EC-321-001 Test #3 JSU (Dr. Bennett)
When a monopolist produces 70 units, total cost of production is $1,400. When a monopolist produces 80 units, the total cost is $1,600. What is the firm's marginal cost?
$20
In an oligopolistic cartel, each firm produces 800 units of output for a price of $80 per unit. Firm A decides to slightly decrease the price in order to increase output by 120 units, but other firms also cut prices. Although Firm A reached the desired output, the price settled eventually on $50. Now, Firm A decides to raise prices by $5 to somehow cover the losses, but other firms keep their prices at $50; therefore, Firm A loses an additional $930 in revenue for each $1 of the raised price as compared to its revenue before the increase in price. Calculate the revenue of Firm A after all the changes discussed.
$41,350
A producer is considering an investment project that costs $150,000 and is expected to return revenues of $172,500. What is the percentage rate of return on this investment? Express the answer as a percentage and round to one decimal place. [Hint: (Revenue - Cost / Cost) x100]
15%
Which of the following are characteristics of a natural monopoly? (Select all that apply) A) The initial set-up cost of physical capital tends to be very high B) The total cost of production falls as output expands C) Production displays economies of scale throughout the range of market demand D) There are legal barriers preventing entry into the market
A & C
Which of the following are characteristics of a natural monopoly? (Select all that apply) A) There are very high fixed costs/sunk costs of production B) Often, there are government licensing requirements that are only granted to one firm C) It is not possible for two firms to share the market and have the same low cost of production D) The total cost curve is downward-sloping over the range of market demand
A & C
Which of the following are public goods? (Select all that apply) A) A podcast B) A truck C) Watching a movie on cable D) Chewing gum E) A full moon
A & E
Which of the following are public goods? (Select all that apply) A) A quiet neighborhood B) A Hulu subscription C) A house D) A note pad E) A public swimming pool
A & E
Which of the three difficulties of command-and-control environmental regulation does the following scenario demonstrate? Tree-cutting lobbyists persuade legislators that stricter environmental rules should not apply to them. A) Loopholes B) No incentives C) Inflexible
A) Loopholes
When a monopolist produces 50 units, total cost of production is $500. When a monopolist produces 60 units, the total cost is $600. What is the firm's marginal cost?
$10
A candy company is sued for polluting the water in a river. 1. What is the effect of this situation on the MARKET SUPPLY CURVE? A) The supply curve will stay the SAME B) The supply curve will shift to the LEFT C) The supply curve will shift to the RIGHT 2. What is the effect of this station on the EQUILIBRIUM PRICE? A) The equilibrium price will FALL B) The equilibrium price will RISE C) The equilibrium price will stay the SAME
1. B) The supply curve will shift to the LEFT 2. B) The equilibrium price will RISE
Companies that use fracking to remove oil and gas from rock are required to clean up the damage. 1. What is the effect of this situation on the MARKET SUPPLY CURVE? A) The supply curve will stay the SAME B) The supply curve will shift to the LEFT C) The supply curve will shift to the RIGHT 2. What is the effect of this station on the EQUILIBRIUM PRICE? A) The equilibrium price will FALL B) The equilibrium price will RISE C) The equilibrium price will stay the SAME
1. B) The supply curve will shift to the LEFT 2. B) The equilibrium price will RISE
Kelly and Fatima are roommates. When they cook and eat dinner together, they gain 50 utils each. When Kelly cooks dinner alone for both of them, Kelly gains 15 utils, and Fatima gains 30 utils. When Fatima cooks dinner alone for both of them, Kelly gains 30 utils, and Fatima gains 15 utils. If neither decides to cook dinner, they both go hungry and earn 12 utils each. Calculate the total utils gained in the worst outcome.
24 (Add 12 & 12)
Verity Studios (V) and Lambert Props (L) are two startups that have developed drones that provide dynamic light installations and flying props for concerts, musicals, circuses, and sporting events. Each firm must decide between a high-price and low-price strategy. The payoff matrix of expected economic profits is given below. Which of the following is true regarding the situation depicted in the matrix? A) Verity always has the incentive to price HIGH, whereas Lambert always has the incentive to price LOW B) The interaction between the firms resembles the Prisoner's Dilemma because self-interested behavior leads to an inferior outcome for both players C) The interaction between the firms does not resemble the Prisoner's Dilemma because the firms are better off if they act independently D) Verity always has the incentive to price LOW, whereas Lambert always has the incentive to price HIGH
B) The interaction between the firms resembles the Prisoner's Dilemma because self-interested behavior leads to an inferior outcome for both players
A monopolist is currently producing a level of output such that marginal revenue is $44 and marginal cost is $46. The monopolist then sets a price based on demand for the current level of output. What should the monopolist do to maximize profit? A) The monopolist should DECREASE output and DECREASE price B) The monopolist should DECREASE output and INCREASE price C) The monopolist should INCREASE output and INCREASE price D) The monopolist should INCREASE output and DECREASE price
B) The monopolist should DECREASE output and INCREASE price
Which statement about public goods is correct? A) A public good is non excludable and rivalrous, so it is not difficult to sell it to individual consumers B) In the case of public goods, the prisoner's dilemma shows that people are likely to cooperate to reach the outcome that is best for all parties C) Not all goods and services with positive externalities are public goods D) The goal of monetary policy is to create public goods
C) Not all goods and services with positive externalities are public goods
Which of the following acts is a command-and-control regulation responsible for preventing smog? A) Sarbanes-Oxley Act B) Clean Water Act C) Dodd-Frank Act D) Clean Air Act
D) Clean Air Act
Which of the following is the best example of a differentiated product? A) Eggs B) Tomatoes C) Lettuce D) Ice cream
D) Ice cream
Suppose there is a single firm in a market that was formed by participating in predatory pricing. What type of monopoly or barrier to entry does this describe? A) Legal monopoly B) Natural monopoly C) Deregulation D) Intimidating potential competitors
D) Intimidating potential competitors
What is the formula for calculating marginal PROFIT?
MP = Marginal revenue - Marginal cost
What is the formula for calculating marginal REVENUE?
MR = Change in total REVENUE / Change in quantity
What does R&D stand for?
Research and Development
T/F) As long as the marginal cost of reducing pollution is LESS than the pollution tax, the firm will choose to ABATE. When the marginal cost of reducing pollution is GREATER than the pollution tax, the firm can minimize its cost by PAYING the tax instead.
True
T/F) Predatory pricing is an example of intimidating potential competitors.
