Q&A Hero

Q: Firms engage in legal price discrimination if they a. charge different prices for the same good based on tastes. b. charge different prices for the same good based on race. c. charge different prices for the same good based on the locational costs associated with producing the good. d. charge the same prices to all. e. never reveal their pricing plan to ineligible customers.

Q: Internet service providers such as Comcast are able to price discriminate easily for many reasons. Which of the following is a reason for them to price discriminate? a. They offer better services than the competition. b. They can easily identify new customers from old customers. c. They let the customers choose from different packages based on income. d. There are many competitors providing Internet services. e. Some companies offer additional services such as cable and phone.

Q: An executive, a surfer, and a schoolteacher each decide to fly from Atlanta, Georgia, to Honolulu, Hawaii. The schoolteacher can travel only during the months of June and July. The executive must travel in May for a meeting with her overseas board of directors. The surfer can travel anytime during the calendar year, but he faces a limited budget. The lowest airfare for each month is summarized in the following table. Assuming that the airline faces a constant cost of production each month for a flight, why is it beneficial for the airline to charge different prices each month? January $804 February $804 March $843 April $843 May $1,052 June $943 July $949 August $829 September $804 October $804 November $829 December $829 a. The airline wants to attract more business executives as customers. b. Because the airline is able to separate its customers into distinct groupsthose who must travel during the summer months and those who can travel any time of the yearit is able to price discriminate and enjoy higher profits. c. The airline wants to restrict the number of customers who fly on a limited budget because it makes less profit on those ticket sales. d. Many schoolteachers travel with their families, so airlines prefer to make ticket prices reasonable for them. e. Because surfers often travel with oversized luggage, airlines want to make ticket prices attractive to these customers so that the airline can claim the extra baggage fees.

Q: Price discrimination can help improve efficiency in the market because goods are sold to more people, thus increasing profits. If all consumers have the same tastes, will a firm be able to price discriminate? a. yes, because the market is homogeneous b. yes, as long as reselling is prohibited in the market c. no, because the firm will not be able to distinguish among groups of consumers d. no, because the similarities among consumers will lead to collusion among buyers e. yes, because there will be a monopoly in the market (because all consumers want to purchase the same goods and services)

Q: A privately owned firm that is regulated by the government is very similar to a firm that the government owns becausea. both make economic profits. b. neither has a profit motive.c. both minimize costs.d. both result in no deadweight loss.e. neither earn economic profits.

Q: In the case of a natural monopoly, which government response is LEAST practical? a. leave the monopolist firm free to maximize its profits b. buy the monopolist firm and operate it as a government-owned entity c. force the monopolist to break up into firms that compete with one another d. subsidize the monopoly, so it can operate at the socially optimal production level e. regulate the monopolist firms price, to equal average total cost

Q: One way the government could regulate a natural monopoly at the marginal cost level would be to a. allow the natural monopoly to produce at the profit-maximizing point. b. tax the monopoly. c. place a tariff on the monopoly. d. give the monopoly a patent. e. subsidize the monopoly.

Q: Breaking up a company that has a natural monopoly would a. result in higher production costs. b. result in lower production costs. c. benefit society. d. result in lower prices for consumers. e. increase government tax revenue.

Q: Refer to the accompanying figure to answer the following questions. If this firm is regulated at a point where price is $30, society would experience ________ in deadweight loss.a. $0 b. $112.50 c. $720d. $525e. $240

Q: Refer to the accompanying figure to answer the following questions. If the government forces a firm to produce at the point that generates the greatest welfare for society, that firm would make ________ in profits.a. $1,500 b. -$720 c. $720d. -$240e. $240

Q: Refer to the accompanying figure to answer the following questions. A profit-maximizing firm without any price regulations would make ________ in profits.a. $1,500 b. -$720 c. $720d. -$240e. $240

Q: Refer to the accompanying figure to answer the following questions. At which price and quantity combination would the government regulate this firm to get as close as possible to the most efficient point for society?a. A and E b. B and F c. C and Gd. D and He. D and E

Q: Refer to the accompanying figure to answer the following questions. Which of the following is the most efficient price and quantity combination for society?a. A and E b. B and F c. C and Gd. D and He. D and E

Q: Refer to the accompanying figure to answer the following questions. Which price and quantity combination is undesirable for both the monopolist firm and society?a. A and E b. B and F c. C and Gd. D and He. A and H

Q: It is unrealistic to regulate a natural monopoly at marginal cost pricing because a. the government is not allowed to regulate markets. b. marginal cost pricing ends up having the natural monopoly firm earn zero economic profits. c. with this type of regulation, the firm will want to shut down, and that outcome is not desirable for society. d. regulating a market causes more deadweight loss. e. firms do not need to follow regulations from the government.

Q: The ________ cost pricing rule means that the government can regulate a natural monopoly to minimize deadweight loss without forcing the private firm out of the market.a. marginal b. average c. totald. fixede. variable

Q: Which pricing rule generates the greatest welfare for society?a. marginal cost b. average cost c. total costd. fixed coste. variable cost

Q: Which provision in the U.S. Constitution blocks the erection of trade barriers between neighboring states? a. No State shall, without the consent of Congress, lay any imposts or duties on imports or exports. b. . . . nor shall private property be taken for public use, without just compensation. c. The Congress shall have power to lay and collect taxes, duties, imposts and excises. d. The judicial power of the United States shall not . . . extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state. e. The powers not delegated to the United States by the Constitution . . . are reserved to the States respectively.

Q: The point of the 1890 Sherman Act was to a. nationalize industries where economies of scale were especially important. b. prevent monopoly practices and promote commercial competition. c. make rent seeking through lobbying of public officials illegal. d. forbid states from imposing import tariffs on other states. ANS: B DIF: Moderate REF: Solutions to the Problems of Monopoly

Q: By reducing trade barriers, the government a. reduces imports. b. increases the price of the imported good. c. reduces exports. d. decreases efficiency. e. decreases deadweight loss.

Q: One benefit from tariffs would be a. the increase in efficiency. b. the elimination of deadweight loss. c. the increase in consumer surplus. d. the protection of domestic businesses. e. more imports into the country.

Q: Reducing trade barriers creates ________ competition, ________ the influence of monopoly, and ________ the efficient use of resources.a. less; reduces; promotes b. more; reduces; promotes c. less; increases; promotesd. more; reduces; hinderse. more; increases; hinders

Q: A tariff is a(n) a. tax on an import. b. tax on domestically produced and sold products. c. natural barrier to entry. d. example of a market structure. e. way to promote competition.

Q: When the government passes antitrust laws in an industry, we see a. higher prices, lower output, and more choices. b. lower prices, higher output, and fewer choices. c. lower prices, higher output, and more choices. d. higher prices, lower output, and fewer choices. e. higher prices, higher output, and more choices.

Q: One way the government can restore competitiveness in a market is througha. patents. b. copyrightsc. tariffs.d. taxes.e. antitrust laws.

Q: One possible outcome of promoting competition isa. higher prices. b. lower output. c. eliminating deadweight loss.d. regulated markets.e. less efficiency.

Q: Antitrust laws are designed to a. promote monopoly practices. b. promote competition. c. increase prices. d. decrease output. e. promote awareness of government programs.

Q: The government has exercised control over monopoly practices since the passage of thea. Morrill Land-Grant Act of 1890. b. Gold Standard Act. c. Crimes Act.d. Sherman Act.e. Foraker Act of 1900.

Q: Harnessing the benefits of competition, reducing trade barriers, and regulating markets are three a. market structures. b. problems of the monopolist. c. solutions to the problem of scarcity. d. solutions to negative and positive externalities. e. solutions to the problems of monopoly.

Q: Three examples of solutions to the problems of a monopoly are harnessing the benefits of________, ________ trade barriers, and ________ markets.a. competition; reducing; regulating b. monopolies; reducing; regulating c. competition; increasing; regulatingd. monopolies; increasing; regulatinge. competition; increasing; deregulating

Q: Taxi medallions are an example ofa. perfect competition. b. a naturally created barrier to entry. c. a government-created barrier to entry.d. rent seeking.e. economies of scale.

Q: Lobbying the government to place harsh tariffs on imports is a form ofa. beneficial competition. b. market failure. c. deregulation.d. rent seeking.e. natural monopoly.

Q: Economists view rent seeking as a. a good way to inspire competition between firms. b. a good way to incentivize firms to invest in research and development. c. essential to solving the problem of scarcity. d. a detrimental form of competition. e. beneficial to the consumer.

