Question 1

"If a natural monopoly is regulated using a marginal cost pricing rule,the firm makes zero economic profit." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.If

Question 2

The above figure shows a market.
-If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly,the amount of the gain in producer surplus is the area ________.

Accepted Answer

A)  ABH 
B)  BFGH 
C)  ACG 
D)  BDEH 
E)  ACE 
A)  ABH 
B)  BFGH 
C)  ACG 
D)  BDEH 
E)  ACE

Question 3

When used with a natural monopoly,an average cost pricing rule results in

Accepted Answer

A)  the efficient level of output. 
B)  economic losses for the firm. 
C)  the need for government to subsidize the natural monopoly. 
D)  zero economic profit for the firm. 
E)  the firm making an economic profit. 
A)  the efficient level of output. 
B)  economic losses for the firm. 
C)  the need for government to subsidize the natural monopoly. 
D)  zero economic profit for the firm. 
E)  the firm making an economic profit.

Question 4

Which of the following is an example of a natural monopoly?

Accepted Answer

A)  the trademark protecting Gatorade 
B)  the talents of Tom Hanks 
C)  the local water company 
D)  the patent on an Intel processor 
E)  Debeers' ownership of a large fraction of the world's diamonds 
A)  the trademark protecting Gatorade 
B)  the talents of Tom Hanks 
C)  the local water company 
D)  the patent on an Intel processor 
E)  Debeers' ownership of a large fraction of the world's diamonds

Question 5

Which of the following can be a barrier to entry?
i.ownership of a necessary input
ii.requiring a government license
iii.large diseconomies of scale

Accepted Answer

A)  i only 
B)  ii only 
C)  i and iii 
D)  i and ii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  i and iii 
D)  i and ii 
E)  i, ii, and iii

Question 6

"If Michigan's electric utilities were allowed to use marginal cost pricing,it would lead to economic profits for these utilities." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.Imp

Question 7

In States where the government runs liquor stores,the monopoly results from

Accepted Answer

A)  economies of scale. 
B)  legal restrictions. 
C)  control of an essential resource. 
D)  patents. 
E)  public fear. 
A)  economies of scale. 
B)  legal restrictions. 
C)  control of an essential resource. 
D)  patents. 
E)  public fear.

Question 8

The assumption that regulation relentlessly seeks out deadweight loss and seeks to eliminate it is called the

Accepted Answer

A)  social interest theory of regulation. 
B)  capture theory of regulation. 
C)  Coase theory of regulation. 
D)  socially optimal theory of regulation. 
E)  predatory theory of regulation. 
A)  social interest theory of regulation. 
B)  capture theory of regulation. 
C)  Coase theory of regulation. 
D)  socially optimal theory of regulation. 
E)  predatory theory of regulation.

Question 9

Once a monopoly has determined how much it produces,it will charge a price that

Accepted Answer

A)  is determined by the intersection of the marginal cost and average total cost curves. 
B)  minimizes marginal cost. 
C)  is determined by its demand curve. 
D)  is independent of the amount produced. 
E)  is equal to its average total cost. 
A)  is determined by the intersection of the marginal cost and average total cost curves. 
B)  minimizes marginal cost. 
C)  is determined by its demand curve. 
D)  is independent of the amount produced. 
E)  is equal to its average total cost.

Question 10

A major characteristic of monopoly is

Accepted Answer

A)  a single seller of a product. 
B)  multiple sellers of a product. 
C)  two sellers of a product. 
D)  a few sellers of differentiated products. 
E)  a few sellers of an identical product. 
A)  a single seller of a product. 
B)  multiple sellers of a product. 
C)  two sellers of a product. 
D)  a few sellers of differentiated products. 
E)  a few sellers of an identical product.

Question 11

A price-discriminating monopoly

Accepted Answer

A)  sells a larger quantity than it would if it were a single-price monopoly. 
B)  is illegal. 
C)  cannot offer discounts. 
D)  cannot control the price of its product. 
E)  makes a smaller economic profit than it would if it were a single-price monopoly. 
A)  sells a larger quantity than it would if it were a single-price monopoly. 
B)  is illegal. 
C)  cannot offer discounts. 
D)  cannot control the price of its product. 
E)  makes a smaller economic profit than it would if it were a single-price monopoly.

Question 12

If a single firm can meet the entire market demand at a lower average total cost than a larger number of smaller firms,the single firm is

Accepted Answer

A)  price discriminating. 
B)  a natural monopoly. 
C)  a legal monopoly. 
D)  efficient when profit maximizing. 
E)  an ownership-of-the-market monopoly. 
A)  price discriminating. 
B)  a natural monopoly. 
C)  a legal monopoly. 
D)  efficient when profit maximizing. 
E)  an ownership-of-the-market monopoly.

Question 13

One way a monopoly can convert additional consumer surplus into economic profit is to

Accepted Answer

A)  lower prices. 
B)  raise prices. 
C)  price discriminate. 
D)  become more competitive. 
E)  produce where price equals average total cost. 
A)  lower prices. 
B)  raise prices. 
C)  price discriminate. 
D)  become more competitive. 
E)  produce where price equals average total cost.