True
Suppose there is a single firm in a market that was formed by owning a patent. What type of monopoly or barrier to entry does this describe? A) Deregulation B) Intimidating potential competitors C) Legal monopoly D) Natural monopoly
C) Legal monopoly
Suppose there is a single firm in a market that was formed by owning a trademark. What type of monopoly or barrier to entry does this describe? A) Natural monopoly B) Deregulation C) Legal monopoly D) Intimidating potential competitors
C) Legal monopoly
If governments do not subsidize education, the societal benefits of education will be _____. A) Equal to zero B) MORE than the efficient level C) LESS than the efficient level D) EQUAL to the efficient level
C) Less than the efficient level
Which statement is correct? A) When firms copy an inventor's idea, both the inventor and the firms pay the same R&D costs B) Inventors usually receive no more than one-quarter of the total economic benefit from their innovations C) Market competition can encourage the development of new technology
C) Market competition can encourage the development of new technology
Bands play different kinds of music (or the same kind of music in slightly different styles) and often produce their own CDs and t-shirts. Which market structure is this industry most likely to be in? A) Oligopoly B) Perfect competition C) Monopolistic competition D) Monopoly
C) Monopolistic competition
A situation in which one producer can serve the entire market more efficiently than a number of smaller producers is known as _____. A) Deregulation B) Intellectual property C) Natural monopoly
C) Natural monopoly
When it is costly or impossible to exclude someone from using a good, the good is called _____. A) Inferior B) Legal C) Non-excludable
C) Non-excludable
If one person can use a good while others can also use it, the good is called _____. A) Legal B) Non-excludable C) Non-rival
C) Non-rival
Which of the following is an example of a good that has primarily private benefits? A) Education that increases worker productivity and social responsibility B) Vaccinations C) New technologies D) A car
D) A car
Suppose that Fred's Films, a firm in a monopolistically competitive industry, is currently maximizing profit by producing a quantity where marginal revenue is EQUAL TO marginal cost. Assume that at this point, profits of the firm are equal to zero. Suppose that market demand INCREASES, which increases demand for all firms in the industry. Based on this information, which option completes the blanks in the following sentence? In the short run, this firm will produce _____, and profits will be _____; in the long run, firms in this industry will _____, and profits will be _____. A) less; negative; exit; zero B) the same amount; positive; enter; zero C) the same amount; positive; enter; negative D) the same amount; positive; enter; positive E) more; positive; enter; zero
E) more; positive; enter; zero
Which definition matches the term, "Pollution charge?" A) A tax imposed on the quantity of pollution that an economic agent emits B) The price of a permit that gives a firm the license to pollute C) A penalty levied on owners of vehicles that do not pass smog tests
A) A tax imposed on the quantity of pollution that an economic agent emits
Which of the following is an example of a good that has both private AND public benefits? A) Bees that pollinate neighboring orchards B) A backyard swimming pool C) A cure for cancer (which cannot be spread from person to person) D) An airplane ticket
A) Bees that pollinate neighboring orchards
A real estate developer offers housing at the equilibrium price of $650 for 1m^2. At that price, a total of 2,200m^2 is supplied and demanded. Calculate the amount the government spends on the subsidy to account for social benefits and increase the market equilibrium to a quantity of 2,950m^22. Assume that the price at which the producer would be willing to sell the new quantity is $850, and the price at which the consumer would be willing to purchase it is $500.
$1,032,500
A private firm is about to provide a public good. The firm estimates that its planned annual expenditures will be $18,000,000. The total quantity demanded of the good is estimated to be 60,000 units per year. Since the good is non-excludable, the share demanded by free riders is estimated to reach 75% of the total quantity demanded. To cover its costs, how much should the firm charge for each unit consumed by paying customers? (Round to the nearest whole number if necessary)
$1,200
There is a monopoly firm that produces agricultural machinery. The total production cost for 1 thousand machines is $85 million, and the total revenue is $220 million. At an output of 2 thousand machines, the total cost will be $125 million, while the expected total revenue will be $380 million. Determine the marginal profit the firm will receive from selling 2 thousand machines.
$120 million
At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $19. At Point B, the output increases by 7 units, the price falls by $4, and the total costs increase by $23. Calculate the absolute difference between the marginal revenue and the marginal cost for Point B. If necessary, round any intermediate calculations and your final answer to two decimal places, and write your final answer as a positive number.
$2.00
In the market for hybrid cars, the market demand curve gives an equilibrium price (P market) of $21,000 and an equilibrium quantity (Q market) of 12 million hybrid cars. However, because hybrid cars exhibit a positive externality, the socially optimal quantity is estimated to be 18 million hybrid cars with a marginal social value of 27,000. To reach a quantity of 18 million hybrid cars, the price paid by consumers would have to fall to 20,500. Calculate the subsidy needed to reach the socially optimal quantity of 18 million hybrid cars.
6,500
In the market for hybrid cars, the market demand curve gives an equilibrium price (P market) of $21,000 and an equilibrium quantity (Q market) of 12 million hybrid cars. However, because hybrid cars exhibit a positive externality, the socially optimal quantity is estimated to be 16 million hybrid cars with a marginal social value of 27,500. To reach a quantity of 16 million hybrid cars, the price paid by consumers would have to fall to 19,500. Calculate the subsidy needed to reach the socially optimal quantity of 16 million hybrid cars.
8,000
When price is equal to 10, a monopolist can sell 0 units of output, and when price is equal to 9, a monopolist can sell 10 units of output. What is the firm's marginal revenue?
