Question 1

The concept of laissez faire calls for government intervention if market failure is evident.

Accepted Answer

A) True 
 B)False

Question 2

If profit regulation is used to control a natural monopolist, the monopolist is likely to

Accepted Answer

A)   Attempt to reduce the costs of production.
B)   Inflate or pad the costs of production.
C)   Increase the quality of its product in an effort to increase sales.
D)   Reduce maintenance of plants and equipment.E) A) and B)
F) All of the above

Question 3

The case for deregulation rests on the argument that

Accepted Answer

A)   Government imperfections are worse than the market imperfections they were designed to cure.
B)   Public goods are best provided by laissez faire.
C)   Economies of scale are better achieved with the invisible hand.
D)   Regulation is desirable and efficient, but a laissez-faire approach is more equitable.E) A) and C)
F) A) and B)

Question 4

An unregulated natural monopoly can lead to all of the following except

Accepted Answer

A)   A suboptimal mix of output.
B)   Less output than society wants.
C)   Unfair monopoly profits.
D)   Low prices for consumers.E) B) and D)
F) A) and D)

Question 5

If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination, the monopolist would

Accepted Answer

A)   Lose money and go out of business.
B)   Earn only normal profits.
C)   Earn economic profits.
D)   Earn less profit than before, but still earn a profit.E) C) and D)
F) All of the above

Question 6

Market failure can result from all of the following except

Accepted Answer

A)   Market power.
B)   Regulation.
C)   Restricted output.
D)   Monopoly.E) C) and D)
F) A) and B)

Question 7

The over 260,000 people employed in regulatory agencies of the federal government represent

Accepted Answer

A)   A compliance cost.
B)   An efficiency cost.
C)   An administrative cost.
D)   An information cost.E) A) and D)
F) All of the above

Question 8

An unregulated natural monopoly can lead to

Accepted Answer

A)   Higher prices for consumers.
B)   An optimal mix of output.
C)   Loss of economies of scale.
D)   Marginal cost pricing.E) A) and C)
F) B) and C)

Question 9

Output regulation forces the natural monopolist to produce at an output

Accepted Answer

A)   That perfectly competitive firms would choose.
B)   Where MR = MC.
C)   Greater than its profit-maximizing choice.
D)   Where MR equals zero.E) A) and B)
F) A) and C)

Question 10

When market outcomes improve after government regulation is enforced,

Accepted Answer

A)   Technical efficiency is achieved.
B)   The net effect of government intervention on society is definitely beneficial.
C)   Government intervention still may not be justified if the economic costs are too high.
D)   Allocative efficiency is achieved.E) A) and D)
F) None of the above

Question 11

In the absence of a subsidy, production efficiency by a natural monopolist will

Accepted Answer

A)   Be achieved if price is set equal to average total cost.
B)   Be achieved if marginal revenue is set equal to marginal cost.
C)   Be achieved if price is set equal to marginal cost.
D)   Never be achieved.E) All of the above
F) B) and C)

Exam 13: Natural Monopolies: Deregulation

Market failure can result from all of the following except

Correct Answer
verified

The concept of laissez faire calls for government intervention if market failure is evident.

Correct Answer
verified

When market outcomes improve after government regulation is enforced,

Correct Answer
verified

Output regulation forces the natural monopolist to produce at an output

Correct Answer
verified

The case for deregulation rests on the argument that

Correct Answer
verified

An unregulated natural monopoly can lead to

Correct Answer
verified

An unregulated natural monopoly can lead to all of the following except

Correct Answer
verified

In the absence of a subsidy, production efficiency by a natural monopolist will

Correct Answer
verified

If profit regulation is used to control a natural monopolist, the monopolist is likely to

Correct Answer
verified

If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination, the monopolist would

Correct Answer
verified

The over 260,000 people employed in regulatory agencies of the federal government represent

Correct Answer
verified

Exam 13: Natural Monopolies: Deregulation

Market failure can result from all of the following except

Correct AnswerverifiedShow Answer

The concept of laissez faire calls for government intervention if market failure is evident.

Correct AnswerverifiedShow Answer

When market outcomes improve after government regulation is enforced,

Correct AnswerverifiedShow Answer

Output regulation forces the natural monopolist to produce at an output

Correct AnswerverifiedShow Answer

The case for deregulation rests on the argument that

Correct AnswerverifiedShow Answer

An unregulated natural monopoly can lead to

Correct AnswerverifiedShow Answer

An unregulated natural monopoly can lead to all of the following except

Correct AnswerverifiedShow Answer

In the absence of a subsidy, production efficiency by a natural monopolist will

Correct AnswerverifiedShow Answer

If profit regulation is used to control a natural monopolist, the monopolist is likely to

Correct AnswerverifiedShow Answer

If the government regulated a natural monopolist to achieve price efficiency without subsidies or price discrimination, the monopolist would

Correct AnswerverifiedShow Answer

The over 260,000 people employed in regulatory agencies of the federal government represent

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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