11) The capture theory of regulation assumes that regulation benefits
A) producers.
B) consumers.
C) government.
D) the general public.
E) the regulators.
12) The capture theory of regulation predicts that
A) regulation helps producers to maximize profits.
B) regulators capture the firm’s economic profit and transfer it to consumers as consumer surplus.
C) regulators eliminate the deadweight loss a monopoly can create.
D) resources are used efficiently.
E) regulators capture the firm’s economic profit and transfer it to themselves.
13) The capture theory of regulation is defined as
A) the use of regulations to assure the efficient use of resources.
B) the constant reapplication of regulation on the cable TV industry.
C) the use of regulation to assist producers to maximize profits.
D) the removal of regulations on business activities.
E) regulation that focuses on consumers’ interests and ignores producers’ interests.
14) Suppose that a regulatory agency helps producers maximize economic profit. This type of regulation coincides with
A) a natural monopoly.
B) a marginal cost pricing rule.
C) an average cost pricing rule.
D) the capture theory of regulation.
E) the social interest theory of regulation.
15) The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.
A) small benefits; small costs
B) small benefits; large costs
C) large benefits; small costs
D) large benefits; large costs
E) large benefits; no costs
16) When economies of scale exist so that one firm can meet the entire market demand at a lower average total cost than two or more firms,
A) a natural monopoly develops.
B) the monopoly encounters competition.
C) economic profit is reduced to zero.
D) the monopoly converts all of the consumer surplus into economic profit.
E) there is always the opportunity to price discriminate.
17) A firm that is a natural monopoly
A) can supply the entire market at a lower average total cost than two or more firms.
B) has very small fixed costs and very large marginal costs.
C) is infrequently regulated because having one firm serve the market is economically sound.
D) cannot make an economic profit if it is not regulated because it must serve a very large customer base.
E) produces the efficient quantity of output when it is not regulated.
18) A natural monopoly
A) sells to a single buyer.
B) sets price equal to marginal revenue.
C) is a firm than can supply the market at lower average total cost than two or more firms.
D) produces a natural resource.
E) faces a horizontal demand curve.
19) Today, you might be buying from a regulated natural monopoly when you purchase
A) a car, a truck, or a bicycle.
B) a computer, a phone, or a camera.
C) natural gas or electricity.
D) a house, a condominium, or a plot of land.
E) food in a grocery store or in a restaurant.
20) Fixed costs are ________ in a natural monopoly, so average total cost ________ as output increases.
A) large; increases
B) large; decreases
C) small; increases
D) small; decreases
E) nonexistent; decreases
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