Deck 12: Economic Efficiency and Public Policy

Question 1

We can safely say that each point on a countryʹs production possibilities boundary (PPB)is

A)allocatively efficient.
B)one at which P = MC for all goods.
C)productively efficient.
D)Pareto optimal.
E)not productively efficient.

Answer 1

productively efficient.

Question 2

Consider two firms,A and B,that are producing the same product but with different average costs.Economists say this situation reflects a problem of

A)unemployed resources.
B)economic inefficiency.
C)productive inefficiency.
D)allocative inefficiency.
E)Not necessarily any of the above.

Answer 2

Not necessarily any of the above.

Question 3

If an economy is productively inefficient,it could improve its situation by

A)moving along its production possibilities boundary.
B)moving beyond its production possibilities boundary.
C)moving onto its production possibilities boundary.
D)acquiring more resources.
E)trading some of its resources.

Answer 3

moving onto its production possibilities boundary.

Question 4

If all firms are profit maximizers,then the following is assured:

A)allocative efficiency.
B)each firm is productively efficient.
C)allocative and productive efficiency.
D)that the economy is operating inside the production possibilities boundary.
E)that firms attain the lowest possible average costs.

Question 5

Traditionally,economists have regarded monopoly as an undesirable market structure because

A)of its ability to minimize costs through large output.
B)it is allocatively inefficient.
C)of its wasteful innovation.
D)it is usually characterized by wastefully confrontational labour relations.
E)it allows producers to earn large profits.

Question 6

For an entire economy,allocative efficiency requires that

A)goods are allocated equitably across markets.
B)marginal cost equals price for all goods.
C)MRP is equated for all factors of production.
D)price equals average cost for all goods.
E)price is greater than marginal cost for all goods.

Question 7

Consider the efficiency of various market structures and complete the following sentence.The larger the minimum efficient scale of firms,ceteris paribus,the

A)more likely we are to have a concentrated market and allocative inefficiency.
B)less the tendency toward monopoly inefficiency.
C)lower the advantages of large-scale production.
D)greater the number of firms comprising an industry.
E)more likely firms will display productive efficiency.

Question 8

Consider an industry with three profit-maximizing firms producing identical soccer jerseys.At their current levels of output,Firm A has a MC of $22,Firm B has a MC of $26,and Firm C has a MC of $27.Each firm is minimizing its costs for its given level of output.Which of the following statements is definitely true?

A)Each firm and the industry are productively efficient.
B)Each firm is productively efficient but the industry is not.
C)The industry is productively efficient but each firm is not.
D)Each firm is allocatively efficient but the industry is not.
E)Each firm and the industry are allocatively efficient.

Question 9

Allocative efficiency is a property of the behaviour of

A)individual firms.
B)all firms in an industry.
C)perfectly-competitive firms.
D)monopolies.
E)the overall economy.

Question 10

At the level of the industry,the condition for productive efficiency is that

A)goods are allocated equitably.
B)there are no idle resources in the industry.
C)MC = P for all goods.
D)MRP = P for all inputs.
E)MC is equal for all firms in the industry.

Question 11

Allocative efficiency concerns

A)producing outputs at lowest possible cost.
B)the allocation of resources such that total economic surplus is maximized.
C)encouraging monopoly if it generates innovation.
D)discouraging all monopoly firms.
E)the equitable distribution of resources.

Question 12

Allocative efficiency is actively sought

A)by profit-maximizing firms in all market structures.
B)only by perfectly-competitive firms.
C)only by profit-maximizing imperfectly-competitive firms.
D)by none of the firms in any market.
E)by all firms in all markets.

Question 13

An economy in which there are no market failures and all industries are in a competitive long -run equilibrium is one where 1.allocative efficiency is achieved;
2.the economy is on the production possibilities boundary;
3.there is no incentive for firms to enter or leave industries.

A)1 and 2
B)2 and 3
C)1 and 3
D)1,2,and 3
E)2 only

Question 14

An economy will be allocatively efficient if

A)the economyʹs resources are fully employed.
B)all firms are breaking even.
C)the average cost of production is the lowest possible for all goods produced.
D)price equals marginal cost for all products.
E)the price equals average cost for all goods.

