Question 1

-Which area in the above figure shows the producer surplus at the price and quantity that would be set by a single-price monopoly?

Accepted Answer

A)  C + D 
B)  C + D + E 
C)  C + D + F + G 
D)  C + D + F + G + I 
A)  C + D 
B)  C + D + E 
C)  C + D + F + G 
D)  C + D + F + G + I

Question 2

A single-price monopolist's demand curve is

Accepted Answer

A)  its marginal revenue curve. 
B)  perfectly elastic. 
C)  the same as the market demand curve. 
D)  more elastic than the market demand curve. 
A)  its marginal revenue curve. 
B)  perfectly elastic. 
C)  the same as the market demand curve. 
D)  more elastic than the market demand curve.

Question 3

If a natural monopoly is broken up into many smaller firms then

Accepted Answer

A)  the price will decrease. 
B)  the average total costs of production will increase. 
C)  efficiency will increase. 
D)  None of the above because it is illegal to break up a natural monopoly into smaller firms. 
A)  the price will decrease. 
B)  the average total costs of production will increase. 
C)  efficiency will increase. 
D)  None of the above because it is illegal to break up a natural monopoly into smaller firms.

Question 4

-In the above figure, if the natural monopoly is regulated and a marginal cost pricing rule is followed, then the consumer surplus will be

Accepted Answer

A)  $192 million. 
B)  $108 million. 
C)  $60 million. 
D)  $48 million. 
A)  $192 million. 
B)  $108 million. 
C)  $60 million. 
D)  $48 million.

Question 5

-We know that the firm shown in the figure above is a natural monopoly because as output increases, the

Accepted Answer

A)  marginal cost is constant. 
B)  demand curve slopes downward. 
C)  marginal revenue curve lies below its demand curve. 
D)  average total cost decreases so that the firm can supply the market at lower cost than two firms. 
A)  marginal cost is constant. 
B)  demand curve slopes downward. 
C)  marginal revenue curve lies below its demand curve. 
D)  average total cost decreases so that the firm can supply the market at lower cost than two firms.

Question 6

-If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the firm's economic profit will be

Accepted Answer

A)  $9 million. 
B)  $12 million. 
C)  $0, that is, the firm's owners make only a normal profit. 
D)  negative, that is, the firm incurs an economic loss. 
A)  $9 million. 
B)  $12 million. 
C)  $0, that is, the firm's owners make only a normal profit. 
D)  negative, that is, the firm incurs an economic loss.

Question 7

-If the market in the figure above was perfectly competitive rather than a monopoly, the perfectly competitive level of output would be

Accepted Answer

A)  4 units per day. 
B)  5 units per day. 
C)  6 units per day. 
D)  10 units per day. 
A)  4 units per day. 
B)  5 units per day. 
C)  6 units per day. 
D)  10 units per day.

Question 8

Patents create monopolies by restricting

Accepted Answer

A)  demand. 
B)  prices. 
C)  entry. 
D)  profit. 
A)  demand. 
B)  prices. 
C)  entry. 
D)  profit.

Question 9

-If a marginal cost pricing rule is imposed on the natural monopoly shown in the figure above, then it will produce

Accepted Answer

A)  2 million units. 
B)  3 million units. 
C)  4 million units. 
D)  5 million units. 
A)  2 million units. 
B)  3 million units. 
C)  4 million units. 
D)  5 million units.

Question 10

Methods of rent seeking include which of the following? I. Buying a monopoly
II) Creating a monopoly
III) Price discrimination

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  III only 
A)  I and II 
B)  I and III 
C)  II and III 
D)  III only

Question 11

Electric utilities are often considered natural monopolies and are regulated. When would the price be highest: when the utility is not regulated, when it is regulated using an average cost pricing rule, or when it is regulated using a marginal cost pricing rule? When would its price be lowest?

Accepted Answer

The price would be highest if

Question 12

Under a price cap regulation, the regulated industry has an incentive to

Accepted Answer

A)  operate efficiently and not inflate its costs. 
B)  inflate costs. 
C)  decrease its output. 
D)  None of the above answers is correct. 
A)  operate efficiently and not inflate its costs. 
B)  inflate costs. 
C)  decrease its output. 
D)  None of the above answers is correct.

