Question 1

When firms have the ability to restrict output,raise prices,stifle competition,and inhibit innovation,the market failure involved is

Accepted Answer

A)  Public goods.
B)  Externalities.
C)  Market power.

Question 2

In cost-benefit analysis,regulatory intervention can be justified if the

Accepted Answer

A)  Marginal benefit of regulation exceeds its marginal cost.
B)  Economic cost of regulation exceeds the value of the improvements in government intervention.
C)  Value of government failure exceeds the value of market failure.

Question 3

A natural monopoly is a desirable market structure because

Accepted Answer

A)  It allows the producer to earn greater profit than is possible under competition.
B)  It allows the producer to deliver a higher-quality product to the market.
C)  It allows the producer to deliver products to the market at the lowest possible cost.

Question 4

An unregulated natural monopoly is most likely to

Accepted Answer

A)  Earn an economic profit.
B)  Produce where marginal cost equals price.
C)  Charge a lower price than if the same product were produced in a competitive market because of the monopolist's greater technical efficiency.

Question 5

When regulation results in an inferior mix of output,there are

Accepted Answer

A)  Administrative costs.
B)  Compliance costs.
C)  Efficiency costs.

Question 6

When market outcomes improve after government regulation is enforced,

Accepted Answer

A)  Technical efficiency is achieved.
B)  The net effect of government intervention on society is definitely beneficial.
C)  Government intervention still may not be justified if the economic costs are too high.

Question 7

The major aim of government regulation is to

Accepted Answer

A)  Control the structure of an industry.
B)  Alter industry behavior.
C)  Prevent monopolies from forming.

Question 8

Antitrust enforcement focuses on market structure,while government regulation deals with all of the following except

Accepted Answer

A)  Prices.
B)  Output.
C)  Perfect competition.

Question 9

Economies of scale refer to the

Accepted Answer

A)  Reduction in minimum average costs due to an increase in the number of workers hired.
B)  Reduction in minimum average costs due to an increase in plant size.
C)  Downward-sloping portion of the marginal cost curve.

Question 10

To maximize profit,a natural monopolist produces the level of output at which

Accepted Answer

A)  Price equals marginal cost.
B)  Price equals average total cost.
C)  Marginal revenue equals marginal cost.

Question 11

The Braden brothers considered starting a new skydiving company.Once they read the government regulations they would have to comply with,they changed their minds.This is an example of

Accepted Answer

A)  An administrative cost of regulation.
B)  An efficiency cost of regulation.
C)  A compliance cost of regulation.

Question 12

The gap between long-distance telephone rates and local telephone rates widened after long-distance service was deregulated.

Accepted Answer

A) True 
 B)False

Question 13

4,Q4. B) P0,Q1. C) P3,Q3." class="answers-bank-image d-inline" rel="preload" > 
-The socially optimal price and output combination in Figure 27.1 is

Accepted Answer

A)  P4,Q4.
B)  P0,Q1.
C)  P3,Q3.

Question 14

If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination,the monopolist would

Accepted Answer

A)  Lose money and go out of business.
B)  Earn only normal profits.
C)  Earn economic profits.

Question 15

Regulations that offer imperfect answers

Accepted Answer

A)  Are options that should never be implemented.
B)  Reflect the realistic choices that society must make between imperfect markets and imperfect government intervention.
C)  Are not consistent with utility maximization in the real world.

Question 16

Before the deregulation in telecommunications,AT&T charged higher rates on long-distance service in order to make local service rates lower.Such a practice is an example of

Accepted Answer

A)  Price discrimination because different prices were charged for the same service.
B)  The pricing of public goods.
C)  Cross-subsidization of local phone service.

Question 17

The human and capital resources used by businesses to satisfy regulatory requirements are known as compliance costs.

Accepted Answer

A) True 
 B)False

Question 18

Eliminating economic profit of a natural monopolist may be justifiable on the basis of society's equity goal.

Accepted Answer

A) True 
 B)False

Question 19

Compared with the profit-maximizing choice of a natural monopolist,output regulation will result in a

Accepted Answer

A)  Higher level of output and a higher price.
B)  Lower level of output and a higher price.
C)  Higher level of output and a lower price.

Question 20

Profit regulation of a natural monopoly is achieved when

Accepted Answer

A)  P = ATC.
B)  P = MC.
C)  MR = MC.

Exam 27: Natural Monopolies: Deregulation

When market outcomes improve after government regulation is enforced,

Correct AnswerverifiedShow Answer

The human and capital resources used by businesses to satisfy regulatory requirements are known as compliance costs.

Correct AnswerverifiedShow Answer

In cost-benefit analysis,regulatory intervention can be justified if the

Correct AnswerverifiedShow Answer

Antitrust enforcement focuses on market structure,while government regulation deals with all of the following except

Correct AnswerverifiedShow Answer

Eliminating economic profit of a natural monopolist may be justifiable on the basis of society's equity goal.

Correct AnswerverifiedShow Answer

Before the deregulation in telecommunications,AT&T charged higher rates on long-distance service in order to make local service rates lower.Such a practice is an example of

Correct AnswerverifiedShow Answer

An unregulated natural monopoly is most likely to

Correct AnswerverifiedShow Answer

The Braden brothers considered starting a new skydiving company.Once they read the government regulations they would have to comply with,they changed their minds.This is an example of

Correct AnswerverifiedShow Answer

Profit regulation of a natural monopoly is achieved when

Correct AnswerverifiedShow Answer

The major aim of government regulation is to

Correct AnswerverifiedShow Answer

When regulation results in an inferior mix of output,there are

Correct AnswerverifiedShow Answer

A natural monopoly is a desirable market structure because

Correct AnswerverifiedShow Answer

When firms have the ability to restrict output,raise prices,stifle competition,and inhibit innovation,the market failure involved is

Correct AnswerverifiedShow Answer

Economies of scale refer to the

Correct AnswerverifiedShow Answer

If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination,the monopolist would

Correct AnswerverifiedShow Answer

To maximize profit,a natural monopolist produces the level of output at which

Correct AnswerverifiedShow Answer

-The socially optimal price and output combination in Figure 27.1 is

Correct AnswerverifiedShow Answer

The gap between long-distance telephone rates and local telephone rates widened after long-distance service was deregulated.

Correct AnswerverifiedShow Answer

Compared with the profit-maximizing choice of a natural monopolist,output regulation will result in a

Correct AnswerverifiedShow Answer

Regulations that offer imperfect answers

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified