Question 1

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

Accepted Answer

A) a horizontal demand curve. 
B) a surplus and a consequent fall in price. 
C) an economic loss for the firm. 
D) a higher price than under average-cost pricing. 
A) a horizontal demand curve. 
B) a surplus and a consequent fall in price. 
C) an economic loss for the firm. 
D) a higher price than under average-cost pricing. C

Question 2

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

Accepted Answer

A) The natural monopoly will earn positive economic profit. 
B) The natural monopoly will produce less output than an unregulated monopoly. 
C) The equilibrium price of the natural monopoly is now the same as the competitive price. 
D) A part of the deadweight loss from an unregulated monopoly is eliminated. 
A) The natural monopoly will earn positive economic profit. 
B) The natural monopoly will produce less output than an unregulated monopoly. 
C) The equilibrium price of the natural monopoly is now the same as the competitive price. 
D) A part of the deadweight loss from an unregulated monopoly is eliminated. D

Question 3

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3  
-In Figure 15-3,if the maximum price allowed in the market is P1,output levels below Q1 will:

Accepted Answer

A) yield more economic profit than at Q1. 
B) yield positive but lesser economic profit than at Q1. 
C) yield negative economic profit. 
D) yield zero economic profit. 
A) yield more economic profit than at Q1. 
B) yield positive but lesser economic profit than at Q1. 
C) yield negative economic profit. 
D) yield zero economic profit. C

Question 4

A monopolist might find it profitable to suppress an innovative new product if:

Accepted Answer

A) the firm would lose its monopoly status by introducing the invention. 
B) it owns all the sources of supply of the inputs used in the production process. 
C) it could prevent other firms from copying the invention. 
D) the projected demand for the product is inelastic. 
A) the firm would lose its monopoly status by introducing the invention. 
B) it owns all the sources of supply of the inputs used in the production process. 
C) it could prevent other firms from copying the invention. 
D) the projected demand for the product is inelastic.

Question 5

Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

Accepted Answer

A) Q2 
B) Q1 
C) Q3 
D) Q4 
A) Q2 
B) Q1 
C) Q3 
D) Q4

Question 6

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1  
-Refer to Table 15-1.If X = 135 and Y = 75,the method of iterated dominance can be used to conclude that company C's strategy of choosing a _____ price is dominated by a strategy of a _____ price.

Accepted Answer

A) high;low 
B) medium;low 
C) low;medium 
D) high;medium 
A) high;low 
B) medium;low 
C) low;medium 
D) high;medium

Question 7

When the average cost curve declines after intersecting the demand curve for a natural monopoly,which of the following must necessarily be true?

Accepted Answer

A) The marginal cost curve lies below the average cost curve at the point of intersection. 
B) Marginal cost is also declining after the point of intersection. 
C) The average cost curve and the marginal cost curve are parallel after the point of intersection. 
D) The price is equal to marginal cost 
A) The marginal cost curve lies below the average cost curve at the point of intersection. 
B) Marginal cost is also declining after the point of intersection. 
C) The average cost curve and the marginal cost curve are parallel after the point of intersection. 
D) The price is equal to marginal cost

Question 8

What is a natural monopoly? Draw a diagram to illustrate the profit-maximizing output of a natural monopoly.

Accepted Answer

A natural monopoly exists when the avera

Question 9

The following payoff matrix shows the profits accruing to two firms,Company A and Company B,under different pricing strategies.In each cell,the figure on the left indicates Company A's payoff and the figure on the right indicates Company B's payoff.
Table 15-2  
-Refer to Table 15-2.Which of the following is true?

Accepted Answer

A) Company A's dominant strategy is to set a high price. 
B) Company A's dominant strategy is to set a medium price. 
C) Company A's dominant strategy is to set a low price. 
D) Company A does not have a dominant strategy. 
A) Company A's dominant strategy is to set a high price. 
B) Company A's dominant strategy is to set a medium price. 
C) Company A's dominant strategy is to set a low price. 
D) Company A does not have a dominant strategy.

Question 10

The following figure shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
Figure 15-2  
-Suppose that the market in Figure 15-2 were served by an oligopoly such that the equilibrium output was 450.Then the welfare loss under oligopoly would be _____ percent of that under monopoly.

Accepted Answer

A) 400 
B) 100 
C) 75 
D) 25 
A) 400 
B) 100 
C) 75 
D) 25

Question 11

Which of the following will be true if a regulator uses average-cost pricing to regulate a natural monopoly?

Accepted Answer

A) The natural monopoly will incur losses. 
B) The output will be lower than that of an unregulated monopoly. 
C) There will be an efficiency gain in the market. 
D) The firm will benefit more than the consumers. 
A) The natural monopoly will incur losses. 
B) The output will be lower than that of an unregulated monopoly. 
C) There will be an efficiency gain in the market. 
D) The firm will benefit more than the consumers.

Question 12

Define and illustrate iterated dominance and commitment strategy.

Accepted Answer

Iterated dominance is eliminating any st

Question 13

The following payoff matrix shows the profits accruing to two firms,Company C and Company D,under different pricing strategies.In each cell,the figure on the left indicates Company C's payoff and the figure on the right indicates Company D's payoff.
Table 15-1  
-Refer to Table 15-1.If X = 145 and Y = 75,company D's strategy of choosing a _____ price is dominated by a strategy of _____ price.

Accepted Answer

A) high;low 
B) medium;high 
C) medium;low 
D) high;medium 
A) high;low 
B) medium;high 
C) medium;low 
D) high;medium

Question 14

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3  
-Refer to Figure 15-3.Which of the following price and output combinations would an unregulated monopolist choose?

