econ final 2

The largest Herfindahl-Hirschman index possible is _____, and the industry is a(n) _____.

10,000 / Monopoly

Seven firms in the market have the following market shares: 30%, 20%, 20%, 10%, 10%, 5%, 5%. The four-firm concentration ratio =

80

Which statement concerning monopoly is TRUE? Monopoly firms are always larger than are perfectly competitive firms. A monopoly has no rivals. Barriers to entry do not prevent other firms from entering a monopolized industry. Monopolists produce more output than does a competitive market with the same demand and cost structure.

A monopoly has no rivals.

Game theory is commonly used to explain behavior in oligopolies because oligopolies are characterized by:

Interdependence

Jake and Zoe are the only producers of funnel cake in their town.Every week, each decides whether to price high or price low for the following week.According to the Nash equilibrium, Jake prices _____ and Zoe prices _____.

Low / Low

The toy industry often engages in price wars. This means that firms often _____ prices until profits _____.

Lower / Approach 0

The 1890 law intended to prevent the establishment of more monopolies and to break up existing ones in the United States was the _____ Act.

Sherman AntiTrust

_____ is the unwritten or unspoken agreement through which firms limit _____.

Tactic Collusion / Competition amongst themselves

What is a firm's breakeven price?

The minimum ATC

Tacit collusion is most likely to occur if there are only a few firms in the industry. True or False

True

The demand curve for a monopoly is: above the marginal revenue curve. below the marginal revenue curve. horizontal because of economies of scale. infinitely elastic.

above the marginal revenue curve.

The MAIN reason a monopoly engages in price discrimination is that: it wants to discriminate against a particular ethnic group. doing so increases its profits. it wants to discourage potential competitors. by charging a lower price to some people, it may succeed in discouraging efforts to regulate it.

doing so increases its profits.

A strategy that is the same, regardless of the action of the other player in a game, is a _____ strategy.

dominant

The demand curve facing a monopolist is: horizontal, the same as that facing a perfectly competitive firm. downward sloping, the same as that facing a perfectly competitive firm. upward sloping, the same as that facing a perfectly competitive firm. downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

downward sloping

The existence of positive economic profits leads firms to:

enter an industry, which shifts the market supply curve to the right and decreases market price.

A perfectly competitive firm's marginal revenue is:

equal to the selling price.

Goods that are subject to network externalities tend to be ones: for which the value of the good to an individual is lower when more people use it. that are land-intensive. for which the value of the good to an individual is higher when more people use it. for which one person owning the good enhances its value because it's the only one.

for which the value of the good to an individual is higher when more people use it.

If the state government gave you the exclusive right to sell cement to municipalities, your monopoly would result from: sunk costs. government restrictions to entry. economies of scale. location.

government restrictions to entry.

One government policy for dealing with natural monopoly is to: impose a price floor to eliminate the deadweight loss. impose a price ceiling to reduce economic profit. break it up into smaller firms. impose fines on the monopolist.

impose a price ceiling to reduce economic profit.

Suppose that you build a high-speed, magnetically powered train from New York to Los Angeles.High fixed costs enable decreasing average cost for practically any level of demand.Your monopoly is the result of your: control of a scarce resource or input. technological superiority. increasing returns to scale. use of government-set barriers.

increasing returns to scale.

Suppose a perfectly competitive firm's marginal revenue is $10 and its marginal cost is $11. Under these circumstances the firm:

is not maximizing profit and should reduce output.

Most electric, gas, and water companies are examples of _____ monopolies. unregulated natural international imperfect

natural

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:

new firms will enter the oat industry.

Many hotel chains offer discounts to senior citizens. This is an example of _____ that is _____ in the United States. market power; illegal single-price monopoly power; legal price discrimination; illegal price discrimination; legal

price discrimination; legal

Barriers to entry:

restrict the number of firms in an industry.

Oligopoly first became an issue in the United States when:

the growth of railroads made possible a national market for goods in the second half of the nineteenth century.