Question 1

The standard monopoly model eliminates the monitoring problem by assuming that:

Accepted Answer

A)  the owner does not maximize profit.
B)  marginal cost is zero, and so the output at which profit is maximized is the same as the output at which sales revenues are maximized.
C)  the owner of the firm makes all the decisions.
D)  the owner of the firm has no control over decisions.E) B) and D)
F) A) and C)

Question 2

Suppose a lazy monopolist's fixed costs are lower than the fixed costs of an efficient monopolist. In all other respects, the monopolists are the same. Which of the following statements about this monopolist is true?

Accepted Answer

A)  It charges a higher price than the monopolist producing efficiently.
B)  It charges a lower price than the monopolist producing efficiently.
C)  Its total revenue is the same as the monopolist producing efficiently.
D)  It produces less than the monopolist producing efficiently.E) A) and C)
F) A) and B)

Question 3

What is the monitoring problem as it applies to corporate management? What are some potential solutions for this problem?

Accepted Answer

The monitoring problem arises whenever t...

Question 4

Suppliers would be less eager to organize to restrict output if they faced a:

Accepted Answer

A)  less elastic demand.
B)  more elastic demand.
C)  perfectly inelastic demand.
D)  unit-elastic demand curve.E) All of the above
F) A) and B)

Question 5

Demonstrate graphically and explain verbally what is meant by the term X-inefficiency.

Accepted Answer

X-inefficiency refers to situations wher...

Question 6

A firm will spend money on a program to develop or protect its monopoly position until the:

Accepted Answer

A)  marginal costs > the marginal benefits.
B)  marginal costs 
C)  marginal benefits = the marginal costs.
D)  total costs = the total benefits.E) B) and C)
F) A) and D)

Question 7

What are the implications of the monitoring problem for economic analysis?

Accepted Answer

The monitoring problem occurs when manag...

Question 8

Refer to the following graph.  A monopolist's inefficiency per unit of output at the profit-maximizing level of output is limited to cost per unit:

Accepted Answer

A)  A minus B.
B)  B minus C.
C)  A minus C.
D)  C.E) A) and D)
F) None of the above

Question 9

Network externalities can:

Accepted Answer

A)  create diffuse profits for producers.
B)  decrease the benefits of a winner-take-all industry.
C)  lead to the adoption of inefficient technologies.
D)  increase the value of new technologies.E) A) and B)
F) None of the above

Question 10

For years, Amazon.com, which began as an Internet bookseller, had no profits and was incurring annual losses. Still, the stock market valued the company very highly. One reason for this was that investors believed that:

Accepted Answer

A)  Amazon.com was in a winner-takes-all market.
B)  Amazon.com faced fierce foreign competition.
C)  the Internet was a perfectly competitive market.
D)  on the Internet brand recognition is unimportant.E) None of the above
F) B) and C)

Question 11

According to Peter Theil's book Zero to One,

Accepted Answer

A)  there are two market structures-oligopoly and monopoly.
B)  there is only one market structure-perfect competition.
C)  there is only one market structure-dynamic monopoly.
D)  there are two market structures-oligopoly and competition.E) B) and C)
F) A) and D)

Question 12

Consumers tend to accept the market restrictions imposed by suppliers because:

Accepted Answer

A)  government prevents them from organizing.
B)  they see themselves as laborers and therefore benefit from restrictions.
C)  their costs of organizing are higher than the cost of the collusion by the suppliers.
D)  when combined, their losses are small for the group as a whole.E) None of the above
F) A) and D)

Question 13

Refer to the graphs shown.  The maximum profits that a lazy monopolist whose average total costs are given by the ATC (X-inefficient) curve but who still produces the profit-maximizing quantity might earn is best shown by the area:

Accepted Answer

A)  A+ B in graph (1) .
B)  A in graph (1) .
C)  C + D in graph (2) .
D)  C in graph (2) .E) A) and B)
F) A) and C)

