Question 1

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 2

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 3

-The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under an average cost pricing rule, what is the price of cable television in Oakland?

Accepted Answer

A) $40 
B) $30 
C) $20 
D) $10 
E) $50 
A) $40 
B) $30 
C) $20 
D) $10 
E) $50

Question 4

When a perfectly competitive industry is taken over by a monopoly, some consumer surplus is transferred to the monopolist in the form of

Accepted Answer

A) marginal cost. 
B) economic profit. 
C) deadweight loss. 
D) taxes. 
E) average variable cost. 
A) marginal cost. 
B) economic profit. 
C) deadweight loss. 
D) taxes. 
E) average variable cost.

Question 5

Assume someone organizes all farms in the nation into a monopoly. What is the monopoly's marginal cost curve?

Accepted Answer

A) It is a horizontal line at the competitive industry's price. 
B) It is a vertical line at the formerly competitive industry's quantity. 
C) It is a vertical line at the monopoly's chosen output level. 
D) It is the formerly competitive industry's supply curve. 
E) It is the same as the formally competitive industry's average total cost curve. 
A) It is a horizontal line at the competitive industry's price. 
B) It is a vertical line at the formerly competitive industry's quantity. 
C) It is a vertical line at the monopoly's chosen output level. 
D) It is the formerly competitive industry's supply curve. 
E) It is the same as the formally competitive industry's average total cost curve.

Question 6

Give an example of price discrimination.

Accepted Answer

Price discrimination occurs wh

Question 7

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 8

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 9

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.

Question 10

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

Accepted Answer

A) The ATC curve is downward sloping throughout the relevant range, therefore the MC is lower than the ATC. 
B) The demand curve is downward sloping, therefore price falls as quantity increases. 
C) The MC is constant and equal to price. 
D) Because output is determined by setting MC equal to the price, consumer surplus is maximized. 
E) The firm's MR is always less than its price. 
A) The ATC curve is downward sloping throughout the relevant range, therefore the MC is lower than the ATC. 
B) The demand curve is downward sloping, therefore price falls as quantity increases. 
C) The MC is constant and equal to price. 
D) Because output is determined by setting MC equal to the price, consumer surplus is maximized. 
E) The firm's MR is always less than its price.

Question 11

The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.

Accepted Answer

A) small benefits; small costs 
B) small benefits; large costs 
C) large benefits; small costs 
D) large benefits; large costs 
E) large benefits; no costs 
A) small benefits; small costs 
B) small benefits; large costs 
C) large benefits; small costs 
D) large benefits; large costs 
E) large benefits; no costs

Question 12

Describe the difference between social interest theory of regulation and the capture theory of regulation.

Accepted Answer

Both are theories of regulation but they

Question 13

A monopoly produces a product ________ and there ________ barriers to entry into the market.

Accepted Answer

A) identical to its many competitors; are 
B) with no close substitutes; are 
C) identical to its many competitors; are no 
D) with no close substitutes; are no 
E) slightly different from those of its many competitors; are 
A) identical to its many competitors; are 
B) with no close substitutes; are 
C) identical to its many competitors; are no 
D) with no close substitutes; are no 
E) slightly different from those of its many competitors; are

Question 14

The outcome of regulating a natural monopoly using the marginal cost pricing rule is

Accepted Answer

A) that the firm makes a normal profit. 
B) that the firm maximizes its profit. 
C) that consumer surplus is less than what it would be if the firm maximized its profit. 
D) an efficient level of production. 
E) that the firm makes an economic profit. 
A) that the firm makes a normal profit. 
B) that the firm maximizes its profit. 
C) that consumer surplus is less than what it would be if the firm maximized its profit. 
D) an efficient level of production. 
E) that the firm makes an economic profit.

Question 15

$$\begin{array} { c c } 
\text { Price(dollars) } & \text { Quantity(units) } \
\hline 6 & 1 \
5 & 2 \
4 & 3 \
3 & 4 \
2 & 5 \
1 & 6 \
\hline
\end{array}$$
-The above table gives the demand schedule for a monopoly. The demand is inelastic over the entire price range between

Accepted Answer

A) $6 and $1. 
B) $5 and $1. 
C) $3 and $1. 
D) $6 and $4. 
E) $4 and $3. 
A) $6 and $1. 
B) $5 and $1. 
C) $3 and $1. 
D) $6 and $4. 
E) $4 and $3.