9
Suppose that, in a competitive market, every firm is currently creating pollution. If the firms are now legally required to clean up any pollution that they create, the equilibrium market output will _____, and price will equal the _____. A) FALL; SOCIAL marginal cost B) RISE; SOCIAL marginal cost C) RISE; PRIVATE marginal cost D) FALL; PRIVATE marginal cost
A) FALL; SOCIAL marginal cost
Suppose a company creates its own differentiated type of sneaker and is thus considered a monopolistically competitive firm. This firm has a constant marginal cost curve. For each unit of output that the monopolistically competitive firm produces, it costs an additional $30. The firm's marginal revenue curve is MR = 50 − 4Q, where Q is the quantity produced. The firm's perceived demand curve is P = 50 − 2Q. What is the monopolistically competitive firm's profit-maximizing output and price? Write the exact answer. Do not round. A) Quantity = _____ B) Price = _____
A) 5 B) $40
Suppose a company creates its own differentiated type of sneaker and is thus considered a monopolistically competitive firm. This firm has a constant marginal cost curve. For each unit of output that the monopolistically competitive firm produces, it costs an additional $10. The firm's marginal revenue curve is MR = 70 − 10Q, where Q is the quantity produced. The firm's perceived demand curve is P = 70 − 5Q. What is the monopolistically competitive firm's profit-maximizing output and price? Write the exact answer. Do not round. A) Quantity = _____ B) Price = _____
A) 6 B) $40
Which option is an example of a public good? A) A fountain in a city park B) Internet access C) A rock concert D) Higher education
A) A fountain in a city park
A beneficial spillover to a third party or parties is called _____. A) A positive externality B) Marginal utility C) Intellectual property
A) A positive externality
A situation where markets consider only some social costs instead of all of them is called _____. A) An externality B) A market failure C) Social surplus D) A side effect
B) A market failure
Which of the following is the best example of a differentiated product? A) Aluminum B) Athletic shoes C) Bushels of corn D) Vegetable oil
B) Athletic shoes
Which statement is correct? A) A prominent example of monopolistic competition is the commercial aircraft industry B) Monopolistic competition and perfect competition are at opposite ends of the competition spectrum C) Advertising is a significant factor that contributes to differentiation in monopolistically competitive markets
C) Advertising is a significant factor that contributes to differentiation in monopolistically competitive markets
Which of the following is an example of a good that has primarily private benefits? A) New technologies B) Education that increases worker productivity and social responsibility C) A home security system D) Vaccinations
C) A home security system
Shade Sunscreen Company produces 75 bottles of sunscreen per day and sells their sunscreen at $10 per bottle. Its output and pricing decisions do not consider the external costs resulting from hazardous waste resulting from the production process. Now, suppose the government forces Shade Sunscreen to consider the external costs it creates by imposing taxes or fines. Which of the following quantity and price combinations would likely emerge? A) A quantity of 65 and a price of $8 B) A quantity of 90 and a price of $9 C) A quantity of 70 and a price of $11 D) A quantity of 75 and a price of $10
C) A quantity of 70 and a price of $11
What is the formula for calculating marginal COST?
MC = Change in total COST / Change in quantity
A private firm is about to provide a public good. The firm estimates that its planned annual expenditures will be $42,000,000. The total quantity demanded of the good is estimated to be 70,000 units per year. Since the good is non-excludable, the share demanded by free riders is estimated to reach 40% of the total quantity demanded. To cover its costs, how much should the firm charge for each unit consumed by paying customers? (Round to the nearest whole number if necessary)
$1,000
Consider a market with a monopoly firm. Sales revenue of this firm is $20,160,000, total cost is $13,680,000, and average cost is $5.70. Another firm wants to enter the market and provide the same product at a lower price. To intimidate the potential competitor, the monopoly firm intends to use predatory pricing. By how much can this firm reduce the price of its product without losses? (Round to two decimal places if necessary)
$2.70 per unit
Consider a market with a monopoly firm. Sales revenue of this firm is $13,500,000, total cost is $5,670,000, and average cost is $2.10. Another firm wants to enter the market and provide the same product at a lower price. To intimidate the potential competitor, the monopoly firm intends to use predatory pricing. By how much can this firm reduce the price of its product without losses? (Round to two decimal places if necessary)
$2.90 per unit
There is a beautiful lake that is maintained using voluntary donations from residents in the area. Annually, 2,500 people donate $210 each. However, they are angry because others who do not donate still get to enjoy the lake. The local government agrees to prohibit people from using the lake if they do not contribute to its upkeep. Consequently, the number of contributors rises to 3,000 people. Excluding free riders from using the lake is difficult and costs up to $165,000 annually. The amount required to maintain the lake does not change. How much would each lake user have to pay annually to cover the total costs of maintenance and security under the new system? (Round to the nearest whole number if necessary)
$230
There is a beautiful lake that is maintained using voluntary donations from residents in the area. Annually, 2,500 people donate $250 each. However, they are angry because others who do not donate still get to enjoy the lake. The local government agrees to prohibit people from using the lake if they do not contribute to its upkeep. Consequently, the number of contributors rises to 3,100 people. Excluding free riders from using the lake is difficult and costs up to $119,000 annually. The amount required to maintain the lake does not change. How much would each lake user have to pay annually to cover the total costs of maintenance and security under the new system? (Round to the nearest whole number if necessary)
$240
There is a duopoly in the market, with Firm A and Firm B considering whether to compete against each other or cooperate. If Firm A and Firm B both agree to cooperate, they will each earn $1,120 in profits. If one of them decides to compete at the expense of the other, it will earn $1,500 in profits, while the other will earn three times less. Calculate the difference between the total profits for both firms when they cooperate and when one takes advantage of the other. Enter your answer as a positive number
$240
In order to create more jobs in the region, the local government gave permission to a foreign investor to build a chemical plant not far from a residential area. Analysts predict that real estate prices will drop by 5%. Currently, the total value of real estate is $80 million. Calculate the potential external cost for the residents in this area of building the chemical plant. Enter your answer in millions.
$4 million
Suppose there is a public park. The annual cost of maintenance is $370,000. Visiting the park is free, and it is visited 150,000 times every year. However, to fund better maintenance of the park, the government wants to make visitors pay $7.00 per visit. Implementing a security system (to prevent visitors from sneaking into the park) will cost $0.70 per visit and $260,000 in annual fixed expenditures. At the same time, maintenance costs are expected to rise by 25%, not including security costs. The number of visits to the park are expected to fall by 19%. Calculate the annual profit the government will receive after all these changes take place.
$42,950
Consider a firm that produces toasters. The price of one toaster is $35, and the quantity of toasters sold is 115. A new environmental protection law is passed, so the firm must pay additional external costs per toaster produced. As a result, the quantity of toasters sold decreases by 36, and total revenue decreases by $786. Calculate the additional external costs per toaster. Enter your answer as a positive number.
$6
A firm produces microwaves for $80 each, including external costs of $12 per unit. A new production technology reduces pollution, so the external costs decrease to $6 per unit. The quantity supplied increases, and the firm's private costs of production decrease by $13. What is the price of a microwave after the firm starts using the new technology?
$61
A private firm is about to provide a public good. The firm estimates that its planned annual expenditures will be $40,000,000. The total quantity demanded of the good is estimated to be 80,000 units per year. Since the good is non-excludable, the share demanded by free riders is estimated to reach 20% of the total quantity demanded. To cover its costs, how much should the firm charge for each unit consumed by paying customers? (Round to the nearest whole number if necessary)
$625
At Point A on the demand curve, a monopolistic competitor sells 14 units of a product at a price of $21. At Point B, the output increases by 9 units, the price falls by $4, and the total costs increase by $25. Calculate the absolute difference between the marginal revenue and the marginal cost for Point B. If necessary, round any intermediate calculations and your final answer to two decimal places, and write your final answer as a positive number.
