Question

7) If the government forces a monopoly to set its price equal to its marginal cost and there are high economies of scale: Group of answer choices

the monopolist’s costs will exceed revenue.

the market will be more efficient than if the prices was equal to average cost.

the monopolist is more likely to innovate.

the monopolist will earn more profit than if they were unregulated.

8) If production costs and profits are similar, in a competitive market prices will be ________ and its output ________ than a monopoly market. Group of answer choices

higher; greater

lower; lower

higher, lower

lower; greater

9) Many politicians say that pharmaceutical prices are too high. If the government were to set maximum prices for certain drugs, what would most likely happen? Group of answer choices More new drugs would be introduced.

Lower prices would decrease quantity demanded.

The public’s standard of living would increase.

Pharmaceutical producers would have lower profits to use to research and develop new drugs.

Answer 1

7.

A

Marginal cost pricing, will only cover the variable cost, but not fixed cost. So, total cost of the regulated monopolist, will be more than the total revenue.

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8.

D

Perfectly competitive market has allocative as well as productive efficiency. It cause price to lower and output to be higher than that of the monopoly market.

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9.

D

Regulating these producers, will make them earn less profit. So, less amount of funds will be available, for the R&D work.