Question 1

The capture theory of regulation assumes that regulation benefits

Accepted Answer

A) producers. 
B) consumers. 
C) government. 
D) the general public. 
E) the regulators. 
A) producers. 
B) consumers. 
C) government. 
D) the general public. 
E) the regulators.

Question 2

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 3

If Microsoft is a monopoly and currently charges prices where its demand is elastic, then Microsoft's marginal revenue is

Accepted Answer

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

Question 4

-The above figure shows the demand for cable and the cable company's cost of providing cable.
a. What price and quantity will be produced if the company is unregulated and profit maximizes?
b. What price and quantity will be produced if the company is regulated using the marginal cost pricing rule?
c. What is the advantage of the marginal cost pricing rule?
d. What price and quantity will be produced if the company is regulated using the average cost pricing rule?
e. What is the advantage of the average cost pricing rule?

Accepted Answer

a. The price will be $90 per month and t

Question 5

When used with a natural monopoly, an average cost pricing rule results in

Accepted Answer

A) the efficient level of output. 
B) economic losses for the firm. 
C) the need for government to subsidize the natural monopoly. 
D) zero economic profit for the firm. 
E) the firm making an economic profit. 
A) the efficient level of output. 
B) economic losses for the firm. 
C) the need for government to subsidize the natural monopoly. 
D) zero economic profit for the firm. 
E) the firm making an economic profit.

Question 6

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost, the firm

Accepted Answer

A) makes zero economic profit. 
B) makes an economic profit. 
C) incurs an economic loss. 
D) makes a normal-economic profit. 
E) makes either zero economic profit or an economic profit, depending on whether the firm's average total cost equals or is less than its marginal cost. 
A) makes zero economic profit. 
B) makes an economic profit. 
C) incurs an economic loss. 
D) makes a normal-economic profit. 
E) makes either zero economic profit or an economic profit, depending on whether the firm's average total cost equals or is less than its marginal cost.

Question 7

-The figure above shows a natural monopoly that the government must regulate. If the government uses ________, the firm produces ________ units per week.

Accepted Answer

A) the HHI; 50 
B) an average cost pricing rule; 30 
C) rate of return regulation; 40 
D) social interest regulation; 30 
E) a marginal cost pricing rule; 20 
A) the HHI; 50 
B) an average cost pricing rule; 30 
C) rate of return regulation; 40 
D) social interest regulation; 30 
E) a marginal cost pricing rule; 20

Question 8

-In the above figure, for a single-price monopoly the deadweight loss is equal to the area

Accepted Answer

A) abP₁. 
B) acP₂. 
C) bce. 
D) bed. 
E) P₁beP₃. 
A) abP₁. 
B) acP₂. 
C) bce. 
D) bed. 
E) P₁beP₃.

Question 9

For a natural monopoly, economies of scale

Accepted Answer

A) exist along the long-run average cost curve at least until it crosses the market demand curve. 
B) and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
C) lead to a legal barrier to entry. 
D) as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
E) are totally absent. 
A) exist along the long-run average cost curve at least until it crosses the market demand curve. 
B) and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
C) lead to a legal barrier to entry. 
D) as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
E) are totally absent.

Question 10

Why can a monopoly make an economic profit in the long run?

Accepted Answer

A) because there are close substitutes for the firm's product 
B) because the firm is protected by barriers to entry 
C) because the firm produces where MR=MC 
D) because P > MR 
E) All of the above are reasons why a monopoly can make an economic profit in the long run. 
A) because there are close substitutes for the firm's product 
B) because the firm is protected by barriers to entry 
C) because the firm produces where MR=MC 
D) because P > MR 
E) All of the above are reasons why a monopoly can make an economic profit in the long run.

Question 11

If a monopoly wants to sell a greater quantity of output, it must

Accepted Answer

A) lower its price. 
B) raise its price. 
C) tell consumers to buy more because it's a monopolist. 
D) raise its marginal cost. 
E) change its fixed costs. 
A) lower its price. 
B) raise its price. 
C) tell consumers to buy more because it's a monopolist. 
D) raise its marginal cost. 
E) change its fixed costs.

Question 12

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 13

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. If

Question 14

$$\begin{array} { c c } 
\hline \text { Price(dollars) } & \text { Quantity(units) } \
\hline 8 & 1 \
6 & 2 \
5 & 3 \
4 & 4 \
3 & 5 \
\hline
\end{array}$$
-The above table gives the demand schedule for a single-price monopoly. The marginal revenue first becomes negative when going from

Accepted Answer

A) 1 unit to 2 units. 
B) 2 units to 3 units. 
C) 3 units to 4 units. 
D) 4 units to 5 units. 
E) None of the above; the total revenue is always positive so the marginal revenue must always be positive. 
A) 1 unit to 2 units. 
B) 2 units to 3 units. 
C) 3 units to 4 units. 
D) 4 units to 5 units. 
E) None of the above; the total revenue is always positive so the marginal revenue must always be positive.

Question 15

In States where the government runs liquor stores, the monopoly results from

Accepted Answer

A) economies of scale. 
B) legal restrictions. 
C) control of an essential resource. 
D) patents. 
E) public fear 
A) economies of scale. 
B) legal restrictions. 
C) control of an essential resource. 
D) patents. 
E) public fear

Question 16

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 17

-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 quant

Question 18

A monopoly will arise if

Accepted Answer

A) two out of three of a town's pizzerias go out of business and only one new pizzeria opens. 
B) the town council passes a law granting Nick's Pizza the exclusive right to operate in that town. 
C) Papa Joe's Pizza becomes the largest pizza producer in town and Nick's Pizza stays small in size. 
D) several big pizza chains force several small pizzerias out of business. 
E) people decide they like pizza more than before so some pizzerias gain new customers. 
A) two out of three of a town's pizzerias go out of business and only one new pizzeria opens. 
B) the town council passes a law granting Nick's Pizza the exclusive right to operate in that town. 
C) Papa Joe's Pizza becomes the largest pizza producer in town and Nick's Pizza stays small in size. 
D) several big pizza chains force several small pizzerias out of business. 
E) people decide they like pizza more than before so some pizzerias gain new customers.

Question 19

Suppose a single-price monopoly sells 3 units of a good at $20 per unit. If the monopoly sells 4 units, the total revenue increases to $72. What is the marginal revenue of the fourth unit?

Accepted Answer

A) $52 
B) $18 
C) $60 
D) $12 
E) $20 
A) $52 
B) $18 
C) $60 
D) $12 
E) $20

Question 20

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.

The capture theory of regulation assumes that regulation benefits

The relationship between marginal revenue and elasticity is

If Microsoft is a monopoly and currently charges prices where its demand is elastic, then Microsoft's marginal revenue is

When used with a natural monopoly, an average cost pricing rule results in

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost, the firm

-The figure above shows a natural monopoly that the government must regulate. If the government uses , the firm produces units per week.

-In the above figure, for a single-price monopoly the deadweight loss is equal to the area

For a natural monopoly, economies of scale

Why can a monopoly make an economic profit in the long run?

If a monopoly wants to sell a greater quantity of output, it must

A monopoly

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

Price(dollars) Quantity(units) 8 1 6 2 5 3 4 4 3 5 -The above table gives the demand schedule for a single-price monopoly. The marginal revenue first becomes negative when going from

In States where the government runs liquor stores, the monopoly results from

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

A monopoly will arise if

Suppose a single-price monopoly sells 3 units of a good at $20 per unit. If the monopoly sells 4 units, the total revenue increases to $72. What is the marginal revenue of the fourth unit?

Price cap regulation is defined as regulation that

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

The capture theory of regulation assumes that regulation benefits

The relationship between marginal revenue and elasticity is

If Microsoft is a monopoly and currently charges prices where its demand is elastic, then Microsoft's marginal revenue is

When used with a natural monopoly, an average cost pricing rule results in

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost, the firm

-The figure above shows a natural monopoly that the government must regulate. If the government uses ________, the firm produces ________ units per week.

-In the above figure, for a single-price monopoly the deadweight loss is equal to the area

For a natural monopoly, economies of scale

Why can a monopoly make an economic profit in the long run?

If a monopoly wants to sell a greater quantity of output, it must

A monopoly

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

Price(dollars) Quantity(units) 8 1 6 2 5 3 4 4 3 5 -The above table gives the demand schedule for a single-price monopoly. The marginal revenue first becomes negative when going from

In States where the government runs liquor stores, the monopoly results from

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

A monopoly will arise if

Suppose a single-price monopoly sells 3 units of a good at $20 per unit. If the monopoly sells 4 units, the total revenue increases to $72. What is the marginal revenue of the fourth unit?

Price cap regulation is defined as regulation that

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 figure above shows a natural monopoly that the government must regulate. If the government uses , the firm produces units per week.