$8.00
Suppose there is a public park. The annual cost of maintenance is $260,000. Visiting the park is free, and it is visited 170,000 times every year. However, to fund better maintenance of the park, the government wants to make visitors pay $4.70 per visit. Implementing a security system (to prevent visitors from sneaking into the park) will cost $0.60 per visit and $190,000 in annual fixed expenditures. At the same time, maintenance costs are expected to rise by 31%, not including security costs. The number of visits to the park are expected to fall by 12%. Calculate the annual profit the government will receive after all these changes take place.
$82,760
Suppose there is a public park. The annual cost of maintenance is $220,000. Visiting the park is free, and it is visited 170,000 times every year. However, to fund better maintenance of the park, the government wants to make visitors pay $4.40 per visit. Implementing a security system (to prevent visitors from sneaking into the park) will cost $0.70 per visit and $130,000 in annual fixed expenditures. At the same time, maintenance costs are expected to rise by 34%, not including security costs. The number of visits to the park are expected to fall by 17%. Calculate the annual profit the government will receive after all these changes take place.
$97,270
A producer is considering an investment project that costs $60,000 and is expected to return revenues of $66,000. What is the percentage rate of return on this investment? Express the answer as a percentage and round to one decimal place. [Hint: (Revenue - Cost / Cost) x100]
10%
Kelly and Fatima are roommates. When they cook and eat dinner together, they gain 50 utils each. When Kelly cooks dinner alone for both of them, Kelly gains 20 utils, and Fatima gains 40 utils. When Fatima cooks dinner alone for both of them, Kelly gains 40 utils, and Fatima gains 20 utils. If neither decides to cook dinner, they both go hungry and earn 10 utils each. Calculate the total utils gained in the worst outcome.
20 (Add 10 & 10)
When price is equal to 80, a monopolist can sell 20 units of output, and when price is equal to 70, a monopolist can sell 30 units of output. What is the firm's marginal revenue?
50
Suppose two firms with the same LRAC curve supply goods to one market. For both firms, equilibrium quantity is 3,600 units per month, and equilibrium price is $16 per unit. Firm A invented a new technology, received a patent for it, and increased its sales by 25%. The increase in demand causes the market price to decrease by 10%. If Firm B continues to produce 3,600 units, how will the total revenue for each firm change in a month? Round to the nearest whole number if necessary. Use a minus sign to show a decrease in total revenue. A) Firm B (without patent): _____ B) Firm A (with patent): _____
A) -$5,760 B) $7,200
Suppose that a monopolist has a constant marginal cost curve. That is, for each unit of output that the monopolist produces, it costs an additional $20. The monopolist's marginal revenue is MR = 80 − 2Q, where Q is the quantity produced. The demand curve is P = 80 − 1Q. What is the monopolist's profit-maximizing output and price? Write the exact answer. Do not round. A) Quantity = _____ B) Price = _____
A) 30 B) $50
Which statement about monopolistic competition is true? A) A monopolistic competitor should fear that other firms with substitute products might enter the market and shift eh firm's perceived demand curve to the left B) Much like in perfect competition, in monopolistic competition the price will lie at the very bottom of the AC curve C) A monopolistic competitor's demand curve is the market demand curve
A) A monopolistic competitor should fear that other firms with substitute products might enter the market and shift eh firm's perceived demand curve to the left
Which of the following statements explains how a natural monopoly arises? A) A natural monopoly is a market situation in which the average cost of production is minimized by having one firm produce the entire quantity demanded in the market B) A natural monopoly is a firm that has been granted an exclusive patient to produce a product C) A natural monopoly is a firm that controls the entire supply chain, from production to retail D) A natural monopoly is a company that is subject to economic regulation by the government because it produces a product that is critical to national security
A) A natural monopoly is a market situation in which the average cost of production is minimized by having one firm produce the entire quantity demanded in the market
Which of the following statements explains how a natural monopoly arises? A) A natural monopoly occurs when firms experience declining average total costs over the full range of output that consumers are willing to buy B) When a firm is able to provide a better quality good or service more efficiently than its competitors, that firm is called a natural leader or a natural monopoly C) A natural monopoly arises when one firm deliberately erects strong entry barriers to keep competitors out D) A natural monopoly results when a single large firm buys out any smaller rival firms to avoid competition
A) A natural monopoly occurs when firms experience declining average total costs over the full range of output that consumers are willing to buy
Shade Sunscreen Company produces 145 bottles of sunscreen per day and sells their sunscreen at $11 per bottle. Its output and pricing decisions do not consider the external costs resulting from hazardous waste resulting from the production process. Now, suppose the government forces Shade Sunscreen to consider the external costs it creates by imposing taxes or fines. Which of the following quantity and price combinations would likely emerge? A) A quantity of 135 and a price of $12 B) A quantity of 125 and a price of $9 C) A quantity of 155 and a price of $10 D) A quantity of 145 and a price of $11
A) A quantity of 135 and a price of $12
Which of the following acts is a command-and-control regulation responsible for preventing ozone depletion? A) Clean Air Act B) Dodd-Frank Act C) Sarbanes-Oxley Act D) Clean Water Act
A) Clean Air Act
What should a profit-maximizing monopolist do in the short run given the columns Total Revenue X and Total Cost X and a current output of X? A) Decrease quantity B) Increase quantity C) Keep the quantity the same D) Shut down
A) Decrease quantity: If TC is MORE THAN SLIGHTLY greater than TR & quantity is HIGH B) Increase quantity: If TC is greater than TR & quantity is LOW C) Keep the quantity the same: If TR is greater than TC *OR* if TC is SLIGHTLY greater than TR D) Shut down: None
Which statement is correct? A) For a monopoly, the profit-maximizing quantity will occur where marginal revenue is EQUAL TO marginal cost B) In contrast to a perfectly competitive market, a monopoly positively affects society by offering the required quantity of goods at a price comparable to the cost of production C) A monopoly firm is interested in improving its product
A) For a monopoly, the profit-maximizing quantity will occur where marginal revenue is EQUAL TO marginal cost
In what scenario will markets be efficient if there is a negative externality? A) If firms are required to pay the external costs B) If the production of the polluting good is prohibited C) If the markets are competitive D) If consumers are not allowed to purchase the good
A) If firms are required to pay the external costs
Which statement is true? A) In the prisoner's dilemma, both players will gain more if they cooperate than if they pursue self-interest B) In the prisoner's dilemma, cooperation between firms leads to an increase in competition C) Cooperation is the dominant strategy in the oligopoly version of the prisoner's dilemma
A) In the prisoner's dilemma, both players will gain more if they cooperate than if they pursue self-interest
Suppose there is a single firm in a market that was formed by imposing restrictions on retailers. What type of monopoly or barrier to entry does this describe? A) Intimidating potential competitors B) Legal monopoly C) Deregulation D) Natural monopoly
A) Intimidating potential competitors
