Regulation of a natural monopoly will maximize the sum of consumer surplus and producer surplus if the firm is regulated with
A) an average cost pricing rule.
B) a marginal cost pricing rule.
C) rate of return regulation.
D) All of the above answers are correct.
Ques. 2The table above shows the marginal costs and marginal benefits of college education. The marginal private benefit of college education at the efficient amount of enrollment is
A) 20,000 per year.
B) 16,000 per year.
C) 12,000 per year.
D) 14,000 per year.
Ques. 3An auction of the leases to drill for natural gas on about 55,000 acres on the Roan Plateau in western Colorado in August 2008 generated nearly 114 million, a record for onshore energy lease sales in the lower 48 states.
Is natural gas a renewable or non-renewable resource? Why? A) Renewable, because the resource can be recycled
B) Non-renewable, because the used resource cannot be reused
C) Non-renewable, because the value of marginal product for natural gas is diminishing
D) Renewable, because oil, natural gas, and coal are traded in global community markets
Ques. 4Income redistribution ________.
A) creates an income distribution that is less equal than the market distribution
B) is efficient because it makes the distribution of income more equal.
C) eliminates the big tradeoff between rich and poor
D) creates a deadweight loss
Ques. 5Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.
What will be an ideal response?
Ques. 6When a firm is experiencing economies of scale
A) the MP curve slopes upward.
B) the LRAC curve slopes downward.
C) diminishing returns to labor have been suspended.
D) the MC curve slopes downward.
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