Question 1

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

Question 2

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.In order to maximize profit, the Busy Bee produces ________ hamburgers per hour and sets a price of ________ per hamburger.

Accepted Answer

A)  20; $3.00
B)  20; $1.00
C)  30; $2.00
D)  30; $4.00
E)  50; $5.00 A

Question 3

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. C

Question 4

A single-price monopoly

Accepted Answer

A)  must practice price discrimination.
B)  can lower its price for only a few select consumers if it wants to increase its sales.
C)  will set its price equal to a consumer's willingness to pay.
D)  must lower the price for all customers if it wants to increase its sales.
E)  is able to raise its price as high as it wants and consumers must still buy from it because it is a monopoly.

Question 5

A monopolist can make an economic profit in the long run because of

Accepted Answer

A)  the relatively elastic demand for its product.
B)  the relatively inelastic demand for its product.
C)  the firm's price setting behavior.
D)  barriers to entry.
E)  the fact that the firm produces where MR = MC.

Question 6

For a single-price monopoly,

Accepted Answer

A)  if marginal cost exceeds marginal revenue, profits will increase if output decreases.
B)  if marginal revenue exceeds marginal cost, profits will increase if output decreases.
C)  there are several different price and output combinations that maximize profit.
D)  marginal revenue will be greater than price if demand is elastic.
E)  marginal revenue will be greater than price if demand is inelastic.

Question 7

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units, the total revenue increases to $72.What is the marginal revenue of the fourth unit?

Accepted Answer

A)  $52
B)  $18
C)  $60
D)  $12
E)  $20

Question 8

If Microsoft is a monopoly and currently charges prices where its demand is elastic, then Microsoft's marginal revenue is

Accepted Answer

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

Question 9

-The figure above shows a natural monopoly that the government must regulate.Which of the following pairs most likely results in similar outcomes?

Accepted Answer

A)  marginal cost pricing and rate of return regulation
B)  marginal cost pricing and a two-part tariff
C)  average cost pricing and rate of return regulation
D)  predatory pricing and price caps
E)  marginal cost pricing and price cap regulation

Question 10

-A monopolist has the market demand and marginal cost schedules given in the above table.If the monopoly can perfectly price discriminate, what is the profit-maximizing level of output and price?

Accepted Answer

The answer of 
-A monopolist has the market demand and...

Question 11

Arnie's Airlines decides to offer different fares to different customers for the same trip.Arnie's price discriminates because Arnie

Accepted Answer

A)  wants to convert consumer surplus to deadweight loss.
B)  wants to help some buyers with lower fares.
C)  has different costs for the same flight.
D)  wants to convert consumer surplus to economic profit.
E)  wants to convert producer surplus to consumer surplus.

Question 12

-The above table gives the demand schedule for a monopoly.The demand is elastic at all prices between

Accepted Answer

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

Question 13

Which of the following is correct for a single-price monopoly?
I∙The firm can determine the quantity it produces and the price it charges.
Ii∙It would never profitably produce output in the inelastic range of its demand.
Iii∙Its marginal revenue is less than price.

Accepted Answer

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

Question 14

The figure above shows a monopoly's total revenue and total cost curves.
-Using the figure above, which of the following statements are correct?
I∙MR = MC = $42 when 3 haircuts are produced.
Ii∙If the firm charges each customer the same price for a haircut, the price of a haircut is $14.
Iii∙The firm's economic profit is $12.

Accepted Answer

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

Question 15

Which of the following best describes the capture theory of regulation?
I∙Regulation seeks an efficient use of resources.
Ii∙Regulation is aimed at keeping prices as low as possible.
Iii∙Regulation helps firms maximize economic profit.

Accepted Answer

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

Question 16

-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 operated under a marginal cost pricing rule, how many households in Oakland are served?

Accepted Answer

A)  20,000
B)  30,000
C)  40,000
D)  50,000
E)  10,000

Question 17

Pizza producers charge one price for a single pizza and almost give away a second one.This is an example of

Accepted Answer

A)  monopoly.
B)  a barrier to entry.
C)  behavior that is not profit-maximizing.
D)  price discrimination.
E)  rent seeking.

Question 18

-The table above gives the demand for a monopolist's output.Between which two quantities is marginal revenue equal to 0?

Accepted Answer

A)  4 and 5
B)  3 and 4
C)  2 and 3
D)  1 and 2

Question 19

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.

Question 20

When a natural monopoly is regulated using a marginal cost pricing rule, what can you say about the firm's profit and the market's efficiency?

Accepted Answer

The answer of When a natural monopoly is regulated using...

Exam 16: Monopoly

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

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.In order to maximize profit, the Busy Bee produces hamburgers per hour and sets a price of per hamburger.