Question : 16.7   Integrative Questions 1) A monopoly can arise when A) there : 1226224

 

16.7   Integrative Questions

 

1) A monopoly can arise when

A) there are diseconomies of scale.

B) there are barriers to entry and no close substitutes for the good being produced.

C) a firm cannot price discriminate.

D) firms engage in rent seeking.

E) a firm must set MR equal to MC in order to maximize its profit.

2) The total revenue test using the price elasticity of demand

A) explains why monopolies will only operate on the elastic portion of their demand curve.

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

C) demonstrates why a monopoly can earn an economic profit in the long run.

D) determines whether a monopoly can perfectly price discriminate or not.

E) cannot be used for a price discriminating monopoly.

 

3) A monopoly definitely incurs an economic loss if

A) it produces where its marginal revenue equals its marginal cost.

B) its average total cost is greater than price.

C) it cannot perfectly price discriminate.

D) it price discriminates.

E) The statement errs because a monopoly cannot incur an economic loss.

 

4) A difference between a perfectly competitive industry and a monopoly is that

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

B) a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot.

C) only monopolies have an incentive to maximize profit.

D) perfectly competitive firms can have a public franchise.

E) a barrier to entry protects perfectly competitive firms in the short run and protects a monopoly in the long run.

5) If a monopoly engages in rent seeking,

i.its average total cost curve is lower than otherwise.

ii.it might or might not make an economic profit depending on how many other competitors also are rent seeking.

iii.it necessarily incurs an economic loss.

A) i only

B) ii only

C) iii only

D) i and ii

E) i and iii

 

6) If a monopoly can perfectly price discriminate,

A) all the demanders pay one price.

B) it minimizes its profit.

C) it produces the same amount of output as would be produced if the market was a perfectly competitive industry.

D) it produces less output than would be produced if the market was a perfectly competitive industry.

E) it creates the same amount of consumer surplus as would be created if the market was a perfectly competitive industry.

 

7) Which of the following is NOT a requirement for a firm to be able to price discriminate?

A) monopoly power

B) groups of customers with different willingness to pay for the good

C) economies of scale

D) ability to keep the members of different customer groups separate

E) ability to prevent resales of the product by customers

8) Monopolies arise when there are

A) many substitutes but there are no barriers to entry.

B) no close substitutes and there are no barriers to entry.

C) no close substitutes and there are barriers to entry.

D) many substitutes and there barriers to entry.

E) None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry.

 

9) The assumption that regulation relentlessly seeks out deadweight loss and seeks to eliminate it is called the

A) social interest theory of regulation.

B) capture theory of regulation.

C) Coase theory of regulation.

D) socially optimal theory of regulation.

E) predatory theory of regulation.

10) The figure above shows a natural monopoly that the government must regulate. If the government uses ________, the firm produces ________ units per week.

A) the HHI; 50

B) an average cost pricing rule; 30

C) rate of return regulation; 40

D) social interest regulation; 30

E) a marginal cost pricing rule; 20

 

11) The figure above shows a natural monopoly that the government must regulate. Which of the following pairs most likely results in similar outcomes?

A) marginal cost pricing and rate of return regulation

B) marginal cost pricing and a two-part tariff

C) average cost pricing and rate of return regulation

D) predatory pricing and price caps

E) marginal cost pricing and price cap regulation