Q: Sandras Steel Mill has decided that lobbying Congress to pass a tariff on imported steel will cost less than trying to modernize its facility to compete with foreign steel prices. Sandras Steel Mill will a. decide that lobbying is wrong and modernize its facility. b. participate in rent seeking and lobby Congress for the tariff. c. lobby Congress for the tariff and modernize its facility. d. produce more steel to attract more customers. e. lower its price to compete with the imported foreign steel.

Q: Rent seeking a. is desired by consumers. b. is not a type of competition. c. is a type of competition that leads to a market price and output. d. is a type of competition that leads to an undesirable outcome. e. occurs when resources are used to deregulate a market through the political process.

Q: When resources are used to secure monopoly rights through the political processa. firms are rent seeking. b. consumers are profit maximizing. c. total surplus is maximized.d. the government is deregulating.e. prices decrease.

Q: Rent seeking occurs when a. resources are used to deregulate a market through the political process. b. resources are used to maximize profits. c. resources are used to secure monopoly rights through the political process. d. two firms try to enter the same market. e. landlords attempt to raise the rent on tenants.

Q: If cable companies were in a highly competitive market, we would expect a. cable companies to make profits in the long run. b. customers to be unhappy about their cable package options. c. a company to be willing to sell specific channels as well as packaged options. d. cable companies to force us to choose between buying a little more cable than we really need or going without cable altogether. e. deadweight loss in the market.

Q: Most economists are against monopolies because a. monopolists do not maximize profits. b. monopolies produce too much of a product. c. monopolies offer consumers more choices than they need. d. monopolies can never produce the quantity that a perfectly competitive market would produce. e. monopolies offer less choice to consumers.

Q: We cannot purchase a cable subscription for single channels like the Food Network or Cartoon Network because cable companies a. act like perfectly competitive firms. b. are not interested in maximizing their profits. c. have no market power to sell individual channels. d. act like monopolies. e. are pressured by the government to provide channel packages.

Q: Maries Car Dealership is the only dealership in Victorville, California. The owner, Marie, experiences large economies of scale. Because she is the only seller of cars in the town, a. Marie has market power. b. Marie has no market power and must price at marginal cost. c. Marie can charge any price she wants and will still sell the number of cars that maximize her profits. d. consumer surplus is maximized in the car market. e. total economic surplus is maximized in the car market.

Q: When a town has a single cable provider a. the cable company usually offers many different cable packages to satisfy customers wants. b. customers must buy some cable channels they dont want in order to get the channels they do want. c. the government regulates the cable providers offerings. d. the cable provider is a price taker. e. the consumers experience no consumer surplus.

Q: Refer to the accompanying figure to answer the following questions.The consumer surplus that is transferred to the monopolist as a result of the monopolist taking over the market isa. $900. b. $150. c. $300.d. $100.e. $450.

Q: Refer to the accompanying figure to answer the following questions.Consumer surplus associated with a profit-maximizing monopoly is equal toa. $900. b. $600. c. $300.d. $100.e. $450.

Q: Refer to the accompanying figure to answer the following questions.The deadweight loss associated with this profit-maximizing monopoly is equal toa. $900. b. $600. c. $300.d. $100.e. $450.

Q: Refer to the accompanying figure to answer the following questions.The revenue received by the profit-maximizing monopolist isa. $900. b. $150. c. $300.d. $100.e. $450.

Q: Refer to the accompanying figure to answer the following questions.Which areas of the graph represent the consumer surplus transferred to the monopolist as a result of the monopolist taking over the market?a. A + B b. B + D + G + E + H c. C + Dd. A + B + C + D + Ee. E + H

Q: Refer to the accompanying figure to answer the following questions.Deadweight loss exists in a monopoly because the monopolista. charges a price equal to marginal cost, which is higher than the price charged in a competitive market.b. produces a quantity that is higher than the quantity produced in a competitive market.c. makes a positive economic profit in the short run.d. charges a price below marginal cost.e. charges a price that is above marginal revenue.

Q: Refer to the accompanying figure to answer the following questions.When a competitive market comes under the control of a monopoly, the quantity changes froma. D to E.b. E to D. c. C to A.d. B to A.e. A to B.

Q: Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant. This is mainly becausea. it costs the owners of the baseball teams more money to buy the beer from distributors.b. demand is much higher at a baseball game than at a bar.c. baseball team owners have market power and can charge a higher price when they are the only sellers of the beer.d. the government forces the owners of baseball teams to charge a high price.e. the owners baseball teams are not profit maximizing.

