Question Patent and copyright laws are major sources of

31 May Question Patent and copyright laws are major sources of

Question

16. Patent and copyright laws are major sources of
17. natural monopolies.
18. government-created monopolies.
19. resource monopolies.
20. None of the above are correct.
21. Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for
22. resource monopolies.
23. natural monopolies.
24. government-created monopolies.
25. breaking up monopolies into smaller firms.
26. When a firm’s average total cost curve continually declines, the firm is a
27. government-created monopoly.
28. natural monopoly.
29. revenue monopoly.
30. All of the above are correct.
31. Which of the following scenarios best represents a monopoly situation?
32. 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.
33. Tom owns a fishing tackle shop in Miami, Florida, in which he sells the top-of-the-line fishing equipment.
34. Bill owns the only grocery store in a small community that lies 200 miles from the nearest city.
35. None of the above adequately represents a monopoly.
36. The simplest way for a monopoly to arise is for a single firm to
37. decrease its prices without consulting other firms.
38. decrease production to increase demand for its product.
39. jointly make pricing decisions with other firms.
40. 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?
22. 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.
23. Sellers will be able to charge a premium for the water.
24. The price of a gallon of water will exceed its marginal cost.
25. The price of a gallon of water will be driven to equal its marginal cost.
26. 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?
27. The price of a gallon of water will be driven to equal its marginal cost.
28. The price of a gallon of water will exceed its marginal cost.
29. 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.
30. The seller will be able to earn unlimited profit.
31. 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.
32. The town residents will likely be better off.
33. The price of water is likely to fall.
34. The individual water sellers will not have as much pricing power as Jack had.
35. All of the above are correct.
36. In practice, monopolies rarely arise from exclusive ownership of a resource because
37. actual economies are quite large.
38. the natural scope of many such markets is often worldwide.
39. few firms own a resource for which there are no close substitutes.
40. All of the above are correct.
41. A government-created monopoly arises when
42. government spending in a certain industry gives rise to monopoly power.
43. the government exercises its market control by encouraging competition among sellers.
44. the government gives a firm the exclusive right to sell some good or service.
45. All of the above could qualify as government-created monopolies.
46. 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.

1. (i) and (ii)
2. (ii) and (iii)
3. (i) and (iii)
4. All of the above are correct.
5. Drug companies are allowed to be monopolists in the drugs they discover in order to
6. allow drug companies to charge a price that is equal to their marginal cost.
7. discourage new firms from entering the drug market.
8. encourage research.
9. All of the above are correct.
10. Authors are allowed to be monopolists in the sale of their books in order to
11. encourage authors to write more and better books.
12. correct for the negative externalities that the internet and television impose.
13. satisfy literary advocacy groups that exercise their lobbying power.
14. promote a society in which people think for themselves and learn from whichever books they please.
15. 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.

1. (i) and (ii)
2. (ii) and (iii)
3. (ii) only
4. 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?
31. ownership of a key resource by a single firm
32. natural monopoly
33. government-created monopoly

<pclass=”msonormal” style=”box-sizing: border-box;”>d. None of the above are correct.</pclass=”msonormal”>

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