Question

Help with 17-20 please.

17. Allocative efficiency for a monopoly is characterized by the condition: A. PMC B. P-MR C. P> MC D. P-min ATC 18. A regulatory commission wants a monopoly to have a 'fair return" price. It should establish a price equal to A. Average Fixed Cost B. Average Total Cost C. Marginal Cost D. Marginal Revenue 19. Owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly, Economists refer to these expenditures as: A Network Effects B. Price Discrimination C. Rent Seeking D. X-Efficiency 20. X-Inefficiency refers to a situation in which a firm A Fails to achieve the minimum average total costs attainable at each level of output B. Is not as technologically progressive as it might be. C Encounters diseconomies of scale. D. Fails to realize all existing economies of scale.

Answer 1

17 - Option C

P > MC

The monopoly earns the supernatural profits , hence the condition of this would be P > MC .

All the given conditions do not match with the condition of the monopoly firm. Hence will be wrong.

18 - Option B

Average total cost

Fair return price refers to the price at which it equals the Average total cost or earns only the normal profits.

All the other options do not represent the Fair return price and will be wrong.

19 - Option C

Rent seeking.

Since the members are violating the social practise of avoiding corruption to increase their profits by bribing the government officials , hence it is called the rent seeking activity.

Price discrimination is the charging of the different price from different class of the consumers , X effficiency is the lack of the competitive pressure , hence they will not be the correct answer.

20 - Option A

Fail to achieve the minimum average total cost attainable at each level of output.

Due to the lack of the competitive pressure , the firm does not produce to an output sufficient to reduce the Average total cost. Hence the ATC remain at a higher level than required and the firm faces loss.

The other options do not accurately represent the condition of the X inefficiency .