10.4

If a monopolist's profits were taxed away and redistributed to its consumers, A) inefficiency would remain because output would be lower than under competitive conditions. B) inefficiency would remain, but not because output would be lower than under competitive conditions. C) efficiency would be obtained because output would be increased to the competitive level. D) efficiency would be obtained because output would be increased and profits removed.

A

Refer to Figure 10.2. At output Qm, and assuming that the monopoly has set her price to maximize profit, the consumer surplus is: A) CDE. B) BDEF. C) ADEG. D) 0DEQm. E) none of the above

A

The monopolist that maximizes profit A) imposes a cost on society because the selling price is above marginal cost. B) imposes a cost on society because the selling price is equal to marginal cost. C) does not impose a cost on society because the selling price is above marginal cost. D) does not impose a cost on society because price is equal to marginal cost.

A

Refer to Scenario 10.9. At the profit maximizing level of output, what is the level of consumer surplus? A) 0 B) 1,800 C) 2,700 D) 3,600 E) 4,800

B

Refer to Scenario 10.9. What is the profit maximizing level of output? A) 0 B) 30 C) 45 D) 60 E) none of the above

B

The marginal cost of a monopolist is constant and is $10. The demand curve and marginal revenue curves are given as follows: demand: Q = 100 - P marginal revenue: MR = 100 - 2Q The deadweight loss from monopoly power is ________. A) $1000.00 B) $1012.50 C) $1025.00 D) $1037.50 E) none of the above

B

The regulatory lag: A) always benefits the regulated firm. B) is likely to occur with rate-of-return regulation. C) promotes economic efficiency. D) all of the above

B

Which of the following statements about natural monopolies is true? A) Natural monopolies are only found in the markets for natural resources (like crude oil and coal). B) For natural monopolies, marginal cost is always below average cost. C) For natural monopolies, average cost is always increasing. D) Natural monopolies cannot be regulated.

B

With respect to monopolies, deadweight loss refers to the A) socially unproductive amounts of money spent to obtain or acquire a monopoly. B) net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy. C) lost consumer surplus from monopolistic pricing. D) none of the above

B

Refer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss? A) 0 B) 450 C) 900 D) 1,800 E) none of the above

C

Refer to Scenario 10.9. At the profit maximizing level of output, what is the level of producer surplus? A) 0 B) 1,800 C) 5,400 D) 7,200 E) 9,600

C

Refer to Scenario 10.9. What is the maximum amount that Maui Macadamia would be willing to spend in order to maintain its monopoly through rent seeking? A) 0 B) 1,800 C) 5,400 D) 10,800

C

Suppose a government sets theprice for a natural monopoly at the competitive level such that P = MC. To keep the seller from taking a loss under this policy, the government could provide a lump-sum payment to the firm. How could we determine this payment? A) Multiply the competitive quantity by the competitive marginal cost B) Multiply the competitive quantity by the regulated price C) Multiply the competitive quantity by the difference between MC and AC D) Multiply the difference in the competitive and monopoly quantities by AC

C

Which of the following is true when the government imposes a price ceiling on a monopolist? A) Marginal revenue becomes horizontal. B) Marginal revenue is linear. C) Marginal revenue is kinked—horizontal and then downward sloping. D) Marginal revenue is kinked—downward sloping and then horizontal.

C

Refer to Figure 10.2. In moving from the competitive level of output and price to the monopoly level of output and price, the deadweight loss is the area: A) QmEHQc. B) GEH. C) GFH. D) FEH. E) none of the above

B

Refer to Figure 10.2. In moving from the competitive level of output and price to the monopoly level of output and price, the monopolist is able to add to producer surplus: A) the area BCEF. B) the area BCEF less the area GFH. C) the area BCEH. D) the area BCEH less the area GFH. E) none of the above

B

Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows: AC = Q + (10,000/Q) MC = 2Q AR = 30 - (Q/2) MR = 30 - Q Refer to Scenario 10.8. The deadweight loss from monopoly is ________. A) 0 B) 5 C) 10 D) 25 E) none of the above

B

Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows: AC = Q + (10,000/Q) MC = 2Q AR = 30 - (Q/2) MR = 30 - Q 16) Refer to Scenario 10.8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make? A) She will lose money and will go out of business. B) She will break even. C) She will make a profit. D) none of the above

B

Refer to Figure 10.1. If the monopolist is not regulated, the price will be set at ________. A) P1 B) P2 C) P3 D) P4 E) none of the above

B

If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be A) equal to the competitive level. B) equal to the monopoly profit maximizing level. C) greater than the monopoly profit maximizing level and less than the competitive level. D) greater than the competitive level.

C

Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q 18) Refer to Scenario 10.9. What level of output maximizes the sum of consumer surplus and producer surplus? A) 0 B) 30 C) 45 D) 60 E) none of the above

C

Refer to Figure 10.1. The minimum feasible price is ________. A) P1 B) P2 C) P3 D) P4

C

) Deadweight loss from monopoly power is expressed on a graph as the area between the A) competitive price and the average revenue curve bounded by the quantities produced by the competitive and monopoly markets. B) competitive price line and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets. C) competitive price line and the monopoly price line bounded by zero output and the output chosen by the monopolist. D) average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets.

D

Refer to Figure 10.1. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at ________. A) P1 B) P2 C) P3 D) P4

D