1. Which of the following industries is most likely closest to achieving perfect price discrimination?
a. the textbook industry
b. the wheat industry
c. the airline industry
d. the soft drink industry
e. the toilet paper industry
2. Suppose that a regulatory agency helps producers maximize economic profit. This type of regulation coincides with
a. a natural monopoly.
b. the social interest theory of regulation.
c. an average cost pricing rule.
d. a marginal cost pricing rule.
e. the capture theory of regulation.
3. If a firm successfully price discriminates, it increases
i. consumer surplus.
ii. deadweight loss.
iii. economic profit.
a. i and ii
b. ii only
c. iii only
d. i and iii
e. i only
4. Which of the following is an example of a natural monopoly?
a. Debeers' ownership of a large fraction of the world's diamonds
b. the patent on an Intel processor
c. the local water company
d. the trademark protecting Gatorade
e. the talents of Tom Hanks
5. Today, you might be buying from a regulated natural monopoly when you purchase
a. a car, a truck, or a bicycle.
b. natural gas or electricity.
c. a house, a condominium, or a plot of land.
d. food in a grocery store or in a restaurant
e. a computer, a phone, or a camera.
6. In order to maximize its profit, a single-price monopoly produces the amount of output so that
a. P = ATC.
b. P = MC - MR.
c. P = MR.
d. P = MC.
e. MR = MC.
7. A firm in monopolistic competition is
a. efficient because of the ease of entry.
b. efficient because it produces where MR = MC.
c. inefficient because price exceeds marginal cost.
d.efficient because it produces at the minimum average total cost.
e. efficient because in the long run it earns zero economic profit.
8. Monopolistic competition is a market structure in which
a. firms face barriers to entry.
b. the firms have no ability to influence the price of their product.
c. firms produce and sell an identical product.
d. a large number of firms compete.
e. firms face perfectly elastic demand for their product.