Question 15

Consider a monopolistically competitive industry in long-run equilibrium.Will this industry be productively efficient?

A)Yes.Since the firms are in long-run equilibrium,they will all be producing at the minimum of their LRAC curves.
B)Yes.Since the firms are in long-run equilibrium,they will all be operating on their LRAC curves.
C)Yes.In long-run equilibrium,each firm is producing at an output level where price is equal to marginal cost.
D)No.Firms are selling their output at a level where price exceeds marginal cost and thus,by definition,cannot be productively efficient.
E)No.Since firms are selling differentiated products and there is no industry -wide price,we cannot conclude that marginal cost will be equated across all firms.

Question 16

Productive efficiency (at the level of the firm)is a goal that is sought

A)by profit-maximizing firms in all market structures.
B)only by perfectly competitive firms.
C)only by profit-maximizing imperfectly competitive firms.
D)by no firms in any market.
E)only by profit-maximizing firms in an oligopolistic market structure.

Question 17

Consider two firms,A and B,that are producing the same product but with different marginal costs.In this case,

A)a reallocation of output between the firms can lower the industryʹs total cost.
B)neither firm is producing its output at the lowest attainable cost.
C)some resources must be unemployed.
D)each firm is being wasteful.
E)one firm is not maximizing profits.

Question 18

Productive efficiency for an individual firm requires that

A)all resources be fully used.
B)MC = P for all goods.
C)the firm be on its LRAC curve.
D)the firm be allocatively efficient.
E)P = ATC for all goods.

Question 19

An important defence of oligopoly as a market structure is that

A)it involves less allocative inefficiency than monopoly.
B)it results in lower prices than perfect competition.
C)it is the most efficient available alternative when the minimum efficient scale is large.
D)it generates less unused capacity than monopolistic competition.
E)it is more productively efficient than monopoly.

Question 20

An economy will be allocatively efficient if

A)least-cost production techniques are employed by all firms.
B)the marginal costs of all firms in an industry are equal.
C)marginal cost equals price for all goods.
D)the economyʹs resources are fully employed.
E)imperfectly competitive markets are regulated.

Question 21

Consider a natural monopoly that has declining LRAC over the entire range of the market demand curve.If it is regulated and required to charge a price that is equal to MC,the resulting level of output is

A)allocatively efficient,and profit is earned.
B)allocatively efficient,but the firm must be paid a subsidy or it will eventually go out of business.
C)less than the allocatively efficient level,and profit is zero.
D)less than the allocatively efficient level,but losses occur.
E)greater than the allocatively efficient level,but losses occur.

Question 22

The economic efficiency of a natural monopoly can be improved with the use of two -part tariffs because it allows the monopoly to

A)charge users according to their willingness to pay.
B)charge residential users different rates than business users.
C)charge users according to their ability to pay.
D)charge users separately for fixed and variable costs.
E)lower its total costs.

Question 23

Consider a regulated natural monopoly,such as an electricity distribution company,that faces falling long -run average costs.If it is forced to price its output at average cost it will provide

A)less output than what is socially optimal.
B)more output than what is socially optimal.
C)the socially optimal amount of output.
D)more output than can be absorbed by the market.
E)so little output that there will be a shortage.

Question 24

Which of the following is the definition of consumer surplus?

A)the difference between the value that consumers place on a good and the payment they make to buy the good,summed over the quantity consumed
B)the total value that consumers place on the quantity consumed of some good
C)the quantity consumed in excess of the allocatively efficient amount
D)the value that consumers place on the last unit consumed of a good
E)the marginal value that consumers place on the last unit consumed of a good

Question 25

Choose the statement that best describes the dilemma facing the regulator of a natural monopoly.

A)Marginal-cost pricing leads to profit or losses; average-cost pricing results in allocative inefficiency.
B)Marginal-cost pricing will result in allocative inefficiency; average-cost pricing leads to profits or losses.
C)Marginal-cost pricing will result in productive and allocative inefficiency; average-cost pricing will not.
D)Both kinds of regulation have the same implications for allocative efficiency.
E)There is no dilemma.

