eco exam 3

An oligopoly consists of______ providing_____ goods in a market where barriers to entry are _____

An oligopoly consists of a few seller(s) providing differentiated goods in a market where barriers to entry are high.

All of these are characteristic of monopolistic competition EXCEPT barriers to entry. easy entry and exit. price maker. product differentiation.

Barriers to entry

How are corporations different from partnerships? Corporations transform factors of production into products for consumers, but partnerships do not. Corporations have limited liability, but partnerships have unlimited liability. Corporations are an example of a firm, but partnerships are not. Partnerships have the legal rights of individuals, but corporations do not.

Corporations have limited liability, but partnerships have unlimited liability.

A profit-maximizing monopolist can charge any price to consumers. True False

False

All monopolies earn profits. True False

False

Suppose that the only café in town can sell five fish dinners per night at a price of $10 each. If this monopoly firm wants to sell six fish dinners, it must reduce the price to $9 each. When the business pursues this strategy to increase sales, the marginal revenue from the sixth dinner sold is $9. $4. $54. $50.

$4

The market price of pomegranates is $2, and JoAnne sells 25 pomegranates at the local farmer's market. The total revenue is _____ and the marginal revenue is _____. $50.00; $2.00 $12.50; $2.00 $50.00; $12.50 $12.50; $12.50

$50.00; $2.00

If the total cost of 3 units is $40 and the total cost of 4 units is $50, the marginal cost of the fourth unit is $50. $90. $40. $10.

10

A wedding planner determines that one waiter can serve 30 guests, two waiters can serve 70 guests, three waiters can serve 120 guests, four waiters can serve 160 guests, and five waiters can serve 180 guests. The marginal product of the third waiter is _____ guests. 40 36 120 50

50

A group of sellers who agree to restrict their collective output in order to drive up prices above marginal costs is a

Cartel

Which statement is generally true of cartels? Cartels usually raise prices by expanding output. Cartels never stick to their agreed‑upon quotas. Cartels collude to raise prices and profits. In the United States, cartel members can legally meet to set prices.

Cartels collude to raise prices and profits

Firms in perfectively competitive industries earn _____ economic profits. positive negative zero excessive

zero

If a business has revenue of $100,000, explicit costs of $50,000, and implicit costs of $60,000, it is earning an economic profit. True False

False

When a business sells an excess factory, it is incurring a sunk cost. True False

False

If the owner of a concert hall wishes to use third-degree price discrimination to price its tickets at $20, $15, and $10, it should price tickets lower for customers who are very likely to attend the concert regardless of the price. have more elastic demand for tickets. are not willing to attend the concert regardless of the price. have less elastic demand for tickets.

Have more elastic demand for tickets

In a perfectly competitive market, each firm's demand curve is: vertical. downward-sloping. upward-sloping. Horizontal

Horizontal

For a monopolistically competitive firm, profit is maximized when it produces at a level of output where MC = P. MC > ATC. ATC > P. MC = MR.

MC=MR

Perfectly competitive firms and monopoly firms should increase production when _____ marginal cost. price is equal to price is less than marginal revenue is greater than marginal revenue is less than

Marginal revenue is greater than

Compared to a competitive industry, a monopolist is likely to achieve _____ producer surplus while generating _____ deadweight loss. more; more more; less less; more less; less

More,more

Which statement is true of OPEC? The United States is a leading member of OPEC. Saudi Arabia is an occasional and minor player in OPEC. OPEC includes only nations from the Middle East. OPEC sets production quotas in order to restrict supply.

OPEC sets production quotas in order to restrict supply.

If a competitive firm can increase its profits by increasing its output, then the firm's MR < MC. P > MR. P > MC. MC > P.

P > MC.

what is the formula for total revenue?

P x Q

In the long run, which statement is TRUE for a monopolistically competitive firm? Price is greater than average total cost, and MR = MC. Price equals average total cost, and MR = MC. Price equals average total cost, and MR > MC. Price is less than average total cost, and MR = MC.

Price equals average total cost, and MR = MC.

Suppose that a monopoly in the market for an HIV drug becomes competitive after another company develops a different formula with the same efficacy. What is likely to happen to prices and quantity in this market? Prices would fall, but quantity would rise. Both prices and quantity would fall. Both prices and quantity would rise. Prices would rise, but quantity would fall.

