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Question;16. Patent and copyright laws are major sources of;a. natural monopolies.;b. government-created monopolies.;c. resource monopolies.;d. None of the above are correct.;17. Encouraging firms to invest in research and development;and individuals to engage in creative endeavors such as writing novels is one;justification for;a. resource monopolies.;b. natural monopolies.;c. government-created monopolies.;d. breaking up monopolies into smaller firms.;18. When a firm's average total cost curve continually;declines, the firm is a;a. government-created monopoly.;b. natural monopoly.;c. revenue monopoly.;d. All of the above are correct.;19. Which of the following scenarios best represents a;monopoly situation?;a. Bill and Tom work separately from one another but both;sell a very rare form of the same diamond. They are the only sellers of this;type of diamond in town.;b. Tom owns a fishing tackle shop in Miami, Florida, in;which he sells the top-of-the-line fishing equipment.;c. Bill owns the only grocery store in a small community;that lies 200 miles from the nearest city.;d. None of the above adequately represents a monopoly.;20. The simplest way for a monopoly to arise is for a single;firm to;a. decrease its prices without consulting other firms.;b. decrease production to increase demand for its product.;c. jointly make pricing decisions with other firms.;d. own a key resource.;Use the following information to answer question 21;through 23.;Consider the market for water in a small town in the Old;West. Assume that the only source of water is the underground aquifer that lies;directly below the town. Wells are used to supply water to the entire town.;21. If dozens of residents have their own wells, which of;the following statements most adequately describes the behavior of sellers of;water?;a. Since water is a necessity of life, there will be no;decline in the quantity of water consumed, regardless of how high the price is;raised.;b. Sellers will be able to charge a premium for the water.;c. The price of a gallon of water will exceed its marginal;cost.;d. The price of a gallon of water will be driven to equal;its marginal cost.;22. Suppose only one resident owns all the wells in town.;Which of the following statements is most likely going to be true of the market;for water?;a. The price of a gallon of water will be driven to equal;its marginal cost.;b. The price of a gallon of water will exceed its marginal;cost.;c. Since water is a necessity of life, there will be no;decline in the quantity of water consumed, regardless of how high the price is;raised.;d. The seller will be able to earn unlimited profit.;23. Assume that Jack is the sole owner of all the wells in;town. He decides to move to a more suitable climate and sells the wells to a;couple of dozen different town residents.;a. The town residents will likely be better off.;b. The price of water is likely to fall.;c. The individual water sellers will not have as much;pricing power as Jack had.;d. All of the above are correct.;24. In practice, monopolies rarely arise from exclusive;ownership of a resource because;a. actual economies are quite large.;b. the natural scope of many such markets is often;worldwide.;c. few firms own a resource for which there are no close;substitutes.;d. All of the above are correct.;25. A government-created monopoly arises when;a. government spending in a certain industry gives rise to;monopoly power.;b. the government exercises its market control by;encouraging competition among sellers.;c. the government gives a firm the exclusive right to sell;some good or service.;d. All of the above could qualify as government-created;monopolies.;26. Allowing an inventor to have the exclusive rights to;market her new invention will lead to;(i) a product that is priced higher than it would be without;the exclusive rights.;(ii) desirable behavior in the sense that inventors are;encouraged to invent.;(iii) higher profits for the inventor.;a. (i) and (ii);b. (ii) and (iii);c. (i) and (iii);d. All of the above are correct.;27. Drug companies are allowed to be monopolists in the;drugs they discover in order to;a. allow drug companies to charge a price that is equal to;their marginal cost.;b. discourage new firms from entering the drug market.;c. encourage research.;d. All of the above are correct.;28. Authors are allowed to be monopolists in the sale of;their books in order to;a. encourage authors to write more and better books.;b. correct for the negative externalities that the internet;and television impose.;c. satisfy literary advocacy groups that exercise their;lobbying power.;d. promote a society in which people think for themselves;and learn from whichever books they please.;29. Which of the following statements is true about patents;and copyrights?;(i) They both have benefits and costs.;(ii) They lead to higher prices.;(iii) They enhance the ability of monopolists to earn;above-average profits.;a. (i) and (ii);b. (ii) and (iii);c. (ii) only;d. All of the above are correct.;Use the figure to answer question 30 and 31;30. The shape of the average total cost curve reveals;information about the nature of the barrier to entry that might exist in a;monopoly market. Which of the following monopoly types best coincides with the;figure?;a. ownership of a key resource by a single firm;b. natural monopoly;c. government-created monopoly d. None of the above are correct. ="msonormal">

 

Paper#57960 | Written in 18-Jul-2015

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