Question 26

In the long run,the imposition of average-cost pricing in natural monopolies,such as Manitoba Hydro and New Brunswick Power,would generally lead to

A)allocative efficiency.
B)productive efficiency.
C)distorted investment decisions.
D)a reduction in the output by these firms.
E)both allocative efficiency and productive efficiency.

Question 27

In which of the following situations would a natural monopoly exist?

A)a firm has a government charter to be the sole producer of some good
B)a firm is able to operate at the minimum point of its long-run average total cost curve
C)a firm produces a product essential to national security
D)only one firm is supplying a natural resource
E)one firm can most efficiently supply the entire market demand

Question 28

Consider a public utility that is a natural monopoly with falling long-run average costs.If a regulatory agency ordered this firm to price all of its output at marginal cost,then the firm

A)would lose money unless it is subsidized.
B)could incur profits or losses depending on the position of the demand curve and the LRAC curve.
C)would earn profits since the demand curve is perfectly inelastic.
D)would incur losses since the demand curve is perfectly elastic.
E)would have to shut down.

Question 29

Which of the following is an example of an industry that succeeds in formally restricting entry,thereby maintaining prices above competitive levels?

A)transport trucking
B)beef cattle ranching
C)window washing
D)dentistry
E)book publishing

Question 30

Consider the case of a natural monopoly with falling long -run average costs.If regulation sets the price equal to marginal cost,then

A)the firm would operate at a loss and eventually go out of business.
B)shortages would result.
C)the demand curve would shift to the left.
D)the firm would earn economic profits.
E)the outcome would be allocatively inefficient.

Question 31

Monopoly is allocatively inefficient because

A)the price exceeds the marginal cost of the last unit produced.
B)the opportunity cost exceeds the marginal cost of the last unit produced.
C)the marginal cost exceeds the average cost for the last unit produced.
D)lower costs could be achieved.
E)the firm has no incentive to maximize profits.

Question 32

Suppose your municipality charges your household a flat fee of $100 per year plus $2 per cubic metre of water used.This pricing policy is an example of

A)marginal-cost pricing.
B)average cost pricing.
C)a two-part tariff.
D)utility pricing.
E)linear pricing.

Question 33

If a perfectly competitive industry was suddenly monopolized without any change in cost conditions,

A)both price and quantity produced would increase.
B)both price and quantity produced would decrease.
C)price would increase and quantity produced would decrease.
D)price would decrease and quantity produced would increase.
E)there would be no change in either price or quantity produced.

Question 34

One method of regulating a natural monopoly is known as average -cost pricing.Using this method,the regulator requires that the price be set equal to

A)internal cost.
B)marginal cost.
C)average variable cost.
D)long-run average cost.
E)average fixed cost.

Question 35

Suppose a cell-phone service provider has monopoly rights for a geographical region and is earning monopoly profits.If the government then imposes a lump-sum tax (i.e.,a tax that is independent of the level output)of $X on this firm,the effect is

A)an increase in consumer surplus due to the tax revenue.
B)to increase the firmʹs marginal costs and reduce its profit by $X.
C)to increase the firmʹs average costs and reduce its profit by $X.
D)a reduction in output and an increase in price.
E)an increase in output and a decrease in price.

Question 36

Consider the efficiency of various market structures.In the absence of other market failures,allocative efficiency is achieved only under perfect competition because only this market structure results in

A)zero long-run profits.
B)P = MC.
C)complete freedom of entry and exit.
D)maximization of profits through competition.
E)productive efficiency.

Question 37

If average-cost pricing is imposed on a falling-cost natural monopoly,the result will be

A)exit from the industry in the short run.
B)zero economic profit.
C)economic profits.
D)economic losses.
E)losses and exit from the industry in the long run.

Question 38

A regulated monopoly that faces rising long-run costs (at its current level of output)and which is forced to price its output at average cost will provide

A)less output than what is socially optimal.
B)more output than what is socially optimal.
C)the socially optimal amount of output.
D)more output than what can be absorbed by the market.
E)so little output that there will be a shortage.

