Question 1

The Public Service Company of Colorado is a natural monopoly in the transmission and distribution of electric power. As such, it will incur an economic loss if it

Accepted Answer

A)  goes out of business. 
B)  prices its services at average total cost. 
C)  prices its services at marginal cost. 
D)  all of the above 
A)  goes out of business. 
B)  prices its services at average total cost. 
C)  prices its services at marginal cost. 
D)  all of the above

Question 2

-For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

Accepted Answer

A)  4 units per year and the price will be $6. 
B)  4 units per year and the price will be $4. 
C)  6 units per year and the price will be $4. 
D)  None of the above answers is correct. 
A)  4 units per year and the price will be $6. 
B)  4 units per year and the price will be $4. 
C)  6 units per year and the price will be $4. 
D)  None of the above answers is correct.

Question 3

Compare and contrast the marginal cost and average cost pricing rules for regulating natural monopolies.

Accepted Answer

Marginal cost pricing sets the price equ

Question 4

If a monopolist is maximizing profits, then it is producing an amount of output so that

Accepted Answer

A)  MR = ATC. 
B)  MC = AVC. 
C)  MR = TC. 
D)  MR = MC. 
A)  MR = ATC. 
B)  MC = AVC. 
C)  MR = TC. 
D)  MR = MC.

Question 5

If a natural monopoly is regulated using the marginal cost pricing rule, how does the regulation affect prices, outputs, profits, and the distribution of surpluses? What are the pros and cons to this method of regulation?

Accepted Answer

The marginal cost pricing rule sets the

Question 6

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging ________ per grooming and producing ________ groomings per day.

Accepted Answer

A)  $30; 8 
B)  $20; $8 
C)  $20; $12 
D)  None of the above answers is correct. 
A)  $30; 8 
B)  $20; $8 
C)  $20; $12 
D)  None of the above answers is correct.

Question 7

-The area of economic profit shown in the above figure for the single-price monopolist is

Accepted Answer

A)  bed. 
B)  P3P5fc. 
C)  0P5fQ1. 
D)  0P4eQ3. 
A)  bed. 
B)  P3P5fc. 
C)  0P5fQ1. 
D)  0P4eQ3.

Question 8

-The unregulated, single-price monopolist illustrated in the figure above has a total revenue of

Accepted Answer

A)  $8.00 per day. 
B)  $16.00 per day. 
C)  $36.00 per day. 
D)  $40.00 per day. 
A)  $8.00 per day. 
B)  $16.00 per day. 
C)  $36.00 per day. 
D)  $40.00 per day.

Question 9

What is price discrimination? Can a perfectly competitive firm price discriminate? Explain you answer.

Accepted Answer

Price discrimination is the practice of

Question 10

Compared to a competitive industry, a monopoly transfers

Accepted Answer

A)  deadweight loss away from producers to consumers. 
B)  deadweight loss away from consumers to producers. 
C)  producer surplus to consumers. 
D)  consumer surplus to producers. 
A)  deadweight loss away from producers to consumers. 
B)  deadweight loss away from consumers to producers. 
C)  producer surplus to consumers. 
D)  consumer surplus to producers.

Question 11

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up produces the unregulated, profit-maximizing level of output?

Accepted Answer

A)  abd 
B)  acg 
C)  deg 
D)  There is no deadweight loss. 
A)  abd 
B)  acg 
C)  deg 
D)  There is no deadweight loss.

Question 12

-If the market illustrated in the above figure was a perfectly competitive market with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be

Accepted Answer

A)  P3 and Q1. 
B)  P5 and Q1. 
C)  P1 and Q1. 
D)  P4 and Q3. 
A)  P3 and Q1. 
B)  P5 and Q1. 
C)  P1 and Q1. 
D)  P4 and Q3.

Question 13

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)  All of the above are reasons why a monopoly can earn 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)  All of the above are reasons why a monopoly can earn an economic profit in the long run.

Question 14

-The above figure shows the demand and cost curves for a monopolist. What is the maximum economic profit this firm can make?

Accepted Answer

A)  zero 
B)  $400 
C)  $100 
D)  $200 
A)  zero 
B)  $400 
C)  $100 
D)  $200

Question 15

Activity aimed at creating artificial barriers to entry into a particular market

Accepted Answer

A)  is rent seeking. 
B)  has no social cost. 
C)  improves competition. 
D)  improves the economy's efficiency. 
A)  is rent seeking. 
B)  has no social cost. 
C)  improves competition. 
D)  improves the economy's efficiency.

