Question 1

Under the social interest theory of regulation,the goal of regulating natural monopolies is

Accepted Answer

A) to provide a larger,though not maximum,profit for the firms. 
B) to use average cost pricing. 
C) to provide an outcome similar to the competitive outcome. 
D) to provide a the maximum profit for the firms. 
E) None of the above answers is correct. 
A) to provide a larger,though not maximum,profit for the firms. 
B) to use average cost pricing. 
C) to provide an outcome similar to the competitive outcome. 
D) to provide a the maximum profit for the firms. 
E) None of the above answers is correct.

Question 2

Is a single-price monopoly efficient?

Accepted Answer

A) Yes,because it creates a deadweight loss. 
B) No,because it creates a deadweight loss. 
C) Yes,because consumers gain and producers lose some of their surpluses. 
D) Yes,because consumers lose and producers gain some of their surpluses. 
E) Yes,because it produces the quantity at which MR = MC. 
A) Yes,because it creates a deadweight loss. 
B) No,because it creates a deadweight loss. 
C) Yes,because consumers gain and producers lose some of their surpluses. 
D) Yes,because consumers lose and producers gain some of their surpluses. 
E) Yes,because it produces the quantity at which MR = MC.

Question 3

A firm that is a natural monopoly

Accepted Answer

A) can supply the entire market at a lower average total cost than two or more firms. 
B) has very small fixed costs and very large marginal costs. 
C) is infrequently regulated because having one firm serve the market is economically sound. 
D) cannot make an economic profit if it is not regulated because it must serve a very large customer base. 
E) produces the efficient quantity of output when it is not regulated. 
A) can supply the entire market at a lower average total cost than two or more firms. 
B) has very small fixed costs and very large marginal costs. 
C) is infrequently regulated because having one firm serve the market is economically sound. 
D) cannot make an economic profit if it is not regulated because it must serve a very large customer base. 
E) produces the efficient quantity of output when it is not regulated.

Question 4

"When electric utilities are regulated using an average cost pricing rule,they will earn zero economic profit." Is the previous statement correct or incorrect? Why?

Accepted Answer

The statement is correct.An av

Question 5

What are a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?

Accepted Answer

Natural monopolies can be regulated usin

Question 6

-Ron's Hamburger Joint is the only restaurant in town.The above figure represents Ron's cost,the market demand,and marginal revenue curves.Ron operates as a single-price monopoly.
a.How many hamburgers does Ron produce?
b.What price does Ron charge for a hamburger?
c.What is Ron's total revenue?
d.What is his total cost?
e.What is Ron's economic profit?

Accepted Answer

a.Ron produces 20 hamburgers p

Question 7

Monopolies arise when there are

Accepted Answer

A) many substitutes but there are no barriers to entry. 
B) no close substitutes and there are no barriers to entry. 
C) no close substitutes and there are barriers to entry. 
D) many substitutes and there barriers to entry. 
E) None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry. 
A) many substitutes but there are no barriers to entry. 
B) no close substitutes and there are no barriers to entry. 
C) no close substitutes and there are barriers to entry. 
D) many substitutes and there barriers to entry. 
E) None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry.

Question 8

With price discrimination,a monopoly

Accepted Answer

A) converts consumer surplus into economic profit. 
B) converts producer surplus into economic profit. 
C) can charge a single price to all customers. 
D) produces less output than if it does not price discriminate. 
E) converts consumer surplus into deadweight loss. 
A) converts consumer surplus into economic profit. 
B) converts producer surplus into economic profit. 
C) can charge a single price to all customers. 
D) produces less output than if it does not price discriminate. 
E) converts consumer surplus into deadweight loss.

Question 9

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 10

-The above figure illustrates the market for electric power that is served by the one utility in Alberta,Canada.
a.If the government did not regulate this utility,what would be the price of a kilowatt hour in this region and how much power would be generated?
b.If the government regulates the utility and chooses an average cost pricing rule,what would be the price of a kilowatt hour and how much power would be generated?
c.If the government regulates the utility and chooses a marginal cost pricing rule,what would be the price of a kilowatt hour and how much power would be generated?

Accepted Answer

a.The price would be 12¢ a kilowatt hour

Question 11

"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? Explain your answer.

Accepted Answer

The statement is incorrect.If

Question 12

When a monopoly price discriminates,it

Accepted Answer

A) increases the amount of consumer surplus. 
B) decreases its economic profit. 
C) converts consumer surplus into economic profit. 
D) converts economic profit into consumer surplus. 
E) has no effect on the deadweight loss in the market. 
A) increases the amount of consumer surplus. 
B) decreases its economic profit. 
C) converts consumer surplus into economic profit. 
D) converts economic profit into consumer surplus. 
E) has no effect on the deadweight loss in the market.