At Point A on the demand curve, a monopolistic competitor sells 14 units of a product at a price of $21. At Point B, the output increases by 9 units, the price falls by $4, and the total costs increase by $25. Is Point B a profit-maximizing point on the demand curve? A) NO, because at Point B, the marginal revenue is GREATER than the marginal cost B) NO, because at Point B, the marginal revenue is LOWER than the marginal cost C) YES, because at Point B, the marginal revenue is GREATER than the marginal cost D) YES, because at Point B, the marginal revenue is LOWER than the marginal cost
A) NO, because at Point B, the marginal revenue is GREATER than the marginal cost
The following table shows the utility payouts that Consumer 1 and Consumer 2 will receive depending on whether they invest in the public good or not. In each pair, Consumer 1's payoff is the first number, and Consumer 2's payoff is the second number. Does the dominant strategy for Consumer 2 make them want to free ride rather than invest in the public good? A) No, Consumer 2 will not want to free ride B) Yes, Consumer 2 will want to free ride
A) No, Consumer 2 will not want to free ride
Does the following scenario describe a command-and-control regulation? Climbers who want to scale Mount Everest are required to pay a substantial trash-collection fee based on the number of days they spend at Base Camp. A) No, this is not an example of command-and-control regulation B) Yes, this is an example of command-and-control regulation
A) No, this is not an example of command-and-control regulation
Which statement about cooperation in oligopolies is correct? A) Oligopoly cooperation might lead to monopoly profits B) OPEC countries can legally force each other to follow the conditions of the formal collusion agreements they have signed C) If an oligopoly firm decides to raise prices, other colluding firms will also raise their prices
A) Oligopoly cooperation might lead to monopoly profits
Farmers produce grains, such as wheat and corn, and the grain from one farm is identical to the grain from any other farm. Which market structure is this industry most likely to be in? A) Perfect competition B) Monopolistic competition C) Oligopoly D) Monopoly
A) Perfect competition
You are a bird watcher, and your neighbor has put up several birdhouses in the yard. Is this situation an example of a negative or a positive externality? A) Positive externality B) Negative externality
A) Positive externality
Your apartment building invests in a fancy coffee machine for all the residents to use. Is this situation an example of a negative or a positive externality? A) Positive externality B) Negative externality
A) Positive externality
Which statement is correct? A) Reduced crime is a possible externality of investing in education B) In the U.S., the rates of return on education are lower than on Treasury bonds C) In the U.S., high school graduates and college graduates will likely earn he same wage/salary
A) Reduced crime is a possible externality of investing in education
_____ include(s) the private costs of production that a firm incurs and the external costs of pollution that it passes on to society. A) Social costs B) Spillovers C) Explicit costs D) Sunk costs
A) Social costs
Which statement is correct? A) Technology is not the only example of a positive externality B) If the price of a good produced by a firm providing positive externalities is based on the marginal social benefit curve, it will be lower than the market price C) Assuming there are no spillover benefits in a market, the market supply curve reflects marginal social benefits
A) Technology is not the only example of a positive externality
The following diagram shows the curves for perceived demand, marginal revenue, and cost for Manuela's Pizza, which serves Mexican-style pizza. Manuela's is one of many other fast food restaurants in this town. Manuela's Pizza is a monopolistically competitive firm. Which of the following is NOT a characteristic of monopolistically competitive firms? A) The demand curve for Manuela's is more elastic than the demand curve for a firm in perfect competition B) There are many other firms in the market that produce similar, but not identical products C) Manuela's produces a differentiated product D) Manuela's has a downward-sloping demand curve, which indicates that it has some control over its price, unlike a firm in perfect competition
A) The demand curve for Manuela's is more elastic than the demand curve for a firm in perfect competition
Which statement about monopolistic competition is true? A) The demand curve in monopolistic competition is downward-sloping but more elastic than a monopolist's demand curve B) In monopolistic competition, the long-run equilibrium point is going to be located at the intersection of the demand and marginal cost curves C) In monopolistic competition when another competitor enters the market, the intersection of marginal cost and marginal revenue is going to occur at a higher point than before because the demand curve shifts to the right
A) The demand curve in monopolistic competition is downward-sloping but more elastic than a monopolist's demand curve
How does accounting for the externality affect the equilibrium price and quantity? A) The equilibrium PRICE RISES, and the equilibrium QUANTITY DECLINES B) The equilibrium PRICE RISES, and the equilibrium QUANTITY RISES C) The equilibrium PRICE DECLINES, and the equilibrium QUANTITY RISES D) The equilibrium PRICE DECLINES, and the equilibrium QUANTITY DECLINES
A) The equilibrium PRICE RISES, and the equilibrium QUANTITY DECLINES
Which statement describes a legal monopoly? A) The existence of this type of monopoly doesn't depend on government regulation B) Most monopolies of this type are utilities and socially beneficial C) This monopoly may occur through the protection of intellectual property
A) The existence of this type of monopoly doesn't depend on government regulation
Which statement is correct? A) The price charged by a monopoly firm is constrained by demand for the firm's product B) In contrast to a perfectly competitive market, a monopoly positively affects society by offering the required quantity of goods at a price comparable to the cost of production C) A monopoly firm is interested in improving its product
A) The price charged by a monopoly firm is constrained by demand for the firm's product
Which of the following is NOT a criticism of command-and-control policies? A) They do not promote alternative energy sources B) They offer no incentive to reduce pollution below the defined limits C) They are inflexible D) They are full of loopholes and exceptions
A) They do not promote alternative energy sources
An industry where the fixed costs are extremely high but the marginal cost of adding an additional customer is low. Which of the following describes this scenario? A) This is a barrier to entry that is not government-enforced B) This is a government-enforced barrier to entry C) This is not a barrier to entry
A) This is a barrier to entry that is not government-enforced
Does the following statement refer to a command-and-control regulation, a pollution tax/charge, or neither? There is a requirement that all coal-burning power plants install scrubbers, an apparatus used to remove sulfur emissions from coal and lessen the formation of acid rain. A) This is an example of a technology standard for coal-burning plants B) This is a pollution charge imposed on coal-burning plants C) This is neither a tax nor a standard. It is an example of a consumer safety regulation
A) This is an example of a technology standard for coal-burning plants
A city passes a law that all taxicab drivers must pass a driving safety test and have insurance. Which of the following describes this scenario? A) This is not a barrier to entry B) This is a government-enforced barrier to entry C) This is a barrier to entry that is not government-enforced
A) This is not a barrier to entry
Which statement describes a legal monopoly? A) This monopoly may be the result of obtaining a patent for production B) This monopoly is caused by geographical barriers C) This monopoly occurs when one producer can serve the entire market more efficiently than a number of smaller producers
A) This monopoly may be the result of obtaining a patent for production
Which statement describes a legal monopoly? A) This monopoly may occur through the protection of intellectual property B) This monopoly occurs when a company has control of a scarce physical resource C) The existence of this type of monopoly doesn't depend on government regulation
A) This monopoly may occur through the protection of intellectual property
Which statement is correct? A) When new technology is developed, the private benefits are represented by the profit the firm receives from its development B) The private benefits of new technology are usually equal to the social benefits received from it C) The development of new technology can be discouraged when other firms in the market cannot use the innovative firm's idea
A) When new technology is developed, the private benefits are represented by the profit the firm receives from its development
Which statement about oligopoly is true? A) When the firms in an oligopoly lack real competition, they may not be motivated to provide innovative products and high-quality service B) In order to ensure cooperation, oligopolists may sign legally enforceable contracts to agree upon prices and levels of output C) Although an oligopoly is a complex model, it can be described with a generally accepted theory called the prisoner's dilemma
A) When the firms in an oligopoly lack real competition, they may not be motivated to provide innovative products and high-quality service
Verity Studios (V) and Lambert Props (L) are two startups that have developed drones that provide dynamic light installations and flying props for concerts, musicals, circuses, and sporting events. Each firm must decide between a high-price and low-price strategy. The payoff matrix of expected economic profits is given below. Does Lambert Props have a dominant strategy? A) Yes, and it is to select a LOW price B) No, Lambert's strategy depends on the number of potential buyers for its product C) No, Lambert's strategy depends on Verity's strategy D) Yes, and it is to select a HIGH price
A) Yes, and it is to select a LOW price
Oliver's Opals is a firm in a monopolistically competitive industry. Currently, the firm is choosing an output where marginal revenue is LESS than marginal cost. To maximize profit, Oliver's Opals should _____ and set a price based on _____. A) decrease output; the firm's perceived demand curve B) increase output; the market demand curve C) decrease output; the market demand curve D) increase output; the firm's perceived demand curve
A) decrease output; the firm's perceived demand curve
Economists have found that, in general, investment in education yields a private return that is _____. A) Impossible to calculate B) GREATER than the cost of borrowing B) LESS than the cost of borrowing C) EQUAL to the cost of borrowing
B) GREATER than the cost of borrowing
Which statement about cooperation in oligopolies is correct? A) Firms face a kink in the demand curve because of how their customers react to price changes B) Firms that want to ensure cooperation keep close tabs on other firms' prices and output C) A kinked demand curve only occurs if a form collusion agreement is signed
B) Firms that want to ensure cooperation keep close tabs on other firms' prices and output
If the government wished to put a specific limit on the amount of pollution each firm could produce, what would be the best type of policy? A) Pollution charges or other taxes B) A command-and-control policy C) Marketable pollution permits D) Subsidies for cleaner energy sources
B) A command-and-control policy
A company that offers a specific product or service at a regulated price and can either be independently run and government-regulated or government-run and regulated is known as _____. A) Predatory pricing B) A legal monopoly C) Deregulation
B) A legal monopoly
Which statement is correct? A) Investing in education will always yield specific future benefits B) A more stable, democratic government is a possible externality of investing in education C) In the U.S., the rates of return on education are lower than on Treasury bonds
B) A more stable, democratic government is a possible externality of investing in education
Which of the following statements explains how a natural monopoly arises? A) A natural monopoly is a firm that naturally self-selects into the single player in the market by using the threat of sharp price cuts to keep potential competitors out of the market B) A natural monopoly arises when economies of scale are large relative to the market demand such that one producer can serve the entire market more efficiently than a number of smaller producers that would need to make duplicate physical capital investments C) A natural monopoly results when a large firm is insulated from competition by government-imposed trade restrictions D) A natural monopoly results when a very large firm is able to purchase its inputs at a lower price than its rivals so that it is able to force its competitors out of the market
B) A natural monopoly arises when economies of scale are large relative to the market demand such that one producer can serve the entire market more efficiently than a number of smaller producers that would need to make duplicate physical capital investments
Which statement is correct? A) To differentiate their products, firms try to adjust only physical aspects B) Advertising is a significant factor that contributes to differentiation in monopolistically competitive markets C) Monopolistically competitive firms take up a small share of the market
B) Advertising is a significant factor that contributes to differentiation in monopolistically competitive markets
Which statement about oligopoly is true? A) Although an oligopoly is a complex model, it can be described with a generally accepted theory called the prisoner's dilemma B) An oligopoly arises when a small number of large firms have all or most of the sales in the industry C) In oligopolies, there are always powerful incentives for innovation as firms seek to earn profits in the short run
B) An oligopoly arises when a small number of large firms have all or most of the sales in the industry
Is a park bench a public good or a common resource? A) Public good B) Common resource
B) Common resource
Which statement is true? A) Defenders of the market-oriented economy argue that people do not benefit from firms that seek short-term profits by providing differentiated products B) Critics of a market-oriented economy argue that most people would be just as happy with a smaller range of differentiated products C) Mobile devices are of little interest to advertisers
B) Critics of a market-oriented economy argue that most people would be just as happy with a smaller range of differentiated products
Which option would be considered an INTANGIBLE aspect of a product? A) The color of a product B) Delivery terms of a product C) The taste of a product
B) Delivery terms of a product
What kind of good is a commercial slot on a TV network? A) Non-rivalrous B) Excludable and rivalrous C) Non-excludable D) Public good
B) Excludable and rivalrous
Which statement about monopolistic competition is true? A) The demand curve in monopolistic competition is perfectly flat B) If a monopolistic competitor is earning losses, the combination of price and quantity at which the firm operates lies below the AC curve C) In monopolistic competition, profit maximization will occur at the point on the curve where price is equal to marginal cost
B) If a monopolistic competitor is earning losses, the combination of price and quantity at which the firm operates lies below the AC curve
Which statement is true? A) Cooperation is the dominant strategy in the oligopoly version of the prisoner's dilemma B) In the prisoner's dilemma, a player has an incentive to pursue the dominant strategy regardless of the other player's choice C) Game theory applies well to monopolies
B) In the prisoner's dilemma, a player has an incentive to pursue the dominant strategy regardless of the other player's choice
The paper factory in your town emits pollution into the air. Is this situation an example of a negative or a positive externality? A) Positive externality B) Negative externality