Question 14

Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs?
i.Consumer surplus decreases.
ii.Economic profit increases.
iii.A deadweight loss is created.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i, ii, and iii

Question 15

Price cap regulation

Accepted Answer

A)  does not provide incentives to firms to minimize their costs because firms cannot change prices. 
B)  sets the maximum price these firms can charge. 
C)  gives firms the incentive to exaggerate their costs. 
D)  Both answers A and C are correct. 
E)  Both answers A and B are correct. 
A)  does not provide incentives to firms to minimize their costs because firms cannot change prices. 
B)  sets the maximum price these firms can charge. 
C)  gives firms the incentive to exaggerate their costs. 
D)  Both answers A and C are correct. 
E)  Both answers A and B are correct.

Question 16

"When electric utilities are regulated using an average cost pricing rule,they will earn zero economic profit." Is the previous statement correct or incorrect? Why?

Accepted Answer

The statement is correct.An av

Question 17

Capture theory is

Accepted Answer

A)  an economic theory of regulation. 
B)  a model about perfect competition. 
C)  the same as the public interest theory. 
D)  the theory that regulators capture firms' attention by dictating a very low price. 
E)  a theory that explains behavior of competitive firms. 
A)  an economic theory of regulation. 
B)  a model about perfect competition. 
C)  the same as the public interest theory. 
D)  the theory that regulators capture firms' attention by dictating a very low price. 
E)  a theory that explains behavior of competitive firms.

Question 18

"A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly's output." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is correct.Only when the d

Question 19

A single-price monopoly faces a linear demand curve.If the marginal revenue for the second unit is $20,then the marginal revenue for the

Accepted Answer

A)  first unit is less than $20. 
B)  third unit is less than $20. 
C)  third unit is more than $20. 
D)  third unit is also $20. 
E)  more information is needed to determine if the marginal revenue for the third unit is more than, less than, or equal to $20. 
A)  first unit is less than $20. 
B)  third unit is less than $20. 
C)  third unit is more than $20. 
D)  third unit is also $20. 
E)  more information is needed to determine if the marginal revenue for the third unit is more than, less than, or equal to $20.

Question 20

When a monopoly price discriminates,it

Accepted Answer

A)  increases the amount of consumer surplus. 
B)  decreases its economic profit. 
C)  converts consumer surplus into economic profit. 
D)  converts economic profit into consumer surplus. 
E)  has no effect on the deadweight loss in the market. 
A)  increases the amount of consumer surplus. 
B)  decreases its economic profit. 
C)  converts consumer surplus into economic profit. 
D)  converts economic profit into consumer surplus. 
E)  has no effect on the deadweight loss in the market.

"If a natural monopoly is regulated using a marginal cost pricing rule,the firm makes zero economic profit." Is the previous statement correct or incorrect?

The above figure shows a market. -If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly,the amount of the gain in producer surplus is the area ________.

When used with a natural monopoly,an average cost pricing rule results in

Which of the following is an example of a natural monopoly?

Which of the following can be a barrier to entry? i.ownership of a necessary input ii.requiring a government license iii.large diseconomies of scale

"If Michigan's electric utilities were allowed to use marginal cost pricing,it would lead to economic profits for these utilities." Is the previous statement correct or incorrect?

In States where the government runs liquor stores,the monopoly results from

The assumption that regulation relentlessly seeks out deadweight loss and seeks to eliminate it is called the

Once a monopoly has determined how much it produces,it will charge a price that

A major characteristic of monopoly is

A price-discriminating monopoly

If a single firm can meet the entire market demand at a lower average total cost than a larger number of smaller firms,the single firm is

One way a monopoly can convert additional consumer surplus into economic profit is to

Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs? i.Consumer surplus decreases. ii.Economic profit increases. iii.A deadweight loss is created.

Price cap regulation

"When electric utilities are regulated using an average cost pricing rule,they will earn zero economic profit." Is the previous statement correct or incorrect? Why?

Capture theory is

"A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly's output." Explain why the previous statement is correct or incorrect.

A single-price monopoly faces a linear demand curve.If the marginal revenue for the second unit is $20,then the marginal revenue for the

When a monopoly price discriminates,it

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 16: Monopoly

"If a natural monopoly is regulated using a marginal cost pricing rule,the firm makes zero economic profit." Is the previous statement correct or incorrect?

The above figure shows a market. -If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly,the amount of the gain in producer surplus is the area ________.

When used with a natural monopoly,an average cost pricing rule results in

Which of the following is an example of a natural monopoly?

Which of the following can be a barrier to entry? i.ownership of a necessary input ii.requiring a government license iii.large diseconomies of scale

"If Michigan's electric utilities were allowed to use marginal cost pricing,it would lead to economic profits for these utilities." Is the previous statement correct or incorrect?

In States where the government runs liquor stores,the monopoly results from

The assumption that regulation relentlessly seeks out deadweight loss and seeks to eliminate it is called the

Once a monopoly has determined how much it produces,it will charge a price that

A major characteristic of monopoly is

A price-discriminating monopoly

If a single firm can meet the entire market demand at a lower average total cost than a larger number of smaller firms,the single firm is

One way a monopoly can convert additional consumer surplus into economic profit is to

Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs? i.Consumer surplus decreases. ii.Economic profit increases. iii.A deadweight loss is created.

Price cap regulation

"When electric utilities are regulated using an average cost pricing rule,they will earn zero economic profit." Is the previous statement correct or incorrect? Why?

Capture theory is

"A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly's output." Explain why the previous statement is correct or incorrect.

A single-price monopoly faces a linear demand curve.If the marginal revenue for the second unit is $20,then the marginal revenue for the

When a monopoly price discriminates,it

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters