Question 1

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 2

Define and illustrate iterated dominance and commitment strategy.

Accepted Answer

Iterated dominance is eliminating any st

Question 3

Answer the following:
a)Define and illustrate graphically average-cost pricing and marginal-cost pricing.
b)What are the problems faced in regulating natural monopolies?

Accepted Answer

a)Average-cost pricing is at (P₁,Q₁)where

Question 4

A natural monopoly is defined as an industry in which:

Accepted Answer

A) regulatory barriers to entry prevent the operation of more than one firm. 
B) the marginal cost curve of the dominant firm is upward sloping. 
C) the monopoly firm is not regulated by the government. 
D) the average cost of the firm declines over the entire range of market demand. 
A) regulatory barriers to entry prevent the operation of more than one firm. 
B) the marginal cost curve of the dominant firm is upward sloping. 
C) the monopoly firm is not regulated by the government. 
D) the average cost of the firm declines over the entire range of market demand.

Question 5

The following figure shows the marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1  
Refer to Figure 15-1.If the regulator sets a maximum price of P2,the monopolist's demand curve is _____.

Accepted Answer

A) P2EG 
B) FG 
C) the marginal cost curve 
D) FH 
A) P2EG 
B) FG 
C) the marginal cost curve 
D) FH

Question 6

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

Question 7

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price.  
-In Figure 15-3,if the monopoly is forced to use the average-cost pricing policy,it would:

Accepted Answer

A) produce Q2 at a price P3 and make zero economic profit. 
B) produce Q3 at a price P4 and make positive economic profit. 
C) produce Q1 at a price P1 and make zero economic profit. 
D) produce Q2 at a price P3 and make positive economic profit. 
A) produce Q2 at a price P3 and make zero economic profit. 
B) produce Q3 at a price P4 and make positive economic profit. 
C) produce Q1 at a price P1 and make zero economic profit. 
D) produce Q2 at a price P3 and make positive economic profit.

Question 8

In game theory,the concept of _____ can be used to arrive at an equilibrium in a game with no dominant strategies.

Accepted Answer

A) multiple iterations 
B) non-cooperation 
C) iterated dominance 
D) best response 
A) multiple iterations 
B) non-cooperation 
C) iterated dominance 
D) best response

Question 9

Which of the following is necessary for a Nash equilibrium in a two-player game where both players have three strategies each?

Accepted Answer

A) The players should behave altruistically. 
B) At least one of the two players should have a dominant strategy. 
C) The game should be simultaneous and not sequential. 
D) It is not necessary for either player to have a dominant strategy. 
A) The players should behave altruistically. 
B) At least one of the two players should have a dominant strategy. 
C) The game should be simultaneous and not sequential. 
D) It is not necessary for either player to have a dominant strategy.

Question 10

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 11

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 12

Suppose that the elasticity of demand at a competitive equilibrium is 2.50.If the price under
Monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,one can conclude that the monopoly output is _____ percent below of the competitive output.

Accepted Answer

A) 25 
B) 40 
C) 2.5 
D) 4 
A) 25 
B) 40 
C) 2.5 
D) 4

Question 13

The value of the difference between price and marginal cost is a measure of profit per unit only if:

Accepted Answer

A) marginal cost equals marginal revenue. 
B) marginal cost equals average revenue. 
C) average cost is greater than marginal revenue. 
D) average cost equals marginal cost. 
A) marginal cost equals marginal revenue. 
B) marginal cost equals average revenue. 
C) average cost is greater than marginal revenue. 
D) average cost equals marginal cost.

Question 14

Use the following table to answer the question : Table 15-2: 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.
 
-In Table 15-2,company A's strategy of choosing a _____ price is dominated by a strategy of _____ price.

Accepted Answer

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

Question 15

Use the following table to answer the question : Table 15-1: shows the marginal cost [MC],marginal revenue [FH],and demand [FG] curves for a monopolist who faces constant costs.
Figure 15-1  
-Refer to Figure 15-1.Given that P1= $100,P2 = $50,Q2= 2,000 units,and Q1=1,000 units,what is the deadweight loss of a monopoly?

Accepted Answer

A) $10,000 
B) $2,000 
C) $50,000 
D) $25,000 
A) $10,000 
B) $2,000 
C) $50,000 
D) $25,000

Question 16

Use the following table to answer the question : Table 15-2: shows the marginal revenue curve [MR],the demand curve,and the marginal cost curve [MC] for a monopolist with constant costs.
 
-Based on Figure 15-2,it can be concluded that the change in consumer surplus due to the shift from perfect competition to monopoly is _____.

