eco chapter 16 exam 3

only perfectly price-discriminating monopoly

Under which of the following is consumer surplus zero? all types of monopoly only single-price monopoly only perfectly price-discriminating monopoly only price discrimination on the basis of the number of units purchased perfect competition

4 0

The above table gives the demand schedule for a monopoly. The demand is elastic at all prices between $6 and $1. $5 and $1. $3 and $1. $6 and $4. $4 and $3.

$3 and $1.

The above table gives the demand schedule for a monopoly. The demand is inelastic over the entire price range between $6 and $1. $5 and $1. $3 and $1. $6 and $4. $4 and $3.

Both Answers price-discriminating; different prices and single-price; the same price are correct.

A ________ monopoly sells different units of its good or service for ________. price-discriminating; different prices price-discriminating; the same price single-price; the same price single-price; different prices Both Answers price-discriminating; different prices and single-price; the same price are correct.

in the long run, firms in a perfectly competitive industry make zero economic profit and a monopoly can make an economic profit.

A difference between a perfectly competitive industry and a monopoly is that in the long run, firms in a perfectly competitive industry make zero economic profit and a monopoly can make an economic profit. a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot. only monopolies have an incentive to maximize profit. perfectly competitive firms can have a public franchise. a barrier to entry protects perfectly competitive firms in the short run and protects a monopoly in the long run.

Both answers produces a good with no close substitutes and faces a downward-sloping demand curve are correct.

A monopoly is not protected by barriers to entry. produces a good with no close substitutes. faces a downward-sloping demand curve. Both answers is not protected by barriers to entry and produces a good with no close substitutes are correct. Both answers produces a good with no close substitutes and faces a downward-sloping demand curve are correct.

produces less than the efficient quantity.

A monopoly creates a deadweight loss because the monopoly sets a price that is too low. makes a normal profit. does not maximize profit. produces less than the efficient quantity. produces more than the efficient quantity.

the long-run average cost curve slopes downward as it crosses the demand curve.

A natural monopoly arises when one firm controls the supply of a unique resource. a firm has many small firms that it can control. there are firms which act together as a monopoly. the long-run average cost curve slopes downward as it crosses the demand curve. one firm naturally convinces the government to limit competition in the market.

incurs an economic loss.

A natural monopoly that is regulated to set price equal to marginal cost makes an economic profit. makes zero economic profit. incurs an economic loss. could make an economic loss, an economic profit, or zero economic profit. makes zero normal profit.

sets a single price for all consumers.

A single-price monopoly sets a single, different price for each consumer. sets a single price for all consumers. asks each consumer what single price they would be willing to pay. sets a single, different price for each of two different groups. sells each unit of its output for the single, highest price that the buyer of that unit is willing to pay.

not maximizing its profit and should increase output to increase its profit.

A single-price monopoly is producing at an output level where marginal revenue is $15, marginal cost is $13, and price is $20. This monopoly is not maximizing its profit and should decrease output to increase its profit. not maximizing its profit and should increase output to increase its profit. maximizing its profit but should shut down. maximizing its profit and should not shut down. maximizing its profit but still should decrease output to earn even more profit.

consumer surplus to producers.

A single-price monopoly transfers consumer surplus to producers. producer surplus to consumers. economic profit to consumers. economic profit to the government. economic profit to deadweight loss.

consumer surplus decreases.

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then Arnie's profit decreases. consumer surplus decreases. Arnie's revenues decrease. Arnie's sells fewer tickets. Arnie's will see all of his tickets at a single price.

i, ii, and iii

Assume someone organizes all farms in the nation into a monopoly. Which of the following occurs? i only ii only iii only i and ii i, ii, and iii

an economic theory of regulation.

Capture theory is an economic theory of regulation. a model about perfect competition. the same as the public interest theory. the theory that regulators capture firms' attention by dictating a very low price. a theory that explains behavior of competitive firms.

creates a deadweight loss and decreases consumer surplus.

Compared to a similar perfectly competitive industry, a single-price monopoly creates a deadweight loss and decreases economic profit. produces more output. creates a deadweight loss and decreases consumer surplus. is more efficient because there is no wasteful competition. sets a lower price because there is less competition.

decreases the amount of consumer surplus.

Comparing single-price monopoly to perfect competition, monopoly increases the amount of consumer surplus. has the same amount of consumer surplus. has no consumer surplus. decreases the amount of consumer surplus. decreases the amount of economic profit.

greater than marginal revenue.

For a single-price monopoly, price is equal to marginal revenue. greater than marginal revenue. less than marginal revenue because the firm must lower its price in order to sell another unit of output. less than marginal revenue because the firm cannot increase its total revenue when the demand curve is downward sloping. equal to zero because the firm is not a price taker.

iii only

If a firm successfully price discriminates, it increases i only ii only iii only i and iii i and ii

rise; decrease

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly, the price will ________ and the quantity will ________. fall; decrease fall; increase rise; decrease rise; increase not change; decrease

legal restrictions.

In States where the government runs liquor stores, the monopoly results from economies of scale. legal restrictions. control of an essential resource. patents. public fear.

exaggerate the firm's costs.

Managers of a natural monopoly regulated using rate of return regulation have an incentive to exaggerate the firm's costs. underestimate the firm's costs. minimize the monopoly's deadweight loss. make zero economic profit. exaggerate the firm's profit.

there is a product with no close substitutes.

One of the requirements for a monopoly is that products are high priced. there are several close substitutes for the product. there is a product with no close substitutes. the product cannot be produced by small firms. there is no barrier to entry.

increase the incentive to innovate.

Patents are granted only to competitive firms and not monopolies. require that monopolies increase the amount they produce. increase the incentive to capture economies of scale. increase the incentive to innovate. grant the holder a monopoly that lasts forever.

i and iii

Patents i only ii only ii and iii i and iii i, ii, and iii

imposes a price ceiling on the regulated firm.

Price cap regulation is defined as regulation that imposes a price ceiling on the regulated firm. encourages firms to exaggerate costs to increase profits. uses marginal cost pricing to ensure efficient output. uses average cost pricing to ensure costs are covered. is essentially the same as rate of return regulation.

price discrimination and two-part tariff pricing.

Regulated natural monopolies can obey a marginal cost pricing rule and still make a normal profit by engaging in least cost pricing and average cost pricing. price discrimination and two-part tariff pricing. zero profit pricing. profit-maximizing pricing. None of these answers is correct because a natural monopoly regulated using a marginal cost pricing rule always incurs an economic loss.

20 hamburgers per hour

Suppose the Busy Bee Caf is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. What quantity will the Busy Bee produce to maximize its profit? 20 hamburgers per hour 30 hamburgers per hour 50 hamburgers per hour 0 hamburgers per hour. 10 hamburgers per hour

2,000 pounds.

Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is a monopoly, the quantity of steak is 2,000 pounds. 3,000 pounds. 4,000 pounds. 5,000 pounds. less than 2,000 pounds.

$8; $12

Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the price of a pound of steak is ________ and when it is a monopoly, the price of a pound of steak is ________. $4; $20 $8; $4 $8; $12 $4; $8 $4; $12

help producers to maximize economic profits.

The capture theory of regulation is that regulations help producers to maximize economic profits. mean producers suffer losses. result in diseconomies of scale. benefit society, not producers. benefit the regulators, not the producers or the consumers.

a public franchise.

The U.S. Postal Service's monopoly on first-class mail service is the result of a natural monopoly. a patent. a public franchise. a government license. an ownership barrier to entry.

decreases; 10,000

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. Compared to a marginal cost pricing rule, under an average cost pricing rule, TWC ________ output by ________ households. increases; 20,000 decreases; 10,000 increases; 30,000 decreases; 50,000 decreases; 40,000

average cost pricing and rate of return regulation

The figure above shows a natural monopoly that the government must regulate. Which of the following pairs most likely results in similar outcomes? marginal cost pricing and rate of return regulation marginal cost pricing and a two-part tariff average cost pricing and rate of return regulation predatory pricing and price caps marginal cost pricing and price cap regulation

4

The figure above shows a natural monopoly. In the figure above, if the firm is regulated using an average cost pricing rule, the consumer surplus created is equal to the area of ABG. BEFG. BCFG. BCE. None of these because there is no consumer surplus created.

abf

The figure above shows the demand curve, marginal revenue curve, and marginal cost curve. The amount of consumer surplus when the market has a monopoly producer is ace. abf. bcd. bcef. acd.

abf; ace

The figure above shows the demand curve, marginal revenue curve, and marginal cost curve. The amount of consumer surplus when the market has a monopoly producer is ________ and the amount of consumer surplus when the market is perfectly competitive is ________. abf; ace abf; bcd ace; bcd ace; abf bcd; ace

$70; $40

The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, the price is ________ per pillow and the marginal cost is ________ per pillow. $60; $60 $60; $40 $70; $60 $70; $40 $100; $40

movie is protected by copyright law.

The makers of the movie Titanic have some monopoly power over this film because the movie is patented. name Titanic is trademarked. movie is protected by copyright law. government has issued the maker of this movie a public franchise. owner never price discriminated in marketing the movie.

use of regulations to assure an efficient use of resources.

The social interest theory of regulation is defined as the use of regulations to maximize firms' profits. use of regulations to assure an efficient use of resources. removal of regulations on business activities. implementation and removal of regulations on the cable TV industry. use of rate of return regulation.

regulation seeks an efficient use of resources.

The social interest theory of regulation is that regulators help producers maximize economic profit. regulation seeks to increase the government's revenue. regulation causes producers to produce at a point where they are earning normal profits. regulation seeks an efficient use of resources. regulation focuses on the consumers' interests and ignores producers' interests.

6 and 5

The table above gives the demand for a monopolist's output. Between which two quantities is demand elastic? 6 and 5 5 and 4 4 and 3 3 and 2

capture theory.

The theory that regulation helps producers to maximize profit is the social interest theory. consumer surplus theory. antitrust theory. capture theory. oligopoly theory of regulatory bodies.

explains why monopolies will only operate on the inelastic portion of their demand curves.

The total revenue test using the price elasticity of demand explains why monopolies will only operate on the elastic portion of their demand curve. explains why monopolies will only operate on the inelastic portion of their demand curves. demonstrates why a monopoly can earn an economic profit in the long run. determines whether a monopoly can perfectly price discriminate or not. cannot be used for a price discriminating monopoly.

price multiplied by the quantity sold.

Total revenue is equal to the change in price resulting from a one-unit increase in quantity sold. the amount people will buy at a given price. the change in the quantity sold when you change the price by one unit. price multiplied by the quantity sold. the price at which the good or service is sold.

$20 more; earn $0 economic profit

Use the figure above to answer this question. Mary is the only veterinarian in a small town and rents a space for her practice. If Mary's landlord decided to charge ________ per hour in rent, Mary would ________. $20 more; earn $0 economic profit $20 more; still earn an economic profit because she is a monopolist $30 more; earn $0 economic profit $10 less; raise her prices and earn a higher profit $30 more; operate on the inelastic portion of her demand curve

is the same as its demand curve.

When a firm is able to engage in perfect price discrimination, its marginal revenue curve lies below its demand curve. is the same as its demand curve. lies above its demand curve. is the same as its supply curve. is undefined because it does not exist.

firm's managers have an incentive to inflate the firm's costs.

When a regulatory agency uses rate of return regulation, the agency is able to eliminate the deadweight loss. firm's managers have an incentive to inflate the firm's costs. regulated firm's profit must be maximized for the market to be efficient. regulated firm must receive a government subsidy. the agency is using a form of marginal cost pricing.

managers of the 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? stockholders managers of the monopoly customers of the monopoly regulators of the industry None of these answers is correct.

anything that protects a firm from the arrival of new competitors

Which of the following describes a barrier to entry? something that establishes a barrier to expanding output anything that protects a firm from the arrival of new competitors a government regulation that bars a monopoly from earning an economic profit firms already in the market incurring economic losses so that no new firm wants to enter the market Firms are legally prohibited from exiting the market in order to enter another market.

The firm must be able to identify and separate its buyers into different classes, and the low-price buyers cannot resell the product to the high-price buyers.

Which of the following must exist for a firm to engage in price discrimination? The firm must be able to identify and separate its buyers into different classes, and the low-price buyers cannot resell the product to the high-price buyers. The firm must face an inelastic demand. The firm must be able to realize economies of scale. The firm must have no more than one class of buyer. The firm must be a natural monopoly.

A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC.

Which of the following statements is FALSE? A perfectly competitive market produces more output and charges a lower price than a monopoly. A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm.

In order to price discriminate, a firm must sell a good or service that cannot be resold.

Which of the following statements is correct? Any firm can price discriminate. Only firms that sell high-priced products can price discriminate. In order to price discriminate, a firm must sell a good or service that cannot be resold. In order to price discriminate, the firms must sell a low-priced product. Price discrimination is always illegal.

the entire economy

Who receives benefits if regulation works according to social interest theory? the entire economy cohesive interest groups everyone not in the cohesive interest group the regulators It is impossible to determine who benefits.

less than

With an average cost pricing rule, the quantity produced by the natural monopoly is ________ the quantity produced with a marginal cost pricing rule. greater than less than equal to greater than in the long run and less than in the short run than not comparable to

maximum; consumer

With perfect price discrimination, a monopoly can extract the ________ price each customer is willing to pay and thereby obtain the entire ________ surplus. maximum; consumer minimum; producer maximum; producer minimum; consumer None of these answers is correct.