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Question;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


Paper#57935 | Written in 18-Jul-2015

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