6.2 quiz

A single-price pure monopoly is economically inefficient: a) because it produces short of minimum average total cost and price is greater than marginal cost. b) only because it produces short of the point of minimum average total cost. c) because it produces beyond minimum average total cost and marginal cost is greater than price. d) only because it produces beyond the point of minimum average total cost.

a

At its profit-maximizing output, a pure nondiscriminating monopolist achieves: a) neither productive efficiency nor allocative efficiency. b) allocative efficiency but not productive efficiency. c) both productive efficiency and allocative efficiency. d) productive efficiency but not allocative efficiency.

a

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's: a) price and average total cost would be higher, but output would be lower. b) price, output, and average total cost would all be higher. c) price, output, and average total cost would all be lower. d) price and output would be lower, but average total cost would be higher.

a

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to: a) average total cost. b) minimum average fixed cost. c) marginal revenue. d) marginal cost.

a

Price discrimination refers to: a) the selling of a given product at different prices that do not reflect cost differences. b) any price above that which is equal to a minimum average total cost. c) selling a given product for different prices at two different points in time. d) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.

a

Refer to the graph above for an industry. If the industry had a pure monopoly, the output quantity would be: a) 160 b) 90 c) 195 d) A level that is not labeled in the graph

b

Suppose for a regulated monopoly that price equals minimum ATC but price exceeds MC. This means that: a) both productive and allocative efficiency are being achieved. b) productive efficiency is being achieved, but not allocative efficiency. c) allocative efficiency is being achieved, but not productive efficiency. d) neither productive nor allocative efficiency is being achieved.

b

Allocative inefficiency due to unregulated monopoly is characterized by the condition: a) P > ATC b) P > AVC c) P > MC d) P > MR

c

Answer the question on the basis of the following information for a pure monopolist: At its profit-maximizing output, the above nondiscriminating monopolist: a) earns an economic profit of $150. b) earns a normal profit of $250. c) earns an economic profit of $250. d) incurs a loss.

c

Assume the above figure applies to a pure monopolist, and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, it should charge prices of: a) P2 to both children and adults. b) P1 to both children and adults. c) P1 to children, and P2 to adults. d) P1 to adults, and P2 to children.

c

Other things equal, in which of the following cases would economic profit be the greatest? a) a regulated monopolist charging a price equal to marginal cost b) an unregulated, nondiscriminating monopolist c) an unregulated monopolist which is able to engage in price discrimination d) a regulated monopolist charging a price equal to average total cost

c

Refer to the above graph for a pure monopoly. If the government regulated the monopoly shown and made it produce the level of output that would achieve allocative efficiency, what price and quantity levels would we observe in the short run? a) P4 and Q1 b) P1 and Q1 c) P2 and Q3 d) P3 and Q2

c

With a natural monopoly, the fair return price: a) And the socially optimal price are both allocatively efficient b) And the socially optimal price are both allocatively inefficient c) Is allocatively inefficient; the socially optimal price is allocatively efficient d) Is allocatively efficient; the socially optimal price is allocatively inefficient

c

If a pure monopolist is producing more output than the MR = MC output: a) the firm may, or may not, be maximizing profits. b) it will be in the interest of the firm and society to increase output. c) it will be in the interest of the firm and society to reduce output. d) it will be in the interest of the firm, but not necessarily of society, to reduce output.

d

Refer to the above graph for a pure monopoly. If the government regulated the monopoly and made the firm set a fair-return price, what price and quantity levels would we observe in the short run? a) P2 and Q3 b) P1 and Q1 c) P4 and Q1 d) P3 and Q2

d

How many units would the above profit-maximizing nondiscriminating monopolist produce? a) 4 b) 1 c) 3 d) 2

c