Reading 19: Monopoly-LOS d 习题精选 2011, following, including, monopoly, center

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Session 5: Economics: Market Structure and Macroeconomic Analysis
Reading 19: Monopoly

LOS d: Explain how consumer and producer surplus are redistributed in a monopoly, including the occurrence of deadweight loss and rent seeking.

 

 

Which of the following is the most accurate description of rent seeking?

A) Producers spend time and resources to acquire or establish a monopoly.

B) Producers supply a quantity that does not maximize the sum of consumer surplus and producer surplus, resulting in inefficiency.

C) Consumers seek out the lowest possible price that a monopolist is willing to charge, which decreases the producer’s profits.

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Rent seeking occurs when producers use resources to try to acquire or establish a monopoly. When a firm expands the range of goods it produces so that its average total cost is reduced, it achieves economies of scope.

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When producers expend resources to establish monopoly power in a market, this is called:

A) surplus allocation.

B) rent seeking.

C) resource rationalization.

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When producers expend resources and time in an effort to establish a monopoly position, this behavior is described as rent seeking.

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Even though the producer surplus increases under a monopoly scenario, relative to one of perfect competition, the consumer surplus decreases by:

A) a lesser amount.

B) a greater amount.

C) an equal amount.

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The consumer surplus decreases by a greater amount than the producer surplus increases, with the difference representing a deadweight loss.

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Compared to a competitive market, a monopoly situation will produce:

A) less output, and the sum of the consumer surplus and the producer surplus will be increased.

B) more output, and the sum of the consumer surplus and the producer surplus will be reduced.

C) less output, and the sum of the consumer surplus and the producer surplus will be reduced.

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A monopolist, faced with the same demand curve that would exist under perfect competition, will decrease output to the point that marginal revenue equals marginal cost. This will have the effect of reducing the sum of the consumer surplus and the producer surplus, relative to what they would have been under perfect competition. However, the size of the producer surplus increases on an absolute basis at the expense of the consumer surplus.