Question 1

Which of the following is true of a natural monopoly?

Accepted Answer

A)  Its long-run average cost curve slopes upward as it intersects the demand curve. 
B)  Economies of scale exist to only a very low level of output. 
C)  Economies of scale allow one firm to supply the entire market at the lowest possible cost. 
D)  The firm is not protected by any barrier to entry. 
A)  Its long-run average cost curve slopes upward as it intersects the demand curve. 
B)  Economies of scale exist to only a very low level of output. 
C)  Economies of scale allow one firm to supply the entire market at the lowest possible cost. 
D)  The firm is not protected by any barrier to entry.

Question 2

Gene's Car Wash is a natural monopoly. To wash 100 cars a week, if Gene is unregulated, he would charge a price of $10. Gene's long-run average cost for washing 100 cars is $8, his average variable cost is $6, and his marginal cost is $4. If Gene was regulated using a marginal cost pricing rule, the price he would be allowed to charge to wash 100 cars is

Accepted Answer

A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
A)  $10. 
B)  $8. 
C)  $6. 
D)  $4.

Question 3

The use of a two-part price in a regulated natural monopoly

Accepted Answer

A)  maximizes the deadweight loss. 
B)  allows the firm to maximize profits. 
C)  may make it possible for the firm to obey a marginal cost pricing rule and not go out of business. 
D)  All of the above answers are correct. 
A)  maximizes the deadweight loss. 
B)  allows the firm to maximize profits. 
C)  may make it possible for the firm to obey a marginal cost pricing rule and not go out of business. 
D)  All of the above answers are correct.

Question 4

-Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When an average cost price rule regulation is imposed, the price per household per month is ________.

Accepted Answer

A)  $20 and 30,000 households are served 
B)  $40 and 40,000 households are served 
C)  $40 and 30,000 households are served 
D)  $60 and 20,000 households are served 
A)  $20 and 30,000 households are served 
B)  $40 and 40,000 households are served 
C)  $40 and 30,000 households are served 
D)  $60 and 20,000 households are served

Question 5

-For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

Accepted Answer

A)  4 units per year and the price will be $6. 
B)  4 units per year and the price will be $4. 
C)  6 units per year and the price will be $4. 
D)  None of the above answers is correct. 
A)  4 units per year and the price will be $6. 
B)  4 units per year and the price will be $4. 
C)  6 units per year and the price will be $4. 
D)  None of the above answers is correct.

Question 6

A price cap regulation ________.

Accepted Answer

A)  is illegal 
B)  is a price floor 
C)  is a price ceiling 
D)  encourages a firm to operate inefficiently 
A)  is illegal 
B)  is a price floor 
C)  is a price ceiling 
D)  encourages a firm to operate inefficiently

Question 7

-In the above figure, if this natural monopoly is not regulated the deadweight loss to society is

Accepted Answer

A)  ecf. 
B)  ebc. 
C)  gac. 
D)  gde. 
A)  ecf. 
B)  ebc. 
C)  gac. 
D)  gde.

Question 8

-The figure above shows a monopoly's total revenue and total cost curves. The monopoly's marginal revenue equals its marginal cost when it produces

Accepted Answer

A)  0 units of output. 
B)  5 units of output. 
C)  15 units of output. 
D)  20 units of output. 
A)  0 units of output. 
B)  5 units of output. 
C)  15 units of output. 
D)  20 units of output.

Question 9

Why are water companies considered a natural monopoly?

Accepted Answer

Once one water company incurs the cost o

Question 10

Explain the difference between price cap regulation in a natural monopoly and the effect of a price ceiling in a competitive market.

Accepted Answer

In regulating a natural monopoly, a pric

Question 11

The airline and trucking industries are two examples of industries that were regulated because they were natural monopolies.

Accepted Answer

A) True 
 B)False

Question 12

-Natural gas is a natural monopoly. The figure shows the market for natural gas in the city of Lucknow. When an average cost price rule regulation is imposed, the price per household per month is ________.

Accepted Answer

A)  $30 and 20,000 household are served 
B)  $10 and 40,000 household are served 
C)  $25 and 20,000 household are served 
D)  $20 and 30,000 households are served 
A)  $30 and 20,000 household are served 
B)  $10 and 40,000 household are served 
C)  $25 and 20,000 household are served 
D)  $20 and 30,000 households are served

Question 13

-The figure above shows the demand curve (D) faced by Visual, Inc., a cable TV company, and the firm's marginal revenue (MR), marginal cost (MC), and average cost (LRAC) curves. If Visual is regulated using rate of return regulation, and the regulator knows the firm's costs curves, the company will serve ________ million households and set a price of ________ per household per month.

Accepted Answer

A)  2.5; $30 
B)  3; $24 
C)  4; $12 
D)  2; $36 
A)  2.5; $30 
B)  3; $24 
C)  4; $12 
D)  2; $36

Question 14

-In the figure above, compared to a perfectly competitive industry with the same costs, a single-price, unregulated monopoly will raise the price by

Accepted Answer

A)  $2.00 per unit. 
B)  $4.00 per unit. 
C)  $6.00 per unit. 
D)  $8.00 per unit. 
A)  $2.00 per unit. 
B)  $4.00 per unit. 
C)  $6.00 per unit. 
D)  $8.00 per unit.

Question 15

For a monopoly able to perfectly price discriminate, the marginal revenue curve coincides with the demand curve.

Accepted Answer

A) True 
 B)False

Question 16

-In the figure above, the redistribution from the consumers to the producer if the firm is a single-price, unregulated monopoly rather than a perfectly competitive industry is

Accepted Answer

A)  zero. 
B)  $8.00 per day. 
C)  $16.00 per day. 
D)  $32.00 per day. 
A)  zero. 
B)  $8.00 per day. 
C)  $16.00 per day. 
D)  $32.00 per day.

Question 17

What are the characteristics of a market that allow a monopolist to successfully price discriminate between groups?

Accepted Answer

A monopolist can price discriminate betw

Question 18

-If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output.

Accepted Answer

A)  raise; decrease 
B)  lower; increase 
C)  lower; decrease 
D)  raise; increase 
A)  raise; decrease 
B)  lower; increase 
C)  lower; decrease 
D)  raise; increase

Question 19

A monopolist that operates along the elastic range of its demand will find that

Accepted Answer

A)  total revenue increases when price decreases. 
B)  total revenue decreases when price decreases. 
C)  marginal revenue is negative. 
D)  it is more profitable to operate along the inelastic range of the demand curve. 
A)  total revenue increases when price decreases. 
B)  total revenue decreases when price decreases. 
C)  marginal revenue is negative. 
D)  it is more profitable to operate along the inelastic range of the demand curve.

Question 20

It is easier for a monopolist to price discriminate between groups for a service than for a good because

Accepted Answer

A)  it is easier to calculate average willingness to pay for services. 
B)  it is easier to distinguish between groups of customers for services than customers for goods. 
C)  it is easier for consumers to resell goods than resell services. 
D)  customers for goods usually do not differ with respect to their average willingness to pay. 
A)  it is easier to calculate average willingness to pay for services. 
B)  it is easier to distinguish between groups of customers for services than customers for goods. 
C)  it is easier for consumers to resell goods than resell services. 
D)  customers for goods usually do not differ with respect to their average willingness to pay.

Exam 13: Monopoly

Which of the following is true of a natural monopoly?

The use of a two-part price in a regulated natural monopoly

-Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When an average cost price rule regulation is imposed, the price per household per month is ________.

-For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

A price cap regulation ________.

-In the above figure, if this natural monopoly is not regulated the deadweight loss to society is

-The figure above shows a monopoly's total revenue and total cost curves. The monopoly's marginal revenue equals its marginal cost when it produces

Why are water companies considered a natural monopoly?

Explain the difference between price cap regulation in a natural monopoly and the effect of a price ceiling in a competitive market.

The airline and trucking industries are two examples of industries that were regulated because they were natural monopolies.

-Natural gas is a natural monopoly. The figure shows the market for natural gas in the city of Lucknow. When an average cost price rule regulation is imposed, the price per household per month is ________.

-In the figure above, compared to a perfectly competitive industry with the same costs, a single-price, unregulated monopoly will raise the price by

For a monopoly able to perfectly price discriminate, the marginal revenue curve coincides with the demand curve.

-In the figure above, the redistribution from the consumers to the producer if the firm is a single-price, unregulated monopoly rather than a perfectly competitive industry is

What are the characteristics of a market that allow a monopolist to successfully price discriminate between groups?

-If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output.

A monopolist that operates along the elastic range of its demand will find that

It is easier for a monopolist to price discriminate between groups for a service than for a good because

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

-If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will its price and its output.