Question 1

The total revenue test using the price elasticity of demand

Accepted Answer

A)  explains why monopolies will only operate on the elastic portion of their demand curve. 
B)  explains why monopolies will only operate on the inelastic portion of their demand curves. 
C)  demonstrates why a monopoly can earn an economic profit in the long run. 
D)  determines whether a monopoly can perfectly price discriminate or not. 
E)  cannot be used for a price discriminating monopoly. 
A)  explains why monopolies will only operate on the elastic portion of their demand curve. 
B)  explains why monopolies will only operate on the inelastic portion of their demand curves. 
C)  demonstrates why a monopoly can earn an economic profit in the long run. 
D)  determines whether a monopoly can perfectly price discriminate or not. 
E)  cannot be used for a price discriminating monopoly.

Question 2

With a natural monopoly,

Accepted Answer

A)  no regulation is necessary because it is a natural monopoly. 
B)  regulation takes the form of forcing competition from new firms. 
C)  regulation takes the form of forcing the company out of business. 
D)  regulation can take the form of average cost pricing to allow coverage of costs. 
E)  regulation takes the form of breaking the company into several competing firms. 
A)  no regulation is necessary because it is a natural monopoly. 
B)  regulation takes the form of forcing competition from new firms. 
C)  regulation takes the form of forcing the company out of business. 
D)  regulation can take the form of average cost pricing to allow coverage of costs. 
E)  regulation takes the form of breaking the company into several competing firms.

Question 3

Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing,average cost pricing,rate of return regulation,and price cap regulation.

Accepted Answer

Marginal cost pricing: The regulated pri

Question 4

-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 5

What is the social interest theory of regulation? How does it differ from the capture theory of regulation?

Accepted Answer

The social interest theory of regulation

Question 6

-The above figure represents the cost,market demand,and marginal revenue curves for a monopoly.
a.Indicate the price and quantity a single-price monopoly selects by labeling the price Pm and the quantity Qm.
b.In the figure,lightly shade in the area that represents the single-price monopoly's economic profit.
c.Indicate the quantity a perfectly price-discriminating monopoly selects by labeling it Qppd.
d.In the figure,more darkly shade in the area that represents the additional economic profit the monopoly earns as a result of the perfect price discrimination.

Accepted Answer

@#IMG-DLM& 
a.The price is labeled Pm and the quan

Question 7

Electric utilities are often considered natural monopolies and are regulated.When would the price be highest: when the utility is not regulated,when it is regulated using an average cost pricing rule,or when it is regulated using a marginal cost pricing rule? When would its price be lowest?

Accepted Answer

The price would be highest if

Question 8

Which of the following is NOT a requirement for a firm to be able to price discriminate?

Accepted Answer

A)  monopoly power 
B)  groups of customers with different willingness to pay for the good 
C)  economies of scale 
D)  ability to keep the members of different customer groups separate 
E)  ability to prevent resales of the product by customers 
A)  monopoly power 
B)  groups of customers with different willingness to pay for the good 
C)  economies of scale 
D)  ability to keep the members of different customer groups separate 
E)  ability to prevent resales of the product by customers

Question 9

-Christy's Haircuts,the sole supplier of haircuts in a small town,faces the demand schedule shown in the table above.What is Christy's marginal revenue from the 25th haircut?

Accepted Answer

A)  zero 
B)  $5.00 
C)  $17.50 
D)  $50.00 
A)  zero 
B)  $5.00 
C)  $17.50 
D)  $50.00

Question 10

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 11

The figure above shows a natural monopoly.
-In the figure above,if the firm is regulated using a marginal cost pricing rule,the deadweight loss created is equal to the area of

Accepted Answer

A)  ABG. 
B)  BEFG. 
C)  BCFG. 
D)  BCE. 
E)  None of the above because there is no deadweight loss created. 
A)  ABG. 
B)  BEFG. 
C)  BCFG. 
D)  BCE. 
E)  None of the above because there is no deadweight loss created.

Question 12

Competition among rent seekers results in

Accepted Answer

A)  higher rents. 
B)  firms earning normal profits. 
C)  firms setting lower prices. 
D)  lower costs. 
E)  all competing firms earning an economic profit. 
A)  higher rents. 
B)  firms earning normal profits. 
C)  firms setting lower prices. 
D)  lower costs. 
E)  all competing firms earning an economic profit.

Question 13

To encourage invention and innovation,the government provides

Accepted Answer

A)  patents. 
B)  public franchises. 
C)  government licenses. 
D)  natural monopolies. 
E)  easily obtained ownership barriers to entry. 
A)  patents. 
B)  public franchises. 
C)  government licenses. 
D)  natural monopolies. 
E)  easily obtained ownership barriers to entry.

Question 14

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 15

The long-run average cost curve of a natural monopoly

Accepted Answer

A)  is positively sloped until it crosses the demand curve. 
B)  intersects the demand curve while it is negative sloped. 
C)  intersects the demand curve while it is positively sloped. 
D)  is the natural monopoly's supply curve. 
E)  is the same as the natural monopoly's demand curve. 
A)  is positively sloped until it crosses the demand curve. 
B)  intersects the demand curve while it is negative sloped. 
C)  intersects the demand curve while it is positively sloped. 
D)  is the natural monopoly's supply curve. 
E)  is the same as the natural monopoly's demand curve.

