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a.What is the difference between a horizontal merger and a vertical merger? b.Give an example of each type of merger. c.Could a horizontal merger be welfare improving?

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a.A horizontal merger is a merger betwee...

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If you own the only bookstore in a small town,do you have a monopoly?

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Because consumers in your town could buy...

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Figure 15-3 Figure 15-3 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the price charged at the profit-maximizing/loss-minimizing output level? A) $38 B) $54 C) $68 D) $75 Figure 15-3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the price charged at the profit-maximizing/loss-minimizing output level?


A) $38
B) $54
C) $68
D) $75

E) A) and D)
F) B) and C)

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A price maker is


A) a person who actively seeks out the best price for a product that he or she wishes to buy.
B) a firm that has some control over the price of the product it sells.
C) a firm that is able to sell any quantity at the highest possible price.
D) a consumer who participates in an auction where she announces her willingness to pay for a product.

E) None of the above
F) A) and D)

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In 2011,Microsoft filed a complaint with the European Commission accusing Google of taking steps to monopolize the Internet search engine business.Microsoft's primary complaint was that


A) Google is the only Internet search engine available to Windows operating system users.
B) the European Union contracts exclusively with Google for its Internet search engine use.
C) Google was using its dominant position as an Internet search engine to exclude competitors.
D) Google owns the Internet advertising companies that pay for ads on search engine sites, and has prohibited ads from being sold to competitors.

E) None of the above
F) B) and C)

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A profit-maximizing monopoly produces a lower output level than would be produced if the industry was perfectly competitive.

A) True
B) False

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Figure 15-4 Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the amount of the monopoly's total revenue? A) $21,600 B) $20,400 C) $19,740 D) $7,800 Figure 15-4 shows the demand and cost curves for a monopolist. -Refer to Figure 15-4.What is the amount of the monopoly's total revenue?


A) $21,600
B) $20,400
C) $19,740
D) $7,800

E) None of the above
F) A) and D)

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Natural monopolies in the United States are generally regulated by


A) the Federal Trade Commission.
B) the Department of Justice.
C) local or state regulatory commissions.
D) the Department of Commerce.

E) None of the above
F) C) and D)

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A Herfindahl-Hirschman Index is calculated by


A) summing the amount of sales by the four largest firms and dividing by total industry sales.
B) dividing the number of firms wanting to merge by the total number in the industry.
C) summing the squares of the market shares of each firm in the industry.
D) summing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.

E) A) and B)
F) None of the above

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Figure 15-10 Figure 15-10 -Refer to Figure 15-10.What is the area that represents producer surplus under a monopoly? A) the triangle 0P<sub>2</sub>E B) the triangle 0P<sub>3</sub>H C) the trapezium 0P<sub>1</sub>FH D) the rectangle P<sub>1</sub>P<sub>3</sub>HF -Refer to Figure 15-10.What is the area that represents producer surplus under a monopoly?


A) the triangle 0P2E
B) the triangle 0P3H
C) the trapezium 0P1FH
D) the rectangle P1P3HF

E) All of the above
F) C) and D)

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A horizontal merger


A) is a merger between firms in the same industry.
B) results in a trust (for example, the Standard Oil Company) .
C) is a merger between firms at different stages of production of a good.
D) was illegal in the United States until the Federal Trade Commission Act was passed by Congress in 1914.

E) B) and C)
F) A) and B)

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Experience with patents in the pharmaceutical industry shows that when patents on drugs expire


A) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs.
B) prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents.
C) other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents.
D) firms will find ways to obtain additional patent protection - often by making cosmetic changes in drugs that were patented - so that they can continue charging high prices.

E) A) and B)
F) A) and C)

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The Clayton Act prohibited


A) all vertical mergers.
B) all horizontal mergers.
C) any merger if its effect was to substantially lessen competition or create a monopoly.
D) all conglomerate mergers.

E) A) and B)
F) A) and C)

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A merger between firms at different stages of production of a good


A) is a vertical merger.
B) was made illegal by the Sherman Act.
C) was made legal by the Clayton Act.
D) is a horizontal merger.

E) B) and C)
F) A) and D)

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If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

A) True
B) False

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Figure 15-9 Figure 15-9 Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the difference between the monopoly output and the perfectly competitive output? A) 140 units B) 240 units C) 340 units D) 560 units Figure 15-9 shows the demand and cost curves for a monopolist. -Refer to Figure 15-9.What is the difference between the monopoly output and the perfectly competitive output?


A) 140 units
B) 240 units
C) 340 units
D) 560 units

E) C) and D)
F) A) and B)

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Figure 15-6 Figure 15-6 Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist's total cost is A) $1,116. B) $1,240. C) $1,660. D) $1,726.40. Figure 15-6 shows the cost and demand curves for a monopolist. -Refer to Figure 15-6.The monopolist's total cost is


A) $1,116.
B) $1,240.
C) $1,660.
D) $1,726.40.

E) None of the above
F) All of the above

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Figure 15-15 Figure 15-15 Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Why won't regulators require that Erickson Power produce the economically efficient output level? A) because there is insufficient demand at that output level B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit C) because Erickson Power will earn zero profit D) because Erickson Power will sustain persistent losses and will not continue in business in the long run Figure 15-15 shows the cost and demand curves for the Erickson Power Company. -Refer to Figure 15-15.Why won't regulators require that Erickson Power produce the economically efficient output level?


A) because there is insufficient demand at that output level
B) because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit
C) because Erickson Power will earn zero profit
D) because Erickson Power will sustain persistent losses and will not continue in business in the long run

E) A) and D)
F) A) and C)

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Compared to a monopolistic competitor,a monopolist faces


A) a more elastic demand curve.
B) a more inelastic demand curve.
C) a more elastic demand curve at higher prices and a more inelastic demand curve at lower prices.
D) a demand curve that has a price elasticity coefficient of zero.

E) C) and D)
F) All of the above

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Consider the following characteristics: a.a market structure with barriers to entry b.demand curves that are easily identified c.firm cannot make zero profits in the long run d.firm can reap long run profits. Which of the characteristics in the list above is shared by an oligopolist and a monopolist?


A) a, b, c, and d
B) a, b, and d
C) a, c, and d
D) a and d

E) A) and D)
F) B) and D)

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