Question 1

The social interest theory of regulation assumes that

Accepted Answer

A) regulation is against the public interest. 
B) the public is indifferent to regulation. 
C) regulation seeks an efficient use of resources. 
D) the public cares deeply about regulation. 
E) regulators are captured by the firms being regulated. 
A) regulation is against the public interest. 
B) the public is indifferent to regulation. 
C) regulation seeks an efficient use of resources. 
D) the public cares deeply about regulation. 
E) regulators are captured by the firms being regulated.

Question 2

A monopoly

Accepted Answer

A) must determine the price it will charge. 
B) faces extensive competition from firms making close substitutes. 
C) cannot price discriminate because such a pricing strategy is illegal in the United States. 
D) has no control over the price it can charge. 
E) Both answers B and C are correct. 
A) must determine the price it will charge. 
B) faces extensive competition from firms making close substitutes. 
C) cannot price discriminate because such a pricing strategy is illegal in the United States. 
D) has no control over the price it can charge. 
E) Both answers B and C are correct.

Question 3

Rate of return regulation is designed to allow a natural monopoly to

Accepted Answer

A) make an economic profit. 
B) make zero economic profit. 
C) underestimate its average cost. 
D) compete with any firm entering the market. 
E) make zero normal profit. 
A) make an economic profit. 
B) make zero economic profit. 
C) underestimate its average cost. 
D) compete with any firm entering the market. 
E) make zero normal profit.

Question 4

"The theory that regulation seeks an efficient use of resources is called the capture theory of regulation." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The capture t

Question 5

A monopoly can set any price it wants.So why does it still produce at a point where MR = MC, just like a perfectly competitive firm?

Accepted Answer

The point where MR = MC maximizes any fi

Question 6

Regulated natural monopolies can obey a marginal cost pricing rule and still make a normal profit by engaging in

Accepted Answer

A) least cost pricing and average cost pricing. 
B) price discrimination and two-part tariff pricing. 
C) zero profit pricing. 
D) profit-maximizing pricing. 
E) None of the above answers is correct because a natural monopoly regulated using a marginal cost pricing rule always incurs an economic loss. 
A) least cost pricing and average cost pricing. 
B) price discrimination and two-part tariff pricing. 
C) zero profit pricing. 
D) profit-maximizing pricing. 
E) None of the above answers is correct because a natural monopoly regulated using a marginal cost pricing rule always incurs an economic loss.

Question 7

The relationship between marginal revenue and elasticity is

Accepted Answer

A) when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative. 
B) whenever the elasticity is positive, marginal revenue is positive. 
C) whenever the elasticity is negative, marginal revenue is positive. 
D) when demand is elastic, marginal revenue is negative and when demand is inelastic, marginal revenue is positive. 
E) that total revenue equals zero at the quantity for which the demand is unit elastic. 
A) when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative. 
B) whenever the elasticity is positive, marginal revenue is positive. 
C) whenever the elasticity is negative, marginal revenue is positive. 
D) when demand is elastic, marginal revenue is negative and when demand is inelastic, marginal revenue is positive. 
E) that total revenue equals zero at the quantity for which the demand is unit elastic.

Question 8

A monopoly market has

Accepted Answer

A) a few firms. 
B) a single firm. 
C) two dominating firms in the market. 
D) only two firms in it. 
E) some unspecified number of firms in it. 
A) a few firms. 
B) a single firm. 
C) two dominating firms in the market. 
D) only two firms in it. 
E) some unspecified number of firms in it.

Question 9

-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 10

One of the tendencies that is common among firms regulated using rate of return regulation is to

Accepted Answer

A) increase production to an inefficient level. 
B) inflate the costs of production. 
C) incur an economic loss. 
D) understate the costs of production. 
E) overstate their total revenue. 
A) increase production to an inefficient level. 
B) inflate the costs of production. 
C) incur an economic loss. 
D) understate the costs of production. 
E) overstate their total revenue.

Question 11

Explain how a single-price monopoly determines its output and price.Compare this process to how a perfectly competitive firm determines its output and price.

Accepted Answer

Single-price monopolies follow the same

Question 12

Which of the following statements is correct?

Accepted Answer

A) Any firm can price discriminate. 
B) Only firms that sell high-priced products can price discriminate. 
C) In order to price discriminate, a firm must sell a good or service that cannot be resold. 
D) In order to price discriminate, the firms must sell a low-priced product. 
E) Price discrimination is always illegal. 
A) Any firm can price discriminate. 
B) Only firms that sell high-priced products can price discriminate. 
C) In order to price discriminate, a firm must sell a good or service that cannot be resold. 
D) In order to price discriminate, the firms must sell a low-priced product. 
E) Price discrimination is always illegal.

