econ exam 3 yao wvu

A monopoly firm is different from a competitive firm in that: A. there are many substitutes for a monopolist's product while there are no substitutes for a competitive firm's product. B. a monopolist's demand curve is perfectly inelastic while a competitive firm's demand curve is perfectly elastic. C. a monopolist can influence market price while a competitive firm cannot. D. a competitive firm has a U-shaped average cost curve while a monopolist does not

c. a monopolist can influence a market price while a competitive firm cannot

If MC = Q/15 represents marginal cost for a monopolist and market demand is given by Qd = 500 - 10P, the equation for marginal revenue is: a. MR = 50Q - (1/5)Q2. b. MR = 50Q - (1/10)Q2. c. MR = 50 - (1/5)Q. d. MR = 50 - (1/10)Q.

c. MR= 50 - (1/5)Q

In a perfectly competitive decreasing-cost industry, a decrease in market demand in the long run causes: a. a decrease in quantity, an increase in price, and no change in profit. b. a decrease in quantity, price, and profit. c. a decrease in quantity, no change in price, and no change in profit. d. a decrease in quantity, an increase in price, and an increase in profit.

a. a decrease in quantity, an increase in price, and no change in profit

During a recession, the price of restaurant meals falls by over ten percent. The most likely cause is: A. a shift of the demand curve to the left. B. a shift of the supply curve to the left. C. a shift of the supply curve to the right. D. a shift of the demand curve to the right.

a. a shift of demand curve to the left

Suppose the dry cleaning industry is initially in long-run equilibrium but then experiences a sharp increase in the price of its inputs. Assuming that the industry is perfectly competitive, the increase in costs should: a. decrease the number of firms in the industry in the long run and raise the market price. b. increase the number of firms in the industry in the industry and raise the market price. c. decrease the number of firms in the industry in the long run and reduce the market price. d. increase the number of firms in the industry in the industry and reduce the market price.

a. decrease the number of firms in the industry in the long run and raise the market price

A price-discriminating monopolist will charge a higher price to: a. individuals with a more inelastic demand. b. individuals with a more elastic demand. c. women. d. minorities.

a. individuals with a more elastic demand

eBay.com is a vast auction site that is similar to a competitive market in some ways but differs from it in others. Which of the following describes how eBay resembles a competitive market? a. It is easy to enter and easy to leave eBay. b. Sellers sometimes do not describe the products accurately on eBay. c. There is a great variety of different products sold on eBay. d. On eBay the large sellers dominate the market.

a. it is easy to enter and easy to leave ebay

At the socially optimum quantity of production price equals: A. marginal cost. B. marginal revenue. C. average total cost. D. average variable cost.

a. marginal cost

At the socially optimum quantity of production, price equals: a. marginal cost. b. marginal revenue. c. average total cost. d. average variable cost.

a. marginal cost

If market demand increases in a perfectly competitive increasing-cost industry: A. new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase. B. new firms will enter the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall. C. some firms will exit the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase. D. some firms will exit the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.

a. new firms will enter the industry, factor price will rise, and the price at which each firm earns zero economic profit will increase

If market demand increases in a perfectly competitive increasing-cost industry: a. new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase. b. new firms will enter the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall. c. some firms will exit the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase. d. some firms will exit the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.

a. new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase

Monopoly is a market structure in which: a. one firm makes up the entire market. b. a few firms dominate the market. c. many firms produce differentiated products. d. many firms produce identical products.

a. one firm makes up the entire market

In the early 2000s, Microsoft created a special version of its Windows operating system that it sold at a low price in countries where cheap, pirated software was widespread. The cost of producing another copy of this software is the same as the cost of producing another copy of the regular Windows product. Selling this "special edition" software at a low price in certain countries is very similar to what economists call: A. price discrimination. B. natural monopoly. C. a price taker. D. welfare loss.

a. price discrimination

Microsoft has a special version of its Windows operating system that it sells at a low price in countries where cheap pirated software is widespread. The cost of producing another copy of this software is the same as the cost of producing another copy of the regular Windows product. Selling this "special edition" software at a low price in certain countries is very similar to what economists call: a. price discrimination. b. natural monopoly. c. a price taker. d. welfare loss.