Accepted Answer

A) P2,Q2 
B) P1,Q1 
C) P3,Q2 
D) P4,Q3 
A) P2,Q2 
B) P1,Q1 
C) P3,Q2 
D) P4,Q3

Question 15

Abbott and Costello are two firms that compete with each other in the market for ice-cream.They can price their product at a high,medium,or low price.The following matrix shows their profits from their respective pricing strategies.
Table 15-3  
-Refer to Table 15-3.What is the highest payoff from Abbott's dominated strategy?

Accepted Answer

A) $100 
B) $115 
C) $107 
D) $60 
A) $100 
B) $115 
C) $107 
D) $60

Question 16

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.
Figure 15-3  
-In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

Accepted Answer

A) negative economic profit equal to P3CBP2. 
B) positive economic profit equal to P2BQ2O. 
C) negative economic profit equal to FBQ2Q1. 
D) positive economic profit equal to FCQ2Q1. 
A) negative economic profit equal to P3CBP2. 
B) positive economic profit equal to P2BQ2O. 
C) negative economic profit equal to FBQ2Q1. 
D) positive economic profit equal to FCQ2Q1.

Question 17

Mike and Bill face the following payoff matrix. $$\begin{array} { | c | c | c | c | } 
\hline \text { Payoffs } = \text { (Mike, Bill) } & \text { B1 } & \text { B2 } & \text { B3 } \
\hline \text { M1 } & 1,1 & 4,0 & 4,2 \
\hline \text { M2 } & 0,3 & 1,5 & 3,4 \
\hline \text { M3 } & 2,4 & 3,6 & 2,5 \
\hline
\end{array}$$ What is the outcome of the game?

Accepted Answer

Since both Mike and Bill do not have a d

Question 18

Which of the following is true of public ownership of a natural monopoly?

Accepted Answer

A) Most publicly owned natural monopolies run economic losses. 
B) In publicly owned monopolies,the incentive to minimize cost is higher. 
C) Public ownership of natural monopolies reduces production efficiency in the market. 
D) Natural monopolies that are publicly owned tend to innovate and create cost-saving technologies. 
A) Most publicly owned natural monopolies run economic losses. 
B) In publicly owned monopolies,the incentive to minimize cost is higher. 
C) Public ownership of natural monopolies reduces production efficiency in the market. 
D) Natural monopolies that are publicly owned tend to innovate and create cost-saving technologies.

Question 19

Which of the following,if true,would be considered a natural monopoly?

Accepted Answer

A) The pharmaceuticals industry where patents form a barrier to entry 
B) The airlines industry that has high fixed costs and high operating costs 
C) The software industry that has very low marginal costs 
D) The utilities industry that has falling average costs over the entire range of output 
A) The pharmaceuticals industry where patents form a barrier to entry 
B) The airlines industry that has high fixed costs and high operating costs 
C) The software industry that has very low marginal costs 
D) The utilities industry that has falling average costs over the entire range of output

Question 20

Two diners,that are located close to each other,compete aggressively for customers.One of their main strategies is the 'daily special' that they use to draw customers.The following payoff matrix shows how many customers they attract per day if their daily special is either beef stew [B],pot roast [P],or salmon pie [S].   What daily special will be chosen by Diner A and Diner B in equilibrium if they agree not to benefit at each other's expense??

Accepted Answer

Both Diner A and Diner B do not have a d

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,if the maximum price allowed in the market is P₁,output levels below Q₁ will:

A monopolist might find it profitable to suppress an innovative new product if:

Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

When the average cost curve declines after intersecting the demand curve for a natural monopoly,which of the following must necessarily be true?

What is a natural monopoly? Draw a diagram to illustrate the profit-maximizing output of a natural monopoly.

Which of the following will be true if a regulator uses average-cost pricing to regulate a natural monopoly?

Define and illustrate iterated dominance and commitment strategy.

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -Refer to Figure 15-3.Which of the following price and output combinations would an unregulated monopolist choose?

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

Mike and Bill face the following payoff matrix. Payoffs = (Mike, Bill) B1 B2 B3 M1 1,1 4,0 4,2 M2 0,3 1,5 3,4 M3 2,4 3,6 2,5 What is the outcome of the game?

Which of the following is true of public ownership of a natural monopoly?

Which of the following,if true,would be considered a natural monopoly?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 15: Using Noncompetitive Market Models

For a natural monopoly where average cost declines after intersecting the demand curve,marginal-cost pricing would lead to:

Which of the following is true of a natural monopoly that is regulated by the average-cost pricing strategy?

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,if the maximum price allowed in the market is P1,output levels below Q1 will:

A monopolist might find it profitable to suppress an innovative new product if:

Refer to Figure 15-1.The monopolist produces output equal to _____ in equilibrium.

When the average cost curve declines after intersecting the demand curve for a natural monopoly,which of the following must necessarily be true?

What is a natural monopoly? Draw a diagram to illustrate the profit-maximizing output of a natural monopoly.

Which of the following will be true if a regulator uses average-cost pricing to regulate a natural monopoly?

Define and illustrate iterated dominance and commitment strategy.

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -Refer to Figure 15-3.Which of the following price and output combinations would an unregulated monopolist choose?

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,under marginal-cost pricing,the monopoly would earn:

Mike and Bill face the following payoff matrix. Payoffs = (Mike, Bill) B1 B2 B3 M1 1,1 4,0 4,2 M2 0,3 1,5 3,4 M3 2,4 3,6 2,5 What is the outcome of the game?

Which of the following is true of public ownership of a natural monopoly?

Which of the following,if true,would be considered a natural monopoly?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

The following figure shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. Figure 15-3 -In Figure 15-3,if the maximum price allowed in the market is P₁,output levels below Q₁ will: