Marginal cost regulatory pricing turns out to be the same as output regulation (for a natu

Marginal cost regulatory pricing turns out to be the same as output regulation (for a natural monopoly firm) if the output level set by government is the

a.amount at which marginal cost equals average total cost.

b.resource-allocative efficient amount.

c.amount at which average total cost is at its highest level.

d.amount at which marginal revenue equals marginal cost.

e.none of the above

 

 

 

124.Regulatory lag refers to

a.the fact that most regulated firms are slow to change their structures of production.

b.the fact that most regulated firms are slow to respond to their customers' preferences.

c.the time period between when a natural monopoly's costs change and when the regulatory agency adjusts prices for the natural monopoly.

d.the time period between when natural monopoly begins to produce its output and when it sells its product.

e.none of the above

 

 

 

125."To understand the decisions of regulatory bodies, you must first understand how the decisions affect the regulators themselves." The person who made this statement probably believes in the __________ theory of regulation.

a.capture

b.public interest

c.social interest

d.public choice

e.none of the above

 

 

 

126.The capture theory of regulation holds that

a.regulators try to capture as much "profit" (for themselves) from the regulatory process as possible.

b.the special interests that are being regulated will eventually capture and control the regulatory body that "regulates" them.

c.the public usually captures the regulatory body and makes it do what it wants.

d.the courts usually capture the regulatory body and force it to do what is in the public's best interest.

e.none of the above

 

 

 

127.The public interest theory of regulation holds that regulators will

a.make regulatory decisions that benefit them at the expense of the special interests they are regulating.

b.be slow to adopt sound economic principles to guide their regulatory decision-making.

c.do through regulation what is in the public's best interest.

d.say they are doing what is right for the public, but in reality they are doing what is right for themselves.

e.often take vacations at taxpayer's expense.

 

 

 

128.The capture theory of regulation implicitly holds that

a.the members of a regulated industry have a stronger incentive to attend regulatory meetings than taxpayers and consumers.

b.regulators will always do what they think is in the public's best interest.

c.regulatory lag is often longer than most people think.

d.b and c

e.a, b, and c

 

 

 

129.Which of the following statements is false?

a.Average-cost pricing usually refers to setting a price for a natural monopoly firm that is equal to its ATC, thus guaranteeing the firm a normal profit.

b.An economist thinks that there are both benefits and costs to most (if not all) types of regulation.

c.The public choice theory of regulation holds that regulators are seeking to do, and will do through regulation, what is in the best interest of the society at large.

d.One of the unintended effects of profit regulation (in the form of guaranteeing the natural monopoly firm that it will always earn normal profit-nothing more and nothing less) is that the natural monopoly has no incentive to keep its costs down.

 

 

 

130.The profit-maximizing natural monopoly will

a.set price equal to marginal cost.

b.produce the quantity of output at which MR = MC.

c.charge the highest price per unit for the quantity of output it chooses to produce.

d.necessarily face higher production costs if it is unregulated than if it is regulated.

e.b and c

 

 

 

131.The monopoly power problem is that a monopoly

a.produces a smaller output than that produced by a perfectly competitive firm.

b.charges a higher price than the price a perfectly competitive firm would charge.

c.creates a deadweight loss to society.

d.a and b

e.a, b, and c

 

 

 

132.The statement, "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of the trade or commerce...shall be guilty of a misdemeanor" is a part of the

a.Clayton Act.

b.Robinson-Patman Act.

c.Sherman Act.

d.Wheeler-Lea Act.

e.none of the above