Question : 12.2  Sources of Market Power 1) Which of the following statements : 1377487

 

12.2  Sources of Market Power

1) Which of the following statements is true?

A) Monopoly is characterized by no entry barriers.

B) Perfect competition is characterized by high entry barriers.

C) Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers.

D) Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers.

2) When a firm obtains market power through barriers to entry created not by the firm, but by the government, it is referred to as:

A) legal market power.

B) regulated market power.

C) firm-biased market power.

D) differentiated market power.

3) A ________ is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good.

A) brand

B) patent

C) copyright

D) trademark

4) Patents are source of:

A) legal market power.

B) natural market power.

C) regulated market power.

D) firm-biased market power.

5) Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a:

A) patent.

B) blueprint.

C) copyright.

D) trademark.

6) A ________ is an exclusive right granted by the government to an author’s intellectual property.

A) patent

B) blueprint

C) copyright

D) trademark

7) A copyright is a source of:

A) legal market power.

B) natural market power.

C) regulated market power.

D) competitive market power.

8) A musician was guaranteed by the government that no one else could replicate or sell his music CDs. This is an example of a:

A) brand.

B) patent.

C) copyright.

D) trademark.

9) Which of the following was an implication of the U.S. government’s Clean Air Act Amendments (CAAA) of 1977?

A) It acted as a barrier to entry.

B) It increased consumer surplus.

C) It reduced the profits of existing firms.

D) It reduced the market power of existing firms.

10) If a monopolist owns or controls a key resource necessary for production, it is a source of:

A) legal market power.

B) natural market power.

C) regulated market power.

D) restricted market power.

11) In Barylia, Greenaqua Corp. is the sole controller of a resource required for the production of bottled drinking water. Therefore, Greenaqua Corp. enjoys:

A) legal market power.

B) natural market power.

C) regulated market power.

D) restricted market power.

12) Economies of scale in production act as a source of:

A) legal market power.

B) natural market power.

C) restricted market power.

D) regulated market power.

13) A key resource is a material:

A) that is unlimited in supply.

B) that is rationed by the government.

C) that is available to monopolies only.

D) that is essential for the production of a good.

14) A network externality refers to a situation when:

A) the value of a product increases as more consumers start to use it.

B) firms collude to sell products at a price higher than the equilibrium market price.

C) a firm who has control over key resources auctions the resources off to other firms.

D) the government interferes to prevent the concentration of market power in the hands of a few firms.

15) As a firm increases its output, its average total cost decreases. This is an outcome of:

A) law of demand.

B) economies of scale.

C) diseconomies of scale.

D) law of diminishing returns.

16) Average total cost decreases with an increase in output because:

A) the total variable cost decreases with an increase in output.

B) the average fixed cost decreases with an increase in output.

C) the marginal cost of production increases with an increase in output.

D) diminishing marginal returns sets in after a particular level of production.

17) A market in which a firm emerges as a monopoly due to large economies of scale is referred to as:

A) a natural monopoly.

B) an explicit monopoly.

C) an implicit monopoly.

D) an exhaustive monopoly.

18) Firm A is a monopoly because of network effects, whereas firm B is a natural monopoly. Which of the following statements is likely to be true in this context?

A) The average total costs of both firms decrease as they increase their output.

B) The value of the product that both firms produce increases with an increase in the number of buyers.

C) Firm A enjoys a monopoly status because its average total cost decreases with increase in output, whereas firm B enjoys a monopoly status because the value of its product increases as more consumers buy it.

D) Firm B enjoys a monopoly status because its average total cost decreases with increase in output, whereas firm A enjoys a monopoly status because the value of its product increases as more consumers buy it.

19) Which of the following statements is true?

A) Network effects arise because of economies of scale.

B) Economies of scale arise because of network effects.

C) Economies of scale act as barriers to entry into a market.

D) Network effects provide incentives to new sellers to enter the market.

20) Which of the following statements is true?

A) Network effects act as barriers to entry in a market.

B) Economies of scale act as incentives for new firms to enter a market.

C) If a firm is enjoying economies of scale, then its product must have network effects.

D) If a firm’s product has network effects, then the firm must be enjoying economies of scale.

21) Which of the following statements correctly identifies a similarity between network effects and economies of scale?

A) Both are related to costs incurred by a firm.

B) Both act as barriers to entry in a market.

C) Both act as disincentives to monopolies.

D) Both are related to the number of consumers using a firm’s product.

22) If a new seller enters a market to compete with an existing natural monopoly, it will:

A) decrease the costs for both the sellers.

B) increase the costs of production for both the sellers.

C) increase the production costs for the existing seller, and a decrease in the costs for the new entrant.

D) decrease the production costs for the existing seller, and an increase in the costs for the new entrant.

23) Everything else remaining unchanged, if a new seller enters a market to compete with an existing monopoly which is enjoying economies of scale, it will lead to:

A) higher profits for both the firms.

B) higher profits for the existing firm.

C) lower profits for the existing firm.

D) higher market power for the existing firm.

24) Which of the following statements is true?

A) A natural monopoly always arises from government intervention in the market.

B) An increase in consumer demand can change a natural monopoly into a multi-seller market.

C) A natural monopoly earns higher profits than a monopolistically competitive firm because it faces an upward sloping market demand curve.

D) A natural monopoly earns higher profits than a monopolistically competitive firm because it faces a horizontal market demand curve.