Question 1

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 2

The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.

Accepted Answer

A)  small benefits; small costs 
B)  small benefits; large costs 
C)  large benefits; small costs 
D)  large benefits; large costs 
E)  large benefits; no costs 
A)  small benefits; small costs 
B)  small benefits; large costs 
C)  large benefits; small costs 
D)  large benefits; large costs 
E)  large benefits; no costs

Question 3

Total revenue is equal to

Accepted Answer

A)  the change in price resulting from a one-unit increase in quantity sold. 
B)  the amount people will buy at a given price. 
C)  the change in the quantity sold when you change the price by one unit. 
D)  price multiplied by the quantity sold. 
E)  the price at which the good or service is sold. 
A)  the change in price resulting from a one-unit increase in quantity sold. 
B)  the amount people will buy at a given price. 
C)  the change in the quantity sold when you change the price by one unit. 
D)  price multiplied by the quantity sold. 
E)  the price at which the good or service is sold.

Question 4

If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham and eggs where the demand is unit elastic,its marginal revenue for ham and eggs is

Accepted Answer

A)  negative. 
B)  positive. 
C)  zero. 
D)  maximized. 
E)  undefined. 
A)  negative. 
B)  positive. 
C)  zero. 
D)  maximized. 
E)  undefined.

Question 5

A gas station in the mountains of Oregon has a monopoly over the retail gas market within a 50-mile radius.The station decides not to price discriminate.As a result,all consumers will pay

Accepted Answer

A)  the highest price each consumer is willing to pay. 
B)  the lowest price possible. 
C)  a single price. 
D)  multiple prices. 
E)  a price that depends on their willingness to pay. 
A)  the highest price each consumer is willing to pay. 
B)  the lowest price possible. 
C)  a single price. 
D)  multiple prices. 
E)  a price that depends on their willingness to pay.

Question 6

Price cap regulation is regulation that

Accepted Answer

A)  is a marginal cost pricing rule. 
B)  is an average cost pricing rule. 
C)  imposes a price ceiling on the regulated firm. 
D)  has the same incentive effects as does rate of return regulation. 
E)  is the same as allowing the firm to operate as if it was totally unregulated. 
A)  is a marginal cost pricing rule. 
B)  is an average cost pricing rule. 
C)  imposes a price ceiling on the regulated firm. 
D)  has the same incentive effects as does rate of return regulation. 
E)  is the same as allowing the firm to operate as if it was totally unregulated.

Question 7

A monopoly can arise when

Accepted Answer

A)  there are diseconomies of scale. 
B)  there are barriers to entry and no close substitutes for the good being produced. 
C)  a firm cannot price discriminate. 
D)  firms engage in rent seeking. 
E)  a firm must set MR equal to MC in order to maximize its profit. 
A)  there are diseconomies of scale. 
B)  there are barriers to entry and no close substitutes for the good being produced. 
C)  a firm cannot price discriminate. 
D)  firms engage in rent seeking. 
E)  a firm must set MR equal to MC in order to maximize its profit.

Question 8

A price-discriminating monopoly charges

Accepted Answer

A)  the same price to every buyer for the same product. 
B)  a different price to different types of buyers for the same product, even though there are no differences in costs. 
C)  a different price to different buyers, because the costs are different. 
D)  different prices to buyers for different products. 
E)  each customer a price that equals the marginal cost of serving that customer. 
A)  the same price to every buyer for the same product. 
B)  a different price to different types of buyers for the same product, even though there are no differences in costs. 
C)  a different price to different buyers, because the costs are different. 
D)  different prices to buyers for different products. 
E)  each customer a price that equals the marginal cost of serving that customer.

Question 9

If a monopoly engages in rent seeking,
i.its average total cost curve is lower than otherwise.
ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking.
iii.it necessarily incurs an economic loss.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  i and ii 
E)  i and iii

Question 10

-Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on:
a. efficiency.
b.consumer surplus.
c.economic profit in the long run.

Accepted Answer

a.Both perfect competition and perfect p

Question 11

-Give an example of price discrimination.

Accepted Answer

Price discrimination occurs wh

Question 12

A barrier to entry is

Accepted Answer

A)  the economic term for diseconomies of scale. 
B)  illegal in most markets. 
C)  anything that protects a firm from the arrival of new competitors. 
D)  a factor that increases competition because firms must continue to operate in the market in which they were founded. 
E)  the same as rent seeking. 
A)  the economic term for diseconomies of scale. 
B)  illegal in most markets. 
C)  anything that protects a firm from the arrival of new competitors. 
D)  a factor that increases competition because firms must continue to operate in the market in which they were founded. 
E)  the same as rent seeking.

Question 13

The figure above shows a monopoly's total revenue and total cost curves.
-Using the figure above,which of the following statements is (are)correct?
i.MR = MC when 3 haircuts are produced.
ii.If the firm charges each customer the same price for a haircut,the price of a haircut is $42.
iii.The firm's MC equals $30.

Accepted Answer

A)  i only 
B)  ii only 
C)  i and ii 
D)  i and iii 
E)  None of the above is correct. 
A)  i only 
B)  ii only 
C)  i and ii 
D)  i and iii 
E)  None of the above is correct.

