Econ 102 Final PSU-Dave Brown
55. Which of the following is a characteristic of oligopoly? A. Easy entry and exit B. Many firms C. Strategic dependence D. None of the above
C
39. Which of the following is NOT a necessary condition for price discrimination? A. Preventing resale of the product B. Downward sloping demand curve C. Separating markets for the good D. Having a constant marginal cost
D
The demand curve has a (1) slope. A change in (2) will cause a movement along the demand curve, and a change in (3) will cause the demand curve to shift.
1. negative slope 2. change in price 3. change in other factors
15. Clothing retailers have faced greater competition in recent years as more firms have entered the clothing market. Some of the competition has come from foreign competitors, but much of it is domestic competition. As a result there is much competition in markets for many types of clothing and A. individual buyers and sellers cannot affect the market price because it is determined by the market forces of demand and supply. B. there are no other implications. C. firms have a great degree of flexibility in pricing their products because these products can be sold at a high profit level. D. there are relatively few buyers and sellers in the market, and one individual firm can determine the market price.
A
31. To be able to engage in profit-maximizing price searching, a monopoly firm must be able to A. prevent the entry of other firms into the market for its product. B. induce the entry of other firms into the market for its product. C. avoid earning negative economic profits in the short run. D. always earn zero economic profits.
A
44. Monopolistic competition is characterized by A. relative ease of entry into the market. B. a standard, undifferentiated product. C. persistent long-run economic profits. D. production at minimum average cost in the long run.
A
47. Entry into a monopolistically competitive industry A. is relatively easy. B. is very difficult. C. can be easy or difficult, depending on the type of product. D. is about the same as entering a monopoly industry.
A
50. Firms in a monopolistically competitive market will advertise because A. they want to differentiate their products. B. they want to increase the elasticity of the demand curve. C. of the significant differences in their product over their competitors. D. the elasticity for their product is inelastic.
A
51. Which of the following products is most likely to be sold in a monopolistically competitive market? A. fast food B. coal C. wheat D. electricity
A
77. Suppose that an industry consists of 100 firms, and the top 4 firms have annual sales of $1 million, $1.5 million, $2 million, and $2.5 million, respectively. If the entire industry has annual sales of $8.5 million, the four-firm concentration ratio is approximately A. 82 percent. B. 50 percent. C. 94 percent. D. 70 percent.
A
83. By reducing the product compatibility of iPod, Apple can lower the price elasticities of demand for A. Apple products that are complementary to the iPod. B. Apple products that are substitutable to the iPod. C. products by other firms that have a positive network effects. D. products that are not related to the iPod.
A
87. What does it mean when the products sold by the firms in an industry are homogeneous? A. The product sold by one firm is a perfect substitute of the product sold by another firm in the same industry. B. Firms in the industry can produce the same product with different inputs. C. All firms in the industry are identical in size. D. The product sold by one firm is a perfect complement of the product sold by another firm in the same industry.
A
89. For a firm in a perfectly competitive industry, the demand curve for its own product is A. horizontal. B. vertical. C. upward sloping. D. downward sloping.
A
93. The monopolist determines the price and quantity combination that maximizes short-run profits by A. finding the quantity at which marginal cost and marginal revenue are equal and then using the demand curve to find price. B. determining the price by finding the highest price at which sales can be made and then using the demand curve to find the appropriate quantity. C. finding the point at which marginal revenue and demand intersect. This gives the price and quantity that maximizes profits. D. finding the quantity at which average revenue and average total cost are furthest apart.
A
99. A profit-maximizing monopolist earns an economic loss whenever A. it pays taxes to the government on each unit of output it produces. B. the price it charges for its product exceeds average total cost. C. the demand curve lies completely below the ATC curve. D. it produces along the elastic portion of a demand curve.
A
80. A situation where a consumer's willingness to use an item depends on how many others use it is A. a positive-sum game. B. a network effect. C. price-leadership. D. a vertical merger.
B
16. The demand curve for a perfectly competitive industry is A. perfectly elastic. B. downward sloping. C. perfectly inelastic. D. unit elastic.
B
22. Which of the following is an example of a vertical merger? A. Northeastern Illinois University merging with McDonald's. B. Northeastern Illinois University merging with a training academy for new professors. C. Northeastern Illinois University merging with Roosevelt University. D. Northeastern Illinois University going from a public to a private university.
