Mod 62: Monopoly and Public Policy

Which of the following is true of a monopoly compared to a perfectly competitive market with the same costs?

• consumer surplus is smaller

• producer surplus is smaller

• deadweight loss is smaller

• profit is smaller

• the product is smaller

A monopoly typically causes deadweight loss due to

• low prices

• low profits

• low quantity of output

• high input prices

• high production

Which of the following is true of a natural monopoly?

• It experiences diseconomies of scale.

• It relies on organic resources for production.

• The government can provide the service most efficiently.

• It is a decreasing cost industry.

• Costs are lower if there is a single firm in the market.

Which of the following government actions is the most common response to a natural monopoly in the USA?

• prevent its formation

• break it up using antitrust laws

• treat it like any industry in the free market

• regulate prices

• make it public

In order for a natural monopoly to continue operations in the long run, the regulated price must be at least as high as:

• minimum MC

• minimum VC

• the MC where MC = Demand

• the ATC where ATC = Demand

• MC = MR

Where the average total cost curve for a natural monopoly crosses the demand curve:

• the marginal revenue curve is rising

• the marginal revenue curve also crosses the demand curve

• the average total cost curve is rising

• the marginal cost curve is below the average total cost curve

• the average total cost curve is below that average variable cost curve