Question 1

A firm that is a natural monopoly

Accepted Answer

A)  can supply the entire market at a lower average total cost than two or more firms. 
B)  has very small fixed costs and very large marginal costs. 
C)  is infrequently regulated because having one firm serve the market is economically sound. 
D)  cannot make an economic profit if it is not regulated because it must serve a very large customer base. 
E)  produces the efficient quantity of output when it is not regulated. 
A)  can supply the entire market at a lower average total cost than two or more firms. 
B)  has very small fixed costs and very large marginal costs. 
C)  is infrequently regulated because having one firm serve the market is economically sound. 
D)  cannot make an economic profit if it is not regulated because it must serve a very large customer base. 
E)  produces the efficient quantity of output when it is not regulated.

Question 2

Price cap regulation involves

Accepted Answer

A)  setting the monopoly's price equal to its average total cost. 
B)  setting the monopoly's price equal to its profit-maximizing price. 
C)  setting a maximum price the monopoly may charge. 
D)  assuming a natural monopoly will not charge a higher than profit-maximizing price. 
E)  setting the monopoly's price equal to its marginal cost. 
A)  setting the monopoly's price equal to its average total cost. 
B)  setting the monopoly's price equal to its profit-maximizing price. 
C)  setting a maximum price the monopoly may charge. 
D)  assuming a natural monopoly will not charge a higher than profit-maximizing price. 
E)  setting the monopoly's price equal to its marginal cost.

Question 3

Which of the following is an example of a two-part tariff?

Accepted Answer

A)  price discrimination based on the buyers' willingness to pay 
B)  charging a hookup fee plus a monthly charge equal to marginal cost 
C)  higher sales tax on specific products 
D)  different prices based on the cost of production and quantity bought 
E)  A regulated firm uses marginal cost pricing for some customers and average cost pricing for other customers. 
A)  price discrimination based on the buyers' willingness to pay 
B)  charging a hookup fee plus a monthly charge equal to marginal cost 
C)  higher sales tax on specific products 
D)  different prices based on the cost of production and quantity bought 
E)  A regulated firm uses marginal cost pricing for some customers and average cost pricing for other customers.

Question 4

A marginal cost pricing rule sets marginal cost equal to

Accepted Answer

A)  minimum average variable cost. 
B)  price. 
C)  average cost. 
D)  marginal revenue. 
E)  the smaller of price or marginal revenue. 
A)  minimum average variable cost. 
B)  price. 
C)  average cost. 
D)  marginal revenue. 
E)  the smaller of price or marginal revenue.

Question 5

-The above figure represents the cost and demand curves for a natural monopoly that is regulated using a marginal cost pricing rule.
a.What is the quantity?
b.What price is charged?
c.What area represents the consumer surplus when the firm is regulated using a marginal cost pricing rule?
d.What distance represents the firm's loss per unit when the firm is regulated using a marginal cost pricing rule?

Accepted Answer

a.The quantity is the efficient quantity

Question 6

To encourage invention and innovation,the government provides

Accepted Answer

A)  patents. 
B)  public franchises. 
C)  government licenses. 
D)  natural monopolies. 
E)  easily obtained ownership barriers to entry. 
A)  patents. 
B)  public franchises. 
C)  government licenses. 
D)  natural monopolies. 
E)  easily obtained ownership barriers to entry.

Question 7

Under which of the following does a monopoly's demand curve become its marginal revenue curve?

Accepted Answer

A)  all types of monopoly 
B)  only single-price monopoly 
C)  only perfect price discrimination 
D)  only price discrimination on the basis of the number of units purchased 
E)  any monopoly that price discriminates 
A)  all types of monopoly 
B)  only single-price monopoly 
C)  only perfect price discrimination 
D)  only price discrimination on the basis of the number of units purchased 
E)  any monopoly that price discriminates

Question 8

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot Pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,he produces ________ pillows per hour.

