries will operate as efficiently as possibleb. to provide an incentive for artists and other creators of original workc. to ensure that creative activity gets the publicity it deservesd. so that in the long run, creative works are readily and cheaply availablee. to help writers and musicians become price makers

Q: Why do governments issue patents?a. Patents foster economies of scale.b. Inventors have a moral right to control their inventions.c. Patents ensure that socially beneficial goods are affordable.d. Firms benefit from the publicity associated with patents.e. The prospect of large profits is an incentive to innovation.

Q: One argument against patent and copyright laws is that theya. provide incentives to invest in research and development.b. protect intellectual property.c. hinder creativity.d. increase competition.e. limit exposure that can benefit companies and individuals.

Q: After a patent on a product expires, a. other firms must wait to mimic the product. b. all negative and positive externalities are internalized. c. rivals can start to mimic the product. d. no other firms can mimic the product. e. no further profits are able to be made by the original producer of the good.

Q: Patents and copyrights cana. create strong incentives to develop new medicines.b. provide heavy competition in markets.c. never lead to deadweight loss.d. assure firms that their products will make a profit.e. be considered natural barriers.

Q: Patents and copyright lawa. are natural barriers.b. create more competition.c. mean more varieties of goods and services at different price levels.d. assure inventors that no one else will sell their ideas.e. always result in zero economic profits.

Q: Apple and Google apply for hundreds of patents every year. These patents a. allow Apple and Google to produce goods with no risk of monetary loss. b. provide incentives for Apple and Google to spend large amounts of money up front on research and development of new products. c. create more competition among Apple, Google, and other tech firms than would occur without government intervention. d. make it easy for Apple and Google products to be similar. e. make it easy for other firms to compete with Apple and Google.

Q: What is the usual rationale for governments to issue monopoly-promoting licenses to firms providing services such as trash collection?a. lower risk for investors in the firmsb. increased customer choice c. better-quality servicesd. economies of scalee. public safety

Q: In instances when having a single firm in the market makes sense, governments ________ to minimize negative externalities.a.will grant a patent or copyrightd.hand out subsidiesb.require licensese.break down barriers to entryc.deregulate industries

Q: Licensing a. is a natural barrier. b. creates more competition. c. causes more varieties of goods and services at different price levels. d. creates an opportunity for corruption. e. always results in zero economic profits.

Q: Market-created and government-created barriers a. are the same thing. b. are regarded by all economists as bad. c. increase competition in markets. d. create monopolies. e. are problems solved only by government intervention.

Q: Two government-created barriers to entry area.licensing and economies of scale.b.economies of scale and patent system/copyright law.c.licensing and patent system/copyright law.d.economies of scale and control of resources.e.licensing and control of resources.

Q: In the soda industry, production costs per unit continue to fall as the firm expands. In this type of industry, smaller rivals trying to enter the industry a. will easily be able to gain market power. b. have lower average costs. c. do not have high fixed costs. d. will have much higher average costs. e. experience a government-created barrier.

Q: A natural monopoly a. exists when many sellers experience lower average total costs than potential competitors do. b. exists when a firm has sole ownership of a natural resource. c. is an example of a government-created barrier. d. is needed to make a profit in the long run. e. exists when a single seller experiences lower average total costs than any potential competitor.

Q: Economies of scale is an example ofa. rent seeking.b. consumer surplus. c. a government-created barrier. d. an externality. e. a natural barrier.

Q: Economies of scale exist a. only for monopolists. b. when long-run average total costs increase. c. when long-run average total costs decrease. d. when long-run average total costs are constant. e. when governments create barriers to entry.

Q: Reginald has developed a new social media site that he feels can compete heavily with Facebook. Unfortunately, he cannot find someone to lend him enough money to market his product to consumers. Reginald is facing which kind of barrier to entry?a.only for monopolists.b.when long-run average total costs increase.c.when long-run average total costs decrease.d.when long-run average total costs are constant.e.when governments create barriers to entry.

Q: Raising capital to compete against an entrenched monopolist a. is very easy. b. is unnecessary. c. can be done only through private investors. d. is very difficult. e. can be done only through banks.

Q: Problems raising capital is an example ofa. a natural barrier.b. consumer surplus. c. a government-created barrier.d. an externality.e. inefficient output and price.

Q: Ash is the preferred wood to be used in the production of baseball bats. If a company was to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created?a.control of resourcesd.licensingb.problems raising capitale.patents and copyright lawc.economies of scale

Q: The best way to limit competition is to a. lobby for a government-created barrier. b. charge a low price. c. produce a high quantity. d. control a resource that is essential in the production process. e. minimize costs.

Q: Control of resources is an example ofa. an externality. b. consumer surplus. c. a government-created barrier.d. a natural barrier.e. rent seeking.

Q: Three natural barriers to entry area. control of resources, patents and copyright law, and licensing.b. economies of scale, problems raising capital, and control of resources.c. problems raising capital, patents and copyright law, and licensing.d. control of resources, patents and copyright law, and economies of scale.e. control of resources, economies of scale, and licensing.

Q: Control of resources, problems raising capital, and economies of scale are all examples ofa. government-created barriers. b. market structures.c. patents and copyright laws.d. price makers.e. natural barriers.

Q: Which of the following is NOT an example of a natural barrier to entry? a. A software firm cannot get a loan to fund development of a new computer operating system. b. A manufacturing firm has to buy a rare metal from the one company that controls most of the worldwide supply. c. A small soft-drink company struggles to produce its product as cheaply as its much larger competitor can. d. A single utility firm can deliver services to every home in an area more efficiently than a cluster of competing firms could. e. A patent gives a pharmaceutical firm the exclusive right to manufacture and sell an anticancer drug.

Q: The typical result of monopoly is ________ prices and ________ output than we find in a competitive market.a. lower; lower b. higher; higher c. higher; lowerd. lower; highere. higher; the same

Q: Which of the following is NOT a necessary characteristic of monopolies? a. Prices are set by the seller, not the consumer. b. There is just one firm in the role of seller. c. The market is for a unique product without close substitutes. d. Government plays a role in maintaining barriers to entry. e. The seller has a high level of market power.

Q: In the movie Forrest Gump, the title characters Bubba Gump Shrimp Company is able to gain monopoly power in its market because ofa. control of an essential resource. b. high barriers to entry. c. a unique product.d. economies of scale.e. Forrests good luck.

Q: Monopoly power is a measure of a. a firms ability to set prices. b. the uniqueness of a firms product. c. the existence of close substitutes for a firms product. d. a firms ability to overcome barriers to entry in its market. e. a firms profitability.

Q: Two conditions allow a single seller to become a monopolist. Those two conditions are that the firm must a. have something unique to sell and it must be able to estimate its demand curve. b. have something unique to sell and it must have a way to prevent potential competitors from entering the market. c. be able to estimate its demand curve and it must have a way to prevent potential competitors from entering the market. d. be able to segregate its consumers and it must have a way to prevent potential competitors from entering the market. e. have something unique to sell and it must be able to segregate its consumers.

Q: Barriers to entry a. measure the ability of firms to set the price for a good. b. do not exist for monopolies. c. always lead to profits. d. restrict the entry of new firms into the market. e. exist for perfectly competitive firms.

Q: Monopolists a. enjoy market power for their specific product. b. have no market power for their specific product. c. will never experience a loss. d. always experience economies of scale. e. exist in all markets.

Q: CHAPTER 10: Understanding MonopolyA monopolya. always makes a profit.b. can force consumers to purchase what it is selling.c. is characterized by a single seller who produces a well-defined product for which there are no good substitutes.d. always has naturally created barriers.e. always has government-created barriers.

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