Question 14

Refer to the graph shown.  If suppliers can reduce output from M to L, the remaining firms in the market that are still producing L will find that their revenues will rise by:

Accepted Answer

A)  area A.
B)  area B.
C)  area A, B, and C.
D)  area A, B, and D.E) All of the above
F) None of the above

Question 15

A sizeable proportion of corporate takeovers are financed with so-called junk bonds.Such bonds offer bondholders higher rates of return than most other bonds traded because there are no hard assets as collateral to reduce the risk for bondholders in case of a default.The sellers of the bonds hope to be able to meet their obligations to pay these high rates of return to bondholders through the expected increase in profits of the company(ies)just taken over.How do the monitoring problem and the existence of lazy monopolists contribute to the market for junk bonds?

Accepted Answer

It is because of the monitoring problem ...

Question 16

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

Accepted Answer

A)  an example of the monitoring problem in the United States.
B)  an example of X-inefficiency in Japan.
C)  due to the fact that the U.S. economy is much less competitive.
D)  due to the fact that there are more natural monopolies in the United States.E) B) and C)
F) A) and D)

Question 17

According to the phrase, "competition is for losers," a goal of all firms is to:

Accepted Answer

A)  monopolize a market.
B)  be perfect competitors.
C)  provide social goods.
D)  provide public goods.E) A) and B)
F) A) and C)

Question 18

Real-world market structures tend to be:

Accepted Answer

A)  perfectly competitive.
B)  monopolies.
C)  between monopolistically competitive and oligopolistic.
D)  oligarchies.E) None of the above
F) A) and D)

Question 19

The cost of dispensing fluoxetine (the generic for Prozac) is about $5 to $10 per prescription, but the consumer's price at most pharmacies is about $85. This suggests that the market for prescription drugs is:

Accepted Answer

A)  perfectly competitive.
B)  a pure monopoly.
C)  something that cannot be explained by economic theory.
D)  not very competitive.E) B) and C)
F) A) and B)

Question 20

Across the United States, fire departments are fighting with private companies over the right to respond to medical emergencies. Each side will fight harder the:

Accepted Answer

A)  more inelastic the demand.
B)  more elastic the demand.
C)  less inelastic the demand.
D)  more elastic the supply.E) All of the above
F) A) and B)

Exam 16: Real-World Competition and Technology

According to Peter Theil's book Zero to One,

Correct Answer
verified

What are the implications of the monitoring problem for economic analysis?

Correct Answer
verified
The monitoring problem occurs when manag...
View Answer

The cost of dispensing fluoxetine (the generic for Prozac) is about $5 to $10 per prescription, but the consumer's price at most pharmacies is about $85. This suggests that the market for prescription drugs is:

Correct Answer
verified

For years, Amazon.com, which began as an Internet bookseller, had no profits and was incurring annual losses. Still, the stock market valued the company very highly. One reason for this was that investors believed that:

Correct Answer
verified

Real-world market structures tend to be:

Correct Answer
verified

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

Correct Answer
verified

Refer to the graphs shown. The maximum profits that a lazy monopolist whose average total costs are given by the ATC (X-inefficient) curve but who still produces the profit-maximizing quantity might earn is best shown by the area:

Correct Answer
verified

Network externalities can:

Correct Answer
verified

Demonstrate graphically and explain verbally what is meant by the term X-inefficiency.

Correct Answer
verified
X-inefficiency refers to situations wher...
View Answer

Suppliers would be less eager to organize to restrict output if they faced a:

Correct Answer
verified

Refer to the graph shown. If suppliers can reduce output from M to L, the remaining firms in the market that are still producing L will find that their revenues will rise by:

Correct Answer
verified

Across the United States, fire departments are fighting with private companies over the right to respond to medical emergencies. Each side will fight harder the:

Correct Answer
verified

Refer to the following graph. A monopolist's inefficiency per unit of output at the profit-maximizing level of output is limited to cost per unit:

Correct Answer
verified

Correct Answer
verified
It is because of the monitoring problem ...
View Answer

Consumers tend to accept the market restrictions imposed by suppliers because:

Correct Answer
verified

The standard monopoly model eliminates the monitoring problem by assuming that:

Correct Answer
verified

A firm will spend money on a program to develop or protect its monopoly position until the:

Correct Answer
verified

According to the phrase, "competition is for losers," a goal of all firms is to:

Correct Answer
verified

What is the monitoring problem as it applies to corporate management? What are some potential solutions for this problem?