Question 13

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 14

If a regulatory agency sets the price equal to marginal cost for a natural monopoly, the

Accepted Answer

A) government might have to provide a subsidy to the firm to keep it in business. 
B) price is the same as the unregulated monopoly price. 
C) firm makes an economic profit, though not the maximum economic profit. 
D) firm makes the maximum economic profit. 
E) firm makes zero economic profit. 
A) government might have to provide a subsidy to the firm to keep it in business. 
B) price is the same as the unregulated monopoly price. 
C) firm makes an economic profit, though not the maximum economic profit. 
D) firm makes the maximum economic profit. 
E) firm makes zero economic profit.

Question 15

One of the requirements for a monopoly is that

Accepted Answer

A) products are high priced. 
B) there are several close substitutes for the product. 
C) there is a product with no close substitutes. 
D) the product cannot be produced by small firms. 
E) there is no barrier to entry. 
A) products are high priced. 
B) there are several close substitutes for the product. 
C) there is a product with no close substitutes. 
D) the product cannot be produced by small firms. 
E) there is no barrier to entry.

Question 16

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule, we see that output is

Accepted Answer

A) greater with marginal cost pricing but average cost pricing allows for costs to be covered. 
B) the same under both cases but the profit is greater with average cost pricing. 
C) greater under average cost pricing but profits are greater with marginal cost pricing. 
D) the same but profits are greater with marginal cost pricing. 
E) greater with marginal cost pricing and the firm's profit is larger with marginal cost pricing. 
A) greater with marginal cost pricing but average cost pricing allows for costs to be covered. 
B) the same under both cases but the profit is greater with average cost pricing. 
C) greater under average cost pricing but profits are greater with marginal cost pricing. 
D) the same but profits are greater with marginal cost pricing. 
E) greater with marginal cost pricing and the firm's profit is larger with marginal cost pricing.

Question 17

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 18

-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, his total economic profit is

Accepted Answer

A) $60. 
B) $405. 
C) $0. 
D) $210,000. 
E) unknown because more information is needed to determine Paul's profit. 
A) $60. 
B) $405. 
C) $0. 
D) $210,000. 
E) unknown because more information is needed to determine Paul's profit.

Question 19

Monopolies arise when there are

Accepted Answer

A) many substitutes but there are no barriers to entry. 
B) no close substitutes and there are no barriers to entry. 
C) no close substitutes and there are barriers to entry. 
D) many substitutes and there barriers to entry. 
E) None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry. 
A) many substitutes but there are no barriers to entry. 
B) no close substitutes and there are no barriers to entry. 
C) no close substitutes and there are barriers to entry. 
D) many substitutes and there barriers to entry. 
E) None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry.

Question 20

The figure above shows a natural monopoly.
-In the figure above, if the firm is regulated using a marginal cost pricing rule, the consumer surplus created is equal to the area of

Accepted Answer

A) ABG. 
B) ACF. 
C) BCFG. 
D) BCE. 
E) None of the above because there is no consumer surplus created. 
A) ABG. 
B) ACF. 
C) BCFG. 
D) BCE. 
E) None of the above because there is no consumer surplus created.

The social interest theory of regulation assumes that

A monopoly

Rate of return regulation is designed to allow a natural monopoly to

"The theory that regulation seeks an efficient use of resources is called the capture theory of regulation." Is the previous statement correct or incorrect?

A monopoly can set any price it wants.So why does it still produce at a point where MR = MC, just like a perfectly competitive firm?

Regulated natural monopolies can obey a marginal cost pricing rule and still make a normal profit by engaging in

The relationship between marginal revenue and elasticity is

A monopoly market has

-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.

One of the tendencies that is common among firms regulated using rate of return regulation is to

Explain how a single-price monopoly determines its output and price.Compare this process to how a perfectly competitive firm determines its output and price.

Which of the following statements is correct?

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 .

If a regulatory agency sets the price equal to marginal cost for a natural monopoly, the

One of the requirements for a monopoly is that

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule, we see that output is

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

-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, his total economic profit is

Monopolies arise when there are

The figure above shows a natural monopoly. -In the figure above, if the firm is regulated using a marginal cost pricing rule, the consumer surplus created is equal to the area of

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

The social interest theory of regulation assumes that

A monopoly

Rate of return regulation is designed to allow a natural monopoly to

"The theory that regulation seeks an efficient use of resources is called the capture theory of regulation." Is the previous statement correct or incorrect?

A monopoly can set any price it wants.So why does it still produce at a point where MR = MC, just like a perfectly competitive firm?

Regulated natural monopolies can obey a marginal cost pricing rule and still make a normal profit by engaging in

The relationship between marginal revenue and elasticity is

A monopoly market has

-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.

One of the tendencies that is common among firms regulated using rate of return regulation is to

Explain how a single-price monopoly determines its output and price.Compare this process to how a perfectly competitive firm determines its output and price.

Which of the following statements is correct?

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 ________.

If a regulatory agency sets the price equal to marginal cost for a natural monopoly, the

One of the requirements for a monopoly is that

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule, we see that output is

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

-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, his total economic profit is

Monopolies arise when there are

The figure above shows a natural monopoly. -In the figure above, if the firm is regulated using a marginal cost pricing rule, the consumer surplus created is equal to the area of

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

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 .

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