Question 1

Under a price cap regulation, the regulated industry has an incentive to

Accepted Answer

A)  operate efficiently and not inflate its costs. 
B)  inflate costs. 
C)  decrease its output. 
D)  None of the above answers is correct. 
A)  operate efficiently and not inflate its costs. 
B)  inflate costs. 
C)  decrease its output. 
D)  None of the above answers is correct.

Question 2

Which of the following is a barrier to entry for a monopoly?

Accepted Answer

A)  a patent 
B)  severe diseconomies of scale 
C)  close substitutes for the good or service exist 
D)  All of the above answers are correct. 
A)  a patent 
B)  severe diseconomies of scale 
C)  close substitutes for the good or service exist 
D)  All of the above answers are correct.

Question 3

Relative to a perfectly competitive market with the same cost and demand, a single-price monopolist produces ________ output and has a ________ price.

Accepted Answer

A)  more; higher 
B)  less; lower 
C)  more; lower 
D)  less; higher 
A)  more; higher 
B)  less; lower 
C)  more; lower 
D)  less; higher

Question 4

-In the above figure, draw and label the demand and cost curves of a monopoly. Identify the quantity a single-price monopoly will produce by labeling it Qm and identify the price by labeling it Pm.

Accepted Answer

@#IMG-DLM& The compl

Question 5

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. If marginal revenue is positive at the number of surfboard rentals made each hour, then Sue's Surfboards

Accepted Answer

A)  must face an elastic demand for surfboard rentals. 
B)  must face an inelastic demand for surfboard rentals. 
C)  can increase its total revenue by increasing the price of rentals. 
D)  must face a unit elastic demand for surfboard rentals. 
A)  must face an elastic demand for surfboard rentals. 
B)  must face an inelastic demand for surfboard rentals. 
C)  can increase its total revenue by increasing the price of rentals. 
D)  must face a unit elastic demand for surfboard rentals.

Question 6

-If an average cost pricing rule is imposed on the firm in the figure above, the deadweight loss will be

Accepted Answer

A)  zero. 
B)  $150. 
C)  $50. 
D)  $250. 
A)  zero. 
B)  $150. 
C)  $50. 
D)  $250.

Question 7

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Accepted Answer

A)  Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years. 
B)  Merck will have a monopoly on this vaccine because of economies of scale. 
C)  Other firms will quickly copy the formula making the market for the vaccine competitive. 
D)  Merck will not tell anyone about its discovery though it will sell the vaccine. 
A)  Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years. 
B)  Merck will have a monopoly on this vaccine because of economies of scale. 
C)  Other firms will quickly copy the formula making the market for the vaccine competitive. 
D)  Merck will not tell anyone about its discovery though it will sell the vaccine.

Question 8

Rent seeking ________.

Accepted Answer

A)  increases consumer surplus 
B)  occurs only when the firm practices perfect price discrimination 
C)  increases deadweight loss 
D)  results in a larger output than a competitive industry would produce 
A)  increases consumer surplus 
B)  occurs only when the firm practices perfect price discrimination 
C)  increases deadweight loss 
D)  results in a larger output than a competitive industry would produce

Question 9

-If the firm in the figure above is unregulated, the consumer surplus will be

Accepted Answer

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

Question 10

A monopoly firm expands its output and lowers its price. The firm finds that its total revenue falls. Hence, the firm is producing in the

Accepted Answer

A)  elastic range of its demand curve. 
B)  inelastic range of its demand curve. 
C)  elastic range of its supply curve. 
D)  inelastic range of its supply curve. 
A)  elastic range of its demand curve. 
B)  inelastic range of its demand curve. 
C)  elastic range of its supply curve. 
D)  inelastic range of its supply curve.

Question 11

A monopoly can price discriminate between two groups of consumers if each group has ________.

Accepted Answer

A)  a large consumer surplus 
B)  a different willingness to pay 
C)  the same willingness to pay 
D)  the ability to resell the good to the other group 
A)  a large consumer surplus 
B)  a different willingness to pay 
C)  the same willingness to pay 
D)  the ability to resell the good to the other group

Question 12

Which of the following is TRUE about a perfect price discriminating monopolist?

Accepted Answer

A)  There is inefficiency. 
B)  All consumers pay a price equal to marginal cost. 
C)  There is no consumer surplus. 
D)  There is zero economic profit. 
A)  There is inefficiency. 
B)  All consumers pay a price equal to marginal cost. 
C)  There is no consumer surplus. 
D)  There is zero economic profit.

Question 13

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

Accepted Answer

A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit. 
A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit.

Question 14

A single-price monopoly causes a deadweight loss because it ________.