Question 39

In general,which of the following statements guides policymakers with respect to a natural monopoly? The firm

A)should be broken up into a large number of competitive firms.
B)should be taken over by government and run as a crown corporation.
C)is the best way to produce a given product and should be left alone.
D)generally needs to be regulated in order to reduce allocative inefficiency.
E)will not achieve productive efficiency without regulation.

Question 40

If a regulatory agency imposes a lump-sum tax on a monopolist (i.e.,a tax that is independent of the level of output)it will reduce the firmʹs profits because the tax increases

A)the LRAC but not the MC,leaving price and output unchanged.
B)both the LRAC and the MC,leaving price and output unchanged.
C)all costs as it shifts the demand curve to the left.
D)all costs as it shifts the demand curve to the right.
E)price whereas quantity demanded falls.

Question 41

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is being regulated using a policy of marginal-cost pricing.In this case,the firm would experience represented by the area .

A)losses; P1P2bc
B)losses; edbc
C)losses; 0P2bQ2
D)profits; P2P3ad
E)profits; edbc

Question 42

Consider a natural monopoly that is producing an output level such that it is experiencing decreasing returns to scale.If government policy requires the firm to set price equal to marginal cost,

A)the outcome will be allocatively efficient and the firm will be earning profits.
B)the outcome will be allocatively inefficient and the firm will be earning profits.
C)the outcome will be allocatively efficient and the firm will be incurring losses.
D)the outcome will be allocatively inefficient and the firm will be incurring losses.
E)the outcome will be allocatively efficient and the firm will be earning zero profits.

Question 43

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is being regulated using a policy of average -cost pricing.In this case,

A)the result is allocatively efficient because economic profits are zero.
B)the result is allocatively inefficient because price exceeds marginal cost.
C)the level of output is too low,but the price is allocatively efficient.
D)the result is as close to the competitive outcome as possible.
E)the result is allocatively inefficient because the marginal cost curve is downward sloping.

Question 44

Consider the following information for a regional cable television service provider that is a natural monopoly and has a U-shaped long-run average cost curve.(Assume the service provided is basic cable and units are household connections.) - minimum LRAC = $9.00 per month
- minimum efficient scale = 2 million units
- current output = 2.3 million units
- LRAC at current output = $10.25 per month
If this firm is currently being regulated and is following an average -cost pricing policy,the price of the service is per month.

A)less than $9.00
B)$9.00
C)between $9.00 and $10.25
D)$10.25
E)higher than $10.25

Question 45

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12-7
Refer to Figure 12-7.If this firm were unregulated and profit maximizing,its profit would be per day.

A)$0
B)$10 000
C)$60 000
D)$110 000
E)$120 000

Question 46

According to economist George Stigler,the process of regulating firms with market power becomes suspect over time because

A)regulators impose additional costs on regulated firms because they are expected to accomplish other social goals.
B)regulators shift from protecting the consumer to protecting the regulated firm from competition.
C)regulated firms are allowed to expand into other markets and drive out competing firms.
D)regulated firms devise methods to circumvent the regulations.
E)regulation leads to corruption of political parties.

Question 47

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is being regulated using the policy of marginal-cost pricing.The resulting price and output would be

A)P2 and Q2.
B)P3 and Q1.
C)P1 and Q2.
D)P3 and Q2.
E)P1 and Q1.

Question 48

Consider the following information for a regional cable television service provider that is a natural monopoly and has a U-shaped long-run average cost curve.(Assume the service provided is basic cable and units are household connections.) - minimum LRAC = $9.00 per month
- minimum efficient scale = 2 million units
- current output = 2.3 million units
- LRAC at current output = $10.25 per month
Suppose the firm is currently being regulated and is required to follow a marginal-cost pricing policy.The price of the service will be per month.

A)lower than $9.00
B)$9.00
C)between $9.00 and $10.25
D)$10.25
E)higher than $10.25

Question 49

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose the firm is being regulated using a policy of average -cost pricing.The resulting price and output would be

A)P1 and Q2.
B)P1 and Q1.
C)P2 and Q2.
D)P3 and Q1.
E)P3 and Q2.

Question 50

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12-7
Refer to Figure 12-7.Suppose this firm is being regulated using a policy of average -cost pricing.The resulting price and output would be per kwh and kwh per day.

