AP Economics Module 62 (26)

Fair Return: Price=_______

ATC

Consumers do not like _______

monopolies

______ ________ limits the price that a monopolist is allowed to charge.

Price Regulation

Socially optimal price =

Price=Marginal cost

Which of the following markets is an example of a regulated natural monopoly? a. local cable TV b. gasoline c. cell phone service d. organic tomatoes e. diamonds

a.

Which of the following statements is true of a monopoly as compared to a perfectly competitive market with the same costs? I. Consumer surplus is smaller. II. Profit is smaller. III. Deadweight loss is smaller. a. I only b. II only c. III only d. I and II only e. I, II, and III

a.

Which of the following is most likely to be higher for a regulated natural monopoly than for an unregulated natural monopoly? a. product variety b. quantity c. price d. profit e. deadweight loses

b.

Which of the following is true of a natural monopoly? a. It experiences diseconomies of scale. b. ATC is lower if there is a single firm in the market. c. It occurs in a market that relies on natural resources for its production d. there are decreasing returns to scale in the industry e. the government must provide the good or service to achieve efficiency

b.

Fair Return

by allowing the monopoly to charge where P=ATC, they will earn a normal profit

Which of the following government actions is the most common for a natural monopoly in the United States? a. prevents its formation b. break it up using antitrust laws c. use price regulation d. public ownership e. elimination of the market

c.

Monopoly is a source of _______

inefficiency

Consumer surplus in a monopoly is ____ than the consumer surplus in a perfect competition

less

A socially optima price would be achieved by placing a ____ ____ on the price when this is done the regulation will achieve _______ efficiency

price ceiling, allocative

In ______ _______ of a monopoly, the good is supplied by the government or by a firm owned by the government.

public ownership

True or false fair return does not achieve efficiency

true

true or false: MC is the measure of value of other products the resources could have been used for

true