Government intervention without market failure creates:

• A) Efficiency
• B) Economies of scale
• C) Inefficiency
• D) Economies of scope

An amusement park charges an entrance fee of $75 per person, then $2.50 per ride. This is an example of:

• A) Bundling.
• B) A two-part tariff.
• C) Second-degree price discrimination.
• D) First-degree price discrimination.

A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing:

• A) Third-degree price discrimination.
• B) Fourth-degree price discrimination.
• C) First-degree price discrimination.
• D) Second-degree price discrimination.

All of the following options are true for monopoly EXCEPT?

• A) The profit maximizing output is the one at which the difference between total revenue and total cost is largest.
• B) At the profit maximizing output, price equals marginal cost.
• C) The monopolist's demand curve is the same as the market demand curve.
• D) The profit maximizing output is the one at which marginal revenue and marginal cost are equal.

Due to imposition of a specific tax per unit on a product imposed by the government, consumer surplus will ________ and producer surplus will _________.

• A) Decrease; increase
• B) Decrease; decrease
• C) Increase; decrease
• D) Increase; increase

Which of the following is unlikely to occur as a result of a price support program?

• A) An increase in quantity purchased.
• B) An economic cost to government.
• C) A reduction in producer surplus.
• D) A reduction in consumer surplus.

Import tariffs generally result in:

• A) Less consumer surplus.
• B) A deadweight loss.
• C) All of the given options.
• D) Higher domestic prices.

With respect to monopolies, deadweight loss refers to the:

• A) None of the given options.
• B) Lost consumer surplus from monopolistic pricing.
• C) Socially unproductive amounts of money spent to obtain or acquire a monopoly.
• D) Net loss in consumer and producer surplus due to a monopolist’s pricing strategy/policy.

Which of the following strategies are used by business firms to capture consumer surplus?

• A) Two-part tariffs.
• B) All of the given options.
• C) Bundling.
• D) Price discrimination.

A monopoly is a market structure characterized by:

• A) Limited entry and exit.
• B) A product with many close substitutes.
• C) A large number of small firms.
• D) A single buyer.

At equilibrium, monopolist will charge a ______________ price and sell a ______________ quantity as compared to pertfecly competitive firm.

• A) Lower; smaller
• B) Higher; larger
• C) Higher; smaller
• D) Lower; larger

The benefit of a subsidy accrues mostly to producers:

• A) In every instance.
• B) If Ed/Es is large.
• C) If Ed/Es is small.
• D) If Ed and Es are equal.

A monopolist firm will determine its profit maximizing level of output where:

• A) Price equals marginal cost.
• B) Marginal revenue equals marginal cost.
• C) Price equals marginal revenue.
• D) Total revenue equals average total cost.

A lawyer charges different fee from his customers according to their ability to pay. This is an example of:

• A) Second degree price discrimination.
• B) First degree price discrimination.
• C) None of the given options.
• D) Third degree price discrimination.

In a market with a bilateral monopoly:

• A) There are a few buyers and many sellers.
• B) There are many buyers and a single seller.
• C) There is a single buyer and few sellers.
• D) There is a single buyer and a single seller.

The monopolist that maximizes profit:

• A) Does not impose a cost on society because the selling price is above marginal cost.
• B) Imposes a cost on society because the selling price is equal to marginal cost.
• C) Imposes a cost on society because the selling price is above marginal cost.
• D) Does not impose a cost on society because price is equal to marginal cost.

Governments may successfully intervene in competitive markets in order to achieve economic efficiency:

• A) In cases of both positive and negative externalities.
• B) In cases of positive externalities only.
• C) At no time; competitive markets are always efficient without government intervention.
• D) In cases of negative externalities only.

A downward-sloping demand curve exists for:

• A) Both a monopoly and a perfectly competitive firm.
• B) A perfectly competitive firm, but not for a monopoly.
• C) Neither a monopoly nor a perfectly competitive firm.
• D) A monopoly, but not for a perfectly competitive firm.

Unemployment arises when firms are not allowed to pay:

• A) More than minimum wage
• B) All of the given options
• C) Equilibrium wage
• D) Less than minimum wage

Most of the burden of a tax per unit of output will be borne by consumers when demand is relatively ______________ and supply is relatively ______________.

• A) Inelastic; elastic
• B) Elastic; elastic
• C) Inelastic; inelastic
• D) Elastic; inelastic