Question 16

Rent seeking is devoted to the creation of

Accepted Answer

A)  monopolies. 
B)  competitive industries. 
C)  human capital. 
D)  more elastic demand. 
A)  monopolies. 
B)  competitive industries. 
C)  human capital. 
D)  more elastic demand.

Question 17

-For the monopoly shown in the figure above, the profit maximizing output is

Accepted Answer

A)  4 units per day. 
B)  5 units per day. 
C)  6 units per day. 
D)  10 units per day. 
A)  4 units per day. 
B)  5 units per day. 
C)  6 units per day. 
D)  10 units per day.

Question 18

How can managers of natural monopolies exaggerate their costs?

Accepted Answer

By increasing on-the-job luxury items su

Question 19

Which of the following occurs with both perfectly price discriminating and single-price monopolies?

Accepted Answer

A)  The amount of output is inefficient. 
B)  All consumer surplus goes to the monopoly. 
C)  Deadweight loss is created. 
D)  There is a redistribution of consumer surplus to the monopoly. 
A)  The amount of output is inefficient. 
B)  All consumer surplus goes to the monopoly. 
C)  Deadweight loss is created. 
D)  There is a redistribution of consumer surplus to the monopoly.

Question 20

Which of the following statements regarding an average-cost pricing rule for a natural monopoly is WRONG?

Accepted Answer

A)  It sets price equal to average total cost. 
B)  It is efficient. 
C)  The firm makes zero economic profit. 
D)  More output is produced than if the firm maximized profit. 
A)  It sets price equal to average total cost. 
B)  It is efficient. 
C)  The firm makes zero economic profit. 
D)  More output is produced than if the firm maximized profit.

The Public Service Company of Colorado is a natural monopoly in the transmission and distribution of electric power. As such, it will incur an economic loss if it

-For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

Compare and contrast the marginal cost and average cost pricing rules for regulating natural monopolies.

If a monopolist is maximizing profits, then it is producing an amount of output so that

If a natural monopoly is regulated using the marginal cost pricing rule, how does the regulation affect prices, outputs, profits, and the distribution of surpluses? What are the pros and cons to this method of regulation?

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging per grooming and producing groomings per day.

-The area of economic profit shown in the above figure for the single-price monopolist is

-The unregulated, single-price monopolist illustrated in the figure above has a total revenue of

What is price discrimination? Can a perfectly competitive firm price discriminate? Explain you answer.

Compared to a competitive industry, a monopoly transfers

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up produces the unregulated, profit-maximizing level of output?

-If the market illustrated in the above figure was a perfectly competitive market with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be

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

-The above figure shows the demand and cost curves for a monopolist. What is the maximum economic profit this firm can make?

Activity aimed at creating artificial barriers to entry into a particular market

Rent seeking is devoted to the creation of

-For the monopoly shown in the figure above, the profit maximizing output is

How can managers of natural monopolies exaggerate their costs?

Which of the following occurs with both perfectly price discriminating and single-price monopolies?

Which of the following statements regarding an average-cost pricing rule for a natural monopoly is WRONG?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 13: Monopoly

The Public Service Company of Colorado is a natural monopoly in the transmission and distribution of electric power. As such, it will incur an economic loss if it

-For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

Compare and contrast the marginal cost and average cost pricing rules for regulating natural monopolies.

If a monopolist is maximizing profits, then it is producing an amount of output so that

If a natural monopoly is regulated using the marginal cost pricing rule, how does the regulation affect prices, outputs, profits, and the distribution of surpluses? What are the pros and cons to this method of regulation?

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging ________ per grooming and producing ________ groomings per day.

-The area of economic profit shown in the above figure for the single-price monopolist is

-The unregulated, single-price monopolist illustrated in the figure above has a total revenue of

What is price discrimination? Can a perfectly competitive firm price discriminate? Explain you answer.

Compared to a competitive industry, a monopoly transfers

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up produces the unregulated, profit-maximizing level of output?

-If the market illustrated in the above figure was a perfectly competitive market with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be

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

-The above figure shows the demand and cost curves for a monopolist. What is the maximum economic profit this firm can make?

Activity aimed at creating artificial barriers to entry into a particular market

Rent seeking is devoted to the creation of

-For the monopoly shown in the figure above, the profit maximizing output is

How can managers of natural monopolies exaggerate their costs?

Which of the following occurs with both perfectly price discriminating and single-price monopolies?

Which of the following statements regarding an average-cost pricing rule for a natural monopoly is WRONG?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging per grooming and producing groomings per day.