Question

PLEASE ANSWER EACH QUESTION 1 THRU 4

1. Question text

When a pure monopolist price discriminates, which one of following happens?

Select one:

a. Producer's surplus increases by a samller amount than consumer's surplus decreases.

b. Producer's surplus increases by the same amount as consumer's surplus decreases.

c. Producer's surplus increases by a greater amount than consumer's surplus deacreases.

d. Consumer's surplus increase

2. Question

When is the monopolistic firm is under control of a regulatory commission, which of the following is correct?

Select one:

a. Price may be higher than it would be in an un-regulated monopoly, but output is greater.

b. Price would be at the same level as it would be in un-regulated pure monopoly, but government taxes away the economic profit of the regulated monopoly.

c. Price is theoretically set at the level at which average revenue equals average cost, and only normal profit exists.

d. Price is at the same level as it would be under pur competition.

3. Question

Which describes the best realtionship between technical effciency and allocative efficiency in the long run equlibrium under pure competition?

Select one:

a. They have no relationship with each other.

b. Allocative efficiency is greater than thechnical efficiency.

c. Technical efficiency is greater than allocative efficiency.

d. They are both maximized.

4. Question text

Which market structure has the largest number of firms?

Select one:

a. perfect competition

b. monopoly

c. oligopoly

d. monopolistic competition

Answer 1

Q1. C. Producer's surplus increases greater than the consumer's surplus decreases. This happens because the monopolist firm is the price maker and is free to charge any amount from uts consumers as he is the only seller of that product or service. Hence, the firms earns the best profits it wants from consumers.

Q2. C. Price is theoretically set at prices where average revenue equals average costs and only normal profits exists. As now the prices of the monopoly are regulated by the Government hence it will ensure the welfare of the society and make the monopolist charge average prices from the consumers earning only normal profits.

Q3. C. Technical efficiency is greater than allocative efficiency. Thai happens because the sellers work with the motive of producing more quantities with the available resources as the product is completely same of all.

Q4. A. Perfect competition has the highest number of firms. There are a large number of firms selling the same product and earning normal profits. As there is free entry and exit policy available with the firms.