ECON 206 Final May 9th

Oligopolistic industries are characterized by:

a few dominant firms and substantial entry barriers.

The supply of land is:

almost perfectly inelastic

Economics rent refers to the price paid for land and other natural resources that:

are fixed in total supply

In the United States, professional football players earn much higher incomes than a professional soccer player. This occurs because:

consumers have a greater demand for football games than soccer games

In the short run monopolistically competitive firms economic profit:

may be positive, zero, or negative

Refer to the above data. At the profit maximizing level of employment, this firm's total labor cost will be:

$24

Refer to the above data. The firm's optimal amount of R&D spending is:

$80 million

the herfindahl index for a pure monopolist is:

10,000

Jones owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate the shop can now provide a total of 42 haircuts per day, The MP of the second barber is:

18

In the United States, research and development spending as a percentage of GDP is:

2.5 to 3.0 percent, which is higher than that of most other industrial countries

Market is shown by

3

Refer to the above data. In maximizing its profit, this firm will employ:

3 units of labor

A profit-maximizing firms employs resource to the point where:

MRP=MRC

In the inverted-U theory:

R&D expenditures first rise as a percentage of the firm's sales as industry concentration increases but then falls as higher industry concentration occurs

The mutual interdependence that characterizes oligopoly arises because:

a smaller number of firms produce a large proportion of industry output

In the long run, a profit-maximizing monopolistically competitive firm sets its price:

above marginal cost

In the short-run, a profit-maximizing monopolistically competitive firm sets its price:

above marginal cost

Nonprice competition refers to:

advertising, product promotion, and changes in the real or perceived characteristics of a product.

In the market for loanable funds:

an increase in borrowing for investment will increase the interest rate.

OPEC provides an example of:

an international cartel

Process innovation can be depicted as:

an upward shift in a firm's total product curve.

When economist view technologies change as internal to the economy, they mean that it:

arises deliberately from the profit motive and competition

monopolistic competition resembles pure cometition because

barriers to entry are either weak or nonexistent

Entrepreneurship:

can be carried out either by individual or teams of individual

the monopolistically competitive firm shown in the above figure

cannot operate profitably, at least in the short run

Broadly defined, technological advances:

comprises new and improved goods and ew and improved ways of producing or distrubuting them

The demand for labor is derived from:

consumer demand for the product or service it is helping to produce

secret conspiracies to fix prices are examples of:

covert collusion

The process by which new firms and few products replace existing dominant firms and products is called:

creative destruction

Other things equal, an increase in the equilibrium interest rate will:

decrease purchase of capital goods and reduce R&D spendings

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:

demand curve as kinked, being steeper below the going price than above

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut introduced a similar pizza. This imitation illustrates:

diffusion

The spread of innovation through imitation refers to:

diffusion

The wide imitation and spread of an innovation is called:

diffusion

For a new product to be profitable, it must:

enable customers to obtain greater total utility from their money income

The corporate decision on type and level of R&D activity is difficult because:

expected returns lie in the future and are highly uncertain

The marginal benefit to a firm from its R&D expenditures is depicted by its:

expected-rate-of-return curve

Technological advance improves allocative efficiency by:

giving society a more-preferred mix of goods and services

In the long run, economic theory predicts that a monopolistically competitive firm will

have excess production capacity

To say that land rent performs no incentive function means that:

higher rental payments will not bring forth a larger quantity of land

the copper, aluminum, cement, and industrial alcohol industries are examples of:

homogenous oligopoly

Process innovation refers to:

implementation of better methods of producing products

Prices are likely to be least flexible

in oligopoly

The Untied Mines Workers good illustration of:

inclusive unionism

Marginal revenue product (MRP) of labor refers to the:

increases in total revenue resulting from the hire of one more unit of labor

A union may increase the demand for the services of its constituents by all of the tactics below expect:

increasing the price of the product that is complements for the one it is producing

The first successful commercial introduction of a new product refers to:

innovation

The successful commercial introduction of a new product, the use of a new method, or creation of a new form of business enterprise is called:

innovation

the first commercial introduction, as opposed to the first discovery, of transparent tape, is an example of:

innovation

Which of the following is a true statement?

innovation normally follows invention and precedes diffusion

Which of the following correctly orders, highest to lowest, the relative magnitudes of U.S. spendings by a business on components of R&D

innovation, invention, basic research

The first discovery (as distinct from irst commercial application) of a product or process is called:

invention

Technoligical advances is a three-step process involving

invention, innovation, and diffusion

Jones owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate the shop can now provide a total of 42 haircuts per day, The MRP of the second barber is:

is $108

The modern view of technological advance is that it:

is an internal element of capitalism, occuring in responses to profit incentives

as it relates to the R&D decision, the interest-rate-cost-of-funds curve:

is the marginal cost element in the MB=MC decision framework

Henry George advocated a single tax on"

land

The monopolistically competitive sellers demand curve will become more elastic the:

larger the number of competitors

Technological advances improve productive efficiency by:

lowing average total cost

monopolistic competition means:

many firms producing differentiated products

If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the:

marginal revenue product of the second worker is $20

Economic profit is most closely associated with:

monopoly, innovation, and uninsurable risks

The economist term for sole employer is a nonunion community is:

monopsonist

When a monopolistically competitive firm is in long-run equilibrium:

mr=mc and p> minimum atc.

Which of the following is a unique feature of oligopoly?

mutual interdependence

we would expect a cartel to achieve:

neither allocative efficiency nor productive efficiency.

Resource pricing is important because:

of all of the above reasons

economic analysis of a monopolistic competitive industry is more complicated than that of pure competition because:

of product differentiation and consequent product promotion activities

The market supply curve for labor is upsloping because:

of the opportunity cost of labor is housekeeping, leiure, or alternative employment

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because:

over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium

p exceeds minimum atc

Kodak introduced to the marketplace a digital camera which uses no film, but which takes photos that can be shown on personal computers. This is an example of:

product innovation

In an oligopolistic market:

products may be standardized or differentiated.

Which of the following is not a basic characteristic of monopolistic competition

recognized mutual independence

A monopsonist:

reduces the number of workers it employs so that it can pay each worker a lower wage rate

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?

subway sandwich

Fiber-optic telephone lines are rapidly replacing copper telephones cable. This is an example of:

technological advance

The demand for farmland will increase if:

technological advances make land more productive

Marginal revenue products measure the:

the amount by which the extra production of one more worker increased a firm's total revenue

Economic profit is most closely associated with:

the amount by which total revenue exceeds total cost

The demand for airline pilots results from the demand for air travel. This fact is an example of:

the derived demand for labor

The marginal revenue product schedule is:

the firm's resource demand schedule.

If the four-firm concentration ratio for industry X is 80:

the four largest firms account for 80 percent of total sales

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:

the herfindahl index

Oligopoly is difficult to analyze primarily because:

the price and output decisions of any one firm depend on the reaction of its rivals

The equilibrium interest rate equates:

the quantities demanded and supplied of loanable funds

Which of the following is an illustration of differentiated oligopoly

the soft drink industry

The retained earnings that corporations often use to finance R&D are also known as:

undistributed corporate profits

The major source of new scientific knowledge in the United States is:

university and government research

Funds lent to startup firms in return for shares of the profit if the firms succeed are called:

venture capital