Question 16

If a natural monopoly is regulated using

Accepted Answer

A)  a marginal cost pricing rule, the firm maximizes its profit. 
B)  an average cost pricing rule, the firm incurs an economic loss. 
C)  a total cost pricing rule, the firm will exit the industry. 
D)  a marginal cost pricing rule, the firm incurs an economic loss. 
E)  an average cost pricing rule, the firm maximizes its profit. 
A)  a marginal cost pricing rule, the firm maximizes its profit. 
B)  an average cost pricing rule, the firm incurs an economic loss. 
C)  a total cost pricing rule, the firm will exit the industry. 
D)  a marginal cost pricing rule, the firm incurs an economic loss. 
E)  an average cost pricing rule, the firm maximizes its profit.

Question 17

-How do the price,output,consumer surplus,economic profit,and total surplus for a single-price monopoly compare to that of a competitive industry?

Accepted Answer

For the monopoly,price is high

Question 18

Under which of the following is consumer surplus zero?

Accepted Answer

A)  all types of monopoly 
B)  only single-price monopoly 
C)  only perfectly price-discriminating monopoly 
D)  only price discrimination on the basis of the number of units purchased 
E)  perfect competition 
A)  all types of monopoly 
B)  only single-price monopoly 
C)  only perfectly price-discriminating monopoly 
D)  only price discrimination on the basis of the number of units purchased 
E)  perfect competition

Question 19

To be able to price discriminate,a firm must

Accepted Answer

A)  lower prices for all customers. 
B)  raise prices for all customers. 
C)  be able to identify and separate different types of buyers. 
D)  sell a product that can be resold. 
E)  Both answers B and C are correct. 
A)  lower prices for all customers. 
B)  raise prices for all customers. 
C)  be able to identify and separate different types of buyers. 
D)  sell a product that can be resold. 
E)  Both answers B and C are correct.

Question 20

Price cap regulation

Accepted Answer

A)  does not provide incentives to firms to minimize their costs because firms cannot change prices. 
B)  sets the maximum price these firms can charge. 
C)  gives firms the incentive to exaggerate their costs. 
D)  Both answers A and C are correct. 
E)  Both answers A and B are correct. 
A)  does not provide incentives to firms to minimize their costs because firms cannot change prices. 
B)  sets the maximum price these firms can charge. 
C)  gives firms the incentive to exaggerate their costs. 
D)  Both answers A and C are correct. 
E)  Both answers A and B are correct.

The total revenue test using the price elasticity of demand

With a natural monopoly,

Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing,average cost pricing,rate of return regulation,and price cap regulation.

What is the social interest theory of regulation? How does it differ from the capture theory of regulation?

Electric utilities are often considered natural monopolies and are regulated.When would the price be highest: when the utility is not regulated,when it is regulated using an average cost pricing rule,or when it is regulated using a marginal cost pricing rule? When would its price be lowest?

Which of the following is NOT a requirement for a firm to be able to price discriminate?

-Christy's Haircuts,the sole supplier of haircuts in a small town,faces the demand schedule shown in the table above.What is Christy's marginal revenue from the 25th haircut?

The relationship between marginal revenue and elasticity is

The figure above shows a natural monopoly. -In the figure above,if the firm is regulated using a marginal cost pricing rule,the deadweight loss created is equal to the area of

Competition among rent seekers results in

To encourage invention and innovation,the government provides

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

The long-run average cost curve of a natural monopoly

If a natural monopoly is regulated using

-How do the price,output,consumer surplus,economic profit,and total surplus for a single-price monopoly compare to that of a competitive industry?

Under which of the following is consumer surplus zero?

To be able to price discriminate,a firm must

Price cap regulation

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 16: Monopoly

The total revenue test using the price elasticity of demand

With a natural monopoly,

Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing,average cost pricing,rate of return regulation,and price cap regulation.

What is the social interest theory of regulation? How does it differ from the capture theory of regulation?

Electric utilities are often considered natural monopolies and are regulated.When would the price be highest: when the utility is not regulated,when it is regulated using an average cost pricing rule,or when it is regulated using a marginal cost pricing rule? When would its price be lowest?

Which of the following is NOT a requirement for a firm to be able to price discriminate?

-Christy's Haircuts,the sole supplier of haircuts in a small town,faces the demand schedule shown in the table above.What is Christy's marginal revenue from the 25th haircut?

The relationship between marginal revenue and elasticity is

The figure above shows a natural monopoly. -In the figure above,if the firm is regulated using a marginal cost pricing rule,the deadweight loss created is equal to the area of

Competition among rent seekers results in

To encourage invention and innovation,the government provides

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

The long-run average cost curve of a natural monopoly

If a natural monopoly is regulated using

-How do the price,output,consumer surplus,economic profit,and total surplus for a single-price monopoly compare to that of a competitive industry?

Under which of the following is consumer surplus zero?

To be able to price discriminate,a firm must

Price cap regulation

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters