Question 1

Figure: Demand, Revenue, and Cost Curves
   (Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue, and Cost Curves.The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market.If the government regulated the figglenut market by setting a price ceiling of $40, Figglenuts-R-Us might: 
A.produce 60 figglenuts to maximize profit.
B.produce 120 figglenuts to maximize profit.
C.shut down in the short run.
D.increase the price to $60.

Accepted Answer

The answer of Figure: Demand, Revenue, and Cost Curves
 ...

Question 2

If a monopoly is forced to charge a price equal to marginal cost:

Accepted Answer

If a monopoly is forced to charge a price equal to marginal cost, the deadweight loss will decrease because the monopoly will produce more output and sell it at a lower price. This will benefit consumers and reduce the monopoly's market power.

Question 3

In an industry characterized by extensive economies of scale:
A.small companies are more profitable than large companies.
B.large companies are more profitable than small companies.
C.small and large companies are equally profitable.
D.small companies will drive out large companies.

Accepted Answer

The answer of In an industry characterized by extensive economies...

Question 4

_________ is the practice of selling at different prices in different markets, without
corresponding differences in costs.
A.Price discrimination; the same product
B.Privatizing; the same product
C.Monopolizing; similar products
D.Price fixing; different products

Accepted Answer

The answer of _________ is the practice of selling at...

Question 5

In order to engage in price discrimination a firm must be:

Accepted Answer

In order to engage in price discrimination, a firm must be a price-setter, as it needs to have some control over the price it charges. Additionally, it must be able to identify consumers whose elasticities differ, as the practice of price discrimination involves charging different prices to different groups of consumers based on their willingness to pay.

Question 6

Price discrimination is the practice of:
A.charging different prices to buyers of the same good.
B.paying different prices to suppliers of the same good.
C.equating price to marginal cost.
D.equating price to marginal revenue.

Accepted Answer

Price discrimination is the practice of charging different prices to buyers of the same good. This can be done based on various factors such as time of purchase, location, quantity purchased, or buyer characteristics such as age or income. This allows the seller to capture more of the consumer surplus and increase profits.

Question 7

A natural monopoly is one that:
A.monopolizes a natural resource such as a mineral spring.
B.is based on control of something occurring in nature (such as diamonds).
C.has increasing returns to scale over the entire relevant range of output.
D.typically has low fixed costs, making it easy and "natural" for it to shut out competitors.

Accepted Answer

A natural monopoly is a market situation where one firm can supply the entire market at a lower cost than two or more firms. It typically arises in industries with high fixed costs and economies of scale that are so large that they can be achieved only if one firm serves the entire market. In such cases, the average cost of production for the firm decreases as output increases. This is known as "increasing returns to scale." Hence, choice (C) is correct. Choices (A), (B), and (D) do not fully capture the concept of a natural monopoly.

Question 8

One government policy for dealing with a natural monopoly is to:
A.impose a price floor to eliminate the deadweight loss.
B.impose a price ceiling to reduce economic profit.
C.break it up into smaller firms.
D.impose fines on the monopolist.

Accepted Answer

The answer of One government policy for dealing with a...

Question 9

Figure: Demand, Revenue, and Cost Curves
(Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue, and Cost Curves.The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market.If the government wanted to regulate Figglenuts-R-Us such that the entire deadweight loss would be eliminated, it would impose a price ceiling of in the market.
A.$40
B.$46
C.$50
D.$65

Accepted Answer

The answer of Figure: Demand, Revenue, and Cost Curves
(Figure: Demand,...

Question 10

Figure: Demand, Revenue, and Cost Curves
   (Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue, and Cost Curves.The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market.Figglenuts-R-Us will sell
________ figglenuts and set a price of to maximize profits. 
A.70; $65
B.100; $50
C.120; $40
D.150; $46

Accepted Answer

The answer of Figure: Demand, Revenue, and Cost Curves
 ...

Question 11

In general, economists are critical of monopoly where exist(s).
A.no natural monopoly
B.a natural monopoly
C.only a few firms
D.persistent economies of scale

Accepted Answer

Economists are critical of monopolies where no natural monopoly exists because they can lead to inefficiencies, higher prices, and reduced innovation compared to competitive markets. Natural monopolies, on the other hand, might be more efficient in certain industries due to high fixed costs and economies of scale.

Question 12

Figure: Total Surplus with a Regulated Natural Monopolist
(Figure: Total Surplus with a Regulated Natural Monopoly) Look at the figure Total Surplus with a Regulated Natural Monopolist.In the figure, the natural monopoly:
A.would incur an economic profit if regulated to produce where price is less than marginal cost.
B.would incur an economic profit if regulated to charge a price equal to average total cost.
C.creates more consumer surplus than an unregulated monopolist if regulated to produce either where price equals marginal cost or price equals average total cost.
D.creates more consumer surplus than an unregulated monopolist if regulated to produce where price is above the average total cost.

Accepted Answer

The answer of Figure: Total Surplus with a Regulated Natural...

Question 13

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:
A.price discrimination.
B.privatizing.
C.monopolizing.
D.output prioritizing.

Accepted Answer

Price discrimination is the practice of selling the same product at different prices in different markets. This is done in order to maximize profit by charging customers different prices based on their willingness to pay. It is not related to privatizing, monopolizing, or output prioritizing.

Question 14

Figure: Demand, Revenue, and Cost Curves   (Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue, and Cost Curves.The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market.If the government wanted to regulate Figglenuts-R-Us such that it would minimize the deadweight loss while allowing the firm to break even, it would impose a price ceiling of in the market.

Accepted Answer

The answer of Figure: Demand, Revenue, and Cost Curves ...

Question 15

If the regulation of a monopoly results in a price equal to marginal cost but the price is below average total cost:
A.the firm can still make an economic profit.
B.the firm will earn only a zero economic profit.
C.efficiency in allocation will be less.
D.the firm will require subsidization or it will go out of business.

Accepted Answer

The answer of If the regulation of a monopoly results...

Question 16

Amtrak is a publicly owned company that provides rail service.This means that Amtrak's prices tend to be than if it were a private company, and the quality of service tends to be
________ than if it were a private company.
A.higher; worse
B.higher; better
C.lower; worse
D.lower; better

Accepted Answer

As a publicly owned company, Amtrak's prices tend to be lower than if it were a private company because it is subsidized by the government. However, the quality of service tends to be worse than if it were a private company because it lacks the competitive pressure to innovate and provide top-notch service.

Question 17

A monopolist or an imperfectly competitive firm practices price discrimination primarily to:
A.increase profits.
B.expand plant size.
C.lower total costs.
D.reduce marginal costs.

Accepted Answer

A monopolist or an imperfectly competitive firm practices price discrimination to increase profits by charging different prices to different customers based on their willingness to pay. This allows the firm to capture more consumer surplus and maximize their profits.

Question 18

The practice of charging different prices to different customers for the same good or service, even though the cost of supplying those customers is the same, is:
A.privatization.
B.monopolization.
C.output competition.
D.price discrimination.

Accepted Answer

Price discrimination is the practice of charging different prices to different customers for the same good or service, even though the cost of supplying those customers is the same. This can be done based on various factors such as location, age, income, or willingness to pay. It is often done to increase profits by capturing more of the consumer surplus.

Question 19

If a firm wants to charge different customers different prices, it must be:

Accepted Answer

A firm that wants to charge different prices to different customers must be a price-setter. This is because in perfect competition, all firms charge the same price and are unable to differentiate prices between customers. Price differentiation is only possible when a firm has some degree of market power, which allows it to set different prices for different customers. Therefore, the correct answer is C) a price-setter. If a firm wants to charge different customers different prices, it must have some degree of market power to be able to act as a price-setter. In perfect competition, all firms are price-takers and must sell their products at the same price as everyone else in the market. Therefore, the firm cannot be in perfect competition (option B) or a price-taker (option A). Finally, option D is incorrect because perfect competition assumes that all firms sell identical products at the same price to all consumers, which does not allow for price discrimination.

Question 20

Public policies toward monopoly in the United States often consist of:
A.laws outlawing all of them.
B.the regulation of natural monopolies.
C.government takeover if monopoly profit exceeds a certain level.
D.forcing monopoly industries to become perfectly competitive.

Accepted Answer

The regulation of natural monopolies is the most common policy toward monopoly in the US. This means that these monopolies are allowed to exist, but they are subject to government oversight and regulation to ensure that they do not abuse their market power and harm consumers. Outlawing all monopolies or forcing them to become perfectly competitive would not be practical or effective, and government takeover of industries based solely on profit level would not be a sustainable or market-friendly solution.

Quiz 13: Monopoly

If a monopoly is forced to charge a price equal to marginal cost:

In an industry characterized by extensive economies of scale: A.small companies are more profitable than large companies. B.large companies are more profitable than small companies. C.small and large companies are equally profitable. D.small companies will drive out large companies.

_________ is the practice of selling at different prices in different markets, without corresponding differences in costs. A.Price discrimination; the same product B.Privatizing; the same product C.Monopolizing; similar products D.Price fixing; different products

In order to engage in price discrimination a firm must be:

Price discrimination is the practice of: A.charging different prices to buyers of the same good. B.paying different prices to suppliers of the same good. C.equating price to marginal cost. D.equating price to marginal revenue.

One government policy for dealing with a natural monopoly is to: A.impose a price floor to eliminate the deadweight loss. B.impose a price ceiling to reduce economic profit. C.break it up into smaller firms. D.impose fines on the monopolist.

In general, economists are critical of monopoly where exist(s). A.no natural monopoly B.a natural monopoly C.only a few firms D.persistent economies of scale

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is: A.price discrimination. B.privatizing. C.monopolizing. D.output prioritizing.

Amtrak is a publicly owned company that provides rail service.This means that Amtrak's prices tend to be than if it were a private company, and the quality of service tends to be ________ than if it were a private company. A.higher; worse B.higher; better C.lower; worse D.lower; better

A monopolist or an imperfectly competitive firm practices price discrimination primarily to: A.increase profits. B.expand plant size. C.lower total costs. D.reduce marginal costs.

The practice of charging different prices to different customers for the same good or service, even though the cost of supplying those customers is the same, is: A.privatization. B.monopolization. C.output competition. D.price discrimination.

If a firm wants to charge different customers different prices, it must be:

Public policies toward monopoly in the United States often consist of: A.laws outlawing all of them. B.the regulation of natural monopolies. C.government takeover if monopoly profit exceeds a certain level. D.forcing monopoly industries to become perfectly competitive.