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

This type of firm would likely operate as a monopoly

Accepted Answer

A)  one of many U.S. wheat farmers. 
B)  one of the few U.S. auto makers. 
C)  AT&T long distance phone service. 
D)  the local water company. 
A)  one of many U.S. wheat farmers. 
B)  one of the few U.S. auto makers. 
C)  AT&T long distance phone service. 
D)  the local water company.

Question 3

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 4

-Bob's Country Bunker is the only restaurant in town that serves fried rutabaga. Bob faces the demand schedule shown in the table above.
a) What is Bob's marginal revenue from the 50th rutabaga?
   b) Bob has the cost schedule shown in the table above. Draw the demand curve faced by Bob and his marginal revenue curve. Draw Bob's marginal cost curve. If Bob wants to maximize his profit, how many fried rutabagas should he sell?
c) What price will Bob charge?
d) What is Bob's economic profit?
e) Bob currently charges $3 per fried rutabaga. Is he maximizing his profit? Why or why not?

Accepted Answer

a) When Bob sells 40 rutabagas, his tota

Question 5

-Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve. Bob's Books maximizes its profit and sets the price of a book equal to ________ and has total annual revenue of ________.

Accepted Answer

A)  $40; $40,000 
B)  $30; $60,000 
C)  $20, $60,000 
D)  $10; $40,000 
A)  $40; $40,000 
B)  $30; $60,000 
C)  $20, $60,000 
D)  $10; $40,000

Question 6

Are some monopolies created by government legislation that gives a firm the unique right to produce a good or service?

Accepted Answer

Yes, some monopolies are created by gove

Question 7

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. To maximize profits, WaveHouse would produce a quantity where

Accepted Answer

A)  marginal revenue is greater than marginal cost. 
B)  marginal revenue is equal to marginal cost. 
C)  marginal revenue is less than marginal cost. 
D)  price is maximized. 
A)  marginal revenue is greater than marginal cost. 
B)  marginal revenue is equal to marginal cost. 
C)  marginal revenue is less than marginal cost. 
D)  price is maximized.

Question 8

Rent seeking is best defined as attempts

Accepted Answer

A)  by landlords to get tenants. 
B)  to achieve monopoly power and the resulting economic profit. 
C)  by individuals to avoid paying taxes. 
D)  by owners of a monopoly to sell the firm. 
A)  by landlords to get tenants. 
B)  to achieve monopoly power and the resulting economic profit. 
C)  by individuals to avoid paying taxes. 
D)  by owners of a monopoly to sell the firm.

Question 9

How do the price, output, consumer surplus, economic profit, and total surplus for a single-price monopoly compare to that of a competitive industry?

Accepted Answer

For the monopolist, price is h

Question 10

If regulators of the local gas and water utility companies require those firms to price their service at marginal cost

Accepted Answer

A)  there would be a deadweight loss in their markets. 
B)  the firms might require a tax-financed subsidy to survive. 
C)  their customers would enjoy no consumer surplus. 
D)  None of the above answers are correct. 
A)  there would be a deadweight loss in their markets. 
B)  the firms might require a tax-financed subsidy to survive. 
C)  their customers would enjoy no consumer surplus. 
D)  None of the above answers are correct.

Question 11

The marginal revenue curve for a single-price monopoly

Accepted Answer

A)  is horizontal. 
B)  is upward sloping. 
C)  lies above the market demand curve. 
D)  lies below the market demand curve. 
A)  is horizontal. 
B)  is upward sloping. 
C)  lies above the market demand curve. 
D)  lies below the market demand curve.

Question 12

What potential problem is there with rate of return pricing?

Accepted Answer

The monopolist might exaggerate its cost

Question 13

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes a marginal cost pricing rule, the firm provides service to

Accepted Answer

A)  3.5 million households. 
B)  6 million households. 
C)  10.5 million households. 
D)  12.5 million households. 
A)  3.5 million households. 
B)  6 million households. 
C)  10.5 million households. 
D)  12.5 million households.

Question 14

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

Accepted Answer

A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit. 
A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit.