B
32. Which of the following is NOT a barrier to entry that would allow a monopolist to keep potential competitors out of its market? A. Significant economies of scale exist. B. The market price of the product is too high. C. The firm has a patent on the good or control over some resource required for the production of the good. D. The firm has government authorization to be a monopoly.
B
33. To sell more units, a monopolist A. simply moves across its horizontal demand curve to a larger quantity. B. moves down its demand curve to a lower price that will increase quantity demand. C. can continue to receive the same price it always has as long as it has its customers' goodwill. D. must be willing to lower the barriers to entry that have protected it.
B
41. A monopoly will look for opportunities to price discriminate because the practice A. leads to selling more units. B. leads to greater profits. C. allows it to charge higher prices. D. is desired by customers.
B
45. The distinguishing of products by brand name, color, and other attributes A. is known as interdependence. B. is known as product differentiation. C. leads to many firms in the market. D. leads to collusion.
B
56. A merger between firms that are in the same industry is called a A. conglomerate merger. B. horizontal merger. C. vertical merger. D. none of the above.
B
60. The most common reason for the existence of oligopolies is A. ease of entry. B. economies of scale. C. diseconomies of scale. D. advertising.
B
65. All of the following are assumptions of monopolistic competition EXCEPT A. many buyers and sellers. B. homogeneous product. C. easy entry of new firms in the long run. D. profit-maximizing behavior.
B
66. Products can be differentiated A. if the buyers are homogeneous and their number increases. B. by location and by brand name. C. only by brand name. D. none of the above
B
69. When managers in oligopolistic firms make decisions that affect output or price, they must A. also be sure they erect barriers to entry to prevent new entrants from affecting their plans. B. anticipate the reactions of their rivals and plan accordingly. C. register with the Antitrust Division of the Department of Justice. D. inform the regulators of their industry about their plans.
B
7. The measurement of industry concentration which calculates the percentage of all sales contributed by a specific number of leading firms is called the A. Herfindahl-Hirschman Index. B. concentration ratio. C. producer price index. D. P/E ratio
B
75. Since the firm in the above figure is operating in a monopolistically competitive industry, in the long run we can expect to see A. the typical firm's economic profits expand as production becomes more efficient. B. more firms entering the industry until economic profits are zero. C. the typical firm producing at the minimum point on its ATC curve. D. each firm expand its share of the total market.
B
76. Suppose an industry has total sales of $25 million per year. The two largest firms have sales of $6 million each, the third largest firm has sales of $2 million, and the fourth largest firm has sales of $1 million. The four-firm concentration ratio for this industry is A. 36 percent. B. 60 percent. C. 50 percent. D. 25 percent.
B
79. Which of the following is NOT a cause for an oligopoly to exist? A. economies of scale B. structural dependence C. barriers to entry D. horizontal mergers
B
8. The major similarity between monopolistic competition and perfect competition is A. the shape of the demand curve. B. that both assume many buyers and sellers. C. price equals marginal revenue in each. D. both assume products are differentiated.
B
82. Product compatibility is A. the capability of a product sold by one firm to compete with another firm's product. B. the capability of a product sold by one firm to function together with another firm's complementary product. C. the sensitivity of the price of one product is to the change of the price of another product. D. how much one product can be substituted for another product.
B
84. An industry battle between incompatible product formats can occur if competing firms selling compatible products A. take into account network effects. B. fail to take into account network effects. C. take into account economies of scale. D. fail to take into account economies of scale.
B
86. A price taker is a firm that A. seeks to maximize revenue rather than profit. B. cannot influence the market price. C. searches for the best price and then takes the highest profits possible. D. buys inputs for firms.
B
95. A pure monopolist is selling 7 units at a price of $12. If the marginal revenue of the 8th unit is $4, then the price of the 8th unit is A. $10. B. $11. C. greater than $12. D. $4.
B
52. Monopolistic competition means A. monopolies from several countries compete in the global market. B. a large number of firms producing homogeneous products. C. a large number of firms producing differentiated products. D. few firms producing differentiated products.
C
13. Which of the following is NOT a characteristic of a perfectly competitive market? A. The products sold by the firms in the market are homogeneous. B. There are many buyers and sellers in the market. C. It is difficult for a firm to enter or leave the market. D. Each firm is a price taker.