Accepted Answer

A) $150 
B) -$300 
C) -$450 
D) $600 
A) $150 
B) -$300 
C) -$450 
D) $600

Question 17

Which of the following is not a problem faced by regulators while regulating a natural monopoly such as cable television or electric utility company?

Accepted Answer

A) Regulators lack sufficient information regarding the monopolists cost structure. 
B) Regulation reduces the incentive for the monopolist to reduce costs. 
C) Regulation may cause the monopolist to suppress innovation and new product development. 
D) Regulation of a monopoly usually leads to a decline in total surplus. 
A) Regulators lack sufficient information regarding the monopolists cost structure. 
B) Regulation reduces the incentive for the monopolist to reduce costs. 
C) Regulation may cause the monopolist to suppress innovation and new product development. 
D) Regulation of a monopoly usually leads to a decline in total surplus.

Question 18

Intellectual property rights are protected by patents.One of the controversial aspects of the patent system is the patents that are granted to pharmaceutical companies.Critics of the patent system claim that these increase the price of life-saving drugs and make them unaffordable to the poor.For example,patents restrict the availability of AIDS medicine in developing countries that require them the most.What would happen if drugs were not allowed to be patented in the interests of increasing their availability at a lower price? How do the long-run and short-run effects differ?

Accepted Answer

Patents allow pharmaceutical companies t

Question 19

Use the following table to answer the question : Table 15-1: 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.
 
-Refer to Table 15-1.If X = 145 and Y = 62,it is evident that _____.

Accepted Answer

A) both firms have a dominant strategy. 
B) neither firm has a dominant strategy. 
C) only company C has a dominant strategy. 
D) only company D has a dominant strategy. 
A) both firms have a dominant strategy. 
B) neither firm has a dominant strategy. 
C) only company C has a dominant strategy. 
D) only company D has a dominant strategy.

Question 20

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.Using iterated dominance,one can conclude that in equilibrium:

Accepted Answer

A) company A chooses a high price and company B chooses a medium price. 
B) both company A and company B choose a high price. 
C) both company A and company B choose a medium price. 
D) company A chooses a medium price and company B chooses a high price. 
A) company A chooses a high price and company B chooses a medium price. 
B) both company A and company B choose a high price. 
C) both company A and company B choose a medium price. 
D) company A chooses a medium price and company B chooses a high price.

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

Define and illustrate iterated dominance and commitment strategy.

Answer the following: a)Define and illustrate graphically average-cost pricing and marginal-cost pricing. b)What are the problems faced in regulating natural monopolies?

A natural monopoly is defined as an industry in which:

The following figure shows the marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 Refer to Figure 15-1.If the regulator sets a maximum price of P₂,the monopolist's demand curve is _____.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the monopoly is forced to use the average-cost pricing policy,it would:

In game theory,the concept of _____ can be used to arrive at an equilibrium in a game with no dominant strategies.

Which of the following is necessary for a Nash equilibrium in a two-player game where both players have three strategies each?

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

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

Suppose that the elasticity of demand at a competitive equilibrium is 2.50.If the price under Monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,one can conclude that the monopoly output is _____ percent below of the competitive output.

The value of the difference between price and marginal cost is a measure of profit per unit only if:

Which of the following is not a problem faced by regulators while regulating a natural monopoly such as cable television or electric utility company?

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

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

Define and illustrate iterated dominance and commitment strategy.

Answer the following: a)Define and illustrate graphically average-cost pricing and marginal-cost pricing. b)What are the problems faced in regulating natural monopolies?

A natural monopoly is defined as an industry in which:

The following figure shows the marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 Refer to Figure 15-1.If the regulator sets a maximum price of P2,the monopolist's demand curve is _____.

Use the following table to answer the question : Table 15-3: shows the average cost [AC],marginal cost [MC],and demand [D] curves for a natural monopoly;Qi denotes quantity and Pi denotes price. -In Figure 15-3,if the monopoly is forced to use the average-cost pricing policy,it would:

In game theory,the concept of _____ can be used to arrive at an equilibrium in a game with no dominant strategies.

Which of the following is necessary for a Nash equilibrium in a two-player game where both players have three strategies each?

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

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

Suppose that the elasticity of demand at a competitive equilibrium is 2.50.If the price under Monopoly is 10 percent higher than under perfect competition,assuming identical cost curves,one can conclude that the monopoly output is _____ percent below of the competitive output.

The value of the difference between price and marginal cost is a measure of profit per unit only if:

Which of the following is not a problem faced by regulators while regulating a natural monopoly such as cable television or electric utility company?

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 marginal cost [MC],marginal revenue [FH] and demand [FG] curves for a monopolist who faces constant costs. Figure 15-1 Refer to Figure 15-1.If the regulator sets a maximum price of P₂,the monopolist's demand curve is _____.