Ch. 13 Microeconomics Homework

A monopolist maximizes profit by setting output where a. MR = MC b. MC is minimized c. MR is maximized d. All of the above are correct

A

A monopolist will not produce a. In the inelastic portion of its demand curve, where MR is negative b. Positive level of output when price is less than ATC but greater than AVC c. In the perfectly competitive level of output when it engages in perfect price discrimination d. A positive level of output when its MR is declining

A

Explain why the marginal revenue curve facing a competitive firm differs from the marginal revenue curve facing a monopolist. Unlike for perfectly competitive firms, whose marginal revenue curves are the same as their individual demand curves, a monopolist's marginal revenue curve differs from its demand curve because a. A monopoly must lower the price on all units to sell one more unit of output b. A monopoly's demand curve is horizontal c. A monopoly has no market power d. The demand curve for a monopoly has half the slope of the market demand curve

A

For a monopoly, the marginal revenue curve has _______ point(s) in common with the firm's linear demand curve a. One b. No c. All d. Indeterminate from the given information

A

If a perfectly competitive firm with constant returns to scale reorganized as a monopoly, its monopoly price would be ________ the perfectly competitive price and its monopoly output would be ________ the perfectly competitive output a. Greater than; less than b. Greater than; greater than c. Less than; less than d. Less than; greater than

A

In an imperfectly competitive industry a. A single firm has some control over the price of its output b. The government will always regulate the output price c. A single firm will be able to sell all of its output at whatever price it wants to charge d. A single firm has no control over the price of its output

A

Market power refers to a firm's ability to a. Raise price without losing all sales of its product b. Charge any price it likes c. Monopolize a market completely d. Sell any amount of output it desires at the market-determined price

A

Monopolies, oligopolies, and monopolistic competition industries all a. Have market power b. Earn positive profits in the long run c. Are completely unconstrained in their pricing d. Raise price and quantity over what would occur in perfect competition in order to maximize their profits

A

When the demand curve is a downward sloping straight line, the quantity at which the demand curve intersects the horizontal (quantity) axis is ________ the quantity at which the marginal revenue curve intersects the horizontal (quantity) axis. a. Twice b. Equal to c. Four times d. Less than

A

When the demand curve is a downward sloping straight line, the slope of the marginal revenue curve is a. Twice as steep as the demand curve b. The same as the slope of the demand curve c. Always equal to one d. Half as steep as the demand curve

A

Actions to enforce the antitrust laws are initiated a. Only by the FTC b. By the Antitrust Division of the Justice Dept., the FTC, and private firms or citizens c. Only by the Antitrust Division of the Justice Dept. d. By the Antitrust Division of the Justice Dept. or by the FTC, but not only private firms or citizens

B

An industry with a single firm in which the entry of new firms is blocked is called a. Perfect competition b. Monopoly c. Monopolistic competition d. Oligopoly

B

Between 1890 and 1920, antitrust legislation was passed in response to the a. Growing role of banking trusts b. Increasing importance of very large firms and trusts, which were groups of firms that acted like monopolies c. Growing strengths of trusts, which were associations of buyers d. Growing importance of agricultural trusts

B

For a monopoly, marginal revenue a. Is less than price, because a monopolist can increase sales without reducing price b. Is less than price, because a monopolist must lower its price in order to sell more c. Is more than price, because a monopolist cannot control price d. Is more than price, because a monopolist can increase both sales and price at the same time

B

For a profit maximizing monopolist, a. MR > P b. MR < P c. MR = P d. MR is unrelated to P

B

If a monopolist is protected by barriers that prevent other firms from selling the same product, the monopolist a. Can charge any price without fear of losing customers b. Is still constrained by the demand curve for its product c. Can always increase profit by raising price d. Will pass on to its customers any increase in production cost

B

In 1914 Congress passed the Clayton Act and The Federal Trade Commission Act a. The Clayton Act creates a govt. agency to investigate business behavior, and the FTC Act forbids mergers b. The Clayton Act outlaws Certain specific behavior, and the FTC Act prohibits "unfair methods of competition" c. The Clayton Act, like the Sherman Act, is vague, while the FTC Act outlaws very specific behavior d. The Clayton Act allows Congress to prohibit misleading advertising and the FTC investigates tying contracts

B

One of the major characteristics of pure monopoly is a. There are no major barriers to entering the industry b. There is only one firm in the industry c. There are only a few firms in the industry d. Similar products are made by other industries

B

One of the major characteristics of pure monopoly is a. There are only a few firms in the industry b. There are severe barriers to entering the industry c. The total amount produced by the industry is large d. Similar products are made by other industries

B

When ________ substitutes exist, a firm in an imperfectly competitive industry has ________ power to raise price a. More; more b. More; less c. No; infinite d. Fewer; less

B

Which of the following is least likely to be considered a firm in an imperfectly competitive industry? a. A Burger King in Pittsburgh, PA b. A wheat farmer in Kansas c. Ohio Bell Telephone Company d. The only locally owned and operated bank in Severn, MD

B

A market where there is only one buyer for a good or service is called a monopoly a. True b. False

B. False

In interpreting the Sherman Act, the Supreme Court developed the Rule of Reason, which says that a firm may be found guilty of violating the law a. Only if both its conduct and the structure of the industry are unreasonable b. On the basis of industry structure alone c. Only if it its conduct is unreasonable d. Only if its share of industry output is unreasonably large e. Even if its conduct is reasonable

C

Voss calculator has a monopoly on the sale of graphing calculators. If it sells two of these calculators its total revenue is $600, and if it sells three calculators its total revenue is $750. The marginal revenue of the third calculator sold is a. $50 b. $75 c. $150 d. $250

C

When a monopolist sells two units of output its total revenue is $150. When a monopolist sells three units of output its total revenue is $210. When the monopolist sells three units of output, the price per unit is a. $50 b. $60 c. $70 d. $75

C

If a monopolist is at a point on its demand curve such that marginal revenue is greater than marginal cost, then it can increase profit by a. Decreasing both price and output b. Increasing both price and output c. Increasing price and decreasing output d. Decreasing price and increasing output

D

Imperfect competition a. Means there is no competition in the market b. Is a major cause of externalities in the market c. Should always be regulated by the government d. Results in less efficient market outcomes

D

Taylor Swift is a singer-songwriter whose pop album 1989 was the top-selling album of 2014, with 3.66 million copies sold in just its first 9 weeks of release. The path to success for pop musicians involves reducing the elasticity of demand that they face and building barriers to entry. That sounds like economic babble, but it has a lot of meaning. Using the language of economics and the concepts presented in this chapter, explain why lowering the elasticity of demand and building barriers to entry are exactly what Taylor Swift is trying to do. Lowering the elasticity of demand and building barriers to entry will benefit Taylor Swift because ____________. a. A smaller number of pop musicians allows more coordination among other musicians b. It increases her market competition and makes it possible to earn normal profits over time c. The lower the elasticity of demand, the more revenue she can make by lowering the price d. It increases her market power and makes it possible to earn economic profits over time

D

The _______ broadly a market is defined; the more difficult it becomes to find ________. a. More; complements b. Less; goods independent of each other c. Less; substitutes d. More; substitutes

D

The demand for Ben & Jerry's ice cream will be ______ the demand for dessert a. Indeterminate from the given information b. Less price elastic than c. Equally price elastic as d. More price elastic than

D

The term "rent seeking" refers to a. A coalition of tenants who act together to reduce the rents they pay b. An organization of landlords who jointly raise the rents they charge c. Efforts to acquire ownership of real estate which will generate rental income d. Any actions taken to protect positive profits

D

When a firm engages in perfect price discrimination, a. There is no deadweight loss b. Consumer surplus is zero c. They produce the same output level as a competitive firm d. All of the above are true

D