Question 1

If a natural monopoly is told to set price equal to average cost,then the firm

Accepted Answer

A)  is not able to set marginal revenue equal to marginal cost. 
B)  automatically also sets price equal to marginal cost. 
C)  will make a substantial economic profit. 
D)  will incur an economic loss. 
E)  sets a price that is lower than its marginal cost. 
A)  is not able to set marginal revenue equal to marginal cost. 
B)  automatically also sets price equal to marginal cost. 
C)  will make a substantial economic profit. 
D)  will incur an economic loss. 
E)  sets a price that is lower than its marginal cost.

Question 2

When regulated using rate of return regulation,who benefits from the practice of some natural monopolies to count sumptuous offices,free baseball tickets,golf excursions,and limousines as costs of production?

Accepted Answer

A)  stockholders 
B)  managers of the monopoly 
C)  customers of the monopoly 
D)  regulators of the industry 
E)  None of the above answers is correct. 
A)  stockholders 
B)  managers of the monopoly 
C)  customers of the monopoly 
D)  regulators of the industry 
E)  None of the above answers is correct.

Question 3

The Seattle Mariners baseball team has a monopoly on major league baseball in the Northwest.If the Mariners could be purchased by anyone with enough money,we could argue that this purchase is fair according to the

Accepted Answer

A)  fair rules test. 
B)  fair results test. 
C)  fair price test. 
D)  fair output test. 
E)  allocative fairness test. 
A)  fair rules test. 
B)  fair results test. 
C)  fair price test. 
D)  fair output test. 
E)  allocative fairness test.

Question 4

Rent seeking is the act of obtaining special treatment by ________ to create ________.

Accepted Answer

A)  a monopoly; consumer surplus 
B)  the government; economic profit 
C)  consumers; a monopoly 
D)  the government; consumer surplus 
E)  competitive producers; a monopoly 
A)  a monopoly; consumer surplus 
B)  the government; economic profit 
C)  consumers; a monopoly 
D)  the government; consumer surplus 
E)  competitive producers; a monopoly

Question 5

A natural monopoly exists when

Accepted Answer

A)  diseconomies of scale exist in an industry. 
B)  one firm can supply an entire market at a lower average total cost than can two or more firms. 
C)  a firm can engage in price discrimination. 
D)  the producers in an industry have formed a cartel. 
E)  a monopoly firm faces a horizontal demand curve. 
A)  diseconomies of scale exist in an industry. 
B)  one firm can supply an entire market at a lower average total cost than can two or more firms. 
C)  a firm can engage in price discrimination. 
D)  the producers in an industry have formed a cartel. 
E)  a monopoly firm faces a horizontal demand curve.

Question 6

Under which of the following is consumer surplus zero?

Accepted Answer

A)  all types of monopoly 
B)  only single-price monopoly 
C)  only perfectly price-discriminating monopoly 
D)  only price discrimination on the basis of the number of units purchased 
E)  perfect competition 
A)  all types of monopoly 
B)  only single-price monopoly 
C)  only perfectly price-discriminating monopoly 
D)  only price discrimination on the basis of the number of units purchased 
E)  perfect competition

Question 7

An example of a monopoly would be

Accepted Answer

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

Question 8

Rent seeking is defined as

Accepted Answer

A)  charging higher prices for an apartment. 
B)  the act of obtaining special treatment by the government to create an economic profit. 
C)  charging a price below marginal cost. 
D)  selling a greater quantity than is profitable. 
E)  charging different prices for different units of the good or service. 
A)  charging higher prices for an apartment. 
B)  the act of obtaining special treatment by the government to create an economic profit. 
C)  charging a price below marginal cost. 
D)  selling a greater quantity than is profitable. 
E)  charging different prices for different units of the good or service.

Question 9

If a producer wants a monopoly with a legal barrier to entry,how can this be done?
i.The producer can spend funds lobbying to attain passage of the legal barrier to entry.
ii.The producer can purchase an existing monopoly.
iii.The producer can make rent seeking expenditures.

Accepted Answer

A)  i and ii 
B)  i and iii 
C)  ii and iii 
D)  i, ii, and iii 
E)  None of the above are ways to acquire a monopoly with a legal barrier to entry. 
A)  i and ii 
B)  i and iii 
C)  ii and iii 
D)  i, ii, and iii 
E)  None of the above are ways to acquire a monopoly with a legal barrier to entry.

Question 10

What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

Accepted Answer

Rent seeking is the act of obtaining spe

Question 11

A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38.At what price will this firm sell the output?

Accepted Answer

A)  $19 
B)  $38 
C)  $285 
D)  $570 
E)  There is not enough information given to answer the question. 
A)  $19 
B)  $38 
C)  $285 
D)  $570 
E)  There is not enough information given to answer the question.

Question 12

What is a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?

Accepted Answer

Natural monopolies can be regulated usin

Question 13

Gene's Car Wash is a natural monopoly.To wash 100 cars a week,if Gene is unregulated,he would charge a price of $10.Gene's average total cost for washing 100 cars is $8,his average variable cost is $6,and his marginal cost is $4.If Gene is regulated using a marginal cost pricing rule,the price he is allowed to charge to wash 100 cars is

Accepted Answer

A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
E)  $400. 
A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
E)  $400.

Question 14

A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,the monopoly must cut the price to $44.What is the marginal revenue of the extra unit sold?

