9. The total welfare cost of a monopoly that engages in rent-seeking activities:
ID: 1112860 • Letter: 9
Question
9. The total welfare cost of a monopoly that engages in rent-seeking activities:
a. equals only the portion of lost consumer surplus that is not transferred to the monopolist
b. includes the use of resource devoted to rent-seeking
c. equals the loss of welfare in the economy because of barriers to entry
d. equals the total economic profit earned by the monopolist
e. excludes the use of resources devoted to rent seeking
13. If perfect competition existed everywhere, along with frictionless exchange, perfect information, and constant returns to scale, then
a. consumers would carry out transactions directly with resource suplliers
b. firms would not have the information necessary to calculate the marginal productivities of resources
c. entrpreneurs would be needed to collect information about prices
d. consumers would produce output and then engage in barter
e. the economy would be organizaed into one large firm
14. Suppose ten pertzels are sold at a price of $8 each and the marginal product of the last unit of labor required to produce pretzels is 5 units. The total revenue of the firm producing pretzels is ____
a. $80
b.$30
c. $50
d.$6
e. $150
18. Which of the following is likely to limit the extent of a firm's vertical integration?
a. A manager's bounded rationality
b. A small minimum efficient scale of producing inputs relative to the firm's input repuirements
c. The fact that the quality of inputs is easily determined at the time of purchase
d. The presence of a large number of supplies of the firm's inputs
e. A high cost of contracting with resource suppliers
Explanation / Answer
9b) includes the use of resource devoted to rent-seeking.
Rent seeking are activities undertaken by individuals or firms to influence public policy in a way that increases their incomes. The efforts firms devote to securing and maintaining a monopoly right is largely a social waste because they use up scarce resources but add not one unit to output.
13a) consumers would carry out transactions directly with resource suplliers
14a) $80. TR = Q* P = 10*8=80
18e)A high cost of contracting with resource suppliers. Vertical Integration is the combination in one firm of two or more stages of production normally operated by separate firms.
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