a. price discrimination

Two Members of Parliament from coffee growing areas said that no firm should have a monopoly to market Kenyan coffee. Tetu Coffee has sparked a storm in the sector by promising to earn the country Sh400 billion annually if given exclusive licenses to market Kenyan coffee. The MPs .said the coffee sector should instead be liberalized to enable growers to sell their produce wherever prices were better. Maitha said coffee farmers had been exploited for long through poor prices paid for their produce.... (Source: "Coffee Marketing Monopoly Opposed," The East African Standard, Nairobi, Kenya on September 6, 2004) Read the text above to answer this question. What would create a market with one buyer in the situation described? A. the government prohibits other buyers. B. there are economies of scale in purchasing coffee. C. the Tetu coffee has the ability to out-compete other coffee buyers. D. there are economies of scope.

a. the government prohibits other buyers

The supply curve of a perfectly competitive firm is: a. the marginal cost curve only if price exceeds average variable cost. b. the marginal cost curve only if price exceeds average total cost. c. the average total cost curve only if price exceeds average variable cost. d. nonexistent.

a. the marginal cost curve only if price exceeds average variable cost

If a monopolist increases output from 14 to 15 by lowering its price from $32 to $31, marginal revenue is: a. $1. b. $17. c. $448. d. $465.

b. 17

An assumption of a competitive market is that both the buyers and sellers are price takers. When we go to the mall to shop for clothing or to the grocery to buy food, what do we usually observe? A. Both buyers and sellers are usually price takers. B. Buyers are often price takers but sellers are usually price makers. C. Buyers are often price makers but sellers are usually price takers. D. Both buyers and sellers are usually price makers.

b. buyers are often price takers but sellers are usually price makers

An assumption of a competitive market is that both buyers and sellers are price takers. When we go to the mall to shop for clothing or to the grocery to buy food, what do we usually observe? a. Both buyers and sellers are usually price takers. b. Buyers are often price takers, but sellers are usually price makers. c. Buyers are often price makers, but sellers are usually price takers. d. Both buyers and sellers are usually price makers.

b. buyers are often price takers, but sellers are usually price makers

If MR > MC, a monopolist should: a. decrease production. b. increase production. c. maintain the same level of production. d. stop producing.

b. increase production

Which of the following is one of the necessary conditions for perfect competition? A. Diminishing utility. B. Large number of firms. C. Differentiated products. D. Indivisible set up costs.

b. large number of firms

A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of $50 per book. It follows that the marginal cost of textbooks is: a. equal to $50. b. less than $50. c. greater than $50. d. greater than the average total cost.

b. less than 50

Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that: a. the oat industry is in equilibrium. b. new firms will enter the oat industry. c. the price of oats will remain at $2 per bushel in the long run. d. firms in the oat industry will earn economic profits in both the long run and the short run.

b. new firms will enter the oat industry

In the early 2000s many drugs, which provide significant revenue to firms that make them, were slated to lose patent protection. Why are patents important to those who hold them? A. Without patents, there will no longer be economies of scale in production. B. Patents act as a barrier to entry allowing monopoly profits. C. Without patents, there would be considerably more price discrimination in the market. D. Patents actually do not matter because they do not guarantee that a firm will make a profit.

b. patents act as a barrier to entry allowing monopoly profits

A perfectly competitive firm in the long run earns: A. positive economic profits but zero normal profits. B. positive normal profits but zero economic profits. C. positive economic profits and positive normal profits. D. zero economic profits and zero normal profits.

b. positive normal profits but zero economic profits

A perfectly competitive firm in the long run earns: a. positive economic profits but zero normal profits. b. positive normal profits but zero economic profits. c. positive economic profits and positive normal profits. d. zero economic profits and zero normal profits.

b. positive normal profits but zero economic profits

Germany uses a two-tiered patent system, granting shorter periods of patent protection to inventions that are considered minor. If the U.S. were to adopt such a system, it would: A. result in more government-created monopoly power. B. serve to encourage research and development on important inventions without inefficiently granting lengthy patent protection to every invention. C. serve to discourage research and development since it can only be profitable if a full patent lasting for 20 years is granted. D. have no effect on either research efforts or market efficiency

b. serve to encourage research and development on important inventions without inefficiently granting lengthy patent protection to every inention

A monopoly firm is different from a competitive firm in that: a. there are many substitutes for a monopolist's product whereas there are no substitutes for a competitive firm's product. b. a monopolist's demand curve is perfectly inelastic whereas a competitive firm's demand curve is perfectly elastic. c. a monopolist can influence market price whereas a competitive firm cannot. d. a competitive firm has a U-shaped average cost curve whereas a monopolist does not.

c. a monopolist can influence market price whereas a competitive firm cannot

A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should: A. produce more widgets. B. produce fewer widgets. C. continue producing 500 widgets. D. shut down.

c. continue producing 500 widgets

A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should: a. produce more widgets. b. produce fewer widgets. c. continue producing 500 widgets. d. shut down.

c. continue producing 500 widgets

To maximize profits, a perfectly competitive firm should produce where marginal: A. cost equals total revenue. B. cost exceeds marginal revenue. C. cost equals marginal revenue. D. revenue exceeds marginal cost

c. cost equals marginal revenue

For a monopolist, the price of the product: a. equals the marginal revenue. b. is less than the marginal revenue. c. exceeds the marginal revenue. d. equals the marginal cost.

c. exceeds the marginal revenue

Patents do all of the following except: A. generate monopoly profits. B. increase research and development. C. increase quantity produced above its competitive level. D. raise market price above its competitive level.

c. increase quantity produced above its competitive level

In a perfectly competitive market the demand curve faced by an individual firm is: A. perfectly inelastic. B. relatively inelastic. C. perfectly elastic. D. relatively elastic.

c. perfectly elastic

In a perfectly competitive market, the demand curve faced by an individual firm is: a. perfectly inelastic. b. relatively inelastic. c. perfectly elastic. d. relatively elastic.

c. perfectly elastic

All of the following can be barriers to entry except: a. economies of scale. b. a firm's superior production ability. c. price discrimination. d. patents.

c. price discrimination

iTunes charges British customers 20 percent more than customers in France and Germany. Apple defended the price differential, saying that the "underlying economic model in each country has an impact on how we price our track downloads." An economist would say that Apple is engaged in: a. collusion. b. monopolistic competition. c. price discrimination. d. reverse engineering.

c. price discrimination

Barriers to entry: a. do not affect the number of firms in an industry. b. exist only in perfectly competitive markets. c. restrict the number of firms in an industry. d. limit output in an industry.

c. restrict the number of firms in an inustry

Spam (junk e-mail) is a major annoyance for many people who use the Internet. However, spammers sometimes have to send thousands of messages to get just one response that pays money. Given this information: a. spamming cannot be profitable because of the low numbers of buyers; its sole purpose is to annoy others. b. spamming cannot be profitable because of the low numbers of buyers; it is fraudulently profitable. c. spamming can be profitable even with a very low number of buyers because the marginal cost of sending spam is virtually zero. c. as with many other activities on the Internet, spammers are profitable only because they rely on the fees from advertising.

c. spamming can be profitable even with a very low number of buyers because the marginal cost of sending spam is virtually zero

If a college student's demand for magazine subscriptions is more price-elastic than a business executive's demand for magazine subscriptions, then which of the following pricing strategies would a price-discriminating magazine publisher follow? A. Charge the same rate to college students and business executives B. Set price according to the marginal cost of printing the magazines C. Charge a higher price to college students D. Charge a higher price to business executives

d. charge a higher price to business executives

The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will: a. be equal to the marginal cost of diamonds. b. be equal to the average total cost of diamonds. c. exceed the marginal cost of diamonds but be equal to the average total cost of diamonds. d. exceed both the marginal cost and the average total cost of diamonds.

d. exceed both the marginal cost and the average total cost of diamonds

If there were no barriers to entry: a. natural monopolies would still exist. b. patents could still be offered by the government. c. "just" monopolies would still exist. d. firms would compete away monopoly profits.

d. firms would compete away monopoly profits

Perfectly competitive firms: A. maximize market share. B. maximize total sales. C. minimize total costs. D. maximize profits.

d. maximize profits

A natural monopoly: A. has an average total cost curve that reaches minimum possible average total cost at a low level of output. B. is usually subject to antitrust suits. C. is usually allowed to choose its price so as to maximize profits in the United States. D. occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market

d. occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market

Marginal revenue is not equal to price for a monopolist because: A. the monopolist's demand curve is below its marginal revenue curve. B. total revenue increases as output increases. C. the monopolist sets price equal to marginal cost. D. the monopolist must lower the price of all units in order to sell more.

d. the monopolist must lower the price of all units in order to sell more