Question 13

A difference between a perfectly competitive industry and a monopoly is that

Accepted Answer

A) in the long run,firms in a perfectly competitive industry make zero economic profit and a monopoly can make an economic profit. 
B) a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot. 
C) only monopolies have an incentive to maximize profit. 
D) perfectly competitive firms can have a public franchise. 
E) a barrier to entry protects perfectly competitive firms in the short run and protects a monopoly in the long run. 
A) in the long run,firms in a perfectly competitive industry make zero economic profit and a monopoly can make an economic profit. 
B) a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot. 
C) only monopolies have an incentive to maximize profit. 
D) perfectly competitive firms can have a public franchise. 
E) a barrier to entry protects perfectly competitive firms in the short run and protects a monopoly in the long run.

Question 14

-A single-price monopoly has the demand and marginal cost schedules given in the above table.What is the profit-maximizing level of output and price?

Accepted Answer

The profit-maximizing output i

Question 15

When demand is elastic,marginal revenue is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) increasing as output increases. 
E) undefined. 
A) positive. 
B) negative. 
C) zero. 
D) increasing as output increases. 
E) undefined.

Question 16

Earning-sharing regulation involves

Accepted Answer

A) setting the monopoly's price equal to its average total cost. 
B) requiring that the monopoly share its profits with its customers if the profits rise above a certain level. 
C) setting a maximum price the monopoly may charge and maintaining it for many years. 
D) assuming a natural monopoly will not charge a higher than profit-maximizing price. 
E) setting the monopoly's price equal to its marginal cost. 
A) setting the monopoly's price equal to its average total cost. 
B) requiring that the monopoly share its profits with its customers if the profits rise above a certain level. 
C) setting a maximum price the monopoly may charge and maintaining it for many years. 
D) assuming a natural monopoly will not charge a higher than profit-maximizing price. 
E) setting the monopoly's price equal to its marginal cost.

Question 17

Price discrimination is

Accepted Answer

A) always illegal in the United States. 
B) defined as charging the same price to all consumers. 
C) defined as charging different prices for different units. 
D) setting the price to minimize the quantity sold. 
E) Both answers A and C are correct. 
A) always illegal in the United States. 
B) defined as charging the same price to all consumers. 
C) defined as charging different prices for different units. 
D) setting the price to minimize the quantity sold. 
E) Both answers A and C are correct.

Question 18

A natural barrier to entry is defined as a barrier that arises because of

Accepted Answer

A) technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms. 
B) patents or licenses that exclude others from producing a good or service. 
C) many firms producing the good and thereby allowing choice for all consumers. 
D) anticompetitive practices by a firm that keep other firms from producing. 
E) one firm owning a key natural resource. 
A) technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms. 
B) patents or licenses that exclude others from producing a good or service. 
C) many firms producing the good and thereby allowing choice for all consumers. 
D) anticompetitive practices by a firm that keep other firms from producing. 
E) one firm owning a key natural resource.

Question 19

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 20

A monopoly creates a deadweight loss because the monopoly

Accepted Answer

A) sets a price that is too low. 
B) makes a normal profit. 
C) does not maximize profit. 
D) produces less than the efficient quantity. 
E) produces more than the efficient quantity. 
A) sets a price that is too low. 
B) makes a normal profit. 
C) does not maximize profit. 
D) produces less than the efficient quantity. 
E) produces more than the efficient quantity.

Under the social interest theory of regulation,the goal of regulating natural monopolies is

Is a single-price monopoly efficient?

A firm that is a natural monopoly

"When electric utilities are regulated using an average cost pricing rule,they will earn zero economic profit." Is the previous statement correct or incorrect? Why?

What are a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?

Monopolies arise when there are

With price discrimination,a monopoly

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

"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? Explain your answer.

When a monopoly price discriminates,it

A difference between a perfectly competitive industry and a monopoly is that

-A single-price monopoly has the demand and marginal cost schedules given in the above table.What is the profit-maximizing level of output and price?

When demand is elastic,marginal revenue is

Earning-sharing regulation involves

Price discrimination is

A natural barrier to entry is defined as a barrier that arises because of

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

A monopoly creates a deadweight loss because the monopoly

Getting Started

The Usand 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

Under the social interest theory of regulation,the goal of regulating natural monopolies is

Is a single-price monopoly efficient?

A firm that is a natural monopoly

"When electric utilities are regulated using an average cost pricing rule,they will earn zero economic profit." Is the previous statement correct or incorrect? Why?

What are a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?

Monopolies arise when there are

With price discrimination,a monopoly

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

"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? Explain your answer.

When a monopoly price discriminates,it

A difference between a perfectly competitive industry and a monopoly is that

-A single-price monopoly has the demand and marginal cost schedules given in the above table.What is the profit-maximizing level of output and price?

When demand is elastic,marginal revenue is

Earning-sharing regulation involves

Price discrimination is

A natural barrier to entry is defined as a barrier that arises because of

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

A monopoly creates a deadweight loss because the monopoly

Getting Started

The Usand 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