Question 1

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

Accepted Answer

A)  incur an economic loss. 
B)  make zero economic profit, that is, its owners make a normal profit. 
C)  make an economic profit of $4 million. 
D)  make an economic profit of $16 million. 
A)  incur an economic loss. 
B)  make zero economic profit, that is, its owners make a normal profit. 
C)  make an economic profit of $4 million. 
D)  make an economic profit of $16 million.

Question 2

According to social interest theory, ________.

Accepted Answer

A)  price regulations are unconstitutional 
B)  regulation helps markets achieve efficiency 
C)  monopoly practices last forever 
D)  unregulated firms try to avoid creating deadweight loss 
A)  price regulations are unconstitutional 
B)  regulation helps markets achieve efficiency 
C)  monopoly practices last forever 
D)  unregulated firms try to avoid creating deadweight loss

Question 3

-In the figure above, complete the graph of the electric utility company by adding the marginal revenue and marginal cost curves. Assume the marginal cost is constant at 4¢ per kilowatt-hour. Now discuss the two options regulators have in trying to regulate the firm. Be sure to state the price and quantity that are selected for each option. Also, what price and quantity does the firm select if it is not regulated?

Accepted Answer

@#IMG-DLM& The completed figure is above. The two

Question 4

-In the above figure, if the natural monopoly is regulated using a marginal cost pricing rule, then the firm will

Accepted Answer

A)  produce 8 million units and make an economic profit of $24 million. 
B)  produce 12 million units and make zero economic profit. 
C)  produce 16 million units and incur an economic loss of $64 million. 
D)  produce 16 million units and make zero economic profit. 
A)  produce 8 million units and make an economic profit of $24 million. 
B)  produce 12 million units and make zero economic profit. 
C)  produce 16 million units and incur an economic loss of $64 million. 
D)  produce 16 million units and make zero economic profit.

Question 5

-If the natural monopoly shown in the figure above is unregulated, it will make an economic profit of

Accepted Answer

A)  $2 million. 
B)  $4 million. 
C)  $9 million. 
D)  $0, that is, it earns a normal profit. 
A)  $2 million. 
B)  $4 million. 
C)  $9 million. 
D)  $0, that is, it earns a normal profit.

Question 6

-The unregulated, single-price monopolist illustrated in the figure above will produce

Accepted Answer

A)  0 units per day. 
B)  4 units per day. 
C)  6 units per day. 
D)  9 units per day. 
A)  0 units per day. 
B)  4 units per day. 
C)  6 units per day. 
D)  9 units per day.

Question 7

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

Accepted Answer

A)  elastic; P = MC 
B)  elastic; MR = MC 
C)  inelastic; P = MC 
D)  inelastic; MR = MC 
A)  elastic; P = MC 
B)  elastic; MR = MC 
C)  inelastic; P = MC 
D)  inelastic; MR = MC

Question 8

Which of the following statements applies to a single-price monopolist?

Accepted Answer

A)  In order to maximize profits, the monopolist will produce an amount of output that lies in the elastic range of its demand. 
B)  In order to maximize profits, the monopolist will produce an amount of output that lies in the inelastic range of its demand. 
C)  In order to maximize profits, the monopolist will produce where its demand is unit elastic. 
D)  In order to maximize profits, the monopolist will produce an amount of output in the inelastic range of its supply. 
A)  In order to maximize profits, the monopolist will produce an amount of output that lies in the elastic range of its demand. 
B)  In order to maximize profits, the monopolist will produce an amount of output that lies in the inelastic range of its demand. 
C)  In order to maximize profits, the monopolist will produce where its demand is unit elastic. 
D)  In order to maximize profits, the monopolist will produce an amount of output in the inelastic range of its supply.

Question 9

-In the above figure, if a single-price monopolist charges the profit-maximizing price, the triangle dce represents

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  deadweight loss. 
D)  marginal revenue. 
A)  consumer surplus. 
B)  producer surplus. 
C)  deadweight loss. 
D)  marginal revenue.

Question 10

An average cost pricing rule for a natural monopoly sets the price ________ the marginal cost, thereby ________ a deadweight loss.

Accepted Answer

A)  below; avoiding 
B)  below; creating 
C)  above; avoiding 
D)  above; creating 
A)  below; avoiding 
B)  below; creating 
C)  above; avoiding 
D)  above; creating

Question 11

For a monopolist, on the inelastic range of its demand

Accepted Answer

A)  marginal revenue is negative. 
B)  marginal revenue is positive. 
C)  marginal revenue is equal to zero. 
D)  total revenue is maximized. 
A)  marginal revenue is negative. 
B)  marginal revenue is positive. 
C)  marginal revenue is equal to zero. 
D)  total revenue is maximized.

Question 12

-The figure above shows the demand and cost curves for a single-price monopoly. What economic profit does this firm make?

Accepted Answer

A)  zero 
B)  $600 
C)  $400 
D)  $200 
A)  zero 
B)  $600 
C)  $400 
D)  $200

Question 13

Rent seeking

Accepted Answer

A)  is an additional social cost of monopoly. 
B)  is only a problem in the commercial real estate market. 
C)  helps employ resources that would otherwise be unemployed. 
D)  is beneficial to society. 
A)  is an additional social cost of monopoly. 
B)  is only a problem in the commercial real estate market. 
C)  helps employ resources that would otherwise be unemployed. 
D)  is beneficial to society.