C
23. Which of the following is an example of a horizontal merger? A. Northeastern Illinois University merging with McDonald's. B. Northeastern Illinois University merging with a training academy for new professors. C. Northeastern Illinois University merging with Roosevelt University. D. Northeastern Illinois University going from a public to a private university.
C
30. A monopolist is defined as A. a firm with annual sales over $10 million. B. a large firm, making substantial profits, that is able to make other firms do what it wants. C. a single supplier of a good or service for which there is no close substitute. D. a producer of a good or service that is expensive to produce, requiring large amounts of capital equipment.
C
34. A monopolist's marginal revenue curve is A. the same as a perfectly competitive firm's marginal revenue curve. B. higher than the monopolist's demand curve. C. below the firm's demand curve. D. a horizontal line at the market price.
C
35. Which of the following statements about the elasticity of demand for a monopolist is TRUE? A. Since a monopolist produces a good with no close substitutes, the price elasticity of demand for the good is zero. B. A monopolist produces a good with demand that is perfectly inelastic because people can not do without the good. C. Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity. D. Since the demand curve of a monopolist is downward sloping, the demand for the good must be inelastic.
C
4. Which of the following does NOT help explain why oligopolies exist? A. Economies of scale B. Mergers C. Product homogeneity D. Barriers to entry
C
42. Which of the following statements is FALSE? A. Other things being equal, society's overall well-being is reduced when a perfectly competitive industry is monopolized. B. When both a perfectly competitive industry and a monopolist face the same production costs and the same market demand curve,the monopolist offers a lower level of output for sale. C. The profit-maximizing monopolist will always produce only along the inelastic portion of the demand curve, whereas equilibrium in a perfectly competitive industry always occurs along the elastic portion of the demand curve. D. When both a perfectly competitive industry and a monopolist face the same production costs and the same market demand curve, the monopolist charges a higher price for its product than what would be charged in a perfectly competitive situation.
C
49. In general, the demand for the product of a monopolistic competitor is A. unitary elastic. B. relatively inelastic. C. relatively elastic. D. perfectly elastic.
C
59. If a firm is an oligopolist, which is NOT true? A. It must pay attention to other firms' prices. B. It is one of a relatively small number of firms dominating its industry. C. It can sell all the units it wants at the going market price. D. It is engaged in a strategic game.
C
63. Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms? A. No, because domestic firms in oligopoly markets are always so dominant that overseas producers have little or no impact on those markets. B. No, because the United States government has effectively blocked all imports that might compete with domestic firms in oligopoly industries. C. Yes, competition from overseas firms can substantially limit domestic firms' market power. D. There is no way to know.
C
78. Joe's hotdog stand merges with a company that supplies the condiments to Joe's. This is an example of A. conglomerate merger. B. concentration ratio. C. vertical merger. D. horizontal merger.
C
81. Jane is on Facebook only because her friends are. This is A. price-leadership. B. negative-sum game. C. positive market feedback. D. negative market feedback.
C
85. All firms in a perfect competition industry A. are price makers. B. produce differentiated products. C. produce identical products. D. lose money
C
88. Which of the following is NOT a characteristic of perfect competition? A. Firms are "price takers." B. All firms sell identical products. C. There are substantial barriers to entry into the industry. D. There are many buyers and sellers.
C
90. The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm A. lowers its price, it can sell more. B. accepts the market-set price, the number of units the firm can sell is limited. C. raises its price, sales will fall to zero. D. changes its price, the quantity demanded will change in the opposite direction.
C
91. Which of the following statements is correct about the demand curve of the perfectly competitive industry? A. The demand curve of the perfectly competitive industry is horizontal as are the demand curves facing the individual firms. B. The market demand curve of perfect competition is vertical because the individual consumers are buying a homogeneous product. C. The market demand curve of the perfectly competitive industry is downward sloping while the demand curve facing an individual firm is horizontal. D. The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping
C
92. When price and marginal cost are equal for a perfectly competitive firm, the firm is A. minimizing average total cost. B. maximizing total revenue. C. maximizing economic profit. D. earning negative economic profit.