B) Negative externality
Which of the three difficulties of command-and-control environmental regulation does the following scenario demonstrate? A coal company has met the minimum standards and has no plans for further pollution prevention. A) Loopholes B) No incentives C) Inflexible
B) No incentives
Does the following scenario describe a command-and-control regulation? The government taxes a firm for each pound of particulates it emits. A) Yes, this is an example of command-and-control regulation B) No, this is not an example of command-and-control regulation
B) No, this is not an example of command-and-control regulation
The government grants patents to three copier companies, all of which use slightly different methods to produce copied pages. Which market structure is this industry most likely to be in? A) Perfect competition B) Oligopoly C) Monopolistic competition D) Monopoly
B) Oligopoly
The following diagram shows the curves for perceived demand, marginal revenue, and cost for Manuela's Pizza, which serves Mexican-style pizza. Manuela's is one of many other fast food restaurants in this town. Suppose the average total cost (ATC) curve remains the same. Which statement is true when the business transitions to the long run? A) Prices must rise B) Prices must fall C) Prices will remain the same D) Prices could rise or remain the same, but they cannot fall
B) Prices must fall
Is police protection a public good or a common resource? A) Common resource B) Public good
B) Public good
What kind of good is a YouTube video? A) Non-excludable B) Public good C) Non-rivalrous D) Excludable and rivalrous
B) Public good
Which statement is correct? A) Market failure occurs because firms do not account for all the benefits of production, and/or consumers do not account for all the costs of purchasing a product B) Restoration of historic buildings, the results of which are enjoyed not only by the restorers but also the who see the buildings, is an example of a positive externality C) Negative externalizes lead to underproduction because they negatively affect both producers and consumers
B) Restoration of historic buildings, the results of which are enjoyed not only by the restorers but also the who see the buildings, is an example of a positive externality
A monopolist, unlike a competitive firm, has some market power because of barriers to entry. That is, other companies cannot enter the market to create competition in that particular industry. Consider the following scenario: Since the late 1800s, the world's diamond trade has been largely controlled by DeBeers Consolidated Mines. DeBeers not only mines diamonds but has also bought up most of the world's supply of rough diamonds in order to keep prices high. Is there an entry barrier in this scenario, and if so, what is the source? A) There is no entry barrier B) The source of the entry barrier is DeBeers' control of the resource: rough diamonds C) DeBeers created a barrier by engaging in predatory pricing D) Diamond mining requires huge capital outlays, which serves as an entry barrier
B) The source of the entry barrier is DeBeers' control of the resource: rough diamonds
A monopolist, unlike a competitive firm, has some market power because of barriers to entry. That is, other companies cannot enter the market to create competition in that particular industry. Consider the following scenario: In September 2011, a New York federal court ruled that except in the case of shoes that are red all over, no other brand can create a shoe of a contrasting color with a red sole. The court ruled it infringes the trademark for such shoes granted to the French shoe designer, Christian Louboutin. Is there an entry barrier in this scenario, and if so, what is the source? A) The trade secret is the entry barrier B) The trademark is the entry barrier C) There is no barrier to entry because intellectual property rights are not entry barriers D) The patent is the entry barrier
B) The trademark is the entry barrier
A well-known trademark. Which of the following describes this scenario? A) This is a barrier to entry that is not government-enforced B) This is a government-enforced barrier to entry C) This is not a barrier to entry
B) This is a government-enforced barrier to entry
Which statement applies to NEGATIVE externalities? A) When social benefits are taken into account, the demand curve shifts to the right B) When this externality occurs, the government may interfere with taxes C) There is a shortage of goods or services for this type of externality
B) When this externality occurs, the government may interfere with taxes
Which of the following statements explains how a natural monopoly arises? A) A natural monopoly results when a very large firm is able to purchase its inputs at a lower price than its rivals so that it is able to force its competitors out of the market B) A natural monopoly arises when there are barriers to entry that cannot be eroded over time C) A natural monopoly occurs when the quantity demanded is less than the minimum quantity it takes to be at the bottom of the long-run average cost curve D) A natural monopoly is a company that is subject to economic regulation by the government because it produces a product that is critical to national security
C) A natural monopoly occurs when the quantity demanded is less than the minimum quantity it takes to be at the bottom of the long-run average cost curve
Which statement is true? A) Mobile devices are of little interest to advertisers B) Most people would prefer to live in an economy with perfect competition C) Defenders of market-oriented economies that that people really want to see a great variety of differentiated products in the market
C) Defenders of market-oriented economies that that people really want to see a great variety of differentiated products in the market
Which statement refers to competition? A) Firms agree to share the market among themselves B) Oligopolists are tempted to defy the law C) Firms act as if they are in perfect competition D) Firms are able to charge higher prices
C) Firms act as if they are in perfect competition
Which statement refers to competition? A) Firms agree to share the market among themselves B) Antitrust laws are established to prevent this type of interaction among oligopolists C) Firms can earn more by reducing their prices D) Oligopolists are tempted to defy the law
C) Firms can earn more by reducing their prices
Which statement about public goods is correct? A) A public good is non excludable and rivalrous, so it is not difficult to sell it to individual consumers B) In the case of public goods, the prisoner's dilemma shows that people are likely to cooperate to reach the outcome that is best for all parties C) Government spending and taxes are one way of providing public goods D) Goods that are excludable and non-rival are called common resources
C) Government spending and taxes are one way of providing public goods
Which statement about public goods is correct? A) The goal of monetary policy is to create public goods B) The problem of over-harvesting common resources is called the "free-rider problem" C) If many people act as free riders, the public good may never be provided D) Goods that are excludable and non-rival are called common resources
C) If many people act as free riders, the public good may never be provided
Economists argue that instead of regulating behavior through command-and-control policies, the government could use market-oriented tools to achieve environmental goals. One such instrument is the marketable permit program. Which of the following statements about the marketable permits program is FALSE? A) An advantage that emissions permits have over direct controls is that they make it in the firm's best interest to reduce pollution in the most efficient manner B) In a cap-and-trade permit system, the government sets a maximum allowable cap on total emissions C) In a cap-and-trade emissions program, polluters are taxed only on the amount of pollution they discharge beyond their allowed cap D) In a traceable pollution permits system, the firms that can reduce pollution at the lowest cost are the ones that actually do so
