Question 1

Price cap regulation is defined as regulation that

Accepted Answer

A)  imposes a price ceiling on the regulated firm. 
B)  encourages firms to exaggerate costs to increase profits. 
C)  uses marginal cost pricing to ensure efficient output. 
D)  uses average cost pricing to ensure costs are covered. 
E)  is essentially the same as rate of return regulation. 
A)  imposes a price ceiling on the regulated firm. 
B)  encourages firms to exaggerate costs to increase profits. 
C)  uses marginal cost pricing to ensure efficient output. 
D)  uses average cost pricing to ensure costs are covered. 
E)  is essentially the same as rate of return regulation.

Question 2

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 3

How should a natural monopoly be regulated under the social interest theory of regulation?

Accepted Answer

A)  by setting price equal to the average cost of production 
B)  by allowing a price that maximizes the profit of the natural monopoly 
C)  by using a marginal cost pricing rule 
D)  by subsidizing other producers to compete with the monopoly 
E)  by using rate of return regulation 
A)  by setting price equal to the average cost of production 
B)  by allowing a price that maximizes the profit of the natural monopoly 
C)  by using a marginal cost pricing rule 
D)  by subsidizing other producers to compete with the monopoly 
E)  by using rate of return regulation

Question 4

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost,the firm

Accepted Answer

A)  makes zero economic profit. 
B)  makes an economic profit. 
C)  incurs an economic loss. 
D)  makes a normal-economic profit. 
E)  makes either zero economic profit or an economic profit, depending on whether the firm's average total cost equals or is less than its marginal cost. 
A)  makes zero economic profit. 
B)  makes an economic profit. 
C)  incurs an economic loss. 
D)  makes a normal-economic profit. 
E)  makes either zero economic profit or an economic profit, depending on whether the firm's average total cost equals or is less than its marginal cost.

Question 5

One of the requirements for a monopoly is that

Accepted Answer

A)  products are high priced. 
B)  there are several close substitutes for the product. 
C)  there is a product with no close substitutes. 
D)  the product cannot be produced by small firms. 
E)  there is no barrier to entry. 
A)  products are high priced. 
B)  there are several close substitutes for the product. 
C)  there is a product with no close substitutes. 
D)  the product cannot be produced by small firms. 
E)  there is no barrier to entry.

Question 6

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price is ________ per pillow and the marginal cost is ________ per pillow.

Accepted Answer

A)  $60; $60 
B)  $60; $40 
C)  $70; $60 
D)  $70; $40 
E)  $100; $40 
A)  $60; $60 
B)  $60; $40 
C)  $70; $60 
D)  $70; $40 
E)  $100; $40

Question 7

The social interest theory of regulation is that

Accepted Answer

A)  regulators help producers maximize economic profit. 
B)  regulation seeks to increase the government's revenue. 
C)  regulation causes producers to produce at a point where they are earning normal profits. 
D)  regulation seeks an efficient use of resources. 
E)  regulation focuses on the consumers' interests and ignores producers' interests. 
A)  regulators help producers maximize economic profit. 
B)  regulation seeks to increase the government's revenue. 
C)  regulation causes producers to produce at a point where they are earning normal profits. 
D)  regulation seeks an efficient use of resources. 
E)  regulation focuses on the consumers' interests and ignores producers' interests.

Question 8

-In the figure below,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 9

A natural monopoly arises when

Accepted Answer

A)  one firm controls the supply of a unique resource. 
B)  a firm has many small firms that it can control. 
C)  there are firms which act together as a monopoly. 
D)  the long-run average cost curve slopes downward as it crosses the demand curve. 
E)  one firm naturally convinces the government to limit competition in the market. 
A)  one firm controls the supply of a unique resource. 
B)  a firm has many small firms that it can control. 
C)  there are firms which act together as a monopoly. 
D)  the long-run average cost curve slopes downward as it crosses the demand curve. 
E)  one firm naturally convinces the government to limit competition in the market.

Question 10

-The above table gives the demand schedule for a monopoly.The demand is inelastic over the entire price range between

Accepted Answer

A)  $6 and $1. 
B)  $5 and $1. 
C)  $3 and $1. 
D)  $6 and $4. 
E)  $4 and $3. 
A)  $6 and $1. 
B)  $5 and $1. 
C)  $3 and $1. 
D)  $6 and $4. 
E)  $4 and $3.

Question 11

Today,you might be buying from a regulated natural monopoly when you purchase

Accepted Answer

A)  a car, a truck, or a bicycle. 
B)  a computer, a phone, or a camera. 
C)  natural gas or electricity. 
D)  a house, a condominium, or a plot of land. 
E)  food in a grocery store or in a restaurant. 
A)  a car, a truck, or a bicycle. 
B)  a computer, a phone, or a camera. 
C)  natural gas or electricity. 
D)  a house, a condominium, or a plot of land. 
E)  food in a grocery store or in a restaurant.

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

With perfect price discrimination,the quantity of output produced by a monopoly is ________ the quantity produced by a perfectly competitive industry.

Accepted Answer

A)  greater than but not equal to 
B)  less than 
C)  equal to but not greater than 
D)  not comparable to 
E)  either greater than or equal to 
A)  greater than but not equal to 
B)  less than 
C)  equal to but not greater than 
D)  not comparable to 
E)  either greater than or equal to

Question 14

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is perfectly competitive,the quantity of steak is ________ pounds,and when the market is a monopoly,the quantity of steak is ________ pounds.