Accepted Answer

A)  1,000 
B)  3,000 
C)  4,000 
D)  0 
E)  2,000 
A)  1,000 
B)  3,000 
C)  4,000 
D)  0 
E)  2,000

Question 9

Patents

Accepted Answer

A)  are granted only to competitive firms and not monopolies. 
B)  require that monopolies increase the amount they produce. 
C)  increase the incentive to capture economies of scale. 
D)  increase the incentive to innovate. 
E)  grant the holder a monopoly that lasts forever. 
A)  are granted only to competitive firms and not monopolies. 
B)  require that monopolies increase the amount they produce. 
C)  increase the incentive to capture economies of scale. 
D)  increase the incentive to innovate. 
E)  grant the holder a monopoly that lasts forever.

Question 10

A single-price monopoly

Accepted Answer

A)  sets a single, different price for each consumer. 
B)  sets a single price for all consumers. 
C)  asks each consumer what single price they would be willing to pay. 
D)  sets a single, different price for each of two different groups. 
E)  sells each unit of its output for the single, highest price that the buyer of that unit is willing to pay. 
A)  sets a single, different price for each consumer. 
B)  sets a single price for all consumers. 
C)  asks each consumer what single price they would be willing to pay. 
D)  sets a single, different price for each of two different groups. 
E)  sells each unit of its output for the single, highest price that the buyer of that unit is willing to pay.

Question 11

-In the above figure,a perfectly competitive market will have a price of ________ and a single-price monopoly will have a price of ________.

Accepted Answer

A)  P₁ and quantity of Q₁; P₂ and quantity of Q₂ 
B)  P₂ and quantity of Q₂; P₁ and quantity of Q₁ 
C)  P₃ and quantity of Q₃; P₁ and quantity of Q₁ 
D)  P₂ and quantity of Q₂; P₃ and quantity of Q₁ 
E)  P₂ and quantity of Q₁; P₁ and quantity of Q₁ 
A)  P₁ and quantity of Q₁; P₂ and quantity of Q₂ 
B)  P₂ and quantity of Q₂; P₁ and quantity of Q₁ 
C)  P₃ and quantity of Q₃; P₁ and quantity of Q₁ 
D)  P₂ and quantity of Q₂; P₃ and quantity of Q₁ 
E)  P₂ and quantity of Q₁; P₁ and quantity of Q₁

Question 12

When compared to a perfectly competitive market,a single-price monopoly with the same costs produces ________ output and charges ________ price.

Accepted Answer

A)  a larger; a lower 
B)  a smaller; a lower 
C)  the same; a higher 
D)  a smaller; a higher 
E)  a smaller; the same 
A)  a larger; a lower 
B)  a smaller; a lower 
C)  the same; a higher 
D)  a smaller; a higher 
E)  a smaller; the same

Question 13

The figure above shows a monopoly's total revenue and total cost curves.
-Using the figure above,which of the following statements are correct?
i.MR = MC when 3 haircuts are produced.
ii.If the firm charges each customer the same price for a haircut,the price of a haircut is $42.
iii.The firm's MC equals $30.

Accepted Answer

A)  i only 
B)  ii only 
C)  i and ii 
D)  i and iii 
E)  None of the above are correct. 
A)  i only 
B)  ii only 
C)  i and ii 
D)  i and iii 
E)  None of the above are correct.

Question 14

"Price discrimination allows a monopoly to increase its economic profit by capturing part of the consumer surplus and turning it into economic profit." Is the previous statement correct or incorrect? If the statement is correct,why is it important in understanding firms' behaviors? If it is incorrect,why is it incorrect?

Accepted Answer

The statement is correct.The statement i

Question 15

Under a marginal cost pricing rule,a natural monopoly

Accepted Answer

A)  makes a reasonable profit. 
B)  makes an economic profit. 
C)  earns accounting profits, but breaks even in economic terms. 
D)  incurs an economic loss. 
E)  makes a normal profit but it cannot be determined whether or not it makes an accounting profit. 
A)  makes a reasonable profit. 
B)  makes an economic profit. 
C)  earns accounting profits, but breaks even in economic terms. 
D)  incurs an economic loss. 
E)  makes a normal profit but it cannot be determined whether or not it makes an accounting profit.

Question 16

Price discrimination is prevented in situations where

Accepted Answer

A)  customers can resell the good. 
B)  firms have monopolies. 
C)  there are legal barriers to entry. 
D)  there are no close substitutes for the good or service. 
E)  customers have different willingnesses to pay for the good. 
A)  customers can resell the good. 
B)  firms have monopolies. 
C)  there are legal barriers to entry. 
D)  there are no close substitutes for the good or service. 
E)  customers have different willingnesses to pay for the good.

Question 17

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a monopoly producer of pillows stuffed with parrot feathers.When the pillow market is a monopoly,the price of a pillow is ________ and if the pillow market is perfectly competitive,the price of a pillow is ________.

Accepted Answer

A)  $40; $20 
B)  $70; $60 
C)  $40; $60 
D)  $60; $40 
E)  $100; $40 
A)  $40; $20 
B)  $70; $60 
C)  $40; $60 
D)  $60; $40 
E)  $100; $40

Question 18

If a monopoly is able to perfectly price discriminate,then consumer surplus is

Accepted Answer

A)  equal to zero. 
B)  maximized. 
C)  unchanged from what it is with a single-price monopoly. 
D)  unchanged from what it is in a perfectly competitive industry. 
E)  not zero but is less than with a single-price monopoly. 
A)  equal to zero. 
B)  maximized. 
C)  unchanged from what it is with a single-price monopoly. 
D)  unchanged from what it is in a perfectly competitive industry. 
E)  not zero but is less than with a single-price monopoly.

Question 19

The maximum profit for a single-price monopoly is found when the firm produces the level of output so that

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  price equals marginal cost. 
C)  it can charge the highest possible price. 
D)  marginal revenue exceeds marginal cost by as much as possible. 
E)  total revenue equals total cost. 
A)  marginal revenue equals marginal cost. 
B)  price equals marginal cost. 
C)  it can charge the highest possible price. 
D)  marginal revenue exceeds marginal cost by as much as possible. 
E)  total revenue equals total cost.

Question 20

For a natural monopoly to cover its total cost,its price must equal its

Accepted Answer

A)  average total cost. 
B)  marginal cost. 
C)  demand. 
D)  total fixed cost. 
E)  marginal revenue. 
A)  average total cost. 
B)  marginal cost. 
C)  demand. 
D)  total fixed cost. 
E)  marginal revenue.

A firm that is a natural monopoly

Price cap regulation involves

Which of the following is an example of a two-part tariff?

A marginal cost pricing rule sets marginal cost equal to

To encourage invention and innovation,the government provides

Under which of the following does a monopoly's demand curve become its marginal revenue curve?

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot Pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,he produces ________ pillows per hour.

Patents

A single-price monopoly

-In the above figure,a perfectly competitive market will have a price of and a single-price monopoly will have a price of .

When compared to a perfectly competitive market,a single-price monopoly with the same costs produces output and charges price.

Under a marginal cost pricing rule,a natural monopoly

Price discrimination is prevented in situations where

If a monopoly is able to perfectly price discriminate,then consumer surplus is

The maximum profit for a single-price monopoly is found when the firm produces the level of output so that

For a natural monopoly to cover its total cost,its price must equal its

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

A firm that is a natural monopoly

Price cap regulation involves

Which of the following is an example of a two-part tariff?

A marginal cost pricing rule sets marginal cost equal to

To encourage invention and innovation,the government provides

Under which of the following does a monopoly's demand curve become its marginal revenue curve?

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot Pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,he produces ________ pillows per hour.

Patents

A single-price monopoly

-In the above figure,a perfectly competitive market will have a price of ________ and a single-price monopoly will have a price of ________.

When compared to a perfectly competitive market,a single-price monopoly with the same costs produces ________ output and charges ________ price.

Under a marginal cost pricing rule,a natural monopoly

Price discrimination is prevented in situations where

If a monopoly is able to perfectly price discriminate,then consumer surplus is

The maximum profit for a single-price monopoly is found when the firm produces the level of output so that

For a natural monopoly to cover its total cost,its price must equal its

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

-In the above figure,a perfectly competitive market will have a price of and a single-price monopoly will have a price of .

When compared to a perfectly competitive market,a single-price monopoly with the same costs produces output and charges price.