Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?
A) This results in a misallocation of resources.
B) The marginal cost of producing the last unit sold exceeds the marginal benefit.
C) The firm will sustain persistent losses and will not continue in business in the long run.
D) The firm will break even.
22) Refer to Figure 15-7. If the regulators of the natural monopoly allow the owners of the firm to break even on their investment the firm will produce an output of ________ and charge a price of ________.
A) Q1 units; P4
B) Q1 units; P1
C) Q5 units; P3
D) Q3 units; P3
23) Refer to figure 15-7. In the absence of any government regulation, the profit-maximizing owners of this firm will produce ________ units and charge a price of ________.
A) Q0 units; P0
B) Q1 units; P1
C) Q1 units; P4
D) Q3 units; P3
24) The proposed merger between AT&T and T-Mobile wold be classified as a ________ merger.
25) The government estimated that by allowing the merger between AT&T and T-Mobile to go through, the Herfindahl Hirschman Index for the national market would increase by nearly 700 points to about 3,100. According to the merger standards of the Department of Justice and the FTC, a Herfindahl Hirschman index of 3,100 indicates that the market is ________ concentrated, and the increase of nearly 700 points indicates that the merger ________ be challenged.
A) moderately; may
B) moderately; will
C) highly; may
D) highly; will likely
26) Despite the popularity of the National Football League, many cable television systems do not offer their customers the NFL Network. In most cities, cable systems are monopolies so their customers cannot switch to another system that carries the NFL Network. One reason why cable systems don't offer the NFL Network is
A) it would violate antitrust laws.
B) cable systems can make greater profits by not offering the NFL network as part of its normal package, but by forcing consumers to upgrade their service in order to watch it.
C) the marginal cost of adding the NFL Network to their programming packages would exceed the marginal revenue cable systems would receive.
D) consumer surveys convinced cable systems that the NFL Network is not as popular as NFL games that are not carried on the NFL network.
27) Several states have passed laws that allowed greater competition in the cable television market. A likely outcome of these laws is
A) an increase in the number of state laws that allow for greater competition in the satellite television market.
B) an increase in campaign contributions from cable television company officials to state legislators.
C) lower prices for cable television and an improvement in the services cable companies offer to their customers.
D) higher cable prices but an increase in the number of stations offered by cable television companies to their customers.
28) As more cities allow competition in the market for cable television,
A) more cable television providers will exit the market.
B) producer surplus in the market will increase.
C) deadweight loss in the market will be reduced.
D) economic profits in the market will increase.
29) Merger guidelines developed by the Antitrust Division of the U.S. Department of Justice use four-firm concentration ratios as measures of concentration.
30) Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions.
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