C
94. If a monopolist produces to a point at which marginal revenue is less than marginal cost then A. profits are being maximized. B. profits will always be negative. C. the incremental cost of producing the last unit exceeds the incremental revenue. D. the incremental cost of producing the last unit is less than the incremental revenue
C
96. Which of the following is true of a perfectly competitive firm and a monopoly in the long run? A. P = MC B. P = ATC C. MR = MC D. P = MR
C
97. Under which of the following forms of monopoly regulation does the monopolist have no incentives to keep costs low? A. price caps B. profit sharing C. average cost pricing
C
99. A profit-maximizing monopolist earns an economic loss whenever A. it pays taxes to the government on each unit of output it produces. B. the price it charges for its product exceeds average total cost. C. the demand curve lies completely below the ATC curve. D. it produces along the elastic portion of a demand curve.
C
Recall that the goal of the Affordable Care Act (also known as Obamacare) legislation was to get more people access to health insurance. It was recently widely reported that health insurance premiums under Obamacare are going to get much more expensive. What is the main factor causing the premiums to get more expensive? A. Many of the new enrollees were young teens unable to afford their own insurance, causing other people the pay. B. The plan required a lot of paperwork/ administrative tasks, and insurance companies had to hire a lot of people to get the tasks done. C. The new enrollees were older and sicker than expected, increasing healthcare usage and expenses, causing cost/premiums to rise. D. Obamacare created new medical technology which were expensive to use.
C
100. Price discrimination is more likely in the case of services than in the case of goods because A. producers of goods usually do not face downward sloping demand curves. B. it is easier to distinguish customers with different elasticities of demand with respect to services than with goods. C. elasticities of demand vary more with services than with goods. D. it is more difficult to resell services.
D
17. The demand curve for the product of a perfectly competitive firm is A. downward sloping. B. upward sloping. C. perfectly inelastic. D. perfectly elastic.
D
29. Monopoly producers face A. many competitors producing the same product. B. only a few competitors producing the same product. C. at least one competitive producer of the same product. D. no competitive producers of the same product.
D
3. Which of the following is NOT a characteristic of monopolistic competition? A. A large number of sellers in a highly competitive market B. Differentiated products C. The existence of advertising D. Marginal cost pricing in the long run
D
4. Which of the following is NOT a characteristic of a perfectly competitive industry? A. There is free entry and exit in the long run. B. The industry demand curve is downward sloping. C. Each firm produces the same homogeneous product. D. Economic profits must be positive in the short run.
D
40. Price discrimination is the A. refusal by a firm to sell to all customers. B. selling of a given product at more than one price when the price differences reflect cost differences. C. pricing of a product so that not everyone can afford it. D. selling of a given product at more than one price when the price difference is unrelated to cost differences.
D
53. Considering the relevant market structures, which is an INCORRECT statement? A. In a perfectly competitive situation, there is an extremely large number of firms. B. In pure monopoly, there is only one firm. C. In monopolistic competition, there is a large number of firms. D. In any market situation, the number of firms is not very important.
D
58. Which of the following is NOT a common characteristic of oligopoly? A. strategic dependence among firms in the industry B. product differentiation C. barriers to entry D. marginal cost pricing.
D
64. A market situation in which a large number of firms produce similar but not identical products is A. a collusive market structure. B. competitive monopoly. C. a homogeneous market. D. monopolistic competition.
D
67. The demand for the product of a monopolistically competitive firm is highly elastic when A. firms collude. B. there are fewer firms in the industry. C. there is a lot of product differentiation. D. there are a lot of close substitutes.
D
68. A monopolistic competitor behaving in a profit-maximizing way will A. not advertise. B. advertise as much as it can in order to increase its sales. C. advertise to the point where the additional sales from advertising equal the additional marginal costs of the product. D. advertise to the point where the additional revenue from one more dollar of advertising just equals the extra dollar cost of advertising.
D
70. Which of the following statements about concentration ratios is correct? A. A high concentration ratio indicates that the industry is a monopoly. B. A high concentration ratio indicates that the industry is monopolistically competitive. C. A high concentration ratio suggests that the industry is characterized by strategic independence. D. A high concentration ratio suggests that the industry is characterized by strategic dependence
D
98. For a monopoly earning positive economic profits at the profit-maximizing output level, all of the following are true EXCEPT A. P > ATC. B. P > MR. C. P > MC. D. P = MR.
D
Which of the following goods is likely to have the most elastic demand, and why?
elastic - lots of substitutes; as price increases, quantity demanded decreases rapidly Ex. furniture, vehicles
Which of the following goods is likely to have the most inelastic demand, and why?
inelastic - not a lot of substitutes; price change does not affect the quantity demanded Ex. gas, water, clothing, food