Accepted Answer

A)  $484 
B)  $450 
C)  $44 
D)  $34 
E)  -$1 
A)  $484 
B)  $450 
C)  $44 
D)  $34 
E)  -$1

Question 15

If a monopoly engages in rent seeking,
i.its average total cost curve is lower than otherwise.
ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking.
iii.it necessarily incurs an economic loss.

Accepted Answer

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

Question 16

The capture theory of regulation predicts that

Accepted Answer

A)  regulation helps producers to maximize profits. 
B)  regulators capture the firm's economic profit and transfer it to consumers as consumer surplus. 
C)  regulators eliminate the deadweight loss a monopoly can create. 
D)  resources are used efficiently. 
E)  regulators capture the firm's economic profit and transfer it to themselves. 
A)  regulation helps producers to maximize profits. 
B)  regulators capture the firm's economic profit and transfer it to consumers as consumer surplus. 
C)  regulators eliminate the deadweight loss a monopoly can create. 
D)  resources are used efficiently. 
E)  regulators capture the firm's economic profit and transfer it to themselves.

Question 17

Which of the following best describes the capture theory of regulation?
i.Regulation seeks an efficient use of resources.
ii.Regulation is aimed at keeping prices as low as possible.
iii.Regulation helps firms maximize economic profit.

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 18

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will ________ and the quantity will ________.

Accepted Answer

A)  fall, decrease 
B)  fall, increase 
C)  rise, decrease 
D)  rise, increase 
E)  not change; decrease 
A)  fall, decrease 
B)  fall, increase 
C)  rise, decrease 
D)  rise, increase 
E)  not change; decrease

Question 19

Compared to a perfectly competitive market,a single-price monopoly sets

Accepted Answer

A)  a lower price. 
B)  the same price. 
C)  a higher price. 
D)  a price that might be higher, lower, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. 
E)  a price that might be higher, lower, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve. 
A)  a lower price. 
B)  the same price. 
C)  a higher price. 
D)  a price that might be higher, lower, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. 
E)  a price that might be higher, lower, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.

Question 20

A monopoly definitely incurs an economic loss if

Accepted Answer

A)  it produces where its marginal revenue equals its marginal cost. 
B)  its average total cost is greater than price. 
C)  it cannot perfectly price discriminate. 
D)  it price discriminates. 
E)  The statement errs because a monopoly cannot incur an economic loss. 
A)  it produces where its marginal revenue equals its marginal cost. 
B)  its average total cost is greater than price. 
C)  it cannot perfectly price discriminate. 
D)  it price discriminates. 
E)  The statement errs because a monopoly cannot incur an economic loss.

If a natural monopoly is told to set price equal to average cost,then the firm

When regulated using rate of return regulation,who benefits from the practice of some natural monopolies to count sumptuous offices,free baseball tickets,golf excursions,and limousines as costs of production?

The Seattle Mariners baseball team has a monopoly on major league baseball in the Northwest.If the Mariners could be purchased by anyone with enough money,we could argue that this purchase is fair according to the

Rent seeking is the act of obtaining special treatment by to create .

A natural monopoly exists when

Under which of the following is consumer surplus zero?

An example of a monopoly would be

Rent seeking is defined as

If a producer wants a monopoly with a legal barrier to entry,how can this be done? i.The producer can spend funds lobbying to attain passage of the legal barrier to entry. ii.The producer can purchase an existing monopoly. iii.The producer can make rent seeking expenditures.

What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38.At what price will this firm sell the output?

What is a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?

A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,the monopoly must cut the price to $44.What is the marginal revenue of the extra unit sold?

If a monopoly engages in rent seeking, i.its average total cost curve is lower than otherwise. ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking. iii.it necessarily incurs an economic loss.

The capture theory of regulation predicts that

Which of the following best describes the capture theory of regulation? i.Regulation seeks an efficient use of resources. ii.Regulation is aimed at keeping prices as low as possible. iii.Regulation helps firms maximize economic profit.

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will and the quantity will .

Compared to a perfectly competitive market,a single-price monopoly sets

A monopoly definitely incurs an economic loss if

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

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Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

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Exam 16: Monopoly

If a natural monopoly is told to set price equal to average cost,then the firm

When regulated using rate of return regulation,who benefits from the practice of some natural monopolies to count sumptuous offices,free baseball tickets,golf excursions,and limousines as costs of production?

The Seattle Mariners baseball team has a monopoly on major league baseball in the Northwest.If the Mariners could be purchased by anyone with enough money,we could argue that this purchase is fair according to the

Rent seeking is the act of obtaining special treatment by ________ to create ________.

A natural monopoly exists when

Under which of the following is consumer surplus zero?

An example of a monopoly would be

Rent seeking is defined as

If a producer wants a monopoly with a legal barrier to entry,how can this be done? i.The producer can spend funds lobbying to attain passage of the legal barrier to entry. ii.The producer can purchase an existing monopoly. iii.The producer can make rent seeking expenditures.

What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38.At what price will this firm sell the output?

What is a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?

A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,the monopoly must cut the price to $44.What is the marginal revenue of the extra unit sold?

If a monopoly engages in rent seeking, i.its average total cost curve is lower than otherwise. ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking. iii.it necessarily incurs an economic loss.

The capture theory of regulation predicts that

Which of the following best describes the capture theory of regulation? i.Regulation seeks an efficient use of resources. ii.Regulation is aimed at keeping prices as low as possible. iii.Regulation helps firms maximize economic profit.

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will ________ and the quantity will ________.

Compared to a perfectly competitive market,a single-price monopoly sets

A monopoly definitely incurs an economic loss if

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

Rent seeking is the act of obtaining special treatment by to create .

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will and the quantity will .