EXAM 3 ECO 202

Most of the total income earned in the US economy is ultimately paid to

households in the form of wages and fringe benefits

Allowing an inventor to have the exclusive rights to market her new invention will lead to

i. a product that is priced higher than it would be without the exclusive rights ii. desirable behavior in the sense that inventors are encouraged to invent iii. higher profits for the inventor

Which of the following are necessary characteristics of a monopoly

i. the firm is the sole seller of its products ii. the firms product does not have close substitutes

When a single form can supply a product to an entire market at a lower cost that could two or more firms, the industry is called a

natural monopoly

When a natural monopoly exists, it is

never cost effective for two or more private firms to produce the product

Examples of monopolistically competitive markets include the markets for

restaurants and furniture

For a worker, the opportunity cost of an hour of leisure

rises by $5 when her wage rises by $5 per hour

As a group, oligopolists earn the highest profit when they

produce a total quantity of output that falls short of the Nash equilibrium total quantity

Which of the following conditions distinguishes monopolistic competition from perfect competition?

product differentiation

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have

a Nash equilibrium

To move the allocation of resources closer to the social optimum, policy makers should typically try to induce firms in an oligopoly to

compete rather than cooperate with each other

Which of the following pairs illustrates the two extreme examples of market structures?

competition and monopoly

When strategic interactions are important to pricing and production decisions a typical firm will

consider how competing firms might respond to its actions

This table shows a game played between two players, A and B. The payoffs in the table are shown as (Payoff to A, Payoff to B). Which outcomes is the Nash equilibrium in this game

Up-Right (2,2)

Which of the following industries has the highest concentration ratio?

cigarettes

The table shows the town of Pittsvilles demand schedule for gasoline. For simplicity, assume the towns gasoline seller(s) incur no costs in selling gasoline. If the market for gasoline in Pittsville is perfectly competitive, then they equilibrium price of gasoline is

$0 and the equilibrium quantity is 1,000 gallons

Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $11 per hour. during the summer, he drives a tour bus around the ski resort, earning $13 an hour. During the winter months, what is Sam's opportunity cost of taking an hour off work to go skiing?

$11

In 2010, the total income of all US residents was about

$15 trillion

Monopolistic competition is characterized by which of the following attributions

(i) free entry, (ii), product differentiation, (iii) many sellers

In which of the following market structures is (are) there a large number of sellers

(i) monopolistic competition and (ii) perfect competition

If firms in a particular market similar or sell identical products, then the market is

(i) perfectly competitive or (iii) an oligopoly

Approximately how much of the income in the United States is earned by workers in the form of wages and fringe benefits

75 percent

Of the total income earned in the US economy, approximately

75 percent is earned by workers, and 25 percent is earned by owners of the land and capital

Which of the following event would lead to an increase in the supply of labor?

A country experiences an increase in immigrant labor

Which of the following is an example of a firm's derived demand?

A firm's demand for college textbooks study guide authors is inseparable linked to the study of the college textbooks

Patents, copyrights, and trademarks

All of the above are correct

Which of the following statements is correct?

All of the above are correct: If duopolist successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly Although the logic of self interest decreases a duopoly's price below the monopoly price, it does not push the duopolist to reach the competitive price Although the logic of self interest increases a duopoly's level of output above the monopoly level, it does not push the duopolist to reach the competitive level

If the wages of a dentists increase

All of the above are correct: So does her opportunity cost of leisure her hours of labor supplied may increase her hours of labor supplies may decrease

Capital, labor, and land

All of the above are correct: have derived demands are factors of production are inputs used in the production of goods and services

A concentration ratio

All of the above are correct: measures the percent of total output supplied b the four largest firms in the industry reflects the level of competition in an industry is related to the control that each firm has over price

Which of the following is a characteristic of a natural monopoly?

Average total cost declines over large regions of output

Which of the following is an example of barrier to entry?

Dick obtains a copyright for the new computer game that he invented

Fiona's hourly wage increases form $8 to $10. Which of the following describes a consequence of the increase in Fiona's wage?

Fiona may choose to work fewer hours due to the increase in her wage

Suppose that Jay-Z and Beyonce are duopolist in the music industry. In January they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By February, each singer is considering breaking the agreement what would you expect to happen next?

Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium will decrease

Which of the following is not an example of a barrier to entry?

Matt sells computers to his state government for use in their legislative sessions. He sold computers for ten years

Which of the following marker structures is considered a differentiated products market?

