economics data bank

Question # 00004014 Posted By: spqr Updated on: 11/24/2013 09:08 AM Due on: 11/30/2013
Subject Economics Topic General Economics Tutorials:
Dot Image

31. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of

a. economies of scale.

b. diseconomies of scale.

c. diminishing marginal product.

d. increasing marginal cost.

32. In view of what we know about the relationship between average total cost and marginal cost, the marginal cost curve for this firm

a. must lie entirely above the average total cost curve.

b. must lie entirely below the average total cost curve.

c. must be upward sloping.

d. does not exist.

33. When an industry is a natural monopoly,

a. it is characterized by constant returns to scale.

b. it is characterized by diseconomies of scale.

c. a larger number of firms may lead to a lower average cost.

d. a larger number of firms will lead to a higher average cost.

34. If the distribution of water is a natural monopoly, then

(i) multiple firms will each have to pay large fixed costs to develop their own network of pipes.

(ii) allowing for competition among different firms in the water-distribution industry is efficient.

(iii) a single firm can serve the market at the lowest possible average total cost.

a. (i) and (ii)

b. (ii) and (iii)

c. (i) and (iii)

d. (i) only

35. A firm that is a natural monopoly

a. is not likely to be concerned about new entrants eroding its monopoly power.

b. is taking advantage of economies of scale.

c. would experience a higher average total cost if more firms entered the market.

d. All of the above are correct.

36. Additional firms often do not try to compete with a natural monopoly because

a. they fear retaliation in the form of pricing wars from the natural monopolist.

b. they are unsure of the size of the market in general.

c. they know they cannot achieve the same low costs that the monopolist enjoys.

d. the natural monopoly doesn’t make a huge profit.

37. The laws governing patents and copyrights

a. can lead to monopolies.

b. are intended to serve private interests, not the public interest.

c. have costs, but no benefits.

d. All of the above are correct.

38. The De Beers diamond monopoly is a classic example of a monopoly that

a. is government-created.

b. arises from the ownership of a key resource.

c. results in very little advertising of the product that the monopolist produces.

d. was broken up by the government a long time ago.

Use the information below to answer questions 39 and 40.

Consider a transportation corporation named C.R. Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest. Currently, there are plenty of seats on the subway, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans experienced incredible rates of return on their investment, due to the profitability of the corporation.

39. Which of the following statements are most likely to be true?

(i) New entrants to the market know they will earn a smaller piece of the market than C.R. Evans currently has.

(ii) C.R. Evans is most likely experiencing increasing average total cost.

(iii) C.R. Evans is a natural monopoly.

a. (i) and (ii)

b. (ii) and (iii)

c. (i) and (iii)

d. All of the above are correct.

40. C.R. Evans may continue to be a monopolist in the subway transportation industry only if

a. population growth leads to an overcrowding of the subway cars.

b. there are no new entrants to the market.

c. demand for transportation services decreases.

d. All of the above are correct.

41. The fundamental cause of monopoly is

a. incompetent management in competitive firms.

b. the zero-profit feature of long-run equilibrium in competitive markets.

c. advertising.

d. barriers to entry.

42. Which of the following items is a primary source of barriers to entry?

a. The costs of production make a single firm more efficient than a large number of firms.

b. A single firm hires all the people who have the management skills that are important in the industry.

c. Contracts among firms prohibit them from competing with one another in the production and sale of certain products.

d. All of the above are correct.

43. A firm that has a monopoly on water (which is a necessity) can charge a high price for water

a. only if the marginal cost of producing water is high.

b. even if the marginal cost of producing water is low.

c. only if the firm is a natural monopoly.

d. even if the demand for water is low.

44. Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, the large diamond company, has

a. less incentive to advertise than it would otherwise have.

b. less market power than it would otherwise have.

c. more control over the price of diamonds than it would otherwise have.

d. higher profits than it would otherwise have.

45. A benefit to society of the patent and copyright laws is that those laws

a. help to keep prices down.

b. help to prevent a single firm from acquiring ownership of a key resource.

c. encourage creative activity.

d. discourage excessive amounts of output of certain products
Dot Image
Tutorials for this Question
  1. Tutorial # 00003789 Posted By: spqr Posted on: 11/24/2013 09:16 AM
    Puchased By: 2
    Tutorial Preview
    will each have to pay large fixed costs to develop ...
    4113.docx (11.76 KB)

Great! We have found the solution of this question!

Whatsapp Lisa