C) In a cap-and-trade emissions program, polluters are taxed only on the amount of pollution they discharge beyond their allowed cap
The following diagram shows the curves for perceived demand, marginal revenue, and cost for Manuela's Pizza, which serves Mexican-style pizza. Manuela's is one of many other fast food restaurants in this town. Why does the diagram indicate that Manuela's Pizza is currently operating in the short run rather than the long run? A) The business is currently not maximizing its profit B) Its current output is not produced at minimum average total cost (ATC) C) It is currently making a profit D) It is not producing where the average total cost (ATC) curve intersects the demand curve
C) It is currently making a profit
Suppose there is a single firm in a market that was formed by having a copyright. What type of monopoly or barrier to entry does this describe? A) Intimidating potential competitors B) Deregulation C) Legal monopoly D) Natural monopoly
C) Legal monopoly
Does the following statement refer to a command-and-control regulation, a pollution tax/charge, or neither? The government imposes costly fines for non-compliance of all minimal transportation standards for hazardous waste companies. A) The fine is a pollution tax B) The fine itself is an environmental standard C) The fine is a penalty for not complying with a command-and-control standard
C) The fine is a penalty for not complying with a command-and-control standard
Which option would be considered a PHYSICAL aspect of a product? A) A product's price B) Delivery terms of a product C) The texture of a product
C) The texture of a product
A monopolist, unlike a competitive firm, has some market power because of barriers to entry. That is, other companies cannot enter the market to create competition in that particular industry. Consider the following scenario: Wal-Mart regularly sells varying items--ranging from Crest toothpaste to Bayer aspirin--below cost to entice people into its store and increase traffic and sales of other items. Is there an entry barrier in this scenario, and if so, what is the source? A) Wal-Mart's reputation as a low-price store is the entry barrier B) Wal-Mart created a barrier by engaging in predatory pricing C) There is no entry barrier D) Wal-Mart has created an entry barrier through its marketing superiority
C) There is no entry barrier
Which definition matches the term, "Command-and-control regulations?" A) A tax imposed on firms to cover the negative externalities generated by the firms B) A regulation that uniformly allocates a set number of pollution permits to firms in the targeted industry C) These are pollution reduction regulations set by the government and applied uniformly to regulated polluters
C) These are pollution reduction regulations set by the government and applied uniformly to regulated polluters
Chicago has regulations that allow only one electric company to service the whole city. Which of the following describes this scenario? A) This is not a barrier to entry B) This is a barrier to entry that is not government-enforced C) This is a government-enforced barrier to entry
C) This is a government-enforced barrier to entry
A symbol or name for a particular good, which helps producers identify their product and protect it from competitors is known as a _____. A) Patent B) Copyright C) Trademark
C) Trademark
Which statement is correct? A) Assuming there are no spillover benefits in a market, the market supply curve reflects marginal social benefits B) Remodeling a house is only beneficial for the inhabitants C) Vaccinations can benefit society as a whole
C) Vaccinations can benefit society as a whole
Which statement applies to POSITIVE externalities? A) There is a surplus of goods under this type of externality B) The private supply curve lies below the social supply curve C) When this externality occurs, the government may provide subsidies
C) When this externality occurs, the government may provide subsidies
Which of the following are non-excludable goods? A) A University of Phoenix online lecture B) Tylenol C) A backpack D) The sun E) Facebook
D & E
At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $19. At Point B, the output increases by 7 units, the price falls by $4, and the total costs increase by $23. Is Point B a profit-maximizing point on the demand curve? A) NO, because at Point B, the marginal revenue is EQUAL TO the marginal cost B) YES, because at Point B, the marginal revenue is LOWER than the marginal cost C) YES, because at Point B, the marginal revenue is EQUAL TO the marginal cost D) NO, because at Point B, the marginal revenue is LOWER than the marginal cost
D) NO, because at Point B, the marginal revenue is LOWER than the marginal cost
Which of the following is the best example of a differentiated product? A) Milk B) Butter C) Fish D) Nail polish
D) Nail polish
Which option is an example of a public good? A) Higher education B) A satellite TV subscription C) A cab ride D) Police service
D) Police service
Which of the following is NOT an example of a U.S. environmental law or agency? A) The Environmental Protection Agency (EPA) B) The Clean Air Act C) The Clean Water Act D) The Landfill Reduction and Regulation Act
D) The Landfill Reduction and Regulation Act
A monopolist, unlike a competitive firm, has some market power because of barriers to entry. That is, other companies cannot enter the market to create competition in that particular industry. Consider the following scenario: Radio and television broadcasters must obtain a license from the Federal Communications Commission because, according to American law, the public owns the airwaves. There are only a limited number of broadcasting frequencies that do not conflict with each other. A) The barrier is the government's congestion pricing policy B) There is no entry barrier C) The large economies of scale in broadcasting result in a natural barrier to entry D) The government limits the number of licenses it grants, thus creating an entry barrier
D) The government limits the number of licenses it grants, thus creating an entry barrier
A monopolist is currently producing a level of output such that marginal revenue is $102 and marginal cost is $97. The monopolist then sets a price based on demand for the current level of output. What should the monopolist do to maximize profit? A) The monopolist should DECREASE output and DECREASE price B) The monopolist should INCREASE output and INCREASE price C) The monopolist should DECREASE output and INCREASE price D) The monopolist should INCREASE output and DECREASE price
D) The monopolist should INCREASE output and DECREASE price
Fred's Films is a firm in a monopolistically competitive industry. Currently, the firm is choosing an output where marginal revenue is GREATER than marginal cost. To maximize profit, Fred's Films should _____ and set a price based on _____. A) decrease output; the firm's perceived demand curve B) decrease output; the market demand curve C) increase output; the market demand curve D) increase output; the firm's perceived demand curve
D) increase output; the firm's perceived demand curve
Suppose that Fred's Films, a firm in a monopolistically competitive industry, is currently maximizing profit by producing a quantity where marginal revenue is EQUAL TO marginal cost. Assume that at this point, profits of the firm are equal to zero. Suppose that market demand DECREASES, which decreases demand for all firms in the industry. Based on this information, which option completes the blanks in the following sentence? In the short run, this firm will produce _____, and profits will be _____; in the long run, firms in this industry will _____, and profits will be _____. A) the same amount; negative; exit; positive B) the same amount; negative; exit; zero C) more; positive; enter; zero D) less; negative; exit; zero E) the same amount; negative; exit; negative
D) less; negative; exit; zero
T/F) Economies of scale are an example of the control of a physical resource.
False
T/F) Predatory pricing is an example of a legal monopoly.
False
T/F) Predatory pricing is an example of the control of a physical resource.
False
