1) In a "self-regulating" economy, inflationary and recessionary gaps:

a. Are eliminated by the timely actions of economic policymakers,

b. Are eliminated by forces internal to the economy, without government intervention,

c. Are the desirable results of microeconomic price adjustments,

d. Never occur.

2) One problem associated with a monopoly firm is that it:

a. Produces too little output but also charges a low price,

b. Produces too much output and charges too low a price,

c. Restricts output and charges a relatively higher price than a purely competitive industry,

d. Is just as good as a purely competitive firm in terms of output and price but leaves consumers with fewer choices.

3)Post one example of a monopoly.

1) The correct answer is b. Are eliminated by forces internal to the economy, without government intervention.

• No matter the type of economy, inflationary and recessionary gaps will always occur over time. However, a self-regulating economy favors the natural re-equilibration of supply and demand dynamics to address these gaps instead of relying on the government to intervene.

2)The correct answer is c. Restricts output and charges a relatively higher price than a purely competitive industry,

This is because the monopolist sets the market price where the additional revenue is equated with the additional cost. It would lead to create inefficiency in the market by creating the dead weight loss. The monopolist could producer higher output and improve the social welfare but for earning the maximum benefits, the output is restricted.

3)Several US companies are conducting a monopoly market in the economy, such as Microsoft, with a monopoly in the personal computer operating system. The company is the sole producer of windows operation system, Microsoft word, excel, and office, which are used globally. Moreover, its privileges enable it to set the prices for its products in the market since the company is a sole supplier.