Correct Answer
verified
The monitoring problem arises whenever t...
View Answer

Suppose a lazy monopolist's fixed costs are lower than the fixed costs of an efficient monopolist. In all other respects, the monopolists are the same. Which of the following statements about this monopolist is true?

Correct Answer
verified

Exam 16: Real-World Competition and Technology

According to Peter Theil's book Zero to One,

Correct AnswerverifiedShow Answer

What are the implications of the monitoring problem for economic analysis?

Correct AnswerverifiedThe monitoring problem occurs when manag...View AnswerShow Answer

The cost of dispensing fluoxetine (the generic for Prozac) is about $5 to $10 per prescription, but the consumer's price at most pharmacies is about $85. This suggests that the market for prescription drugs is:

Correct AnswerverifiedShow Answer

For years, Amazon.com, which began as an Internet bookseller, had no profits and was incurring annual losses. Still, the stock market valued the company very highly. One reason for this was that investors believed that:

Correct AnswerverifiedShow Answer

Real-world market structures tend to be:

Correct AnswerverifiedShow Answer

The fact that U.S. managers' salaries are about four times higher than those of comparable managers in Japan, where banks control firms more closely, is probably:

Correct AnswerverifiedShow Answer

Refer to the graphs shown. The maximum profits that a lazy monopolist whose average total costs are given by the ATC (X-inefficient) curve but who still produces the profit-maximizing quantity might earn is best shown by the area:

Correct AnswerverifiedShow Answer

Network externalities can:

Correct AnswerverifiedShow Answer

Demonstrate graphically and explain verbally what is meant by the term X-inefficiency.

Correct AnswerverifiedX-inefficiency refers to situations wher...View AnswerShow Answer

Suppliers would be less eager to organize to restrict output if they faced a:

Correct AnswerverifiedShow Answer

Refer to the graph shown. If suppliers can reduce output from M to L, the remaining firms in the market that are still producing L will find that their revenues will rise by:

Correct AnswerverifiedShow Answer

Across the United States, fire departments are fighting with private companies over the right to respond to medical emergencies. Each side will fight harder the:

Correct AnswerverifiedShow Answer

Refer to the following graph. A monopolist's inefficiency per unit of output at the profit-maximizing level of output is limited to cost per unit:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIt is because of the monitoring problem ...View AnswerShow Answer

Consumers tend to accept the market restrictions imposed by suppliers because:

Correct AnswerverifiedShow Answer

The standard monopoly model eliminates the monitoring problem by assuming that:

Correct AnswerverifiedShow Answer

A firm will spend money on a program to develop or protect its monopoly position until the:

Correct AnswerverifiedShow Answer

According to the phrase, "competition is for losers," a goal of all firms is to:

Correct AnswerverifiedShow Answer

What is the monitoring problem as it applies to corporate management? What are some potential solutions for this problem?

Correct AnswerverifiedThe monitoring problem arises whenever t...View AnswerShow Answer

Suppose a lazy monopolist's fixed costs are lower than the fixed costs of an efficient monopolist. In all other respects, the monopolists are the same. Which of the following statements about this monopolist is true?

Correct AnswerverifiedShow Answer

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The monitoring problem occurs when manag...
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X-inefficiency refers to situations wher...
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Correct Answer
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Correct Answer
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Correct Answer
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It is because of the monitoring problem ...
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Correct Answer
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Correct Answer
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Correct Answer
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The monitoring problem arises whenever t...
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Correct Answer
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