Question 1

Describe the main problem with rate of return regulation and name an alternative regulatory scheme that has been devised to deal with that problem.

Accepted Answer

The main problem with rate of return reg

Question 2

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

Accepted Answer

A)  zero. 
B)  2 units per day. 
C)  4 units per day. 
D)  6 units per day. 
A)  zero. 
B)  2 units per day. 
C)  4 units per day. 
D)  6 units per day.

Question 3

-The figure above shows the costs and demand curves for the Bigshow Cable Company. To avoid any deadweight loss in the market served by Bigshow, the regulator must set the price at

Accepted Answer

A)  $8. 
B)  $6. 
C)  $4. 
D)  $2. 
A)  $8. 
B)  $6. 
C)  $4. 
D)  $2.

Question 4

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

Accepted Answer

The monopoly practicing perfec

Question 5

Which of the following is TRUE for a profit maximizing monopolist?

Accepted Answer

A)  Marginal cost is always less than average total cost. 
B)  In the long run, the firm's economic profit equals zero. 
C)  In the short run, the firm will shut down if its marginal cost is less than its average variable cost. 
D)  In the short run, the firm can make an economic profit even if its marginal cost is less than its average variable cost. 
A)  Marginal cost is always less than average total cost. 
B)  In the long run, the firm's economic profit equals zero. 
C)  In the short run, the firm will shut down if its marginal cost is less than its average variable cost. 
D)  In the short run, the firm can make an economic profit even if its marginal cost is less than its average variable cost.

Question 6

In July 2008, the Federal Communications Commission approved the merger of satellite radio providers XM Satellite and Sirius Satellite Radio, establishing a single satellite radio company in America. If the new company was a natural monopoly, which of the following would be a regulation to ensure an efficient quantity of satellite radio service?

Accepted Answer

A)  application of the average cost pricing rule 
B)  government subsidization 
C)  government taxation 
D)  application of the marginal cost pricing rule 
A)  application of the average cost pricing rule 
B)  government subsidization 
C)  government taxation 
D)  application of the marginal cost pricing rule

Question 7

A perfect price discriminator

Accepted Answer

A)  charges the maximum price for each unit that consumers are willing to pay. 
B)  is able to convince consumers to pay more for each unit than they are willing to pay. 
C)  is unable to make an economic profit. 
D)  disregards the market demand curve. 
A)  charges the maximum price for each unit that consumers are willing to pay. 
B)  is able to convince consumers to pay more for each unit than they are willing to pay. 
C)  is unable to make an economic profit. 
D)  disregards the market demand curve.

Question 8

The value of resources devoted to rent seeking will

Accepted Answer

A)  at most equal the monopoly's economic profit. 
B)  reduce deadweight loss. 
C)  reduce consumer surplus. 
D)  raise output to an efficient level. 
A)  at most equal the monopoly's economic profit. 
B)  reduce deadweight loss. 
C)  reduce consumer surplus. 
D)  raise output to an efficient level.

Question 9

-Prime Pharmaceuticals has developed a new asthma medicine, for which is 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 operates as a single-price monopoly, then consumer surplus is ________ and producer surplus is ________.

Accepted Answer

A)  zero; $64 million 
B)  $32 million; $32 million 
C)  $16 million; $32 million 
D)  $16 million; $48 million. 
A)  zero; $64 million 
B)  $32 million; $32 million 
C)  $16 million; $32 million 
D)  $16 million; $48 million.

Question 10

-The table above shows the demand and total cost schedule for a monopolist hotel. What price should the monopolist charge if it is a single-price monopoly that maximizes its profit?

Accepted Answer

A)  $171 
B)  $161 
C)  $151 
D)  $141 
A)  $171 
B)  $161 
C)  $151 
D)  $141

Question 11

If the government grants a firm a public franchise to supply coal, a monopoly is created by

Accepted Answer

A)  a natural barrier to entry. 
B)  a legal barrier to entry. 
C)  price discrimination. 
D)  All of the above answers are correct. 
A)  a natural barrier to entry. 
B)  a legal barrier to entry. 
C)  price discrimination. 
D)  All of the above answers are correct.

Question 12

Compared to the profit-maximizing equilibrium of a natural monopoly, a price cap regulation ________ the firm's price and ________ the firm's output.

Accepted Answer

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

Question 13

When natural or legal forces work to protect a firm from potential competitors, the market is said to have

Accepted Answer

A)  non-competitive supply. 
B)  non-competitive entry. 
C)  barriers to entry. 
D)  restricted competition. 
A)  non-competitive supply. 
B)  non-competitive entry. 
C)  barriers to entry. 
D)  restricted competition.

Question 14

In Delaware County, Pennsylvania, all homes, businesses, and other organizations purchase their water from one seller, Philadelphia Suburban Water Co. (PSWCo). Economists refer to public utility companies like PSWCo as natural monopolies because their

Accepted Answer

A)  marginal cost curves lie everywhere beneath their average fixed cost curves. 
B)  marginal cost curves lie everywhere beneath their demand curves. 
C)  average total cost curves lie everywhere above their demand curves. 
D)  None of the above answers is correct. 
A)  marginal cost curves lie everywhere beneath their average fixed cost curves. 
B)  marginal cost curves lie everywhere beneath their demand curves. 
C)  average total cost curves lie everywhere above their demand curves. 
D)  None of the above answers is correct.

Question 15

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

Accepted Answer

A)  raises variable cost. 
B)  raises fixed cost. 
C)  restricts output. 
D)  reduces the elasticity of demand. 
A)  raises variable cost. 
B)  raises fixed cost. 
C)  restricts output. 
D)  reduces the elasticity of demand.

Question 16

-The above figure illustrates the market for electric power that is served by the one utility in Alberta, Canada.
a) If the government did not regulate this utility, what would be the price of a kilowatt hour in this region and how much power would be generated?
b) If the government regulates the utility and chooses an average cost pricing rule, what would be the price of a kilowatt hour and how much power would be generated?
c) If the government regulates the utility and chooses a marginal cost pricing rule, what would be the price of a kilowatt hour and how much power would be generated?

Accepted Answer

a) The price would be 12¢ a kilowatt hou

Question 17

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, the pizza firm is

Accepted Answer

A)  practicing price discrimination. 
B)  unfair. 
C)  incurring a loss on on-campus sales. 
D)  eliminating all competition. 
A)  practicing price discrimination. 
B)  unfair. 
C)  incurring a loss on on-campus sales. 
D)  eliminating all competition.

Question 18

The marginal revenue curve for a single-price monopoly

Accepted Answer

A)  lies below its demand curve. 
B)  coincides with its demand curve. 
C)  lies above its demand curve. 
D)  is horizontal. 
A)  lies below its demand curve. 
B)  coincides with its demand curve. 
C)  lies above its demand curve. 
D)  is horizontal.

Question 19

-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 20

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

Describe the main problem with rate of return regulation and name an alternative regulatory scheme that has been devised to deal with that problem.

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

-The figure above shows the costs and demand curves for the Bigshow Cable Company. To avoid any deadweight loss in the market served by Bigshow, the regulator must set the price at

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

Which of the following is TRUE for a profit maximizing monopolist?

A perfect price discriminator

The value of resources devoted to rent seeking will

-The table above shows the demand and total cost schedule for a monopolist hotel. What price should the monopolist charge if it is a single-price monopoly that maximizes its profit?

If the government grants a firm a public franchise to supply coal, a monopoly is created by

Compared to the profit-maximizing equilibrium of a natural monopoly, a price cap regulation the firm's price and the firm's output.

When natural or legal forces work to protect a firm from potential competitors, the market is said to have

In Delaware County, Pennsylvania, all homes, businesses, and other organizations purchase their water from one seller, Philadelphia Suburban Water Co. (PSWCo). Economists refer to public utility companies like PSWCo as natural monopolies because their

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, the pizza firm is

The marginal revenue curve for a single-price monopoly

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

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

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

Describe the main problem with rate of return regulation and name an alternative regulatory scheme that has been devised to deal with that problem.

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

-The figure above shows the costs and demand curves for the Bigshow Cable Company. To avoid any deadweight loss in the market served by Bigshow, the regulator must set the price at

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

Which of the following is TRUE for a profit maximizing monopolist?

A perfect price discriminator

The value of resources devoted to rent seeking will

-The table above shows the demand and total cost schedule for a monopolist hotel. What price should the monopolist charge if it is a single-price monopoly that maximizes its profit?

If the government grants a firm a public franchise to supply coal, a monopoly is created by

Compared to the profit-maximizing equilibrium of a natural monopoly, a price cap regulation ________ the firm's price and ________ the firm's output.

When natural or legal forces work to protect a firm from potential competitors, the market is said to have

In Delaware County, Pennsylvania, all homes, businesses, and other organizations purchase their water from one seller, Philadelphia Suburban Water Co. (PSWCo). Economists refer to public utility companies like PSWCo as natural monopolies because their

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, the pizza firm is

The marginal revenue curve for a single-price monopoly

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

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

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

Compared to the profit-maximizing equilibrium of a natural monopoly, a price cap regulation the firm's price and the firm's output.