Ethics

39) Which of the following total cost functions suggests the presence of a natural monopoly?

A) TC = 2Q

B) TC = 100 + 2Q

C) TC = 100 + 2 Q2

D) All of the above.

Answer: B

Diff: 2

Topic: Cost Advantages That Create Monopolies

40) Empirical evidence from electric-power-producing firms suggests that

A) all electric-power-producing firms are natural monopolies.

B) no electric-power-producing firms are natural monopolies.

C) the largest electric-power-producing firms are natural monopolies.

D) the smallest electric-power-producing firms are natural monopolies.

Answer: D

Diff: 2

Topic: Cost Advantages That Create Monopolies

41) Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

A) the average cost curve for these firms is U-shaped.

B) no electric-power-producing firms are natural monopolies.

C) the largest firms enjoy economies of scale.

D) the designation of natural monopoly can only be bestowed by the government.

Answer: A

Diff: 2

Topic: Cost Advantages That Create Monopolies

42) A justification for patents is that without patents consumer surplus would be

A) larger than with the patent.

B) zero since the product would not be invented.

C) only slightly smaller than with the patent.

D) zero since the monopoly would be a revenue maximizer.

Answer: B

Diff: 2

Topic: Government Actions That Create Monopolies

43) Government actions that create monopolies

A) spur product innovation by the monopoly.

B) create deadweight loss.

C) result in lower average costs of production.

D) ensure that firms price at marginal cost.

Answer: B

Diff: 1

Topic: Government Actions That Create Monopolies

44) Optimal price regulation sets price equal to

A) marginal cost.

B) average variable cost.

C) average cost.

D) minimum average cost.

Answer: A

Diff: 1

Topic: Government Actions That Reduce Market...