Question 1

Compared to a similar perfectly competitive industry, a single-price monopoly

Accepted Answer

A)  creates a deadweight loss and decreases economic profit. 
B)  produces more output. 
C)  creates a deadweight loss and decreases consumer surplus. 
D)  is more efficient because there is no wasteful competition. 
A)  creates a deadweight loss and decreases economic profit. 
B)  produces more output. 
C)  creates a deadweight loss and decreases consumer surplus. 
D)  is more efficient because there is no wasteful competition.

Question 2

Today, you might be buying from a regulated natural monopoly when you purchase

Accepted Answer

A)  a car, a truck, or a bicycle. 
B)  a computer, a phone, or a camera. 
C)  natural gas or electricity. 
D)  a house, a condominium, or a plot of land. 
A)  a car, a truck, or a bicycle. 
B)  a computer, a phone, or a camera. 
C)  natural gas or electricity. 
D)  a house, a condominium, or a plot of land.

Question 3

What potential problem is there with rate of return pricing?

Accepted Answer

The monopolist might exaggerate its cost

Question 4

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is ________ per unit and the price is ________ per unit.

Accepted Answer

A)  $10; $30 
B)  $20; $20 
C)  $10; $20 
D)  $30; $20. 
A)  $10; $30 
B)  $20; $20 
C)  $10; $20 
D)  $30; $20.

Question 5

A deadweight loss occurs whenever

Accepted Answer

A)  the total benefit of a good does not equal its total cost. 
B)  the marginal social benefit of a good does not equal its marginal social cost. 
C)  there is perfect price discrimination. 
D)  there is no consumer surplus. 
A)  the total benefit of a good does not equal its total cost. 
B)  the marginal social benefit of a good does not equal its marginal social cost. 
C)  there is perfect price discrimination. 
D)  there is no consumer surplus.

Question 6

When an average cost pricing rule is imposed on a natural monopoly, ________.

Accepted Answer

A)  total surplus is maximized and the monopoly incurs an economic loss 
B)  the monopoly makes zero economic profit 
C)  the monopoly makes an economic profit 
D)  total surplus is maximized and the monopoly makes an economic profit 
A)  total surplus is maximized and the monopoly incurs an economic loss 
B)  the monopoly makes zero economic profit 
C)  the monopoly makes an economic profit 
D)  total surplus is maximized and the monopoly makes an economic profit

Question 7

Rent seeking

Accepted Answer

A)  increases the social cost of monopoly. 
B)  frees scarce resources that could otherwise have been employed in the production of goods and services. 
C)  cannot take the form of lobbying for government imposed import restrictions. 
D)  None of the above answers are correct. 
A)  increases the social cost of monopoly. 
B)  frees scarce resources that could otherwise have been employed in the production of goods and services. 
C)  cannot take the form of lobbying for government imposed import restrictions. 
D)  None of the above answers are correct.

Question 8

If a natural monopoly does not inflate its costs, the output it produces is the smallest when the monopoly is

Accepted Answer

A)  left unregulated. 
B)  regulated according to an average cost pricing rule. 
C)  regulated according to a marginal cost pricing rule. 
D)  regulated to maximize total surplus. 
A)  left unregulated. 
B)  regulated according to an average cost pricing rule. 
C)  regulated according to a marginal cost pricing rule. 
D)  regulated to maximize total surplus.

Question 9

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up is regulated and follows a marginal cost pricing rule?

Accepted Answer

A)  abd 
B)  acg 
C)  deg 
D)  There is no deadweight loss. 
A)  abd 
B)  acg 
C)  deg 
D)  There is no deadweight loss.

Question 10

Which of the following is NOT necessary for a firm to engage in price discrimination?

Accepted Answer

A)  The firm must be able to identify different types of buyers. 
B)  The firm must be able to separate buyers by preventing resales from one customer to another. 
C)  The firm must produce output for different buyers at different costs. 
D)  The firm must sell a product that cannot be resold. 
A)  The firm must be able to identify different types of buyers. 
B)  The firm must be able to separate buyers by preventing resales from one customer to another. 
C)  The firm must produce output for different buyers at different costs. 
D)  The firm must sell a product that cannot be resold.