Question 16

-A single-price monopoly has marginal cost of $23 and marginal revenue of $28. Which of the following is definitely correct?

Accepted Answer

A) It is maximizing profit. 
B) To increase profit, it should produce less. 
C) To increase profit, it should produce more. 
D) It should shut down. 
E) It is making an economic profit. 
A) It is maximizing profit. 
B) To increase profit, it should produce less. 
C) To increase profit, it should produce more. 
D) It should shut down. 
E) It is making an economic profit.

Question 17

Competition keeps prices lower for consumers. So why do we have patent laws?

Accepted Answer

Patent laws are necessary to promote inn

Question 18

Compared to the situation in which it sets a single price, a monopoly that price discriminates ________ its economic profit and ________ its output.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) increases; does not change 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) increases; does not change

Question 19

-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. If the Busy Bee produces 40 hamburgers per hour, then

Accepted Answer

A) marginal revenue will exceed marginal cost. 
B) profit will be maximized. 
C) marginal revenue will be negative. 
D) marginal revenue will be maximized. 
E) both the marginal revenue and the price will be negative. 
A) marginal revenue will exceed marginal cost. 
B) profit will be maximized. 
C) marginal revenue will be negative. 
D) marginal revenue will be maximized. 
E) both the marginal revenue and the price will be negative.

Question 20

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.

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

When a perfectly competitive industry is taken over by a monopoly, some consumer surplus is transferred to the monopolist in the form of

Assume someone organizes all farms in the nation into a monopoly. What is the monopoly's marginal cost curve?

Give an example of price discrimination.

The social interest theory of regulation assumes that

To encourage invention and innovation, the government provides

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

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

The capture theory of regulation predicts that regulations bring to producers and impose on any individual consumer.

Describe the difference between social interest theory of regulation and the capture theory of regulation.

A monopoly produces a product and there barriers to entry into the market.

The outcome of regulating a natural monopoly using the marginal cost pricing rule is

Price(dollars) Quantity(units) 6 1 5 2 4 3 3 4 2 5 1 6 -The above table gives the demand schedule for a monopoly. The demand is inelastic over the entire price range between

-A single-price monopoly has marginal cost of $23 and marginal revenue of $28. Which of the following is definitely correct?

Competition keeps prices lower for consumers. So why do we have patent laws?

Compared to the situation in which it sets a single price, a monopoly that price discriminates its economic profit and its output.

-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. If the Busy Bee produces 40 hamburgers per hour, then

A natural monopoly exists when

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 12: Monopoly

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

When a perfectly competitive industry is taken over by a monopoly, some consumer surplus is transferred to the monopolist in the form of

Assume someone organizes all farms in the nation into a monopoly. What is the monopoly's marginal cost curve?

Give an example of price discrimination.

The social interest theory of regulation assumes that

To encourage invention and innovation, the government provides

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

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.

Describe the difference between social interest theory of regulation and the capture theory of regulation.

A monopoly produces a product ________ and there ________ barriers to entry into the market.

The outcome of regulating a natural monopoly using the marginal cost pricing rule is

Price(dollars) Quantity(units) 6 1 5 2 4 3 3 4 2 5 1 6 -The above table gives the demand schedule for a monopoly. The demand is inelastic over the entire price range between

-A single-price monopoly has marginal cost of $23 and marginal revenue of $28. Which of the following is definitely correct?

Competition keeps prices lower for consumers. So why do we have patent laws?

Compared to the situation in which it sets a single price, a monopoly that price discriminates ________ its economic profit and ________ its output.

-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. If the Busy Bee produces 40 hamburgers per hour, then

A natural monopoly exists when

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

The capture theory of regulation predicts that regulations bring to producers and impose on any individual consumer.

A monopoly produces a product and there barriers to entry into the market.

Compared to the situation in which it sets a single price, a monopoly that price discriminates its economic profit and its output.