If the regulator require a natural monopoly set its price equal to its marginal cost, that would ensure
A) an economic profit for the firm.
B) zero economic profit for the firm.
C) an economic loss for the firm.
D) an accounting loss for the firms.
Ques. 2The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, at the equilibrium quantity, the marginal external benefit is
A) zero.
B) 5,000.
C) 4,000.
D) 8,000.
Ques. 3In the above figure, the long-run average cost curve exhibits diseconomies of scale
A) between 5 and 10 units per hour.
B) between 10 and 20 units per hour.
C) between 20 and 25 units per hour.
D) along the entire curve.
Ques. 4In the long run, perfectly competitive firms cannot make an economic profit. Why?
What will be an ideal response?
Ques. 5Lynn owns Dust Bunnies, a cleaning company. In one week, she is able to clean 9 houses. If she hires an employee, together they are able to clean 15 houses per week.
If Lynn charges 100 to clean a house, and she pays her employee 400 a week, should she hire this employee? A) Yes, because the value of marginal product of the worker is less than the wage.
B) Yes, because the value of marginal product of the worker is greater than the wage.
C) No, because the value of marginal product of the worker is greater than the wage.
D) No, because the value of marginal product of the worker is less than the wage.
Ques. 6A natural monopoly that is regulated to set its price according to the marginal cost pricing rule will
A) incur an economic loss.
B) maximize its profit.
C) produce a quantity of output such that price is above average total cost.
D) produce a quantity of output such that marginal cost is above average total cost.
Ques. 7The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is
A) zero.
B) 4,000.
C) 5,000.
D) 7,000.
Ques. 8In the above figure, the long-run average cost curve exhibits constant returns to scale
A) between 5 and 10 units per hour.
B) between 10 and 20 units per hour.
C) between 20 and 25 units per hour.
D) along the entire curve.
Ques. 9In the long-run equilibrium in monopolistic competition, price equals marginal cost.
Indicate whether the statement is true or false
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