Question

Question 171 pts

Which of the following will cause an unregulated monopolist to produce a more allocatively efficient level of output?

A tax based on the amount of profits

A tax that does not change as output increases

A tax that increases as output increases

A subsidy that increases as output increases

A subsidy that does not change as output increases

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Question 181 pts

The profit-maximizing output level produced by an unregulated monopoly is

the socially optimal output level, since the firm's marginal revenue equals its marginal cost

greater than the socially optimal level, since the firm's marginal cost exceeds its marginal revenue

greater than the socially optimal level, since the firm makes economic profits

less than the socially optimal level, since the price paid by consumers exceeds the firm's marginal cost

less than the socially optimal level, since the price of the product is less than the firm's marginal revenue

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Question 191 pts

Most economists argue that a monopoly is inefficient because it

has no incentive to minimize its costs

produces too little output and sets a price above marginal cost

earns too much profit by charging consumers any price it wants

produces too much output and thus wastes scarce resources

usually produces unsafe products if not regulated by government

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Question 201 pts

A market controlled by two firms is called what?

a monopoly

an oligopoly

a duopoly

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Question 211 pts

Assume that there is only one supplier of oil to the United States. In the short run, why could this cause a market failure?

Immigration of people from the oil supplier would sky rocket.

The supplier can set the price of oil.

It wouldn't because others would enter the market.

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Question 221 pts

Which of the following is NOT a characteristic of monopolistically competitive markets?

Relatively easy market entry

Differentiated products

Substantial product advertising

A large number of both buyers and sellers

Long-run economic profits

Answer 1

Question 17 A subsidy that increases as output increases. This encourages the monopolist to increase production and reduce prices, a step resulting in an outcome closer to allocatively efficient outcome.

Question 18 less than the socially optimal level, since the price paid by consumers exceeds the firm's marginal cost. Socially optimal output occurs at P = MC which is greater than the monopoly output which occurs at P > MR = MC.

Question 19 produces too little output and sets a price above marginal cost.

Question 20 a duopoly

Question 21 The supplier can set the price of oil.

Question 22 Long-run economic profits