Prices would fall, but quantity would rise

Product differentiation contributes to production efficiency. reduces price elasticity of demand. reduces product price. adds product information without increasing product cos

Reduces price elasticity of demand

The taxi industry in many cities has lobbied politicians to increase driver requirements for ride-sharing companies such as Uber in order for them to operate legally. The money spent by the taxi industry for this purpose demonstrates rent-seeking. x-inefficiency. producer surplus. deadweight loss.

Rent seeking

Consumers often seek bargains by purchasing goods in large quantities; for example, buying in bulk at Costco or buying larger boxes of cereal so the price per ounce is lower. These purchasing strategies result in which form of price discrimination? third-degree second-degree first-degree fourth-degree

Second degree

If the market price is $60, a firm's minimum average total cost is $70, and minimum average variable cost is $50, what should the firm do in this perfectly competitive market? The firm should continue producing in the short run in order to minimize losses. The firm should continue producing because the firm is earning an economic profit. The firm should shut down operations in order to minimize losses. The firm should continue producing because the firm is earning a normal profit.

The firm should continue producing in the short run in order to minimize losses.

If a firm's total cost increases by $25 when it produces an additional unit of output, an economist would say that the marginal cost for that unit is $25. True False

True

In a perfectly competitive industry, one would expect that a natural disaster that decreases the production of a significant number of firms in the industry would cause market prices to rise. True False

True

Market power reaches its maximum potential in a monopoly. True False

True

_____ costs increase as the level of production increases. Implicit Fixed Variable Sunk

Variable

when does third degree discrimination occur?

When different groups of customers are charged different prices based on characteristics, like a student discount or last minute buying

A monopoly firm exhibits all of these characteristics EXCEPT the ability to earn economic profits in the long run. an individual demand curve that is the same as the market demand curve. significant barriers to entry. a marginal revenue curve that equals price at all quantities.

a marginal revenue curve that equals price at all quantities.

Price discrimination by a monopolist leads to the firm earning higher profits but it also delivers benefits to: competitors, because the good produced by the monopolist becomes more expensive. consumers, because consumer surplus increases because of the monopolist's pricing actions. consumers, because prices are lowered to potential consumers who otherwise might not have been able to buy the good. competitors, because production techniques for the good produced are improved by the monopolist and the knowledge is shared.

consumers, because prices are lowered to potential consumers who otherwise might not have been able to buy the good.

The National Football League (NFL) achieves market power through its ability to: achieve economies of scale. present its games in major cities. gain government protection through patents or copyrights. control inputs.

control inputs.

For the few firms in an oligopoly, each: controls a substantial share of the market. gains an important benefit from a well‑known brand name. has many sizable competitors. delivers new and innovative products.

controls a substantial share of the market.

what is the formula for marginal revenue?

deltaTR/delta Q

A fixed cost: doesn't change with the level of output in the short run. includes only sunk costs. grows as the level of output grows. refers only to costs for assets that don't move.

doesn't change with the level of output in the short run.

Where does perfectively competitive industry's market demand curve point? upward- slope left of the demand curve upward- slope right of the demand curve downward- slope left of the demand curve downward- slope right of the demand curve

downward-slope to the right of the demand curve.

The reason monopolistically competitive firms have difficulty maintaining a profit in the long run is that ease of entry into the market encourages new firms to enter and force down the price. costs tend to increase as production rises. buyers refuse to pay higher prices over time. income taxes paid by the firms rise as their profits rise.

ease of entry into the market encourages new firms to enter and force down the price.

An oligopoly consists of _____ firms and _____ barriers to entry. many small; low few large; high few large; low many small; high

few large; high

Justin owns a home entertainment installation company. One employee can complete two installations per month; two employees can complete five installations, three employees can complete nine installations, four employees can complete twelve installations, and five employees can complete eleven installations. Diminishing marginal returns begin with the _____ worker. fifth fourth second third

fourth

Three barriers to entry that prevent firms from entering a market and competing in the market are control over inputs, economies of scale, and: the ability to produce products similar to that of other firms. the existence of an unlimited number of buyers. government protection through patents and copyrights. no restrictions on entry and exit from the market.

government protection through patents and copyrights.

The firms in a perfectly competitive market produce _____ products. different cooperative identical complementary

identical

While in perfect competition the market demand curve slopes downward and to the right, the demand curve for individual firms is horizontal, meaning each of the small firms in the industry can sell as much as it wants without reducing price because each firm is too small to influence the market's price.

info on firms

If a firm is producing where price exceeds average variable cost, the firm should continue production even though it may incur a loss, since it can cover its variable costs (payroll, utilities, etc.) and have some funds left over to apply toward paying fixed costs. the loss will quickly revert to a profit. it must adhere to union rules against layoffs. it is important to show stockholders that the company can turn itself around.

it can cover its variable costs (payroll, utilities, etc.) and have some funds left over to apply toward paying fixed costs.

Compared with a competitive market, a cartel as a whole will produce less output in order to decrease prices. more output in order to decrease prices. more output in order to increase prices. less output in order to increase prices.

less output in order to increase prices.

If a firm is able to change all of its factors of production, then it is operating in the long run. market period. short run. medium run.

long run

Walmart is able to order huge quantities of shovels and rakes at very low prices from many different factories in China as it opens more stores. This BEST represents short-run economies of scale. long-run diseconomies of scale. long-run economies of scale. economies of scope.

long-run economies of scale.

Generally, firms in monopolistically competitive industries do not earn long‑run economic profits because: high economies of scale reduce production costs. few brands compete for consumers' purchases. high barriers to entry deter new firms from entering the industry. low barriers to entry enable new firms to enter the industry.

low barriers to entry enable new firms to enter the industry.

For a cartel to be successful it must: force members of the cartel to alter products so consumers can have a wider variety of choice in the market. offer new members a profit incentive to join the cartel, even if the profits of existing members are reduced. seek changes to laws that outlaw price agreements between firms in an oligopoly so higher profits can be realized. maintain loyalty among its members and prevent non‑cartel members from producing output.

maintain loyalty among its members and prevent non‑cartel members from producing output.

A perfectly competitive industry is characterized by: many small firms each producing different products and low barriers to entry. a few large firms each taking into account the behavior of competitors and high barriers to entry. many small firms each producing identical products and no barriers to entry. a single firm that satisfies virtually all of the market's needs for a product with effective barriers to entry.

many small firms each producing identical products and no barriers to entry.

A firm in a perfectly competitive market maximizes its profits when... marginal cost equals its total revenue. marginal cost equals its marginal revenue total cost equals its total revenue total cost equals its marginal revenue

marginal cost equals its marginal revenue.

A firm's profit is maximized at the output level where: marginal cost equals marginal revenue. average fixed cost is minimized. variable cost is maximized. sunk cost is eliminated.

marginal cost equals marginal revenue.

The additional cost of producing one more unit of a good is: average variable cost. total cost. variable cost marginal cost.

marginal cost.

The price charged by a firm in a perfectly competitive market always equals its: total revenue. marginal cost. marginal revenue. average cost.

marginal revenue

The figure represents a monopoly in which all customers pay the same price for the output of the monopoly. To maximize profits, the monopolist produces at a level of output in which: marginal revenue equals average total cost, and then the monopolist charges the highest price for that output indicated by the demand curve. the demand curve intersects the average total cost, and prices are set where the marginal cost curve intersects the demand curve. marginal revenue equals marginal cost, and then the monopolist charges the highest price for that output indicated by the demand curve. the demand curve intersects the marginal cost curve, and prices are set where the average total cost curve intersects the demand curve.

marginal revenue equals marginal cost, and then the monopolist charges the highest price for that output indicated by the demand curve.

The profit-maximizing level of output for a firm in a perfectly competitive market occurs where: total revenue exceeds total cost. marginal revenue equals marginal cost. marginal revenue exceeds marginal cost. marginal revenue equals total cost.

marginal revenue equals marginal cost.

only in the case of perfect competition

marginal revenue=price MR=P

A firm earning a zero economic profit is _____ the financial expectations of its investors. exceeding meeting not meeting gaining

meeting

A firm earning zero economic profit is: failing and will shortly close. meeting its investors' minimum expectations and covering its opportunity costs. earning a positive accounting profit but not covering the opportunity costs of all of the resources employed in the business. not operating.

meeting its investors' minimum expectations and covering its opportunity costs.

A graph that illustrates the interaction of demand, marginal revenue and the determination of short‑run profit maximizing actions is similar for firms in _____ and _____ industries. monopolistic; monopolistically competitive monopolistically competitive; perfectly competitive monopolistic; perfectly competitive oligopolistic; perfectly competitive

monopolistic; monopolistically competitive

Firms in an oligopoly pay close attention to the pricing strategies of their competitors. As a result, these firms are said to be: mutually interdependent. exclusive dependents. mutual beneficiaries. exclusive participants.

mutually interdependent.

