Question 1

Which of the following markets will have the largest deadweight loss?

Accepted Answer

A)  A market that consists of perfectly competitive firms. 
B)  A market that consists of a single-price monopoly. 
C)  A market that consists of a perfect price discriminating monopoly. 
D)  None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost. 
A)  A market that consists of perfectly competitive firms. 
B)  A market that consists of a single-price monopoly. 
C)  A market that consists of a perfect price discriminating monopoly. 
D)  None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost.

Question 2

If marginal revenue equals zero, then demand at this level of output is

Accepted Answer

A)  perfectly inelastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic. 
A)  perfectly inelastic. 
B)  inelastic. 
C)  unit elastic. 
D)  elastic.

Question 3

The social interest theory of regulation assumes that

Accepted Answer

A)  regulations maximize consumer surplus. 
B)  regulations set price equal to average total revenue. 
C)  public officials seek to minimize deadweight loss. 
D)  public officials seek gain through regulation for only their own constituents. 
A)  regulations maximize consumer surplus. 
B)  regulations set price equal to average total revenue. 
C)  public officials seek to minimize deadweight loss. 
D)  public officials seek gain through regulation for only their own constituents.

Question 4

-In the above figure, if the natural monopoly is NOT regulated it will produce

Accepted Answer

A)  12 million units at a price of $18 per unit. 
B)  8 million units at a price of $12 per unit. 
C)  8 million units at a price of $21 per unit. 
D)  8 million units at a price of $24 per unit. 
A)  12 million units at a price of $18 per unit. 
B)  8 million units at a price of $12 per unit. 
C)  8 million units at a price of $21 per unit. 
D)  8 million units at a price of $24 per unit.

Question 5

The capture theory holds that regulations are supplied to maximize

Accepted Answer

A)  total sales. 
B)  economic profit. 
C)  marginal product. 
D)  consumer surplus. 
A)  total sales. 
B)  economic profit. 
C)  marginal product. 
D)  consumer surplus.

Question 6

In the long run, a single-price monopolist will

Accepted Answer

A)  make zero economic profit. 
B)  be able to continue to make an economic profit as long as there is a barrier to entry. 
C)  end up being regulated by the government because it is making short-run economic profits. 
D)  Both answers A and C are correct. 
A)  make zero economic profit. 
B)  be able to continue to make an economic profit as long as there is a barrier to entry. 
C)  end up being regulated by the government because it is making short-run economic profits. 
D)  Both answers A and C are correct.

Question 7

If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be ________ off than if the firm was unregulated and the firm's owners will be ________ off than if it was unregulated.

Accepted Answer

A)  better; better 
B)  better; worse 
C)  worse; better 
D)  worse; worse 
A)  better; better 
B)  better; worse 
C)  worse; better 
D)  worse; worse

Question 8

If the demand for its product is elastic, a monopoly's

Accepted Answer

A)  total revenue is unchanged when the firm lowers its price. 
B)  total revenue decreases when the firm lowers its price. 
C)  marginal revenue is positive. 
D)  marginal revenue is zero. 
A)  total revenue is unchanged when the firm lowers its price. 
B)  total revenue decreases when the firm lowers its price. 
C)  marginal revenue is positive. 
D)  marginal revenue is zero.

Question 9

Which of the following occurs with both perfectly price discriminating and single-price monopolies?

Accepted Answer

A)  The amount of output is inefficient. 
B)  All consumer surplus goes to the monopoly. 
C)  Deadweight loss is created. 
D)  There is a redistribution of consumer surplus to the monopoly. 
A)  The amount of output is inefficient. 
B)  All consumer surplus goes to the monopoly. 
C)  Deadweight loss is created. 
D)  There is a redistribution of consumer surplus to the monopoly.

Question 10

Consumer surplus is

Accepted Answer

A)  positive in the case of a monopolist practicing perfect price discrimination. 
B)  equal to the price minus the marginal cost. 
C)  less in the case of a single-price monopoly than in the case of a perfectly competitive industry. 
D)  zero for a single-price monopolist. 
A)  positive in the case of a monopolist practicing perfect price discrimination. 
B)  equal to the price minus the marginal cost. 
C)  less in the case of a single-price monopoly than in the case of a perfectly competitive industry. 
D)  zero for a single-price monopolist.