Accepted Answer

A)  2,000; 4,000 
B)  3,000; 2,000 
C)  4,000; 4,000 
D)  5,000; 3,000 
E)  4,000; less than 2,000 pounds. 
A)  2,000; 4,000 
B)  3,000; 2,000 
C)  4,000; 4,000 
D)  5,000; 3,000 
E)  4,000; less than 2,000 pounds.

Question 15

A "buy one,get one for half price" promotion is an example of

Accepted Answer

A)  price discriminating among units of a good. 
B)  price discriminating among groups of buyers. 
C)  a legal monopoly. 
D)  a natural monopoly. 
E)  marketing by a perfectly competitive firm designed to increase the firm's sales. 
A)  price discriminating among units of a good. 
B)  price discriminating among groups of buyers. 
C)  a legal monopoly. 
D)  a natural monopoly. 
E)  marketing by a perfectly competitive firm designed to increase the firm's sales.

Question 16

What is an average cost pricing rule? Why do regulatory agencies use it for natural monopolies?

Accepted Answer

Average cost pricing means that the firm

Question 17

The capture theory of regulation is defined as

Accepted Answer

A)  the use of regulations to assure the efficient use of resources. 
B)  the constant reapplication of regulation on the cable TV industry. 
C)  the use of regulation to assist producers to maximize profits. 
D)  the removal of regulations on business activities. 
E)  regulation that focuses on consumers' interests and ignores producers' interests. 
A)  the use of regulations to assure the efficient use of resources. 
B)  the constant reapplication of regulation on the cable TV industry. 
C)  the use of regulation to assist producers to maximize profits. 
D)  the removal of regulations on business activities. 
E)  regulation that focuses on consumers' interests and ignores producers' interests.

Question 18

Compared to the situation in which it sets a single price,a monopoly that price discriminates ________ its economic profit and ________ its output.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  increases; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  increases; does not change

Question 19

The above figure shows a market.
-If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly,the amount of the gain in producer surplus is the area ________.

Accepted Answer

A)  ABH 
B)  BFGH 
C)  ACG 
D)  BDEH 
E)  ACE 
A)  ABH 
B)  BFGH 
C)  ACG 
D)  BDEH 
E)  ACE

Question 20

-Use the figure above to answer this question.Mary is the only veterinarian in a small town.To maximize her profit,Mary will choose to treat ________ animals per hour and charge ________ per customer in order to ________.

Accepted Answer

A)  4; $50; maximize profit 
B)  6; $20; maximize profit 
C)  6; $30; minimize average total cost 
D)  4; $50; operate on the inelastic portion of her demand curve 
E)  6; $20; minimize cost in order to attract more customers 
A)  4; $50; maximize profit 
B)  6; $20; maximize profit 
C)  6; $30; minimize average total cost 
D)  4; $50; operate on the inelastic portion of her demand curve 
E)  6; $20; minimize cost in order to attract more customers

Price cap regulation is defined as regulation that

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

How should a natural monopoly be regulated under the social interest theory of regulation?

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost,the firm

One of the requirements for a monopoly is that

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price is per pillow and the marginal cost is per pillow.

The social interest theory of regulation is that

-In the figure below,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.

A natural monopoly arises when

-The above table gives the demand schedule for a monopoly.The demand is inelastic over the entire price range between

Today,you might be buying from a regulated natural monopoly when you purchase

When a monopoly price discriminates,it

With perfect price discrimination,the quantity of output produced by a monopoly is ________ the quantity produced by a perfectly competitive industry.

A "buy one,get one for half price" promotion is an example of

What is an average cost pricing rule? Why do regulatory agencies use it for natural monopolies?

The capture theory of regulation is defined as

Compared to the situation in which it sets a single price,a monopoly that price discriminates its economic profit and its output.

The above figure shows a market. -If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly,the amount of the gain in producer surplus is the area ________.

-Use the figure above to answer this question.Mary is the only veterinarian in a small town.To maximize her profit,Mary will choose to treat animals per hour and charge per customer in order to .

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

Price cap regulation is defined as regulation that

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

How should a natural monopoly be regulated under the social interest theory of regulation?

At a level of output when regulators require a natural monopoly to set a price that is equal to marginal cost,the firm

One of the requirements for a monopoly is that

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price is ________ per pillow and the marginal cost is ________ per pillow.

The social interest theory of regulation is that

-In the figure below,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.

A natural monopoly arises when

-The above table gives the demand schedule for a monopoly.The demand is inelastic over the entire price range between

Today,you might be buying from a regulated natural monopoly when you purchase

When a monopoly price discriminates,it

With perfect price discrimination,the quantity of output produced by a monopoly is ________ the quantity produced by a perfectly competitive industry.

A "buy one,get one for half price" promotion is an example of

What is an average cost pricing rule? Why do regulatory agencies use it for natural monopolies?

The capture theory of regulation is defined as

Compared to the situation in which it sets a single price,a monopoly that price discriminates ________ its economic profit and ________ its output.

The above figure shows a market. -If the market in the figure above changes from perfectly competitive to a profit-maximizing single-price monopoly,the amount of the gain in producer surplus is the area ________.

-Use the figure above to answer this question.Mary is the only veterinarian in a small town.To maximize her profit,Mary will choose to treat ________ animals per hour and charge ________ per customer in order to ________.

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

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price is per pillow and the marginal cost is per pillow.

Compared to the situation in which it sets a single price,a monopoly that price discriminates its economic profit and its output.

-Use the figure above to answer this question.Mary is the only veterinarian in a small town.To maximize her profit,Mary will choose to treat animals per hour and charge per customer in order to .