Question :
71) Which of the following the definition of consumer surplus?
A) : 1384265
71) Which of the following is the definition of consumer surplus?
A) the difference between the value that consumers place on a good and the payment they make to buy the good, summed over the quantity consumed
B) the total value that consumers place on the quantity consumed of some good
C) the quantity consumed in excess of the allocatively efficient amount
D) the value that consumers place on the last unit consumed of a good
E) the marginal value that consumers place on the last unit consumed of a good
72) Which of the following is an example of an industry that succeeds in restricting entry, thereby maintaining prices above competitive levels?
A) transport trucking
B) beef cattle ranching
C) window washing
D) dentistry
E) book publishing
73) In which of the following situations would a natural monopoly exist?
A) a firm has a government charter to be the sole producer of some good
B) a firm is able to operate at the minimum point of its long-run average total cost curve
C) a firm produces a product essential to national security
D) only one firm is supplying a natural resource
E) one firm can most efficiently supply the entire market demand
74) In general, which of the following statements guides policymakers with respect to a natural monopoly? The firm
A) should be broken up into a large number of competitive firms.
B) should be taken over by government and run as a crown corporation.
C) is the best way to produce a given product and should be left alone.
D) generally needs to be regulated in order to reduce allocative inefficiency.
E) will not achieve productive efficiency without regulation.
75) Consider the case of a natural monopoly with falling long-run average costs. If regulation sets the price equal to marginal cost, then
A) the firm would operate at a loss and eventually go out of business.
B) shortages would result.
C) the demand curve would shift to the left.
D) the firm would earn economic profits.
E) the outcome would be allocatively inefficient.
76) Consider a natural monopoly that has declining LRAC over the entire range of the market demand curve. If it is regulated and required to charge a price that is equal to MC, the resulting level of output is
A) allocatively efficient, and profit is earned.
B) allocatively efficient, but the firm must be paid a subsidy or it will eventually go out of business.
C) less than the allocatively efficient level, and profit is zero.
D) less than the allocatively efficient level, but losses occur.
E) greater than the allocatively efficient level, but losses occur.
77) Consider a public utility that is a natural monopoly with falling long-run average costs. If a regulatory agency ordered this firm to price all of its output at marginal cost, then the firm
A) would lose money unless it is subsidized.
B) could incur profits or losses depending on the position of the demand curve and the LRAC curve.
C) would earn profits since the demand curve is perfectly inelastic.
D) would incur losses since the demand curve is perfectly elastic.
E) would have to shut down.
78) If average-cost pricing is imposed on a falling-cost natural monopoly, the result will be
A) exit from the industry in the short run.
B) zero economic profit.
C) economic profits.
D) economic losses.
E) losses and exit from the industry in the long run.
79) If a regulatory agency imposes a lump-sum tax on a monopolist (i.e., a tax that is independent of the level of output) it will reduce the firm’s profits because the tax increases
A) the LRAC but not the MC, leaving price and output unchanged.
B) both the LRAC and the MC, leaving price and output unchanged.
C) all costs as it shifts the demand curve to the left.
D) all costs as it shifts the demand curve to the right.
E) price whereas quantity demanded falls.
80) Regulation can reduce the profits of a natural monopoly by imposing a per-unit output tax (rather than directly regulating price). Such a tax would cause the monopolist’s
1) average total cost curve to shift upward;
2) marginal cost curve to shift upward;
3) demand curve to shift to the left.
A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 2 and 3
