Question : Figure 15-11 In 2011, Verizon was granted permission to enter the : 1387916

 

Figure 15-11

 

 

In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable television market in Upstate New York.

 

20) Refer to Figure 15-11.  Suppose the local government imposes a $2.50 per month tax on cable companies. What happens to the price charged by the cable company following the imposition of this tax?

A) The price rises from PM to (PM + $2.50).

B) The price rises from PM but it increases by an amount less than $2.50.

C) The price rises from PM but it increases by an amount greater than $2.50 to reflect the monopoly’s markup.

D) The price remains at PM.

 

21) Refer to Figure 15-11.  Following the entry of Verizon, the subscription price falls from PM to PC. What is the increase in consumer surplus as a result of this change?

A) the area A + B + C

B) the area B + C

C) the area D + F

D) the area B + C + D

 

 

22) Refer to Figure 15-11.  What is the size of the deadweight loss prior to Verizon entering the market and what happens to this deadweight loss after Verizon does enter the market?

A) The deadweight loss of area D is converted to consumer surplus.

B) The deadweight loss of area C+D is converted to consumer surplus

C) The deadweight loss of area D is converted to producer surplus.

D) The total deadweight loss is the area D+F; D is converted to consumer surplus and F to producer surplus.

 

 

23) The size of a deadweight loss in a market is reduced by

A) government legislating a ceiling price.

B) government legislating a price floor.

C) market price being close to marginal cost.

D) creative destruction.

 

24) A market economy benefits from market power

A) if the majority of the population are entrepreneurs.

B) if firms with market power do research and development with the profits earned.

C) if market power gets so bad the government creates public enterprises.

D) under no circumstances.

 

 

25) Which of the following statements is consistent with the views of Joseph Schumpeter?

A) Research and development by competitive firms is responsible for most technological changes.

B) An economy benefits from firms having market power because these firms are more likely to be able to commit funds for research and development.

C) Enforcement of antitrust laws is necessary to promote competition among firms.

D) A lack of competition discourages firms from developing new technologies.

 

 

26) Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements regarding economic surplus in each market structure is true?

A) Under perfectly competitive conditions, economic surplus in this industry equals consumer surplus plus producer surplus. Under monopoly conditions, some consumer surplus is transferred to producer surplus, but economic surplus is the same as it was under perfectly competitive conditions.

B) Under perfectly competitive conditions, economic surplus in this industry is maximized. Under monopoly conditions economic surplus is minimized.

C) Under perfectly competitive conditions, economic surplus is equal to consumer surplus; there is no producer surplus because firms are price-takers. Under monopoly conditions, economic surplus is equal to producer surplus.

D) Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a deadweight loss.

 

27) Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements comparing the conditions in the industry under both market structures is true?

A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good.

B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good.

C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good.

D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good.

 

 

28) Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. As a result of this change,

A) price will be higher, output will be lower and the deadweight loss will be eliminated.

B) consumer surplus will be smaller, producer surplus will be greater and there will be a reduction in economic efficiency.

C) price will be higher, consumer surplus will be greater and output will be greater.

D) consumer surplus will be smaller and producer surplus will be greater. There will be a net increase in economic surplus.

 

 

29) The most profitable price for a monopolist is

A) the highest price a consumer is willing to pay for the monopolist’s product.

B) the price at which demand is unit-elastic.

C) a price that maximizes the quantity sold.

D) the price for which marginal revenue equals marginal cost.

 

30) Which of the following statements is true?

A) If a tax is imposed on a product sold by a monopolist, the monopolist will maximize its profits by producing where marginal revenue equals marginal cost.

B) A monopolist will always charge the highest possible price.

C) If a tax is imposed on a product sold by a monopolist, the monopolist can increase its price to pass along the entire tax to consumers.

D) Because a monopolist faces no competition, the demand for its product is perfectly inelastic.