Q1. A market served by only one firm is calleda:

A.

oligopoly.

B.

monopoly.

C.

perfectly competitive market.

D.

Any of the above could be correct.

Q2.Which of the following is NOT a barrier to entry formononoply?

A.

a large number of existing firms in a market

B.

a patent

C.

large economies of scale

D.

government licensing

Q3. A network externality iswhen:

A.

the value of a product to a consumer requires another product.

B.

a firm has a patent.

C.

the value of a product to a consumer increase with the number of other consumers who use it.

D.

a firm has large economies of scale.

Q6. Which of the following best characterizes the tradeoff faced by a monopolist when deciding what quantity toproduce?

A.

The firm can increase itsoutput, but needs to lower its price for only the marginal unit of output.

B.

The firm gets more revenue from new customers by increasingoutput, but gets less revenue from existing customers given that it lowered its price.

C.

The firm can increase itsoutput, but to do so it must charge a higher price to all customers.

D.

The firm gets less revenue from new customers by increasingoutput, but gets more revenue from existing customers given that it lowered its price.

Q8. How do monopoly prices and quantities produced differ from perfectly competitive outcomes, all other thingsequal?

A.

Monopoly prices and quantities are both lower than competitive outcomes.

B.

Monopoly prices are lower than competitive prices but monopoly quantities are higher than competitive quantities.

C.

Monopoly prices and quantities are both higher than competitive outcomes.

D.

Monopoly prices are higher than competitive prices but monopoly quantities are lower than competitive quantities.

Q9. A monopolist maximizes profits by setting the quantitywhere:

A.

total revenue is as high as possible.

B.

marginal revenue is equal to marginal cost.

C.

marginal revenue is less than marginal cost.

D.

marginal revenue is greater than marginal cost.

Q10. Recall the Application about setting the price of tickets for Major League Baseball games to answer the following question.

According to theApplication, what is the reason that MLB teams are setting the price of their tickets where the marginal revenue wasnegative?

A.

The pricing is set by the Federal Trade Commission.

B.

They can get additional revenue from concessions.

C.

MLB owners only care about popularity.

D.

TV revenues are way larger than ticket revenues.

Q11. In the longrun, the main reason that a monopolist can earn positive economic profits while a perfectly competitive firm cannotis:

A.

there are no barriers to entry in a perfectly competitive market.

B.

the monopolist faces an inelastic demand for its product.

C.

perfectly competitive firms face greater opportunity costs.

D.

monopolists enjoy greater economies of scale.

Q12. Which of the following is true in the long run for both monopoly and perfectly competitiveindustries?

A.

Firms will go out of business if they cannot charge a price that is at least equal to average total cost.

B.

There are low barriers to entry.

C.

Firms produce at levels that are economically efficient.

D.

Firms can earn positive economic profits in the long run.

Q13. As amonopolist's profit-maximizing quantity moves further away from the competitiveindustry's profit-maximizingquantity,

A.

the smaller the deadweight loss in the market.

B.

the larger the profits of the monopoly.

C.

the larger the deadweight loss in the market.

D.

the harder it is for the firm to stay as a monopoly.

Q14. As amonopolist's profit-maximizing quantity moves further away from the competitiveindustry's profit-maximizingquantity,

A.

the larger the profits of the monopoly.

B.

the smaller the deadweight loss in the market.

C.

the harder it is for the firm to stay as a monopoly.

D.

the larger the deadweight loss in the market.

Q15. When a pharmaceutical firm spends millions of dollars to lobby and convince Congress to extend the number of years a firm is awarded patentprotection, then the pharmaceutical firm is engagingin:

A.

price discrimination.

B.

fraud.

C.

rent seeking.

D.

marginal cost pricing.

Q16. When a local casino spends millions in TV ads convincing town residents to reject anothercasino's bid to operate in thearea, the casinois:

A.

acting fraudulently.

B.

rent seeking.

C.

allocating resources efficiently.

D.

seeking rent controls.

Q17. In the case of rentseeking behavior in a monopolymarket:

A.

the net loss to society is less than it would have been in the absence of rentseeking behavior.

B.

the net loss to society is greater than it would have been in the absence of rentseeking behavior.

C.

the net loss to society is the same as it would have been in the absence of rentseeking behavior.

D.

monopoly profit is higher than if the monopolist did not engage in rentseeking behavior, but the net loss to society is lower.

Q18. Recall the Application about the Native American Tribes in Michigan that had a monopoly in casino gambling to answer the following question.

Recall the Application. The tribes agreed to pay the state a share of their profits in exchange for being granted a monopoly in casino gambling. What economic concept does thisillustrate?

A.

irrational behavior

B.

profit maximization

C.

rent seeking

D.

None of the above

Q19. Why do pharmaceutical firms benefit most from patentprotection?

A.

Because pharmaceutical drugs need to be controlled by the government.

B.

Because research and development of drugs require large expenditures that need to be recouped while the patent is still valid.

C.

Because only physicians can legally prescribe pharmaceutical drugs.

D.

Because pharmaceutical companies pay large taxes to the government.

Q20. Price discrimination is when a firmcharges:

A.

different prices for different goods to different consumers.

B.

different prices for the same goods to different consumers.

C.

the same price to all consumers.

D.

None of the above are correct.