EC 201

Which of the following companies was/were broken up as a result of an antitrust action?

standard oil

Consumer surplus is represented graphically by

the area between the demand curve and the price line

Which of the following curves is always represented by a horizontal line?

the consumer's marginal-utility curve

Coffee and tea are substitutes. This implies that

the cross-price elasticity of demand for coffee with respect to the price of tea is positive

Which of the following is/are our best measure of the dollar value of the harm done to consumers by an increase in price?

the decrease in consumer surplus

The deadweight loss of monopoly is a measure (in dollars) of

the difference between the consumers' loss from monopoly and the producers' gain from monopoly

For any firm for which (P>=AVC) price is greater than or equal to average variable cost (regardless of market structure), profits will be maximized when the firm chooses to produce and sell the quantity at which

(MR=MC) Marginal revenue is equal to marginal cost

Which of the following statements is/are true regarding (atc) average total cost?

- atc = average variable cost + average fixed cost: atc = avc + afc - atc is total cost divided by the quantity of output

Which of the following is/are restricted by the antitrust laws?

- attempting to monopolize - price fixing - interlocking directorates - tie-in sales

Firm J has market power. This means that

- firm J has some ability to manipulate the price - firm J can raise its price (at least a little) without losing all of its customers - either firm J is large relative to its market, or it has a differentiated product, or both

Monopoly

- one seller - barriers to entry: patents and exclusive franchises - no close substitutes

Rank the four market structures in order of the degree of market power, from the market structure with the least degree of market power to the market structure with the greatest degree of market power.

- perfect competition - monopolistic competition - oligopoly - monopoly

Marginal Cost is

- the change in total cost from producing one additional unit of output - the change in total variable cost from producing one additional unit of output

Consumer Surplus

- the difference between the amount consumers are willing to pay and the amount they actually have to pay. - graphically represented by the area under the demand curve but above the price line. - used in calculating the deadweight loss of monopoly.

Which of the following is/are necessary for a firm to increase its profits by engaging in price discrimination?

- the firm must have some way of distinguishing among its customers, to tell which ones have demand that is more elastic and which ones have demand that is less elastic - it must be difficult or impossible for customers to re-sell to other customers

The slope of a total-cost curve is the same as

- the slope of the total-variable-cost curve - marginal cost

We say perfectly competitive firms are "price takers." Which of the following characteristics of Perfect Competition is/are necessary for price-taking behavior?

- there are many firms, each of which is small relative to the market - the firms produce homogeneous output

There is an increase in the equilibrium price of gasoline, and an increase in the equilibrium quantity of gasoline. Which of the following would be consistent with these changes?

A rightward shift in the demand curve for gasoline.

Which of the following could lead to higher prices for the consumers in the importing country?

A tariff (tax on imports)

At the current level of output for Standish Corporation, (mc) marginal cost is (=) equal to the (avc) average variable cost, but (<)less than the (atc) average total cost. This means that

AVC is at its minimum value, but ATC is decreasing

Huge Corporation is a monopolist. The firm's marginal costs decrease (marginal-cost curve shifts downward). How will the firms change its price and quantity as a result?

Huge Corp. will reduce price and increase quantity

Assume that the elasticity of demand for green and white ball-point pens is 1.2. Due to a rightward shift in the supply curve for pompons, the price decreases by 50%. What will happen to the quantity of pompoms demanded?

Quantity demanded will increase by 60%

The demand curve facing, Colossal Corporation is a downward-sloping straight line. What can we say about the slope of the firm's (mr) marginal-revenue curve?

The MR curve is downward sloping, and it's slope is twice as large as the slope of the demand curve

Which of the following is a normative statement?

The United States should increase the degree of progressively of its tax system

Malfoy Corporation is a monopolist. Its marginal costs decrease (i.e., its entire marginal-cost curve shifts downward). How will the firm change its price and quantity as a result?

The monopoly firm will maximize profits by producing and selling the quantity at which marginal revenue is equal to marginal cost.

For ABC Corporation, at a quantity of 50, average variable cost is $10. When the quantity increases to 51, average variable cost remains at $10. This indicates that

marginal cost is equal to average variable cost

Firm X can sell as many units of output as it wants, as long as it sells them at the market equilibrium price. In other words, over the entire range of output that is relevant for Firm X, it can sell every unit at the same price. What type of firm could this be?

a perfectly competitive firm

Assume that the income elasticity of demand for air conditioners is .4. This means that

air conditioners are normal goods

If average total cost is decreasing, then

marginal cost must be less than average total cost

The marginal revenue for good A is negative. What does this imply about the demand for good A?

demand for good A is inelastic

Normative statement

expresses a value judgment about whether a situation is desirable or undesirable

If an individual receives non-labor income, he/she will work less. This means that

leisure is a normal good

BK Corp. faces a downward-sloping demand curve for its output. What type of market structure might BK have?

monopoly and oligopoly

For seats in the same section on the same flight, Spirit Southwest Corporation charges lower prices for passengers who stay over a Saturday night, and higher for passengers who do not stay over a Saturday night. This is an example of

price discrimination

Profit per unity of output is equal to

price minus average total cost (p-atc)

Flitwick Corporation is a perfect competitor. The market price for a unit of Flitwick's output is $20. The firm's marginal costs is $20, and its average total cost is $15. This suggests that

the firm is making positive profits

Which of the following statements is supported by Prisoner's Dilemma model?

the firms in a cartel may have difficulty in sustaining collusion for very long, because the firms have an incentive to cheat on the cartel

Monopolistic competitive industries have a tendency to move toward zero economic profits. Which of the characteristics of a monopolistically competitive industry is/are responsible for this tendency?

the industry is characterized by free entry and exit

The short-run supply curve for a perfectly competitive firm is

the marginal-cost curve for prices equal to or greater than average variable cost. if price is less than average variable cost, the quantity supplied is zero

Which of the following is/are a measure of what happens when we move along an existing demand curve? (this question is NOT looking for a measure of what happens when we shift to a new demand curve)

the own-price elasticity of demand

Assume that the elasticity of labor supply is smaller than the elasticity of labor demand. A payroll tax is levied on employers. Who will bear the largest share of the burden of the tax?

workers