Question 11

-An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the monopoly's total economic profit when it is maximizing its profit will be

Accepted Answer

A)  negative. 
B)  $0. 
C)  $25. 
D)  $50. 
A)  negative. 
B)  $0. 
C)  $25. 
D)  $50.

Question 12

-If the monopoly illustrated in the figure above could engage in perfect price discrimination, then it would sell

Accepted Answer

A)  30 tickets. 
B)  50 tickets. 
C)  60 tickets. 
D)  100 tickets. 
A)  30 tickets. 
B)  50 tickets. 
C)  60 tickets. 
D)  100 tickets.

Question 13

The area of economic profit shown in the above figure for the single-price monopolist is

Accepted Answer

A)  bed. 
B)  P3P5fc. 
C)  0P5fQ1. 
D)  0P4eQ3. 
A)  bed. 
B)  P3P5fc. 
C)  0P5fQ1. 
D)  0P4eQ3.

Question 14

-The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 5 to 6 units?

Accepted Answer

A)  $18 
B)  $4 
C)  $3 
D)  -$2 
A)  $18 
B)  $4 
C)  $3 
D)  -$2

Question 15

-If the firm in the figure above is unregulated, it will produce

Accepted Answer

A)  5 units. 
B)  20 units. 
C)  30 units. 
D)  40 units. 
A)  5 units. 
B)  20 units. 
C)  30 units. 
D)  40 units.

Question 16

A natural monopoly regulated with a marginal cost pricing rule results in

Accepted Answer

A)  an economic loss for the regulated firm. 
B)  an economic profit for the regulated firm. 
C)  a normal profit for the regulated firm. 
D)  a deadweight loss. 
A)  an economic loss for the regulated firm. 
B)  an economic profit for the regulated firm. 
C)  a normal profit for the regulated firm. 
D)  a deadweight loss.

Question 17

When a natural monopoly is regulated using an average cost pricing rule, what can you say about the firm's profit and the market's efficiency?

Accepted Answer

Using an average cost pricing rule, the

Question 18

-If the above figure illustrated a perfectly competitive industry, the equilibrium market output would be equal to

Accepted Answer

A)  7. 
B)  11. 
C)  13. 
D)  22. 
A)  7. 
B)  11. 
C)  13. 
D)  22.

Question 19

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow a marginal cost pricing rule?

Accepted Answer

A)  -$40 
B)  -$20 
C)  $0 
D)  $30 
A)  -$40 
B)  -$20 
C)  $0 
D)  $30

Question 20

Attempts to create a monopoly by having favorable laws passed are examples of rent seeking.

Accepted Answer

A) True 
 B)False

Exam 13: Monopoly

Compared to a similar perfectly competitive industry, a single-price monopoly

Today, you might be buying from a regulated natural monopoly when you purchase

What potential problem is there with rate of return pricing?

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is ________ per unit and the price is ________ per unit.

A deadweight loss occurs whenever

When an average cost pricing rule is imposed on a natural monopoly, ________.

Rent seeking

If a natural monopoly does not inflate its costs, the output it produces is the smallest when the monopoly is

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up is regulated and follows a marginal cost pricing rule?

Which of the following is NOT necessary for a firm to engage in price discrimination?

-An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the monopoly's total economic profit when it is maximizing its profit will be

-If the monopoly illustrated in the figure above could engage in perfect price discrimination, then it would sell

The area of economic profit shown in the above figure for the single-price monopolist is

-The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 5 to 6 units?

-If the firm in the figure above is unregulated, it will produce

A natural monopoly regulated with a marginal cost pricing rule results in

When a natural monopoly is regulated using an average cost pricing rule, what can you say about the firm's profit and the market's efficiency?

-If the above figure illustrated a perfectly competitive industry, the equilibrium market output would be equal to

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow a marginal cost pricing rule?

Attempts to create a monopoly by having favorable laws passed are examples of rent seeking.

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

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is per unit and the price is per unit.