Question 1

A natural monopoly

Accepted Answer

A) faces more competition after regulation. 
B) might exaggerate its costs if it is regulated using rate of return regulation. 
C) might falsely minimize its costs if it is regulated using rate of return regulation. 
D) might falsely minimize its costs if it is regulated using a marginal cost pricing rule. 
E) is allowed to maximize its profit under a marginal cost pricing rule. 
A) faces more competition after regulation. 
B) might exaggerate its costs if it is regulated using rate of return regulation. 
C) might falsely minimize its costs if it is regulated using rate of return regulation. 
D) might falsely minimize its costs if it is regulated using a marginal cost pricing rule. 
E) is allowed to maximize its profit under a marginal cost pricing rule.

Question 2

What is a legal barrier to entry?

Accepted Answer

A legal barrier to entry arise

Question 3

The above figure shows a market.
-If the market in the figure above is a profit-maximizing single-price monopoly, consumer surplus is the area ________.

Accepted Answer

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

Question 4

Describe the three general types of barriers.

Accepted Answer

Barriers to entry can be divided into le

Question 5

Which of the following is a characteristic of monopoly?

Accepted Answer

A) The firm faces competition from many other firms. 
B) The firm produces a product that has many close substitutes. 
C) There are barriers to enter the market. 
D) The firm's demand is perfectly elastic. 
E) The firm produces a product identical to that produced by its many competitors. 
A) The firm faces competition from many other firms. 
B) The firm produces a product that has many close substitutes. 
C) There are barriers to enter the market. 
D) The firm's demand is perfectly elastic. 
E) The firm produces a product identical to that produced by its many competitors.

Question 6

Assume someone organizes all farms in the nation into a single-price monopoly.As a result, the amount of food produced

Accepted Answer

A) remains constant. 
B) decreases. 
C) increases. 
D) might increase or decrease depending on whether the demand for food is elastic or inelastic. 
E) might increase or decrease depending on whether the monopoly's marginal revenue curve lies below or above its demand curve. 
A) remains constant. 
B) decreases. 
C) increases. 
D) might increase or decrease depending on whether the demand for food is elastic or inelastic. 
E) might increase or decrease depending on whether the monopoly's marginal revenue curve lies below or above its demand curve.

Question 7

With a natural monopoly

Accepted Answer

A) no regulation is necessary because it is a natural monopoly. 
B) regulation takes the form of forcing competition from new firms. 
C) regulation takes the form of forcing the company out of business. 
D) regulation can take the form of average cost pricing to allow coverage of costs. 
E) regulation takes the form of breaking the company into several competing firms. 
A) no regulation is necessary because it is a natural monopoly. 
B) regulation takes the form of forcing competition from new firms. 
C) regulation takes the form of forcing the company out of business. 
D) regulation can take the form of average cost pricing to allow coverage of costs. 
E) regulation takes the form of breaking the company into several competing firms.

Question 8

If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham and eggs where the demand is unit elastic, its marginal revenue for ham and eggs is

Accepted Answer

A) negative. 
B) positive. 
C) zero. 
D) maximized. 
E) undefined. 
A) negative. 
B) positive. 
C) zero. 
D) maximized. 
E) undefined.

Question 9

"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 10

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is perfectly competitive, the quantity of steak is

Accepted Answer

A) 2,000 pounds. 
B) 3,000 pounds. 
C) 4,000 pounds. 
D) 5,000 pounds. 
E) less than 2,000 pounds. 
A) 2,000 pounds. 
B) 3,000 pounds. 
C) 4,000 pounds. 
D) 5,000 pounds. 
E) less than 2,000 pounds.

Question 11

When demand is elastic, marginal revenue is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) increasing as output increases. 
E) undefined. 
A) positive. 
B) negative. 
C) zero. 
D) increasing as output increases. 
E) undefined.

Question 12

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.What price will the Busy Bee charge to maximize its profit?

Accepted Answer

A) $5.00 for a hamburger 
B) $3.00 for a hamburger 
C) $2.00 for a hamburger 
D) $1.00 for a hamburger 
E) $4.00 for a hamburger 
A) $5.00 for a hamburger 
B) $3.00 for a hamburger 
C) $2.00 for a hamburger 
D) $1.00 for a hamburger 
E) $4.00 for a hamburger

Question 13

An airline company

Accepted Answer

A) cannot price discriminate because it is against the law. 
B) price discriminates by charging higher prices to business travelers. 
C) price discriminates by charging lower prices to business travelers. 
D) price discriminates even though its profits are lower because competition forces it to do so. 
E) has fewer customers because it price discriminates than it would have if it did not price discriminate. 
A) cannot price discriminate because it is against the law. 
B) price discriminates by charging higher prices to business travelers. 
C) price discriminates by charging lower prices to business travelers. 
D) price discriminates even though its profits are lower because competition forces it to do so. 
E) has fewer customers because it price discriminates than it would have if it did not price discriminate.