Monopolistic competition

Which of the following statements is correct?

Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared compared to the market

Which government entity is charges with investigating and enforcing antitrust laws?

The US Justice Department

If nations such as Germany, Japan, and the United States prohibited international trade in auto mobiles, a likely effect would be that

The price effect would become more significant consideration for each firm that makes automobiles

Which of the following is necessarily a problem with antitrust laws?

They may target a business whose practices appear to be anti competitive but in fact have legitimate purposes

The Sherman Act made cooperative agreements

a criminal conspiracy

An industry is a natural monopoly when

a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

In order to be successful, a cartel must

agree on the total level of production and on the amount produced by each member

A firm that is a natural monopoly

all of the above

Which of the following could increase the labor supply curve for computer-repair technicians?

an increase in immigration

The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. What is the concentration ratio for Industry A?

approximately 66%

Natural monopolies differ from other forms of monopolies because they are

are generally not worried about competition eroding their monopoly position in the market

Your best friend receives a pay raise at her part-time job from $8 to $10 per hour. She used to work 20 hours per week, but now she decides to work 16 hours per week in order to spend more time studying economics. For this price range, her labor supply curve is

backward sloping

A monopoly market is characterized by

barriers to entry

The fundamental cause of monopoly is

barriers to entry

The defining characteristics of a natural monopoly is

declining average total cost with increased production

The players in a two-person game are choosing between strategy X and strategy Y. If the second player chooses strategy X, the first players best outcome is to select X. If the second player chooses strategy Y, the first players best outcome is to select X. For the first player, strategy X is called a

dominant strategy

The simplest type of oligopoly is

duopoly

The defining characteristics of a natural monopoly is

economies of scale over the relevant range of output

A benefit to society of the patent and copyright laws is that those laws

encourage creative activity

The inputs used to produce goods and services are called

factors of production

An oligopoly would tend to restrict output and drive up price if

firms collude and behave like a monopoly

One characteristic of an oligopoly market structure is

firms in the industry have some degree of market power

Suppose that two poker players believe that they are superior players to the rest of the people at their table. Further suppose that the two players make an agreement to concede hands to each other in order to drive the other players from the game first. Economists would model such behavior as

game theory

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

government - created monopolies

Which of the following statements is true about patents and copyrights

i. they have benefits and costs ii. they leas to higher prices iii. they enhance the ability of monopolies to earn above - average profits

A typical firm in the US economy would be classified as

imperfectly competitive

The general term for market structures that fall somewhere between monopoly and perfect competition is

imperfectly competitive markets

Which of the following is not an example of a factor of production

interest

When there are economies of scale over the relevant range of output for a monopoly, the monopoly

is a natural monopoly

Assuming that oligopolists do not have the opportunity to collude, once they have received Nash equilibrium it

is always in their best interest to leave their quantities supplied unchanged

Because workers in the US economy receive most of the total income earned, which of the following factors of production is considered to be the most important?

labor

Which of the following is an example of a factor of production?

land

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

less market power than it would otherwise have

The equilibrium price in a market characterized by oligopoly is

lower than in monopoly markets and higher than in perfectly competitive markets

A monopolistically competitive industry is characterized by

many firms selling products that are similar but not identical

The two types of imperfectly competitive markets are

monopolistic competition and oligopoly

Which of the following is an example of a monopolistically competitive industry?

movies

A market structure with only a few sellers, each offering similar o identical products, is known as

oligopoly

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a(n)

oligopoly

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

oligopoly or monopolistically competitive market

If there are many firms participating in a market, the market is either

perfectly competitive or monopolistically competitive

Consider a market served by a monopolists, Firm A. A new firm, Firm B, enters the market and, as a result, Firm A lowers its price to try to drive Firm B out of the market. This practice is known as

predatory pricing

As the number of firms in an oligopoly increases, the

price approaches marginal cost, and the quantity approaches the socially efficient level

If government officials break a natural monopoly up into several smaller firms, then

the average costs of production will increase

A cooperative agreement among oligopolists is more likely to be maintained

the more likely it is that the game among the oligopolists will be played over and over again

A household member's decision about how much labor to supply is most closely linked to

the tradeoff between leisure and work

Most markets are not monopolies in the real world because

there are reasonable substitutes for most goods

If a worker respond to an increase in the opportunity cost of leisure by taking less leisure, then his labor supply curve is

upward sloping