Question 13

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

Accepted Answer

A)  incur an economic loss. 
B)  make zero economic profit, that is, its owners make a normal profit. 
C)  make an economic profit of $4 million. 
D)  make an economic profit of $16 million. 
A)  incur an economic loss. 
B)  make zero economic profit, that is, its owners make a normal profit. 
C)  make an economic profit of $4 million. 
D)  make an economic profit of $16 million.

Question 14

The maximum amount a rent seeker would pay for a monopoly is the ________.

Accepted Answer

A)  market price 
B)  deadweight loss 
C)  monopoly's economic profit 
D)  monopoly's normal profit 
A)  market price 
B)  deadweight loss 
C)  monopoly's economic profit 
D)  monopoly's normal profit

Question 15

Because of a decrease in labor costs, a monopoly finds that its marginal cost and average total cost have decreased. The monopoly ________ and ________ its quantity.

Accepted Answer

A)  raises; increases 
B)  raises; decreases 
C)  lowers; increases 
D)  lowers; decreases 
A)  raises; increases 
B)  raises; decreases 
C)  lowers; increases 
D)  lowers; decreases

Question 16

-In the above figure, if the natural monopoly is regulated with an average cost pricing rule and the firm does not inflate its costs, the deadweight loss to society is

Accepted Answer

A)  zero. 
B)  efc. 
C)  ebc. 
D)  gac. 
A)  zero. 
B)  efc. 
C)  ebc. 
D)  gac.

Question 17

Unregulated monopolies can often make an economic profit in the long run because

Accepted Answer

A)  they receive government subsidies. 
B)  they have high costs. 
C)  barriers to entry prevent competing firms from entering the market. 
D)  the risks of running a monopoly are high. 
A)  they receive government subsidies. 
B)  they have high costs. 
C)  barriers to entry prevent competing firms from entering the market. 
D)  the risks of running a monopoly are high.

Question 18

Which produces more output: a perfectly price discriminating monopoly or a single-price monopoly?

Accepted Answer

The monopoly practicing perfec

Question 19

For a single-price monopolist, price is ________ marginal revenue.

Accepted Answer

A)  less than 
B)  greater than 
C)  equal to 
D)  less than or equal to but never more than 
A)  less than 
B)  greater than 
C)  equal to 
D)  less than or equal to but never more than

Question 20

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes a marginal cost pricing rule, the firm provides service to

Accepted Answer

A)  3.5 million households. 
B)  6 million households. 
C)  10.5 million households. 
D)  12.5 million households. 
A)  3.5 million households. 
B)  6 million households. 
C)  10.5 million households. 
D)  12.5 million households.

Exam 13: Monopoly

-Which area in the above figure shows the producer surplus at the price and quantity that would be set by a single-price monopoly?

A single-price monopolist's demand curve is

If a natural monopoly is broken up into many smaller firms then

-In the above figure, if the natural monopoly is regulated and a marginal cost pricing rule is followed, then the consumer surplus will be

-We know that the firm shown in the figure above is a natural monopoly because as output increases, the

-If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the firm's economic profit will be

-If the market in the figure above was perfectly competitive rather than a monopoly, the perfectly competitive level of output would be

Patents create monopolies by restricting

-If a marginal cost pricing rule is imposed on the natural monopoly shown in the figure above, then it will produce

Methods of rent seeking include which of the following? I. Buying a monopoly II) Creating a monopoly III) Price discrimination

Electric utilities are often considered natural monopolies and are regulated. When would the price be highest: when the utility is not regulated, when it is regulated using an average cost pricing rule, or when it is regulated using a marginal cost pricing rule? When would its price be lowest?

Under a price cap regulation, the regulated industry has an incentive to

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

The maximum amount a rent seeker would pay for a monopoly is the ________.

Because of a decrease in labor costs, a monopoly finds that its marginal cost and average total cost have decreased. The monopoly ________ and ________ its quantity.

-In the above figure, if the natural monopoly is regulated with an average cost pricing rule and the firm does not inflate its costs, the deadweight loss to society is

Unregulated monopolies can often make an economic profit in the long run because

Which produces more output: a perfectly price discriminating monopoly or a single-price monopoly?

For a single-price monopolist, price is ________ marginal revenue.

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes a marginal cost pricing rule, the firm provides service to

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

Because of a decrease in labor costs, a monopoly finds that its marginal cost and average total cost have decreased. The monopoly and its quantity.