1. With vertical integration in a monopolized environment:
A) The downstream firm has to purchase the output of the upstream firm a P>MC.
B) The downstream firm can purchase the output of the upstream firm at P=MC.
C) There is no relationship between upstream and downstream entities.
D) Market conditions dictate that the downstream firm will always purchase the output of the upstream firm at a 35-40% mark-up over MC.
2. When a new baseball team enters a league, the effect on nearby teams is to:
A) Shift their demand curve to the left.
B) Shift their demand curve to the right.
C) Increase their marginal costs.
D) Decrease their marginal costs.
3. The true cost of monopoly power to society is attributable to:
A) the higher price that consumers must pay.
B) the reduction in output by the monopolist.
C) the excess profits enjoyed by the monopolist.
D) the failure of other firms to enter the industry.
4. The NCAA operates as a(n):
A) Natural monopoly.
B) For-profit cartel.
C) Incidental cartel.
D) Perfect-competitor in collegiate athletics.
5. Price discrimination:
A) Reduces deadweight loss
B) Creates mutually-beneficial exchanges that would not happen under a single-price scheme
C) Increases consumer surplus
D) Both a and b
6. Natural monopolies are distinguished by
A) Zero fixed costs
B) Increasing average total costs (ATC) over the entire range of output
C) Decreasing average total costs (ATC) over the entire range of output
D) The existence of only one firm in the industry