Question 1

The social interest theory of regulation asserts that regulation

Accepted Answer

A)  seeks an efficient use of resources. 
B)  is aimed at keeping prices as low as possible. 
C)  helps firms maximize economic profit. 
D)  of a natural monopoly must be done using rate of return regulation. 
E)  does not work for society as well as would allowing the firms freedom from regulation. 
A)  seeks an efficient use of resources. 
B)  is aimed at keeping prices as low as possible. 
C)  helps firms maximize economic profit. 
D)  of a natural monopoly must be done using rate of return regulation. 
E)  does not work for society as well as would allowing the firms freedom from regulation.

Question 2

What potential problem is there with rate of return pricing?

Accepted Answer

The monopolist might exaggerate its cost

Question 3

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule,we see that output is

Accepted Answer

A)  greater with marginal cost pricing, but average cost pricing allows for costs to be covered. 
B)  the same under both cases, but the profit is greater with average cost pricing. 
C)  greater under average cost pricing, but profits are greater with marginal cost pricing. 
D)  the same but profits are greater with marginal cost pricing. 
E)  greater with marginal cost pricing, and the firm's profit is larger with marginal cost pricing. 
A)  greater with marginal cost pricing, but average cost pricing allows for costs to be covered. 
B)  the same under both cases, but the profit is greater with average cost pricing. 
C)  greater under average cost pricing, but profits are greater with marginal cost pricing. 
D)  the same but profits are greater with marginal cost pricing. 
E)  greater with marginal cost pricing, and the firm's profit is larger with marginal cost pricing.

Question 4

-Which of the following is ALWAYS true when a single-price monopolist maximizes its profit?

Accepted Answer

A)  P = MC 
B)  P = MR 
C)  MR = MC 
D)  MC = ATC 
E)  P > ATC 
A)  P = MC 
B)  P = MR 
C)  MR = MC 
D)  MC = ATC 
E)  P > ATC

Question 5

Which of the following is a characteristic of monopoly?

Accepted Answer

A)  The firm faces competition from many other firms. 
B)  The firm produces a product that has many close substitutes. 
C)  There are barriers to enter the market. 
D)  The firm's demand is perfectly elastic. 
E)  The firm produces a product identical to that produced by its many competitors. 
A)  The firm faces competition from many other firms. 
B)  The firm produces a product that has many close substitutes. 
C)  There are barriers to enter the market. 
D)  The firm's demand is perfectly elastic. 
E)  The firm produces a product identical to that produced by its many competitors.

Question 6

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 7

If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?

Accepted Answer

A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit. 
E)  The producer, consumers, and society all benefit. 
A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit. 
E)  The producer, consumers, and society all benefit.

Question 8

Firms that can effectively price discriminate

Accepted Answer

A)  can be either perfectly competitive firms or monopolies. 
B)  can prevent the resale of their products. 
C)  have only one class of buyers, buyers willing to pay a high price. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  can be either perfectly competitive firms or monopolies. 
B)  can prevent the resale of their products. 
C)  have only one class of buyers, buyers willing to pay a high price. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 9

The table below gives a monopoly's demand schedule.Complete the table by calculating the total revenue and the marginal revenue.

Accepted Answer

@#IMG-DLM& The compl

Question 10

A natural monopoly

Accepted Answer

A)  faces more competition after regulation. 
B)  might exaggerate its costs if it is regulated using rate of return regulation. 
C)  might falsely minimize its costs if it is regulated using rate of return regulation. 
D)  might falsely minimize its costs if it is regulated using a marginal cost pricing rule. 
E)  is allowed to maximize its profit under a marginal cost pricing rule. 
A)  faces more competition after regulation. 
B)  might exaggerate its costs if it is regulated using rate of return regulation. 
C)  might falsely minimize its costs if it is regulated using rate of return regulation. 
D)  might falsely minimize its costs if it is regulated using a marginal cost pricing rule. 
E)  is allowed to maximize its profit under a marginal cost pricing rule.

Question 11

When regulated using rate of return regulation,who benefits from the practice of some natural monopolies to count sumptuous offices,free baseball tickets,golf excursions,and limousines as costs of production?

Accepted Answer

A)  stockholders 
B)  managers of the monopoly 
C)  customers of the monopoly 
D)  regulators of the industry 
E)  None of the above answers is correct. 
A)  stockholders 
B)  managers of the monopoly 
C)  customers of the monopoly 
D)  regulators of the industry 
E)  None of the above answers is correct.

Question 12

-Why do some firms price discriminate? Relate your answer to the common practice of public colleges charging lower tuition to in-state students and higher tuition to out-of-state students.

Accepted Answer

Price discrimination helps businesses ca

Question 13

Price discrimination is possible,in part,because

Accepted Answer

A)  costs of production vary as output increases. 
B)  monopolies are regulated. 
C)  monopolies don't profit maximize. 
D)  the willingness to pay can vary among groups of buyers. 
E)  monopolies face horizontal demand curves. 
A)  costs of production vary as output increases. 
B)  monopolies are regulated. 
C)  monopolies don't profit maximize. 
D)  the willingness to pay can vary among groups of buyers. 
E)  monopolies face horizontal demand curves.

Question 14

-In the above figure,a perfectly competitive market will have a price of ________,and a single-price monopoly will have a price of ________.

