Question : 91) According to economist George Stigler, the process of regulating : 1384267

91) According to economist George Stigler, the process of regulating firms with market power becomes suspect over time because

A) regulators impose additional costs on regulated firms because they are expected to accomplish other social goals.

B) regulators shift from protecting the consumer to protecting the regulated firm from competition.

C) regulated firms are allowed to expand into other markets and drive out competing firms.

D) regulated firms devise methods to circumvent the regulations.

E) regulation leads to corruption of political parties.

92) One method of regulating a natural monopoly is known as average-cost pricing. Using this method, the regulator requires that the price be set equal to

A) internal cost.

B) marginal cost.

C) average variable cost.

D) long-run average cost.

E) average fixed cost.

93) Choose the statement that best describes the dilemma facing the regulator of a natural monopoly.

A) Marginal-cost pricing leads to profit or losses; average-cost pricing results in allocative inefficiency.

B) Marginal-cost pricing will result in allocative inefficiency; average-cost pricing leads to profits or losses.

C) Marginal-cost pricing will result in productive and allocative inefficiency; average-cost pricing will not.

D) Both kinds of regulation have the same implications for allocative efficiency.

E) There is no dilemma.

94) Suppose your municipality charges your household a flat fee of $100 per year plus $2 per cubic metre of water used. This pricing policy is an example of

A) marginal-cost pricing.

B) average cost pricing.

C) a two-part tariff.

D) utility pricing.

E) linear pricing.

95) Refer to Figure 12-6. The firm depicted in the figure is

A) a perfectly competitive firm.

B) a monopolistically competitive firm.

C) a natural monopoly.

D) an oligopoly.

E) a cartel.

96) Refer to Figure 12-6. Suppose the firm is being regulated using a policy of average-cost pricing. The resulting price and output would be

A) P1 and Q2.

B) P1 and Q1.

C) P2 and Q2.

D) P3 and Q1.

E) P3 and Q2.

97) Refer to Figure 12-6. Suppose this firm is being regulated using a policy of average-cost pricing. In this case, economic profits to the firm are represented by the area

A) P2P3ad.

B) P2P3ab.

C) 0P3aQ1.

D) P1P2bc.

E) There are no economic profits.

98) Refer to Figure 12-6. Suppose this firm is being regulated using a policy of average-cost pricing. In this case,

A) the result is allocatively efficient because economic profits are zero.

B) the result is allocatively inefficient because price exceeds marginal cost.

C) the level of output is too low, but the price is allocatively efficient.

D) the result is as close to the competitive outcome as possible.

E) the result is allocatively inefficient because the marginal cost curve is downward sloping.

99) Refer to Figure 12-6. Suppose this firm is being regulated using the policy of marginal-cost pricing. The resulting price and output would be

A) P2 and Q2.

B) P3 and Q1.

C) P1 and Q2.

D) P3 and Q2.

E) P1 and Q1.

100) Refer to Figure 12-6. Suppose this firm is being regulated using a policy of marginal-cost pricing. In this case, the firm would experience ________ represented by the area ________.

A) losses; P1P2bc

B) losses; edbc

C) losses; 0P2bQ2

D) profits; P2P3ad

E) profits; edbc