Q: Monopolies result in a(n) ________ level of output and provide ________ choice to consumers.a. inefficient; less b. inefficient; more c. efficient; lessd. efficient; moree. high; more

Q: Willow Park is a small community in Texas with only one gas station. The price of gasoline in Willow Park most likely a. never changes. b. is lower than in the big cities in Texas. c. is determined by competitive market forces. d. is higher than in the big cities in Texas. e. produces a surplus of gasoline.

Q: When a competitive market becomes controlled by a monopoly, the price ________ and the output ________.a. increases; stays the same b. increases; increases c. decreases; stays the samed. increases; decreasese. decreases; decreases

Q: The market price for a New York City taxi medallion is less today than it was in 2013. This is because a. the city instituted price caps as part of an effort to regulate the monopoly. b. New Yorkers have turned to walking and bicycling as ways to get around. c. ridesharing services like Uber have made the medallions less valuable. d. the city greatly increased the number of medallions by selling new ones. e. passenger-on-driver crime has made taxi driving a less desirable line of work.

Q: Which statement about rent seeking is INCORRECT? a. It may not involve rent in the sense of payment for the use of property. b. It is a form of beneficial competition. c. It aims at securing monopoly rights. d. It is motivated by a desire for increased profits. e. It is often associated with lobbying of policymakers.

Q: When a cable TV provider offers, say, ESPN and the Weather Channel together but not separately, the reason is that a. there is no demand for either one without the other. b. the provider is betting that customers will buy both rather than neither. c. government regulations limit the range of services a monopolist can offer. d. offering the two separately would be a market inefficiency. e. it is technologically much easier to keep them together.

Q: When several goods or services are sold together as a single take-it-or-leave-it package, that package is called a(n)a. bundle. b. grouping. c. cluster.d. fusion.e. aggregate.

Q: Monopoly leads to an inefficient level of the production of goods. This means that a. the total social benefit is not as high as it could be. b. the monopolists production costs are higher than necessary. c. government tax collected from the monopolist is less than it might be. d. externalities are not as large as they should be. e. fewer people are employed than might be.

Q: Inefficient output and price, few choices for consumers, and rent seeking are all problems associated witha. externalities. b. competitive markets. c. monopolies.d. scarcity.e. trade.

Q: Market failure occurs a. when the output level of the firm is efficient. b. when the output level of the firm is inefficient. c. when firms do not maximize profits. d. only in the presence of a monopoly. e. only in the presence of externalities.

Q: The high-speed Internet access technology that raises the greatest concerns about monopoly control of infrastructure isa. satellite broadband.b. fiber optic cable. c. DSL.d. mobile broadbande. dial-up.

Q: For movement along the demand curve, from an old position to a new one, the output effect is quantified as a. the old quantity times the change in price. b. the new price times the change in quantity. c. the old price divided by the change in quantity. d. the new quantity times the change in price. e. the new price times the old quantity.

Q: The monopolists preferred production level, for maximum profit, is determined by the intersection of which two curves? a. demand and marginal cost b. demand and marginal revenue c. marginal revenue and marginal cost d. marginal cost and average total cost e. demand and average total cost

Q: Refer to the accompanying figure to answer the following questions. For a firm in a competitive market, the demand curve is horizontal, as shown.Under what circumstances will a manufacturing firm facing foreign competition generally lobby for trade barriers rather than improve its production and delivery processes?a. when the foreign goods are more expensive than the firmsb. when no improvement is possiblec. when the foreign goods are of inferior qualityd. when lobbying is cheapere. when rent seeking is illegal

Q: Refer to the accompanying figure to answer the following questions.When marginal revenue intersects marginal cost on a graph,a. profits are maximized for a monopolist but not for a competitive firm.b. profits are maximized for a competitive firm but not for a monopolist.c. a monopolist prices the good at that point.d. a monopolist always makes an economic profit.e. a monopolist must go up to the demand curve to find the price.

Q: Refer to the accompanying figure to answer the following questions.The profit when a firm is profit maximizing isa. $70,000. .b. $50,000. c. $20,500.d. $20,000e. $25,000.

Q: Refer to the accompanying figure to answer the following questions.The total cost 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 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.