Question 11

If an average cost pricing rule is imposed on the firm in the figure above, the firm 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 12

-In the figure above, the deadweight loss when the market is a single-price monopoly rather than perfectly competitive is the area of

Accepted Answer

A)  triangle aeb. 
B)  triangle aic. 
C)  triangle eig. 
D)  triangle eif. 
A)  triangle aeb. 
B)  triangle aic. 
C)  triangle eig. 
D)  triangle eif.

Question 13

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

Accepted Answer

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

Question 14

-Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could perfectly price discriminate, then producer surplus would equal

Accepted Answer

A)  $64 million. 
B)  $16 million. 
C)  $32 million. 
D)  zero. 
A)  $64 million. 
B)  $16 million. 
C)  $32 million. 
D)  zero.

Question 15

Rent seeking is devoted to the creation of

Accepted Answer

A)  monopolies. 
B)  competitive industries. 
C)  human capital. 
D)  more elastic demand. 
A)  monopolies. 
B)  competitive industries. 
C)  human capital. 
D)  more elastic demand.

Question 16

The demand curve facing the monopolist is

Accepted Answer

A)  the same as the market demand curve. 
B)  more elastic than the market demand curve. 
C)  less elastic than the market demand curve. 
D)  upward sloping. 
A)  the same as the market demand curve. 
B)  more elastic than the market demand curve. 
C)  less elastic than the market demand curve. 
D)  upward sloping.

Question 17

For a regulated natural monopoly, an average cost pricing rule sets price equal to

Accepted Answer

A)  average fixed cost. 
B)  average total cost. 
C)  average external cost. 
D)  average variable cost. 
A)  average fixed cost. 
B)  average total cost. 
C)  average external cost. 
D)  average variable cost.

Question 18

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 19

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

Accepted Answer

A)  $4. 
B)  $7. 
C)  $9. 
D)  $11. 
A)  $4. 
B)  $7. 
C)  $9. 
D)  $11.

Question 20

The WaveHouse on Mission Beach in San Diego features the Bruticus Maximus, a ten foot wave, which tests the skills of even the most talented surf and wake board riders on the planet. WaveHouse is the only place in San Diego where this service is offered. You can ride B. Max for $40 for the first hour, $33 for the second hour, and $26 for the third hour. Charging a different price for subsequent hours is a form of

Accepted Answer

A)  price discrimination among groups of buyers. 
B)  rent seeking behavior. 
C)  price discrimination among units of a good. 
D)  monopoly regulation. 
A)  price discrimination among groups of buyers. 
B)  rent seeking behavior. 
C)  price discrimination among units of a good. 
D)  monopoly regulation.

Which of the following markets will have the largest deadweight loss?

If marginal revenue equals zero, then demand at this level of output is

The social interest theory of regulation assumes that

-In the above figure, if the natural monopoly is NOT regulated it will produce

The capture theory holds that regulations are supplied to maximize

In the long run, a single-price monopolist will

If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be off than if the firm was unregulated and the firm's owners will be off than if it was unregulated.

If the demand for its product is elastic, a monopoly's

Which of the following occurs with both perfectly price discriminating and single-price monopolies?

Consumer surplus is

If an average cost pricing rule is imposed on the firm in the figure above, the firm will produce

-In the figure above, the deadweight loss when the market is a single-price monopoly rather than perfectly competitive is the area of

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

Rent seeking is devoted to the creation of

The demand curve facing the monopolist is

For a regulated natural monopoly, an average cost pricing rule sets price equal to

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

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

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 13: Monopoly

Which of the following markets will have the largest deadweight loss?

If marginal revenue equals zero, then demand at this level of output is

The social interest theory of regulation assumes that

-In the above figure, if the natural monopoly is NOT regulated it will produce

The capture theory holds that regulations are supplied to maximize

In the long run, a single-price monopolist will

If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be ________ off than if the firm was unregulated and the firm's owners will be ________ off than if it was unregulated.

If the demand for its product is elastic, a monopoly's

Which of the following occurs with both perfectly price discriminating and single-price monopolies?

Consumer surplus is

If an average cost pricing rule is imposed on the firm in the figure above, the firm will produce

-In the figure above, the deadweight loss when the market is a single-price monopoly rather than perfectly competitive is the area of

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

Rent seeking is devoted to the creation of

The demand curve facing the monopolist is

For a regulated natural monopoly, an average cost pricing rule sets price equal to

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

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

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be off than if the firm was unregulated and the firm's owners will be off than if it was unregulated.

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