If firms in a perfectly competitive market are earning positive economic profits in the short run, one would expect that in the long run: existing firms would leave the market and market prices would decrease. existing firms would leave the market and market prices would increase. new firms would enter the market and market prices would increase. new firms would enter the market and market prices would decrease.

new firms would enter the market and market prices would decrease.

A market structure describes the nature of an industry based on the: size of the industry and number of firms. number and size of firms in the industry. type of products produced by the industry. size of firms in the industry.

number and size of firms in the industry.

Which inputs can be altered in the short run? total number of plants in operation number of hours that existing employees work capacity of the plant amount of heavy machinery used in the plant

number of hours that existing employees work

Implicit costs are the: additional costs of producing an additional unit. costs that change with the level of output. opportunity costs of the resources used by the firm. costs that don't change with the level of output in the short run.

opportunity costs of the resources used by the firm.

Which market structure does NOT exhibit a downward-sloping demand curve for the firm? monopolistic competition perfect competition monopoly oligopoly

perfect competition

In the short‑run, firms in monopolistically competitive markets can earn _____ economic profits and, in the long‑run, such firms typically earn _____ economic profits. zero; positive positive; zero positive; positive negative; negative

positive; zero

A firm is a _____ if its actions have no impact on the market price of a good. price taker price maker price creator price manipulator

price taker

A monopoly harms consumers because: prices are lower than that in perfect competition, and there is always a shortage in the market. new firms are encouraged to enter the industry because of the profits earned by the monopolist. prices are higher and output is lower than if the industry was perfectively competitive. a monopolist is more likely to invest in research and development in comparison to other firms.

prices are higher and output is lower than if the industry was perfectively competitive.

The characteristics of a monopolistically competitive industry include: few firms. high barriers to entry. long‑run price control. product differentiation.

product differentiation

what does natural disasters do to the supply of the market? reduces production is a shift in the market's supply curve to the left reduces production is a shift in the market's supply curve to the right increases production is a shift in the market's supply curve to the left increases production is a shift in the market's supply curve to the right

reduces production is a shift in the market's supply curve to the left

When monopolies waste resources attempting to prevent other firms from competing with them, it is referred to as: price fixing. cream skimming. rent seeking. price discriminating.

rent seeking.

Market power enables businesses to: be eligible for government subsidies. evade taxes and minimize other ancillary expenditures. produce products whose patent is owned by others. set prices and reap profits.

set prices and reap profits.

Sometimes, firms in an oligopoly cooperate in ways that are illegal in the United States and many other countries. This cooperation may involve agreements to ____ and is called _____. set prices; profit minimizing behavior. set prices; a cartel. merge; an action to increase competition. advocate for regulation; perfect competition.

set prices; a cartel

A perfectly competitive firm is a price taker; it must accept the market equilibrium price. maker; it has the freedom to set the selling price. taker; it can coordinate its pricing decisions with other firms. leader; it can change its price and other firms will adjust.

taker; it must accept the market equilibrium price.

what is marginal revenue?

the change in total revenue that results from the sale of one additional unit of a product

4. Monopolistically competitive markets generally keep prices much lower than a monopoly; nevertheless, they are not as low as in perfectly competitive markets because: there are few firms in perfectively competitive markets, so prices are lower. most consumers prefer the higher priced products produced by firms in monopolistically competitive industries. monopolistically competitive firms produce products that are identical to those produced by other firms. the many brands in a monopolistically competitive market mean that economies of scale (and lower costs) are harder to realize.

the many brands in a monopolistically competitive market mean that economies of scale (and lower costs) are harder to realize.

Normal profit for a competitive firm occurs when.. marginal cost exceeds marginal revenue. marginal revenue exceeds marginal cost. the price equals average variable cost. the price equals average total cost.

the price equals average total cost.

All of these are explicit costs, EXCEPT money paid for raw materials. business taxes paid by an entrepreneur. salaries paid to employees. the salary an entrepreneur could have earned in a corporate job.

the salary an entrepreneur could have earned in a corporate job.

Explicit costs are: the same as implicit costs. those paid to some other economic entity. the opportunity costs of the resources used in the business. costs that cannot be documented by a receipt.

those paid to some other economic entity

when does second degree discrimination occur?

when people pay different prices for a good based on the quantity purchased. (number of days at theme park) value pack like Costco or sam's club .

when does first degree discrimination occur?

when the firm is able to charge every customer the maximum amount he or she is willing to pay