Accepted Answer

A)  P1 and quantity of Q1; P2 and quantity of Q2 
B)  P2 and quantity of Q2; P1 and quantity of Q1 
C)  P3 and quantity of Q3; P1 and quantity of Q1 
D)  P2 and quantity of Q2; P3 and quantity of Q1 
E)  P2 and quantity of Q1; P1 and quantity of Q1 
A)  P1 and quantity of Q1; P2 and quantity of Q2 
B)  P2 and quantity of Q2; P1 and quantity of Q1 
C)  P3 and quantity of Q3; P1 and quantity of Q1 
D)  P2 and quantity of Q2; P3 and quantity of Q1 
E)  P2 and quantity of Q1; P1 and quantity of Q1

Question 15

The figure above shows a natural monopoly regulated using a marginal cost pricing rule.
-In the figure above,the dark triangle is the

Accepted Answer

A)  consumer surplus. 
B)  deadweight loss. 
C)  producer surplus. 
D)  total cost. 
E)  economic profit. 
A)  consumer surplus. 
B)  deadweight loss. 
C)  producer surplus. 
D)  total cost. 
E)  economic profit.

Question 16

If the Boston Red Sox baseball team is currently charging a ticket price where its demand is inelastic,then the Red Sox's marginal revenue is

Accepted Answer

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

Question 17

Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate,then

Accepted Answer

A)  Arnie's profit increases. 
B)  consumer surplus increases. 
C)  Arnie's revenues decrease. 
D)  Arnie's sells fewer tickets. 
E)  Arnie can no longer set a price that depends upon the buyer's willingness to pay. 
A)  Arnie's profit increases. 
B)  consumer surplus increases. 
C)  Arnie's revenues decrease. 
D)  Arnie's sells fewer tickets. 
E)  Arnie can no longer set a price that depends upon the buyer's willingness to pay.

Question 18

Assume someone organizes all farms in the nation into a monopoly.What is the monopoly's marginal cost curve?

Accepted Answer

A)  It is a horizontal line at the competitive industry's price. 
B)  It is a vertical line at the formerly competitive industry's quantity. 
C)  It is a vertical line at the monopoly's chosen output level. 
D)  It is the formerly competitive industry's supply curve. 
E)  It is the same as the formally competitive industry's average total cost curve. 
A)  It is a horizontal line at the competitive industry's price. 
B)  It is a vertical line at the formerly competitive industry's quantity. 
C)  It is a vertical line at the monopoly's chosen output level. 
D)  It is the formerly competitive industry's supply curve. 
E)  It is the same as the formally competitive industry's average total cost curve.

Question 19

If total revenue falls when output increases,marginal revenue is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  greater than total revenue. 
E)  elastic. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  greater than total revenue. 
E)  elastic.

Question 20

Ownership of a necessary input creates what type of barrier to entry?

Accepted Answer

A)  legal barrier to entry 
B)  natural barrier to entry 
C)  a public franchise 
D)  a government license 
E)  ownership barrier to entry 
A)  legal barrier to entry 
B)  natural barrier to entry 
C)  a public franchise 
D)  a government license 
E)  ownership barrier to entry

The social interest theory of regulation asserts that regulation

What potential problem is there with rate of return pricing?

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule,we see that output is

-Which of the following is ALWAYS true when a single-price monopolist maximizes its profit?

Which of the following is a characteristic of monopoly?

Earning-sharing regulation involves

If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?

Firms that can effectively price discriminate

The table below gives a monopoly's demand schedule.Complete the table by calculating the total revenue and the marginal revenue.

A natural monopoly

When regulated using rate of return regulation,who benefits from the practice of some natural monopolies to count sumptuous offices,free baseball tickets,golf excursions,and limousines as costs of production?

-Why do some firms price discriminate? Relate your answer to the common practice of public colleges charging lower tuition to in-state students and higher tuition to out-of-state students.

Price discrimination is possible,in part,because

-In the above figure,a perfectly competitive market will have a price of ,and a single-price monopoly will have a price of .

The figure above shows a natural monopoly regulated using a marginal cost pricing rule. -In the figure above,the dark triangle is the

If the Boston Red Sox baseball team is currently charging a ticket price where its demand is inelastic,then the Red Sox's marginal revenue is

Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate,then

Assume someone organizes all farms in the nation into a monopoly.What is the monopoly's marginal cost curve?

If total revenue falls when output increases,marginal revenue is

Ownership of a necessary input creates what type of barrier to entry?

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 social interest theory of regulation asserts that regulation

What potential problem is there with rate of return pricing?

If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule,we see that output is

-Which of the following is ALWAYS true when a single-price monopolist maximizes its profit?

Which of the following is a characteristic of monopoly?

Earning-sharing regulation involves

If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?

Firms that can effectively price discriminate

The table below gives a monopoly's demand schedule.Complete the table by calculating the total revenue and the marginal revenue.

A natural monopoly

When regulated using rate of return regulation,who benefits from the practice of some natural monopolies to count sumptuous offices,free baseball tickets,golf excursions,and limousines as costs of production?

-Why do some firms price discriminate? Relate your answer to the common practice of public colleges charging lower tuition to in-state students and higher tuition to out-of-state students.

Price discrimination is possible,in part,because

-In the above figure,a perfectly competitive market will have a price of ________,and a single-price monopoly will have a price of ________.

The figure above shows a natural monopoly regulated using a marginal cost pricing rule. -In the figure above,the dark triangle is the

If the Boston Red Sox baseball team is currently charging a ticket price where its demand is inelastic,then the Red Sox's marginal revenue is

Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate,then

Assume someone organizes all farms in the nation into a monopoly.What is the monopoly's marginal cost curve?

If total revenue falls when output increases,marginal revenue is

Ownership of a necessary input creates what type of barrier to entry?

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

-In the above figure,a perfectly competitive market will have a price of ,and a single-price monopoly will have a price of .