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-If an average cost pricing rule is imposed on the firm in the figure above, the price will be A) $5 per unit. B) $25 per unit. C) $15 per unit. D) $20 per unit. -If an average cost pricing rule is imposed on the firm in the figure above, the price will be


A) $5 per unit.
B) $25 per unit.
C) $15 per unit.
D) $20 per unit.

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-The figure above shows the costs and demand curves for the Bigshow Cable Company. If the regulator of Bigshow Cable Company set its price at $4, the company would A) receive a producer surplus equal to $18 million. B) make zero economic profit. C) incur an economic loss of $7 million. D) none of the above. -The figure above shows the costs and demand curves for the Bigshow Cable Company. If the regulator of Bigshow Cable Company set its price at $4, the company would


A) receive a producer surplus equal to $18 million.
B) make zero economic profit.
C) incur an economic loss of $7 million.
D) none of the above.

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-In the figure above, the deadweight loss created if the industry changes from perfectly competitive to a single-price, unregulated monopoly is A) zero. B) $8.00 per day. C) $24.00 per day. D) $36.00 per day. -In the figure above, the deadweight loss created if the industry changes from perfectly competitive to a single-price, unregulated monopoly is


A) zero.
B) $8.00 per day.
C) $24.00 per day.
D) $36.00 per day.

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In a regulated natural monopoly, a marginal cost pricing rule maximizes


A) total costs.
B) producer surplus.
C) economic profit.
D) total surplus.

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Demand Schedule Facing aPerfectly Price Discriminating Firm Demand Schedule Facing aPerfectly Price Discriminating Firm -Using the demand schedule in the above table, the marginal revenue for a perfectly price discriminating monopolist from the sale of the third unit of output is A) $3. B) $4. C) $5. D) $6. -Using the demand schedule in the above table, the marginal revenue for a perfectly price discriminating monopolist from the sale of the third unit of output is


A) $3.
B) $4.
C) $5.
D) $6.

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A natural monopoly that is regulated to set its price according to the marginal cost pricing rule will


A) incur an economic loss.
B) maximize its profit.
C) produce a quantity of output such that price is above average total cost.
D) produce a quantity of output such that marginal cost is above average total cost.

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-In the above figure, if the natural monopoly is not regulated then consumer surplus is A) $48 million. B) $60 million. C) $108 million. D) $192 million. -In the above figure, if the natural monopoly is not regulated then consumer surplus is


A) $48 million.
B) $60 million.
C) $108 million.
D) $192 million.

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-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the consumer surplus will be A) $0. B) $8 million. C) $16 million. D) $32 million. -If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the consumer surplus will be


A) $0.
B) $8 million.
C) $16 million.
D) $32 million.

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-In the above figure, a single-price monopolist charges a price of ________ and the equilibrium competitive price is ________. A) $10; $20 B) $20; $30 C) $30; $20 D) $30; $10 -In the above figure, a single-price monopolist charges a price of ________ and the equilibrium competitive price is ________.


A) $10; $20
B) $20; $30
C) $30; $20
D) $30; $10

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-If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the price will be A) $2. B) $4. C) $5. D) $6. -If an average cost pricing rule is imposed on the natural monopoly shown in the figure above, then the price will be


A) $2.
B) $4.
C) $5.
D) $6.

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Under an average cost pricing rule, a regulated natural monopoly ________ and there is ________.


A) makes an economic profit; a deadweight loss
B) makes zero economic profit; no deadweight loss
C) makes zero economic profit; a deadweight loss.
D) incurs an economic loss; no deadweight loss

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One difference between perfectly competitive markets and single-price monopoly markets is that


A) marginal revenue equals marginal cost for perfectly competitive firms, but not for monopolists.
B) marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists.
C) marginal cost equals average variable cost for perfectly competitive firms but not for monopolists.
D) All the above answers are correct.

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Compared to a single-price monopoly, the price charged by a perfectly competitive market with the same costs


A) is higher than the monopoly's price.
B) is the same as the monopoly's price.
C) is lower than the monopoly's price.
D) could be higher than, lower than, or the same as the monopoly's price.

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"Because of rent seeking, a monopoly may end up making zero economic profit." Is the previous statement correct or incorrect? Why?

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The statement is correct. Competition am...

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What is the drawback of forcing a natural monopolist to use a marginal cost pricing rule?


A) No deadweight loss is eliminated.
B) The firm will incur an economic loss.
C) The gain in consumer surplus will be less than the loss in producer surplus, thus creating additional deadweight loss.
D) None of the above answers is correct.

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The use of a two-part price in a regulated natural monopoly


A) maximizes the deadweight loss.
B) allows the firm to maximize profits.
C) may make it possible for the firm to obey a marginal cost pricing rule and not go out of business.
D) All of the above answers are correct.

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-Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could perfectly price discriminate, then producer surplus would equal A) $64 million. B) $16 million. C) $32 million. D) zero. -Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could perfectly price discriminate, then producer surplus would equal


A) $64 million.
B) $16 million.
C) $32 million.
D) zero.

Correct Answer

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Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing, average cost pricing, rate of return regulation, and price cap regulation.

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Marginal cost pricing: The regulated pri...

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-The figure shows the demand for and costs of producing Charlene's Chocolates. If Charlene's Chocolates is a monopoly and charges one price to all customers, then the consumer surplus is ________. A) $400 B) $900 C) $0 D) $200 -The figure shows the demand for and costs of producing Charlene's Chocolates. If Charlene's Chocolates is a monopoly and charges one price to all customers, then the consumer surplus is ________.


A) $400
B) $900
C) $0
D) $200

Correct Answer

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Demand Schedule Facing aPerfectly Price Discriminating Firm Demand Schedule Facing aPerfectly Price Discriminating Firm -Using the demand schedule in the above table, if the firm's marginal cost is constant at $3.00, output for a perfectly price discriminating monopolist is A) 2 units. B) 3 units. C) 4 units. D) 5 units. -Using the demand schedule in the above table, if the firm's marginal cost is constant at $3.00, output for a perfectly price discriminating monopolist is


A) 2 units.
B) 3 units.
C) 4 units.
D) 5 units.

Correct Answer

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