Ch 12 econ
A market structure in which there is no competition is referred to as ________.
a monopoly
A market in which a firm emerges as a monopoly due to large economies of scale is referred to as:
a natural monopoly
If the marginal revenue of a producer exceeds his marginal cost
additional production enhances profits.
If the marginal cost of a monopolist exceeds its marginal revenue, ________.
additional production reduces profits
The quantity effect of a price reduction causes
an increase in revenue because of increased sales.
The policy that aims to regulate and prevent anti-competitive pricing in the United States is referred to as:
antitrust policy
A fair-returns price is a price set at:
average total cost
When compared to a perfectly competitive industry, in a monopoly:
both consumer surplus and social surplus are smaller.
A firmʹs objective behind charging different prices to different consumers for the same good is to:
enhance its profits
As a firm increases its output, its average total cost decreases. This is an outcome of
economies of scale
When firms charge different prices to different consumers for the same good or service, it is referred to as ________.
price discrimination
In comparison to firms in other market structures, monopolists:
produce goods that do not have close substitutes.
The investment by firms in the creation of products not yet available on the market is referred to as:
research and development.
Buyers who buy in bulk are often offered discounts. This is an example of
second-degree price discrimination.
If a monopoly engages in first-degree price discrimination:
social surplus is maximized.
A key resource is a material:
that is essential for the production of a good.
Average total cost decreases with an increase in output because:
the average fixed cost decreases with an increase in output.
If a monopoly engages in first-degree price discrimination
the deadweight loss is zero.
As a monopolist expands its output:
the difference between the demand curve and the marginal revenue curve increases.
The price effect of a price decrease by a monopolist refers to
the loss in revenue due to the price reduction.
A monopolist faces an average total cost of $10 when it produces 400 units of its product. If it sells the 400 units at $6 per unit, ________.
the monopolist makes a loss of $1,600
A monopolist faces an average total cost of $6 when it produces 200 units of its product. If it sells the 200 units at $8 per unit, ________.
the monopolist makes a profit of $400
A network externality refers to a situation when
the value of a product increases as more consumers start to use it.
In the U.S., the ________ is a law to keep markets open and competitive
Sherman act
If a monopolist decides to charge a higher price for its product, it will yield:
a higher revenue per unit sold but a lower number of units sold
A market structure in which identical goods are produced by several different firms and sold at the market determined price is referred to as:
perfect competition.
Price discrimination is never perfect because:
it is impossible to know consumersʹ willingness to pay.
At the profit-maximizing level of production of a monopolist, ________.
marginal revenue equals marginal cost
A ________ is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good.
patent
At a certain level of production, the average total cost faced by a monopolist is $6 and the marginal cost faced by the monopolist is $4. If the government decides to regulate the market by setting the price at the efficient price, the good will be sold at a price of:
$4 per unit.
Which of the following firms is most likely to spend on innovation?
A firm that enjoys some monopolistic power, but faces strong competition from its rivals
Which of the following firms is most likely to have a constant marginal cost?
A firm that has extremely high fixed costs
Which of the following statements is true?
A monopolist can increase the price of its product and not lose all of its business.
Which of the following statements is true of a monopolistʹs supply curve?
A monopolist does not have a supply curve
Which of the following statements is true?
A monopolist does not have a supply curve because its production decision is independent of price.
Which of the following statements is true?
A monopoly is a price maker because it faces a downward sloping demand curve
Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a:
patent
Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm?
A perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost.
Which of the following statements is true?
An increase in consumer demand can change a natural monopoly into a multi-seller market.
Which of the following is an example of a good produced under monopoly?
patented software
Which of the following statements correctly identifies a similarity between network effects and economies of scale?
Both act as barriers to entry in a market.
Which of the following statements is true of the demand curve and the marginal revenue curve of a monopolist
Both curves have the same intercept on the price axis.
Which of the following statements is true?
Economies of scale act as barriers to entry into a market
Which of the following was an implication of the U.S. governmentʹs Clean Air Act Amendments (CAAA) of 1977?
It acted as a barrier to entry.
In which of the following market structures does a seller have NO market power?
perfect competition
Firm A is a monopoly because of network effects, whereas Firm B is a natural monopoly. Which of the following statements is likely to be true in this context?
Firm B enjoys a monopoly status because its average total cost decreases with increase in output, whereas Firm A enjoys a monopoly status because the value of its product increases as more consumers buy it.
Which of the following statements is true?
Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers.
Which of the following statements is true?
Firms under oligopoly produce either identical or differentiated products.
Which of the following statements is true of a perfectly competitive market?
Innovation is less likely in a competitive market because of free entry and exit of firms.
Sellers in which of the following market structures are likely to have the highest market power?
Monopoly
Which of the following statements is true?
Network effects act as barriers to entry in a market.
Which of the following correctly identifies a problem with price regulation?
Sellers do not have an incentive to cut costs.
The outcome of first-degree price discrimination is:
Pareto efficient with inequity.
The effect of the invisible hand is likely to be the strongest under which market structure?
Perfect competition
Which of the following market structures provides socially efficient outcomes?
Perfect competition
Which of the following statements correctly identifies a similarity between monopoly and perfect competition?
Production is expanded until marginal revenue equals marginal cost in both the market structures.
Which of the following statements is true?
The basis for both first-degree price discrimination and third-degree price discrimination is differences in the buyersʹ willingness to pay for a good.
Which of the following statements is true of the demand curve and the marginal revenue curve of a monopolist?
The demand curve has a higher intercept on the quantity axis than the marginal revenue curve.
At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context
The monopolist should expand production.
Which of the following does a social planner necessarily need to know to restore efficiency in a monopoly market?
The monopolistʹs marginal costs and the buyersʹ willingness to pay for the good
Which of the following statements explains why monopolies weaken the functioning of the invisible hand?
The quantity produced by a monopoly is too low.
Which of the following statements is true?
Under monopoly, prospective buyers may not be able to buy a good even if they have a willingness to pay above marginal costs.
Perfect price discrimination occurs when
a firm charges each buyer exactly their willingness to pay.
Compared to a firm under perfect competition, a monopolist:
charges more and produces less.
Second-degree price discrimination occurs when
consumers are charged different prices based on characteristics of their purchase.
A ________ is an exclusive right granted by the government to an authorʹs intellectual property.
copyright
A musician was guaranteed by the government that no one else could replicate or sell his music CDs. This is an example of a:
copyright
Which of the following is an example of a good produced under perfect competition?
corn
Over a particular price range, if the quantity effect of a price decrease is larger than the price effect, it implies that:
demand is elastic in the price range.
Over a particular price range, if the quantity effect of a price decrease is smaller than the price effect, it implies that:
demand is inelastic in the price range.
Third-degree price discrimination occurs when:
different groups of consumers are charged different prices.
Under fair-returns price regulation:
firms are less likely to innovate because they earn zero profits.
Perfect price discrimination is also referred to as:
first-degree price discrimination
A price maker is a firm that
has the power to affect the price of the product it sells.
If a new seller enters a market to compete with an existing natural monopoly, it will:
increase the costs of production for both the sellers.
Encouraging formation of monopolies provides firms an incentive to:
innovate
The price chosen by a monopolist:
is independent of the production of other firms.
The total revenue curve of a monopolist:
is negatively sloped when marginal revenue is negative.
The quantity effect of a price decrease by a monopolist is based on:
law of demand
A copyright is a source of:
legal market power
Patents are a source of:
legal market power
When a firm obtains market power through barriers to entry created not by the firm, but by the government, it is referred to as:
legal market power
When a monopolist sells positive levels of output, its demand curve:
lies above its marginal revenue curve
Everything else remaining unchanged, if a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale, it will lead to:
lower profits for the existing firm.
An efficient price is a price set at:
marginal cost
A socially-optimal price regulation will NOT work if:
marginal cost is less than average total cost
The total revenue curve of a monopolist is at its maximum point when
marginal revenue is zero.
________ refers to the ability of sellers to affect market prices.
market power
A socially optimal price:
maximizes total surplus.
________ is a market structure where only one firm provides a good or service that has no close substitutes.
monopoly
Economies of scale in production act as a source of:
natural market power
If a monopolist owns or controls a key resource necessary for production, it is a source of:
natural market power
In Barylia, Greenaqua Corp. is the sole controller of a resource required for the production of bottled drinking water. Therefore, Greenaqua Corp. enjoys:
natural market powerr
A certain amusement park offers a 50 percent discount to kids between the age of 8 and 14 years. This is an example of
third-degree price discrimination.
When the price of the same product varies by locational attributes, it is an example of:
third-degree price discrimination.
If a monopolist faces a linear demand curve, its marginal revenue curve will be:
twice as steep as the demand curve.
In case of a decrease in product prices
when the price effect dominates the quantity effect, total revenue decreases.
In case of an increase in product prices
when the price effect dominates the quantity effect, total revenue is rising.
In case of an increase in product prices
when the quantity effect dominates the price effect, total revenue is falling