A)$0.06; 1 million
B)$0.07; 1.5 million
C)$0.09; 1.4 million
D)$0.11; 1 million
E)$0.12; 1 million

Question 51

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is being regulated using a policy of marginal-cost pricing.To maintain the resulting level of output

A)the government would have to subsidize the firm or it will eventually shut down.
B)the regulator would have to allow the firm to keep the monopoly profits at this level of output.
C)the government would have to accept the allocative inefficiency associated with this level of output.
D)the average total cost curve would have to shift up.
E)the demand curve would have to the left.

Question 52

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12-7
Refer to Figure 12-7.Suppose this firm is being regulated using a pricing policy of average-cost pricing.In this case,economic profits are equal to

A)$10 000.
B)$6000.
C)$126 000.
D)$28 000.
E)$0.

Question 53

Consider the following information for a regional cable television service provider that is a natural monopoly and has a U-shaped long-run average cost curve.(Assume the service provided is basic cable and units are household connections.) - minimum LRAC = $9.00 per month
- minimum efficient scale = 2 million units
- current output = 1.7 million units
- current LRAC = $10.25 per month
If this firm is currently being regulated and is following an average -cost pricing policy,the price of service is
Per month.

A)lower than $9.00
B)$9.00
C)between $9.00 and $10.25
D)$10.25
E)higher than $10.25

Question 54

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is being regulated using a policy of average -cost pricing.In this case,economic profits to the firm are represented by the area

A)P2P3ad.
B)P2P3ab.
C)0P3aQ1.
D)P1P2bc.
E)There are no economic profits.

Question 55

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is a government-owned natural monopoly and imposes a price so as to achieve allocative efficiency in this market.The amount of tax revenue that the government must raise elsewhere in the economy to offset the losses of this firm is represented by the area

A)P1P3ae.
B)P1P2bc.
C)edbc.
D)Q1dbQ2.
E)0P2bQ2.

Question 56

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12-7
Refer to Figure 12-7.Suppose this firm is being regulated using a policy of marginal-cost pricing.The resulting price and output would be per kwh and kwh per day.

A)$0.06; 1 million
B)$0.07; 1.5 million
C)$0.08; 1.5 million
D)$0.09; 1.4 million
E)$0.12; 1 million

Question 57

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12-7
Refer to Figure 12-7.If this firm were unregulated and profit maximizing,its price and output would be per kwh and kwh per day.

A)$0.08; 1.5 million
B)$0.09; 1.4 million
C)$0.12; 1 million
D)$0.11; 1 million
E)$0.07; 1.5 million

Question 58

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.The firm depicted in the figure is

A)a perfectly competitive firm.
B)a monopolistically competitive firm.
C)a natural monopoly.
D)an oligopoly.
E)a cartel.

Question 59

Consider the following information for a regional cable television service provider that is a natural monopoly and has a U-shaped long-run average cost curve.(Assume the service provided is basic cable and units are household connections.) - minimum LRAC = $9.00 per month
- minimum efficient scale = 2 million units
- current output = 1.7 million units
- current LRAC = $10.25 per month
Suppose the firm is currently being regulated and is required to follow a marginal-cost pricing policy.The price of the service will be per month.

A)lower than $9.00
B)$9.00
C)lower than $10.25
D)$10.25
E)higher than $10.25

Question 60

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12-6
Refer to Figure 12-6.Suppose this firm is being regulated using a policy of marginal-cost pricing.In this case,

A)allocative efficiency is achieved because profits are maximized.
B)the result is allocatively inefficient because the firm is suffering losses.
C)the result is allocatively inefficient because the firm is earning profits.
D)the result is allocatively inefficient because the marginal cost curve lies below the ATC curve.
E)allocative efficiency is achieved because price equals marginal cost.

Question 61

Canadian governments (federal,provincial and municipal)employ public ownership or regulation of industries in an effort to

A)ensure that the goal of profit maximization is being pursued because this ensures allocative efficiency.
B)produce a more equitable distribution of income between consumers and producers with monopoly power.
C)protect consumers from the high prices and restricted output associated with monopoly power.
D)promote productive efficiency in all industries.
E)transfer monopoly profits from private firm owners to the government.

