Kinh tế vi mô UEH - (Bản tiếng Anh) Ôn tập trắc nghiệm chương 15

Chapter 15 Monopoly TRUE/FALSE 1. Monopolists can achieve any level of profit they desire because they have unlimited market power. ANS: F DIF: 2 REF: 15-0 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 2. Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices. ANS: T DIF: 2 REF: 15-0 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 3. One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms. ANS: F DIF: 2 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Definitional 4. The fundamental cause of monopolies is barriers to entry. ANS: T DIF: 2 REF: 15-1 LOC: Monopoly TOP: Monopoly MSC: Interpretive NAT: Analytic 5. The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree. ANS: T DIF: 1 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 6. The De Beers Diamond company is not worried about differentiating its product from all other gemstones. ANS: F DIF: 1 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 7. The amount of power that a monopoly has depends on whether there are close substitutes for its product. ANS: T DIF: 1 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 8. If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli, a rare stone used in jewelry which is found only in Afghanistan, the company benefits from a barrier to entry. ANS: T DIF: 1 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Applicative 9. Copyrights and patents are examples of barriers to entry that afford firms monopoly pricing powers. ANS: T DIF: 2 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Patents MSC: Interpretive 10. If the government deems a newly invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years. ANS: F DIF: 1 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Patents MSC: Interpretive 11. A natural monopoly has economies of scale for most if not all of its range of output. ANS: T DIF: 2 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Natural monopoly MSC: Applicative 12. Declining average total cost with increased production is one of the defining characteristics of a natural monopoly. ANS: T DIF: 1 REF: 15-1 NAT: Analytic LOC: Monopoly TOP: Natural monopoly MSC: Definitional 1002 Chapter 15/Monopoly 1003 13. A monopolist maximizes profit by producing an output level where marginal cost equals price. ANS: F DIF: 2 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Profit maximization MSC: Interpretive 14. A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost. ANS: F DIF: 2 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Profit maximization MSC: Applicative 15. Average revenue for a monopoly is the total revenue divided by the quantity produced. ANS: T DIF: 1 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Average revenue MSC: Definitional 16. For a monopoly, marginal revenue is often greater than the price they charge for their good. ANS: F DIF: 1 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Marginal revenue MSC: Interpretive 17. Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost. ANS: T DIF: 2 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Profit maximization MSC: Interpretive 18. Like competitive firms, monopolies charge a price equal to marginal cost. ANS: F DIF: 2 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Profit maximization MSC: Interpretive 19. A monopolist produces where P > MC = MR. ANS: T DIF: 2 REF: LOC: Monopoly TOP: Profit maximization 15-2 NAT: Analytic MSC: Interpretive 20. A monopolist produces where P = MC = MR. ANS: F DIF: 2 REF: LOC: Monopoly TOP: Profit maximization 15-2 NAT: Analytic MSC: Interpretive 21. A monopolist does not have a supply curve because the firm’s decision about how much to supply is impossible to separate from the demand curve it faces. ANS: T DIF: 2 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Supply curve MSC: Interpretive 22. A monopolist’s supply curve is vertical. ANS: F DIF: 1 LOC: Monopoly TOP: Supply curve REF: 15-2 NAT: Analytic MSC: Applicative 23. A monopolist’s supply curve is horizontal. ANS: F DIF: 1 REF: LOC: Monopoly TOP: Supply curve 15-2 NAT: Analytic MSC: Applicative 24. During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost. ANS: T DIF: 1 REF: 15-2 NAT: Analytic LOC: Monopoly TOP: Profit maximization MSC: Interpretive 25. The socially efficient quantity is found where the demand curve intersects the marginal cost curve. ANS: T DIF: 2 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Interpretive 26. The deadweight loss for a monopolist equals one-half of its profits for any given level of output. ANS: F DIF: 2 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Interpretive 1004 Chapter 15/Monopoly 27. A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits. ANS: F DIF: 2 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Interpretive 28. A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level. ANS: T DIF: 2 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Interpretive 29. Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $4,000. ANS: F DIF: 3 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Analytical 30. Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $2,000. ANS: T DIF: 3 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Analytical 31. Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500. ANS: T DIF: 3 REF: 15-3 NAT: Analytic LOC: Monopoly TOP: Deadweight loss MSC: Analytical 32. In order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage. ANS: T DIF: 2 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive 33. Price discrimination is prohibited by antitrust laws. ANS: F DIF: 2 REF: 15-4 LOC: Monopoly TOP: Price discrimination NAT: Analytic MSC: Interpretive 34. A monopolist earns higher profits by charging one price than by practicing price discrimination. ANS: F DIF: 3 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive 35. A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society. ANS: T DIF: 3 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Perfect price discrimination MSC: Interpretive 36. By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits. ANS: T DIF: 1 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive 37. Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group. ANS: F DIF: 1 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive Chapter 15/Monopoly 1005 38. Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night. ANS: T DIF: 1 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive 39. University financial aid can be viewed as a type of price discrimination. ANS: T DIF: 1 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive 40. By offering lower prices to customers who buy a large quantity, a monopoly is price discriminating. ANS: T DIF: 1 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Price discrimination MSC: Interpretive 41. Goods that do not have close substitutes have downward-sloping demand curves. ANS: T DIF: 1 REF: 15-4 NAT: Analytic LOC: Monopoly TOP: Demand curve MSC: Interpretive 42. If the government regulates the price a natural monopolist can charge to be equal to the firm’s average total cost, the firm has no incentive to reduce costs. ANS: T DIF: 2 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Regulation MSC: Interpretive 43. If the government regulates the price a natural monopolist can charge to be equal to the firm’s marginal cost, the government will likely need to subsidize the firm. ANS: T DIF: 2 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Regulation MSC: Interpretive 44. Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an effort to safeguard society from monopoly power. ANS: T DIF: 1 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Antitrust MSC: Interpretive 45. Some companies merge in order to lower costs through efficient joint production. ANS: T DIF: 1 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Antitrust MSC: Interpretive 46. A common solution to monopoly in European countries is public ownership. ANS: T DIF: 1 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 47. The proper level of government intervention is unclear when dealing with a monopoly. ANS: T DIF: 1 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Regulation MSC: Interpretive 48. The government may choose to do nothing to reduce monopoly inefficiency because the “fix” may be worse than the problem. ANS: T DIF: 1 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Do nothing MSC: Interpretive 49. Government intervention always reduces monopoly deadweight loss. ANS: F DIF: 1 REF: 15-5 NAT: Analytic LOC: Monopoly TOP: Do nothing MSC: Interpretive 50. Firms with substantial monopoly power are quite common because many goods are truly unique. ANS: F DIF: 1 REF: 15-6 NAT: Analytic LOC: Monopoly TOP: Monopoly MSC: Interpretive 1006 Chapter 15/Monopoly SHORT ANSWER 1. Describe how government is involved in creating a monopoly. Why might the government create one? Give an example. ANS: The government can create a monopoly by giving a single firm the exclusive right to produce some good. Monopolies are created for many reasons. When an industry is characterized by high fixed costs, a single firm can usually supply the entire market at a lower cost than having multiple firms in the industry. Examples include most utility companies. The government also grants sole ownership of inventions through patent laws in order to help eliminate the market failure that is likely to otherwise occur in the markets for those goods. Patents encourage creativity and research and development. DIF: TOP: 2 REF: Patents | Regulation 15-1 NAT: Analytic MSC: Applicative LOC: Monopoly 2. What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly. ANS: The defining characteristic of a natural monopoly is when