Question 14

In order to maximize its profit, a single-price monopoly produces the amount of output so that

Accepted Answer

A) P = MC. 
B) MR = MC. 
C) P = MC - MR. 
D) P = MR. 
E) P = ATC. 
A) P = MC. 
B) MR = MC. 
C) P = MC - MR. 
D) P = MR. 
E) P = ATC.

Question 15

-The above figure shows the demand, marginal revenue, and cost curves for a natural monopoly.
a∙Which price and quantity is set if the capture theory is correct?
b∙If production is at the price and quantity specified in part (a), what area represents the economic profit?
c∙If production is at the price and quantity specified in part (a), what area represents the deadweight loss?
d∙If production is at the price and quantity specified in part (a), what area represents the consumer surplus?

Accepted Answer

a∙The profit-maximizing price and quanti

Question 16

A barrier to entry is

Accepted Answer

A) the economic term for diseconomies of scale. 
B) illegal in most markets. 
C) anything that protects a firm from the arrival of new competitors. 
D) a factor that increases competition because firms must continue to operate in the market in which they were founded. 
E) the same as rent seeking. 
A) the economic term for diseconomies of scale. 
B) illegal in most markets. 
C) anything that protects a firm from the arrival of new competitors. 
D) a factor that increases competition because firms must continue to operate in the market in which they were founded. 
E) the same as rent seeking.

Question 17

-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 18

To maximize its profit, a single-price monopoly produces the amount of output so that its marginal revenue

Accepted Answer

A) equals zero. 
B) equals its marginal cost. 
C) exceeds its marginal cost but not necessarily by as much as possible. 
D) is less than its marginal cost. 
E) exceeds its marginal cost by as much as possible. 
A) equals zero. 
B) equals its marginal cost. 
C) exceeds its marginal cost but not necessarily by as much as possible. 
D) is less than its marginal cost. 
E) exceeds its marginal cost by as much as possible.

Question 19

Price cap regulation is defined as regulation that

Accepted Answer

A) imposes a price ceiling on the regulated firm. 
B) encourages firms to exaggerate costs to increase profits. 
C) uses marginal cost pricing to ensure efficient output. 
D) uses average cost pricing to ensure costs are covered. 
E) is essentially the same as rate of return regulation. 
A) imposes a price ceiling on the regulated firm. 
B) encourages firms to exaggerate costs to increase profits. 
C) uses marginal cost pricing to ensure efficient output. 
D) uses average cost pricing to ensure costs are covered. 
E) is essentially the same as rate of return regulation.

Question 20

Patents
I∙encourage the invention of new products and production methods.
Ii∙generally discourage innovation
Iii∙are exclusive rights granted to the inventor of a product or service.

Accepted Answer

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

A natural monopoly

What is a legal barrier to entry?

The above figure shows a market. -If the market in the figure above is a profit-maximizing single-price monopoly, consumer surplus is the area ________.

Describe the three general types of barriers.

Which of the following is a characteristic of monopoly?

Assume someone organizes all farms in the nation into a single-price monopoly.As a result, the amount of food produced

With a natural monopoly

If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham and eggs where the demand is unit elastic, its marginal revenue for ham and eggs is

"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?

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is perfectly competitive, the quantity of steak is

When demand is elastic, marginal revenue is

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.What price will the Busy Bee charge to maximize its profit?

An airline company

In order to maximize its profit, a single-price monopoly produces the amount of output so that

A barrier to entry is

To maximize its profit, a single-price monopoly produces the amount of output so that its marginal revenue

Price cap regulation is defined as regulation that

Patents I∙encourage the invention of new products and production methods. Ii∙generally discourage innovation Iii∙are exclusive rights granted to the inventor of a product or service.

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 natural monopoly

What is a legal barrier to entry?

The above figure shows a market. -If the market in the figure above is a profit-maximizing single-price monopoly, consumer surplus is the area ________.

Describe the three general types of barriers.

Which of the following is a characteristic of monopoly?

Assume someone organizes all farms in the nation into a single-price monopoly.As a result, the amount of food produced

With a natural monopoly

If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham and eggs where the demand is unit elastic, its marginal revenue for ham and eggs is

"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?

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is perfectly competitive, the quantity of steak is

When demand is elastic, marginal revenue is

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.What price will the Busy Bee charge to maximize its profit?

An airline company

In order to maximize its profit, a single-price monopoly produces the amount of output so that

A barrier to entry is

To maximize its profit, a single-price monopoly produces the amount of output so that its marginal revenue

Price cap regulation is defined as regulation that

Patents I∙encourage the invention of new products and production methods. Ii∙generally discourage innovation Iii∙are exclusive rights granted to the inventor of a product or service.

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