Question 1

"Because of rent seeking, a monopoly may end up making zero economic profit." Is the previous statement correct or incorrect? Why?

Accepted Answer

The statement is correct. Competition am

Question 2

-If the natural monopoly shown in the figure above is unregulated, then consumer surplus will be

Accepted Answer

A)  $0. 
B)  $4 million. 
C)  $8 million. 
D)  $16 million. 
A)  $0. 
B)  $4 million. 
C)  $8 million. 
D)  $16 million.

Question 3

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 4

"Price discriminators lose money by being nice to their customers." Is the previous statement correct or incorrect?

Accepted Answer

The statement is inc

Question 5

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

Accepted Answer

A)  $0. 
B)  $8 million. 
C)  $16 million. 
D)  $32 million. 
A)  $0. 
B)  $8 million. 
C)  $16 million. 
D)  $32 million.

Question 6

If a monopolist was operating in a price range where marginal revenue was negative, it would be

Accepted Answer

A)  in the inelastic range of the demand for its product. 
B)  in the unit elastic range of the demand for its product. 
C)  in the elastic range of the demand for its product. 
D)  maximizing revenue but not profits. 
A)  in the inelastic range of the demand for its product. 
B)  in the unit elastic range of the demand for its product. 
C)  in the elastic range of the demand for its product. 
D)  maximizing revenue but not profits.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

-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 9

Which of the following statements is TRUE for both a competitive market and a single-price monopoly?

Accepted Answer

A)  The firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost. 
B)  The firm can make an economic profit in the long run. 
C)  The price is set where the supply curve and demand curve intersect. 
D)  The firm always produces at the lowest possible long-run average cost. 
A)  The firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost. 
B)  The firm can make an economic profit in the long run. 
C)  The price is set where the supply curve and demand curve intersect. 
D)  The firm always produces at the lowest possible long-run average cost.

Question 10

-In the above figure, for a single-price monopolist producing at its profit-maximizing equilibrium price and quantity, the price elasticity of demand at this equilibrium will be

Accepted Answer

A)  greater than 1 and the monopolist's total revenue is maximized. 
B)  less than 1 and the monopolist's economic profit could be larger. 
C)  equal to 1 and the monopolist's total revenue is maximized. 
D)  greater than 1 and the economic profit is maximized but the total revenue is not. 
A)  greater than 1 and the monopolist's total revenue is maximized. 
B)  less than 1 and the monopolist's economic profit could be larger. 
C)  equal to 1 and the monopolist's total revenue is maximized. 
D)  greater than 1 and the economic profit is maximized but the total revenue is not.

Question 11

For a monopoly, the demand for its product is perfectly elastic at the market price.

Accepted Answer

A) True 
 B)False

Question 12

If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

Accepted Answer

A)  $5 per unit. 
B)  $25 per unit. 
C)  $40 per unit. 
D)  $20 per unit. 
A)  $5 per unit. 
B)  $25 per unit. 
C)  $40 per unit. 
D)  $20 per unit.

Question 13

A monopoly that can perfectly price discriminate creates no deadweight loss.

Accepted Answer

A) True 
 B)False

Question 14

Deadweight loss measures the inefficiency as the loss of

Accepted Answer

A)  consumer surplus only. 
B)  consumer surplus minus producer surplus. 
C)  consumer surplus plus producer surplus. 
D)  producer surplus only. 
A)  consumer surplus only. 
B)  consumer surplus minus producer surplus. 
C)  consumer surplus plus producer surplus. 
D)  producer surplus only.

Question 15

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is unregulated, it will produce ________ and sell at a price of ________.

Accepted Answer

A)  200 kwh; 10¢ per kwh 
B)  200 kwh; 30¢ per kwh 
C)  300 kwh; 20¢ per kwh 
D)  400 kwh; 10¢ per kwh 
A)  200 kwh; 10¢ per kwh 
B)  200 kwh; 30¢ per kwh 
C)  300 kwh; 20¢ per kwh 
D)  400 kwh; 10¢ per kwh

Question 16

Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on:
a) efficiency.
b) consumer surplus.
c) economic profit in the long run.

Accepted Answer

a) Both perfect competition and perfect

Question 17

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

Accepted Answer

A)  $2. 
B)  $4. 
C)  $5. 
D)  $6. 
A)  $2. 
B)  $4. 
C)  $5. 
D)  $6.

Question 18

A single-price monopolist will produce the output at which

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  demand is perfectly inelastic. 
C)  marginal revenue is zero. 
D)  demand is inelastic but not perfectly inelastic. 
A)  marginal revenue equals marginal cost. 
B)  demand is perfectly inelastic. 
C)  marginal revenue is zero. 
D)  demand is inelastic but not perfectly inelastic.

Question 19

-The output produced by the single-price, unregulated monopoly in the above figure is

Accepted Answer

A)  efficient because profit is maximized. 
B)  inefficient because less than the efficient quantity is produced. 
C)  efficient because marginal costs equals marginal revenue. 
D)  inefficient because more than the efficient quantity is produced. 
A)  efficient because profit is maximized. 
B)  inefficient because less than the efficient quantity is produced. 
C)  efficient because marginal costs equals marginal revenue. 
D)  inefficient because more than the efficient quantity is produced.

Question 20

A monopoly is a firm that produces a good or service for which no close substitute exists.

Accepted Answer

A) True 
 B)False

"Because of rent seeking, a monopoly may end up making zero economic profit." Is the previous statement correct or incorrect? Why?

-If the natural monopoly shown in the figure above is unregulated, then consumer surplus will be

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

"Price discriminators lose money by being nice to their customers." Is the previous statement correct or incorrect?

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

If a monopolist was operating in a price range where marginal revenue was negative, it would be

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

-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?

Which of the following statements is TRUE for both a competitive market and a single-price monopoly?

-In the above figure, for a single-price monopolist producing at its profit-maximizing equilibrium price and quantity, the price elasticity of demand at this equilibrium will be

For a monopoly, the demand for its product is perfectly elastic at the market price.

If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

A monopoly that can perfectly price discriminate creates no deadweight loss.

Deadweight loss measures the inefficiency as the loss of

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is unregulated, it will produce and sell at a price of .

Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on: a) efficiency. b) consumer surplus. c) economic profit in the long run.

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

A single-price monopolist will produce the output at which

-The output produced by the single-price, unregulated monopoly in the above figure is

A monopoly is a firm that produces a good or service for which no close substitute exists.

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

"Because of rent seeking, a monopoly may end up making zero economic profit." Is the previous statement correct or incorrect? Why?

-If the natural monopoly shown in the figure above is unregulated, then consumer surplus will be

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

"Price discriminators lose money by being nice to their customers." Is the previous statement correct or incorrect?

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

If a monopolist was operating in a price range where marginal revenue was negative, it would be

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

-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?

Which of the following statements is TRUE for both a competitive market and a single-price monopoly?

-In the above figure, for a single-price monopolist producing at its profit-maximizing equilibrium price and quantity, the price elasticity of demand at this equilibrium will be

For a monopoly, the demand for its product is perfectly elastic at the market price.

If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

A monopoly that can perfectly price discriminate creates no deadweight loss.

Deadweight loss measures the inefficiency as the loss of

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is unregulated, it will produce ________ and sell at a price of ________.

Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on: a) efficiency. b) consumer surplus. c) economic profit in the long run.

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

A single-price monopolist will produce the output at which

-The output produced by the single-price, unregulated monopoly in the above figure is

A monopoly is a firm that produces a good or service for which no close substitute exists.

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

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is unregulated, it will produce and sell at a price of .