Question 1

-In the above figure, if the natural monopoly is regulated with a marginal cost pricing rule, then the deadweight loss to society is

Accepted Answer

A)  zero. 
B)  ecf. 
C)  gde. 
D)  efcb. 
A)  zero. 
B)  ecf. 
C)  gde. 
D)  efcb.

Question 2

A monopolist is the sole supplier of a good or service for which there are no close substitutes.

Accepted Answer

A) True 
 B)False

Question 3

A single-price monopolist will always produce where the elasticity of demand

Accepted Answer

A)  is greater than 1. 
B)  is smaller than 1. 
C)  equals 1. 
D)  equals infinity. 
A)  is greater than 1. 
B)  is smaller than 1. 
C)  equals 1. 
D)  equals infinity.

Question 4

When comparing a single-price monopoly to a perfectly competitive market with the same costs,

Accepted Answer

A)  both the monopoly's output and price are lower than the perfectly competitive market's output and price. 
B)  both the monopoly's output and price are higher than the perfectly competitive market's output and price. 
C)  the monopoly's output is higher and the monopoly's price is lower than the perfectly competitive market's output and price. 
D)  the monopoly's output is smaller and the monopoly's price is higher than the perfectly competitive market's output and price. 
A)  both the monopoly's output and price are lower than the perfectly competitive market's output and price. 
B)  both the monopoly's output and price are higher than the perfectly competitive market's output and price. 
C)  the monopoly's output is higher and the monopoly's price is lower than the perfectly competitive market's output and price. 
D)  the monopoly's output is smaller and the monopoly's price is higher than the perfectly competitive market's output and price.

Question 5

An average cost pricing rule for a natural monopoly sets the price ________ the marginal cost, thereby ________ a deadweight loss.

Accepted Answer

A)  below; avoiding 
B)  below; creating 
C)  above; avoiding 
D)  above; creating 
A)  below; avoiding 
B)  below; creating 
C)  above; avoiding 
D)  above; creating

Question 6

If a monopolist can perfectly price discriminate, then

Accepted Answer

A)  it will charge just two different prices in two different markets. 
B)  it will not give a discount to those who buy in bulk. 
C)  the deadweight loss is larger than if it cannot price discriminate. 
D)  there will be no consumer surplus. 
A)  it will charge just two different prices in two different markets. 
B)  it will not give a discount to those who buy in bulk. 
C)  the deadweight loss is larger than if it cannot price discriminate. 
D)  there will be no consumer surplus.

Question 7

-In the above figure, the total revenue for a single-price monopolist is shown by the area

Accepted Answer

A)  0P5fQ1. 
B)  P2P4eb. 
C)  0P3cQ1. 
D)  0P4eQ3. 
A)  0P5fQ1. 
B)  P2P4eb. 
C)  0P3cQ1. 
D)  0P4eQ3.

Question 8

Which of the following statements applies to a single-price monopolist?

Accepted Answer

A)  In order to maximize profits, the monopolist will produce an amount of output that lies in the elastic range of its demand. 
B)  In order to maximize profits, the monopolist will produce an amount of output that lies in the inelastic range of its demand. 
C)  In order to maximize profits, the monopolist will produce where its demand is unit elastic. 
D)  In order to maximize profits, the monopolist will produce an amount of output in the inelastic range of its supply. 
A)  In order to maximize profits, the monopolist will produce an amount of output that lies in the elastic range of its demand. 
B)  In order to maximize profits, the monopolist will produce an amount of output that lies in the inelastic range of its demand. 
C)  In order to maximize profits, the monopolist will produce where its demand is unit elastic. 
D)  In order to maximize profits, the monopolist will produce an amount of output in the inelastic range of its supply.

Question 9

A natural monopoly is likely to experience diseconomies of scale.

Accepted Answer

A) True 
 B)False

Question 10

-Given the market demand and cost data in the above figure, the existence of a monopoly firm producing 8 million cubic feet of natural gas makes it possible to produce natural gas at a long-run average cost of

Accepted Answer

A)  10 cents per cubic foot. 
B)  20 cents per cubic foot. 
C)  30 cents per cubic foot. 
D)  40 cents per cubic foot. 
A)  10 cents per cubic foot. 
B)  20 cents per cubic foot. 
C)  30 cents per cubic foot. 
D)  40 cents per cubic foot.

Question 11

Single-price monopolies maximize profit by producing the amount of output where

Accepted Answer

A)  total revenue is maximized. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  marginal revenue is equal to marginal cost. 
A)  total revenue is maximized. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  marginal revenue is equal to marginal cost.

Question 12

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is

Accepted Answer

A)  $300. 
B)  $225. 
C)  $150. 
D)  $10. 
A)  $300. 
B)  $225. 
C)  $150. 
D)  $10.

Question 13

A monopoly that sells every unit of its output at the same price is a ________.

Accepted Answer

A)  unit-price monopoly 
B)  legal monopoly 
C)  natural monopoly 
D)  single-price monopoly 
A)  unit-price monopoly 
B)  legal monopoly 
C)  natural monopoly 
D)  single-price monopoly

Question 14

For a single-price monopolist, marginal revenue is less than price because

Accepted Answer

A)  the revenue gain from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price. 
B)  the revenue gain from the last unit sold is offset by further gains in price on units not sold at all. 
C)  total revenue always decreases as output increases. 
D)  the price does not have to be lowered on all previous units sold. 
A)  the revenue gain from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price. 
B)  the revenue gain from the last unit sold is offset by further gains in price on units not sold at all. 
C)  total revenue always decreases as output increases. 
D)  the price does not have to be lowered on all previous units sold.

Question 15

-West Coast Gas, Inc., is a natural gas supplier. The firm faces the demand schedule shown in the table above and cannot price discriminate. The company's fixed cost is $1,000 per month and its marginal cost is constant at $10 per thousand of cubic feet. The government imposes a marginal cost pricing rule on the company.
a) What is the price of natural gas supplied by West Coast Gas? How many cubic feet does the company sell? What is the firm's economic profit per month?
b) How does the regulation affect total surplus?
c) Is the regulation in the social interest? Explain.

Accepted Answer

a) Marginal cost pricing regulation sets

Question 16

Rate of return regulation is equivalent to

Accepted Answer

A)  average cost pricing rule. 
B)  marginal cost pricing rule. 
C)  maximizing consumer surplus. 
D)  maximizing producer surplus. 
A)  average cost pricing rule. 
B)  marginal cost pricing rule. 
C)  maximizing consumer surplus. 
D)  maximizing producer surplus.

Question 17

-Interlace, Inc. produces and a unique soda. The company cannot price discriminate. The figure above shows Interlace's demand curve, marginal revenue curve, and marginal cost curve. The quantity of soda Interlace Inc. will choose to produce is ________ because when this quantity is produced, ________.

Accepted Answer

A)  efficient; marginal social benefit exceeds marginal social cost 
B)  efficient; marginal social benefit equals marginal social cost 
C)  not efficient; marginal social benefit exceeds marginal social cost 
D)  not efficient; marginal social benefit equals marginal social cost 
A)  efficient; marginal social benefit exceeds marginal social cost 
B)  efficient; marginal social benefit equals marginal social cost 
C)  not efficient; marginal social benefit exceeds marginal social cost 
D)  not efficient; marginal social benefit equals marginal social cost

Question 18

Which of the following is true about a perfect price discriminating monopolist?

Accepted Answer

A)  There is inefficiency. 
B)  All consumers pay a price equal to marginal cost. 
C)  There is no consumer surplus. 
D)  There is zero economic profit. 
A)  There is inefficiency. 
B)  All consumers pay a price equal to marginal cost. 
C)  There is no consumer surplus. 
D)  There is zero economic profit.

Question 19

The social interest theory of regulation assumes that

Accepted Answer

A)  regulations promote the attainment of efficiency. 
B)  regulations promote the attainment of the maximum economic profit. 
C)  regulators will seek to maximize consumer surplus. 
D)  public officials seek their own gain through regulation. 
A)  regulations promote the attainment of efficiency. 
B)  regulations promote the attainment of the maximum economic profit. 
C)  regulators will seek to maximize consumer surplus. 
D)  public officials seek their own gain through regulation.

Question 20

Activity aimed at creating artificial barriers to entry into a particular market

Accepted Answer

A)  is rent seeking. 
B)  has no social cost. 
C)  improves competition. 
D)  improves the economy's efficiency. 
A)  is rent seeking. 
B)  has no social cost. 
C)  improves competition. 
D)  improves the economy's efficiency.

Exam 13: Monopoly

-In the above figure, if the natural monopoly is regulated with a marginal cost pricing rule, then the deadweight loss to society is

A monopolist is the sole supplier of a good or service for which there are no close substitutes.

A single-price monopolist will always produce where the elasticity of demand

When comparing a single-price monopoly to a perfectly competitive market with the same costs,

An average cost pricing rule for a natural monopoly sets the price ________ the marginal cost, thereby ________ a deadweight loss.

If a monopolist can perfectly price discriminate, then

-In the above figure, the total revenue for a single-price monopolist is shown by the area

Which of the following statements applies to a single-price monopolist?

A natural monopoly is likely to experience diseconomies of scale.

-Given the market demand and cost data in the above figure, the existence of a monopoly firm producing 8 million cubic feet of natural gas makes it possible to produce natural gas at a long-run average cost of

Single-price monopolies maximize profit by producing the amount of output where

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is

A monopoly that sells every unit of its output at the same price is a ________.

For a single-price monopolist, marginal revenue is less than price because

Rate of return regulation is equivalent to

Which of the following is true about a perfect price discriminating monopolist?

The social interest theory of regulation assumes that

Activity aimed at creating artificial barriers to entry into a particular market

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

An average cost pricing rule for a natural monopoly sets the price the marginal cost, thereby a deadweight loss.