Question 15

Regulation that specifies that a firm's profits must be shared with its customers if the profit rises above a target level is called

Accepted Answer

A)  rate of return regulation. 
B)  minimum price regulation. 
C)  earnings sharing regulation. 
D)  average cost pricing. 
A)  rate of return regulation. 
B)  minimum price regulation. 
C)  earnings sharing regulation. 
D)  average cost pricing.

Question 16

A barrier to entry is

Accepted Answer

A)  a natural or legal impediment that makes it difficult for new firms to enter a market. 
B)  a necessary condition for perfect competition. 
C)  the result of highly elastic demand. 
D)  a brick wall that a firm places around its corporate headquarters. 
A)  a natural or legal impediment that makes it difficult for new firms to enter a market. 
B)  a necessary condition for perfect competition. 
C)  the result of highly elastic demand. 
D)  a brick wall that a firm places around its corporate headquarters.

Question 17

-The above figure illustrates a single-price unregulated monopolist. If the monopolist maximizes its profit, the consumer surplus equals

Accepted Answer

A)  $20,000. 
B)  $10,000. 
C)  $45,000. 
D)  $40,000. 
A)  $20,000. 
B)  $10,000. 
C)  $45,000. 
D)  $40,000.

Question 18

-In the above figure, what price will a single-price monopoly set?

Accepted Answer

A)  P1 
B)  P2 
C)  P4 
D)  P5 
A)  P1 
B)  P2 
C)  P4 
D)  P5

Question 19

If the price elasticity of demand is greater than 1, a monopoly's

Accepted Answer

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

Question 20

When a single-price monopoly maximizes its profit, which of the following is FALSE?

Accepted Answer

A)  P = MC 
B)  MC = MR 
C)  P > MR 
D)  None of the above because they are all true. 
A)  P = MC 
B)  MC = MR 
C)  P > MR 
D)  None of the above because they are all true.

Which of the following is TRUE of a natural monopoly?

This type of firm would likely operate as a monopoly

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

-Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve. Bob's Books maximizes its profit and sets the price of a book equal to and has total annual revenue of .

Are some monopolies created by government legislation that gives a firm the unique right to produce a good or service?

Rent seeking is best defined as attempts

How do the price, output, consumer surplus, economic profit, and total surplus for a single-price monopoly compare to that of a competitive industry?

If regulators of the local gas and water utility companies require those firms to price their service at marginal cost

The marginal revenue curve for a single-price monopoly

What potential problem is there with rate of return pricing?

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes a marginal cost pricing rule, the firm provides service to

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

Regulation that specifies that a firm's profits must be shared with its customers if the profit rises above a target level is called

A barrier to entry is

-The above figure illustrates a single-price unregulated monopolist. If the monopolist maximizes its profit, the consumer surplus equals

-In the above figure, what price will a single-price monopoly set?

If the price elasticity of demand is greater than 1, a monopoly's

When a single-price monopoly maximizes its profit, which of the following is FALSE?

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 is TRUE of a natural monopoly?

This type of firm would likely operate as a monopoly

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

-Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve. Bob's Books maximizes its profit and sets the price of a book equal to ________ and has total annual revenue of ________.

Are some monopolies created by government legislation that gives a firm the unique right to produce a good or service?

Rent seeking is best defined as attempts

How do the price, output, consumer surplus, economic profit, and total surplus for a single-price monopoly compare to that of a competitive industry?

If regulators of the local gas and water utility companies require those firms to price their service at marginal cost

The marginal revenue curve for a single-price monopoly

What potential problem is there with rate of return pricing?

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes a marginal cost pricing rule, the firm provides service to

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

Regulation that specifies that a firm's profits must be shared with its customers if the profit rises above a target level is called

A barrier to entry is

-The above figure illustrates a single-price unregulated monopolist. If the monopolist maximizes its profit, the consumer surplus equals

-In the above figure, what price will a single-price monopoly set?

If the price elasticity of demand is greater than 1, a monopoly's

When a single-price monopoly maximizes its profit, which of the following is FALSE?

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

-Bob's Books is the only bookstore in town. The figure above shows the demand curve for books and Bob's Books' marginal revenue curve and marginal cost curve. Bob's Books maximizes its profit and sets the price of a book equal to and has total annual revenue of .