Self-Testing (Body of Knowledge on Infrastructure Regulation)

Body of Knowledge on Infrastructure Regulation

Self-Testing: Full Test

Question 1 of 51

Which of the following is false?

Historically, many countries in the developing world attempted to provide infrastructures service by forming state-owned monopolies.
In recent decades, it became clear that many public sector monopolies were inefficient providers of utility services.
During the 1980s and the 1990s, most countries dramatically increased public investment in infrastructure, leading to significant improvements in sector performance.
Some countries have sought private capital for expanding access to infrastructure services.

Question 2 of 51

Which of the following is false?

Countries often introduce various forms of competition to meet policy objectives, but regulation is able to create much stronger incentives for keeping costs down.
Both competition for the market (franchise bidding) and competition in the market can stimulate investment and encourage efficiency.
Unregulated competition in the market may be impractical or inadequate in some situations.
The steps in utility reform should provide as much certainty as is practicable for investors to reduce political risks that would (otherwise) raise the cost of capital.

Question 3 of 51

Which of the following is false?

"Public interest" theory proves that regulators have more information than "special interest" groups.
Capture theory argues that regulators are often captured by politically powerful economic interests.
Public interest theory holds that regulation is the least-cost remedy to market failures and imperfections (such as pollution or monopoly power).
Theories about how regulation should be done are called normative theories.

Question 4 of 51

Which of the following is false?

In the case of electricity, best practice suggests that new regulatory agencies should not micro-manage private power companies.
Electricity sector reforms have resulted in substantial cost savings and lower prices to all customers.
There is evidence that privatization and creation of independent regulatory commissions in Africa and Latin America have improved electricity sector performance.
Privatization and private participation in electricity markets have caused significant public debates over the benefits (and costs) of public ownership.

Question 5 of 51

Which of the following is false?

Micro-management by politically-motivated government officials sometimes led state-owned operators to have excessive numbers of employees and provide service primarily to politically powerful groups.
Some state-owned operators have needed government subsidies to finance investments and cover other costs.
Recent technological changes have increased the gains to vertical integration in electricity generation and telephony, which strengthens the argument for maintaining vertically integrated monopolies in these sectors.
Some analysts argue that privately owned firms may operate more efficiently than state-owned enterprises because profit motives provide clear and consistent incentives to control costs.

Question 6 of 51

Which of the following is false?

Public and private firms react to competitive pressures in the very same way.
Private owners generally have different objectives than public owners.
When governments own utility service providers, decision-makers may care more about the distribution of benefits across citizen groups than about economic efficiency.
The ability of public owners to develop incentives for managers is complicated by difficulties in objectively measuring some performance outcomes.

Question 7 of 51

Which of the following is false?

Sector performance can be measured in terms of net consumer surplus, service availability, and the affordability of prices.
In fulfilling their objectives, regulators are often called upon to implement policies for attracting capital to the sector and increasing investment.
Regulators are seldom given a legal mandate to encourage the development of competition in markets.
Regulators are sometimes given the mandate to provide incentives for operators to improve efficiency, and to promote universal access.

Question 8 of 51

Which of the following is false?

The price elasticity of demand is the responsiveness of demand to changes in price.
The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
The price elasticity of demand shows how an increase in price will affect total firm revenues; e.g., a value between -1 and zero indicates an inelastic demand.
When demand is inelastic, a price increase results in a decrease in total revenue.

Question 9 of 51

Which of the following is false?

All concepts of natural monopoly state that even though rivalry in a particular market can be sustained, it is easier to regulate one firm than two.
If there are several firms in a natural monopoly, if they engage in price competition, the result is likely to be a single firm supplying the entire market demand.
Economists now define a natural monopoly as a market where no more than one firm can efficiently serve the market and receive non-negative profits.
The term "economies of scale" represents a long run concept where capacity is allowed to adjust.

Question 10 of 51

Which of the following is false?

If price is set at marginal cost, the firm’s total revenue may be less than its total cost.
If price is set at marginal cost, the firm’s total revenue may be greater than its total cost.
Left unregulated and without a threat of government intervention, a profit maximizing monopolist would limit output to receive monopoly profits.
Monopoly pricing leads to marginal revenue being greater than marginal cost, resulting in a deadweight loss.

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Self-Testing: Full Test

Question 1 of 51

Question 2 of 51

Question 3 of 51

Question 4 of 51

Question 5 of 51

Question 6 of 51

Question 7 of 51

Question 8 of 51

Question 9 of 51

Question 10 of 51