Question 62

The objective of government regulation and competition policy can be described as a means to

A)promote economic efficiency.
B)make at least one person better off at the expense of others.
C)reduce inequality in the economy.
D)increase fairness in economic activities.
E)make all industries perfectly competitive.

Question 63

In Canada,the Competition Act specifies that in antitrust cases the ʺwatchdogʺ is the

A)Senate.
B)Commissioner of the Competition Bureau.
C)Supreme Court of Canada.
D)minister responsible for Industry Canada.
E)prime minister.

Question 64

In Canada, alleged violations of the Competition Act are referred to the ________ for adjudication.

A)Commissioner of the Competition Bureau
B)Competition Tribunal
C)minister responsible for Industry Canada
D)RCMP
E)provincial Courts of Appeal

Question 65

An allowable defence for a merger according to Canadaʹs Competition Bureau is that

A)merging firms find it easier to decide how they will share the market.
B)merging firms are more profitable because they no longer have to compete with one another.
C)the gains in efficiency resulting from the merger more than offset any reductions in competition.
D)merged and therefore bigger firms are better placed to compete globally.
E)larger firms are easier to regulate.

Question 66

Which of the following is a possible negative result of a policy of average -cost pricing as a method of regulating a natural monopoly?

A)economic losses will accumulate over time to unsustainable levels
B)taxpayers will have to subsidize the economic losses of the regulated monopoly
C)the regulated monopoly earns unreasonable profits
D)socially desirable capital investment may not occur
E)the induced technological change leads to more industries becoming natural monopolies

Question 67

The administrative agency established to enforce the provisions of the Competition Act is the

A)Competition Bureau.
B)Federal Free Trade Practices Commission.
C)Department of Consumer and Corporate Affairs.
D)Competition Tribunal Act.
E)Director of Investigations.

Question 68

In Canada,a significant challenge for the Competition Bureau when reviewing a possible merger between firms in a concentrated industry is to

A)determine whether efficiency gains make the merger desirable.
B)determine whether monopoly no longer poses a threat to the Canadian economy.
C)impose effective entry barriers to the industry.
D)determine whether criminal charges are required due to unlawful collusion.
E)allow those mergers that lead to larger firms that are easier to regulate.

Question 69

A major aim of Canadian competition policy is to

A)eliminate oligopolies and the allocative inefficiency that they entail.
B)prevent further concentration of industries where such concentration would lessen competition.
C)monitor the pricing practices of crown corporations.
D)protect Canadian companies from unfair foreign competition.
E)achieve a perfectly competitive market structure in all markets in the Canadian economy.

Question 70

Suppose there are only two firms (Firms A and B) in Canada that produce good X, and the two firms propose a merger to create a single firm (Firm AB). Is there any circumstance under which the authorities enforcing Canadian competition policy might approve of such a merger?

A) According to the Competition Act, as long as the revenues of the merged firm are less than $100 million per year.
B) According to the Competition Act, if the merged firm enhances the status of a Canadian cultural industry.
C) If the market is defined as being within Canadaʹs borders, and the merger allows Firm AB to exploit economies of scale.
D) If international trade in good X is such that Firm AB faces a fully competitive environment, both within and outside of Canadaʹs borders.

Question 71

Prior to the 1986 amendments to the Canadian Competition Act,cases brought against mergers were almost always unsuccessful.The reason most often cited for this is

A)that merging firms were always successful in destroying the incriminating evidence.
B)that judges were influenced.
C)that mergers that were detrimental to the public interest previously fell under criminal law,rather than civil law,making them particularly hard to prove.
D)that mergers that were detrimental to the public interest previously fell under civil law,rather than criminal law,making them particularly hard to prove.
E)the lack of a director responsible for prosecution.

Question 72

The diagram below shows cost and revenue curves for a natural monopoly producing electricity.Price is dollars per kilowatt hour and quantity is kilowatt hours per day.
FIGURE 12-7
Refer to Figure 12-7.Suppose this firm is being regulated using a policy of marginal-cost pricing.In this case,economic profits are equal to

A)-$15 000.
B)-$28 000.
C)$0.
D)$90 000.
E)-$50 000.