Accepted Answer

A)  restricts its output so it is less than the efficient quantity 
B)  increases the amount produced beyond the efficient quantity 
C)  maximizes marginal revenue rather than minimizes marginal cost 
D)  increases marginal cost 
A)  restricts its output so it is less than the efficient quantity 
B)  increases the amount produced beyond the efficient quantity 
C)  maximizes marginal revenue rather than minimizes marginal cost 
D)  increases marginal cost

Question 15

An unregulated monopoly will

Accepted Answer

A)  flood the market with goods to deter entry. 
B)  produce only where marginal revenue is zero. 
C)  produce in the inelastic range of its demand curve. 
D)  produce in the elastic range of its demand curve. 
A)  flood the market with goods to deter entry. 
B)  produce only where marginal revenue is zero. 
C)  produce in the inelastic range of its demand curve. 
D)  produce in the elastic range of its demand curve.

Question 16

-Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When a marginal cost pricing rule regulation is imposed, the price per household per month is ________.

Accepted Answer

A)  $30 and 20,000 household are served 
B)  $10 and 40,000 household are served 
C)  $10 and 20,000 household are served 
D)  $20 and 30,000 households are served 
A)  $30 and 20,000 household are served 
B)  $10 and 40,000 household are served 
C)  $10 and 20,000 household are served 
D)  $20 and 30,000 households are served

Question 17

Which of the following markets will have the largest deadweight loss?

Accepted Answer

A)  A market that consists of perfectly competitive firms. 
B)  A market that consists of a single-price monopoly. 
C)  A market that consists of a perfect price discriminating monopoly. 
D)  None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost. 
A)  A market that consists of perfectly competitive firms. 
B)  A market that consists of a single-price monopoly. 
C)  A market that consists of a perfect price discriminating monopoly. 
D)  None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost.

Question 18

-The figure above shows the demand curve (D) faced by Visual, Inc., a cable TV company, and the firm's marginal revenue (MR), marginal cost (MC), and average cost (LRAC) curves. If Visual is regulated using rate of return regulation, and the regulator knows the firm's costs curves, the company will serve ________ million households and set a price of ________ per household per month.

Accepted Answer

A)  2.5; $30 
B)  3; $24 
C)  4; $12 
D)  2; $36 
A)  2.5; $30 
B)  3; $24 
C)  4; $12 
D)  2; $36

Question 19

-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 is regulated and follows a marginal cost pricing rule?

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 20

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

Accepted Answer

A)  raises variable cost. 
B)  raises fixed cost. 
C)  restricts output. 
D)  reduces the elasticity of demand. 
A)  raises variable cost. 
B)  raises fixed cost. 
C)  restricts output. 
D)  reduces the elasticity of demand.

Under a price cap regulation, the regulated industry has an incentive to

Which of the following is a barrier to entry for a monopoly?

Relative to a perfectly competitive market with the same cost and demand, a single-price monopolist produces output and has a price.

-In the above figure, draw and label the demand and cost curves of a monopoly. Identify the quantity a single-price monopoly will produce by labeling it Q_m and identify the price by labeling it P_m.

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. If marginal revenue is positive at the number of surfboard rentals made each hour, then Sue's Surfboards

-If an average cost pricing rule is imposed on the firm in the figure above, the deadweight loss will be

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Rent seeking ________.

-If the firm in the figure above is unregulated, the consumer surplus will be

A monopoly firm expands its output and lowers its price. The firm finds that its total revenue falls. Hence, the firm is producing in the

A monopoly can price discriminate between two groups of consumers if each group has ________.

Which of the following is TRUE about a perfect price discriminating monopolist?

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

A single-price monopoly causes a deadweight loss because it ________.

An unregulated monopoly will

-Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When a marginal cost pricing rule regulation is imposed, the price per household per month is ________.

Which of the following markets will have the largest deadweight loss?

-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 is regulated and follows a marginal cost pricing rule?

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

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

Under a price cap regulation, the regulated industry has an incentive to

Which of the following is a barrier to entry for a monopoly?

Relative to a perfectly competitive market with the same cost and demand, a single-price monopolist produces ________ output and has a ________ price.

-In the above figure, draw and label the demand and cost curves of a monopoly. Identify the quantity a single-price monopoly will produce by labeling it Qm and identify the price by labeling it Pm.

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. If marginal revenue is positive at the number of surfboard rentals made each hour, then Sue's Surfboards

-If an average cost pricing rule is imposed on the firm in the figure above, the deadweight loss will be

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Rent seeking ________.

-If the firm in the figure above is unregulated, the consumer surplus will be

A monopoly firm expands its output and lowers its price. The firm finds that its total revenue falls. Hence, the firm is producing in the

A monopoly can price discriminate between two groups of consumers if each group has ________.

Which of the following is TRUE about a perfect price discriminating monopolist?

If a perfectly competitive market becomes a monopoly and the costs do not change, which of the following allocations of costs and benefits applies?

A single-price monopoly causes a deadweight loss because it ________.

An unregulated monopoly will

-Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When a marginal cost pricing rule regulation is imposed, the price per household per month is ________.

Which of the following markets will have the largest deadweight loss?

-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 is regulated and follows a marginal cost pricing rule?

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

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

Relative to a perfectly competitive market with the same cost and demand, a single-price monopolist produces output and has a price.

-In the above figure, draw and label the demand and cost curves of a monopoly. Identify the quantity a single-price monopoly will produce by labeling it Q_m and identify the price by labeling it P_m.