Question 14

Which of the following can be a barrier to entry?
i.ownership of a necessary input
ii.requiring a government license
iii.large diseconomies of scale

Accepted Answer

A)  i only 
B)  ii only 
C)  i and iii 
D)  i and ii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  i and iii 
D)  i and ii 
E)  i, ii, and iii

Question 15

For a natural monopoly,the efficient quantity is produced when the firm is regulated so that

Accepted Answer

A) P = ATC. B) P > ATC. C) P = MC. D) P > MC. E) P < MC. A) P = ATC. B) P > ATC. C) P = MC. D) P > MC. E) P < MC.

Question 16

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

Accepted Answer

A)  The ATC curve is downward sloping throughout the relevant range, therefore the MC is lower than the ATC. 
B)  The demand curve is downward sloping, therefore price falls as quantity increases. 
C)  The MC is constant and equal to price. 
D)  Because output is determined by setting MC equal to the price, consumer surplus is maximized. 
E)  The firm's MR is always less than its price. 
A)  The ATC curve is downward sloping throughout the relevant range, therefore the MC is lower than the ATC. 
B)  The demand curve is downward sloping, therefore price falls as quantity increases. 
C)  The MC is constant and equal to price. 
D)  Because output is determined by setting MC equal to the price, consumer surplus is maximized. 
E)  The firm's MR is always less than its price.

Question 17

-The above figure represents the demand and marginal revenue curves for Sue's Seafood,a seller of fresh fish.
a.Over what range of output is demand elastic?
b.Over what range of output is demand inelastic?
c.What price maximizes total revenue?
d.What is the price elasticity of demand at the revenue maximizing price?

Accepted Answer

a.Demand is elastic from 0 to 20 pounds

Question 18

A natural monopoly's output is less if it is regulated with

Accepted Answer

A)  a marginal cost pricing rule than if it is unregulated. 
B)  an average cost pricing rule than if it is unregulated. 
C)  an average cost pricing rule than if it is regulated with a marginal cost pricing rule. 
D)  a marginal cost pricing rule than if it is regulated with an average cost pricing rule. 
E)  More information about the firm's demand is needed to determine how its output depends on what regulation it faces. 
A)  a marginal cost pricing rule than if it is unregulated. 
B)  an average cost pricing rule than if it is unregulated. 
C)  an average cost pricing rule than if it is regulated with a marginal cost pricing rule. 
D)  a marginal cost pricing rule than if it is regulated with an average cost pricing rule. 
E)  More information about the firm's demand is needed to determine how its output depends on what regulation it faces.

Question 19

One way a monopoly can convert additional consumer surplus into economic profit is to

Accepted Answer

A)  lower prices. 
B)  raise prices. 
C)  price discriminate. 
D)  become more competitive. 
E)  produce where price equals average total cost. 
A)  lower prices. 
B)  raise prices. 
C)  price discriminate. 
D)  become more competitive. 
E)  produce where price equals average total cost.

Question 20

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC is left unregulated,what is the price of cable television in Oakland?

Accepted Answer

A)  $40 
B)  $30 
C)  $20 
D)  $10 
E)  $50 
A)  $40 
B)  $30 
C)  $20 
D)  $10 
E)  $50

When demand is elastic,marginal revenue is

The capture theory of regulation predicts that regulations bring to producers and impose on any individual consumer.

Total revenue is equal to

If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham and eggs where the demand is unit elastic,its marginal revenue for ham and eggs is

A gas station in the mountains of Oregon has a monopoly over the retail gas market within a 50-mile radius.The station decides not to price discriminate.As a result,all consumers will pay

Price cap regulation is regulation that

A monopoly can arise when

A price-discriminating monopoly charges

If a monopoly engages in rent seeking, i.its average total cost curve is lower than otherwise. ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking. iii.it necessarily incurs an economic loss.

-Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on: a. efficiency. b.consumer surplus. c.economic profit in the long run.

-Give an example of price discrimination.

A barrier to entry is

Which of the following can be a barrier to entry? i.ownership of a necessary input ii.requiring a government license iii.large diseconomies of scale

For a natural monopoly,the efficient quantity is produced when the firm is regulated so that

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

A natural monopoly's output is less if it is regulated with

One way a monopoly can convert additional consumer surplus into economic profit is to

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC is left unregulated,what is the price of cable television in Oakland?

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

When demand is elastic,marginal revenue is

The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.

Total revenue is equal to

If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham and eggs where the demand is unit elastic,its marginal revenue for ham and eggs is

A gas station in the mountains of Oregon has a monopoly over the retail gas market within a 50-mile radius.The station decides not to price discriminate.As a result,all consumers will pay

Price cap regulation is regulation that

A monopoly can arise when

A price-discriminating monopoly charges

If a monopoly engages in rent seeking, i.its average total cost curve is lower than otherwise. ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking. iii.it necessarily incurs an economic loss.

-Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on: a. efficiency. b.consumer surplus. c.economic profit in the long run.

-Give an example of price discrimination.

A barrier to entry is

Which of the following can be a barrier to entry? i.ownership of a necessary input ii.requiring a government license iii.large diseconomies of scale

For a natural monopoly,the efficient quantity is produced when the firm is regulated so that

Which of the following explains why the marginal cost pricing rule results in an economic loss for a natural monopoly?

A natural monopoly's output is less if it is regulated with

One way a monopoly can convert additional consumer surplus into economic profit is to

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC is left unregulated,what is the price of cable television in Oakland?

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 capture theory of regulation predicts that regulations bring to producers and impose on any individual consumer.