{
  "mcq": [
    {
      "question": "A per-unit tax imposed on a firm in a perfectly competitive market will:",
      "options": [
        "a) Shift the firm's average total cost curve upward and the marginal cost curve upward.",
        "b) Shift the firm's average total cost curve upward but not the marginal cost curve.",
       "c) Shift the firm's marginal cost curve upward but not the average total cost curve.",
        "d) Shift the firm's average fixed cost curve upward and the marginal cost curve upward."
      ],
      "answer": "a"
    },
    {
      "question": "Which of the following is true of a lump-sum tax on a firm?",
      "options": [
        "a) It affects marginal cost and average variable cost.",
        "b) It affects marginal cost but not average total cost.",
        "c) It affects average total cost but not marginal cost.",
        "d) It affects average variable cost but not average total cost."
      ],
      "answer": "c"
    }
  ],
  "frq": {
    "question": "Assume a perfectly competitive firm is currently producing at its profit-maximizing output level. The government imposes a per-unit tax on the firm. \n(a) Using a correctly labeled graph, show the impact of the per-unit tax on the firm's cost curves.\n(b) Explain how the per-unit tax will affect the firm's profit-maximizing output level and price.\n(c) Now, suppose instead of a per-unit tax, the government imposes a lump-sum tax. Explain how this will affect the firm's cost curves and profit-maximizing output level.",
    "scoring": {
      "part_a": "1 point for correctly shifting MC and ATC curves upward",
      "part_b": "1 point for stating output will decrease; 1 point for stating price will increase",
      "part_c": "1 point for stating that only ATC shifts up; 1 point for stating that output will not change"
    }
  }
}

{
  "mcq": [
    {
      "question": "If a government regulates a natural monopoly by setting a price ceiling at the socially optimal price, which of the following is most likely to occur?",
      "options": [
        "a) The monopoly will earn positive economic profits.",
        "b) The monopoly will incur an economic loss.",
        "c) The monopoly will produce at the allocatively efficient level of output.",
        "d) The monopoly will produce where marginal revenue equals marginal cost."
      ],
      "answer": "b"
    },
    {
      "question": "A fair-return price for a regulated monopoly is a price that is equal to:",
      "options": [
        "a) marginal cost.",
        "b) average total cost.",
        "c) average variable cost.",
        "d) marginal revenue."
      ],
      "answer": "b"
    }
  ],
  "frq": {
    "question": "Assume a natural monopoly is currently unregulated. \n(a) Draw a correctly labeled graph showing the monopoly's demand, marginal revenue, marginal cost, and average total cost curves. Indicate the profit-maximizing output and price. \n(b) On the same graph, show the socially optimal output and price. Explain why this is considered the socially optimal level.\n(c) Explain why a government might choose to regulate the monopoly at the fair-return price instead of the socially optimal price.",
    "scoring": {
      "part_a": "1 point for correctly labeled axes and curves; 1 point for showing the profit-maximizing output and price where MR=MC",
      "part_b": "1 point for correctly showing the socially optimal point where P=MC; 1 point for explaining that this is where allocative efficiency is achieved",
      "part_c": "1 point for explaining that the fair-return price allows the firm to break even and avoids the need for subsidies"
    }
  }
}