Question 14

Which of the following is TRUE for a single-price monopolist?

Accepted Answer

A) P > MR B) P < MR C) P = MR D) P = elasticity of demand A) P > MR B) P < MR C) P = MR D) P = elasticity of demand

Question 15

-In the figure above, a single-price unregulated monopoly will produce an amount of output equal to

Accepted Answer

A)  h. 
B)  j. 
C)  k. 
D)  none of the above. 
A)  h. 
B)  j. 
C)  k. 
D)  none of the above.

Question 16

A price discriminating monopolist

Accepted Answer

A)  produces more output than that produced by a single-price monopolist. 
B)  has a lower marginal cost than that incurred by a single-price monopolist. 
C)  makes a smaller economic profit than that earned by the single-price monopolist. 
D)  makes zero economic profit in the long run. 
A)  produces more output than that produced by a single-price monopolist. 
B)  has a lower marginal cost than that incurred by a single-price monopolist. 
C)  makes a smaller economic profit than that earned by the single-price monopolist. 
D)  makes zero economic profit in the long run.

Question 17

-An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the monopoly's total costs when it is maximizing its profit will be

Accepted Answer

A)  $30. 
B)  $40. 
C)  $80. 
D)  $140. 
A)  $30. 
B)  $40. 
C)  $80. 
D)  $140.

Question 18

-Rate of return regulation sets the price at a level that enables the regulated firm to earn a specified target percent return on its

Accepted Answer

A)  total cost. 
B)  sales revenue. 
C)  capital. 
D)  variable cost. 
A)  total cost. 
B)  sales revenue. 
C)  capital. 
D)  variable cost.

Question 19

A single-price monopolist will find when it produces its profit-maximizing amount of output that

Accepted Answer

A)  price exceeds marginal revenue. 
B)  price exceeds marginal cost. 
C)  marginal revenue equals marginal cost. 
D)  All of the above occur at the profit-maximizing output level. 
A)  price exceeds marginal revenue. 
B)  price exceeds marginal cost. 
C)  marginal revenue equals marginal cost. 
D)  All of the above occur at the profit-maximizing output level.

Question 20

For a single-price monopolist,

Accepted Answer

A)  MR = P. 
B)  MR < P. 
C)  MR first increases and then decreases with the quantity sold. 
D)  MR first decreases and then increases with the quantity sold. 
A)  MR = P. 
B)  MR < P. 
C)  MR first increases and then decreases with the quantity sold. 
D)  MR first decreases and then increases with the quantity sold.

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

According to social interest theory, ________.

-In the above figure, if the natural monopoly is regulated using a marginal cost pricing rule, then the firm will

-If the natural monopoly shown in the figure above is unregulated, it will make an economic profit of

-The unregulated, single-price monopolist illustrated in the figure above will produce

To maximize profit, the monopolist produces on the portion of its demand where .

Which of the following statements applies to a single-price monopolist?

-In the above figure, if a single-price monopolist charges the profit-maximizing price, the triangle dce represents

An average cost pricing rule for a natural monopoly sets the price the marginal cost, thereby a deadweight loss.

For a monopolist, on the inelastic range of its demand

-The figure above shows the demand and cost curves for a single-price monopoly. What economic profit does this firm make?

Rent seeking

Which of the following is TRUE for a single-price monopolist?

-In the figure above, a single-price unregulated monopoly will produce an amount of output equal to

A price discriminating monopolist

-An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the monopoly's total costs when it is maximizing its profit will be

-Rate of return regulation sets the price at a level that enables the regulated firm to earn a specified target percent return on its

A single-price monopolist will find when it produces its profit-maximizing amount of output that

For a single-price monopolist,

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

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

According to social interest theory, ________.

-In the above figure, if the natural monopoly is regulated using a marginal cost pricing rule, then the firm will

-If the natural monopoly shown in the figure above is unregulated, it will make an economic profit of

-The unregulated, single-price monopolist illustrated in the figure above will produce

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

Which of the following statements applies to a single-price monopolist?

-In the above figure, if a single-price monopolist charges the profit-maximizing price, the triangle dce represents

An average cost pricing rule for a natural monopoly sets the price ________ the marginal cost, thereby ________ a deadweight loss.

For a monopolist, on the inelastic range of its demand

-The figure above shows the demand and cost curves for a single-price monopoly. What economic profit does this firm make?

Rent seeking

Which of the following is TRUE for a single-price monopolist?

-In the figure above, a single-price unregulated monopoly will produce an amount of output equal to

A price discriminating monopolist

-An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the monopoly's total costs when it is maximizing its profit will be

-Rate of return regulation sets the price at a level that enables the regulated firm to earn a specified target percent return on its

A single-price monopolist will find when it produces its profit-maximizing amount of output that

For a single-price monopolist,

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

To maximize profit, the monopolist produces on the portion of its demand where .

An average cost pricing rule for a natural monopoly sets the price the marginal cost, thereby a deadweight loss.