Micro ch 24-26
Compared with a perfectly competitive market structure, firms in a monopolistically competitive market structure in the long run produce at
Selected Answer: D. higher costs and lower output.
A monopolist
Selected Answer: D. is a price maker.
Which of the following are not barriers to entry?
Selected Answer: E. Setting price to maximize profit
A natural monopoly is
Selected Answer: E. a monopoly resulting from economies of scale
Which of the following firms are not able to practice price discrimination?
Selected Answer: © A. Perfectly competitive firms
OPEC is probably the most famous cartel of the last half of the twentieth century.
Selected Answer: © True
Which of the following are not barriers to entry?
Setting price to maximize profit
Which of the following is most like a monopoly?
The U.S. Postal Service
Barriers to entry associated with a monopoly might include
fixed
Barriers to entry associated with a monopoly might include
high fixed costs.
A monopolist
is a price maker.
Assume that the structure of the washing machine industry is characterized as an oligopoly. In the industry firm A observes that if it raises its prices, the other airlines do not follow the change, but if it lowers its prices, the other airlines always follow the change. The shape of the firm A's demand curve is
kinked.
Perfect competition provides one model by which there are many firms with no barriers to entry. If perfect competition as a model lies on one extreme, the model that lies on the opposite extreme is
monopoly.
In monopolistic competition, firms may differentiate their products in many ways except on the basis of
price.
A monopolist maximizes profit by
producing at the level at which MP=MC
One rationale for the regulation of monopoly firms is to
reduce the deadweight loss in the market.
The only uniform description of the behavior of an oligopolist that economists have been able to agree on is
strategic.
The market-demand curve is
the same as the monopolist's demand curve.
Government control of the conditions under which goods and services are produced and the impact of these goods on the public is known as
© C. social regulation.
In comparing perfect competition and monopoly markets with similar cost characteristics, which of the following statements is false?
© D. Consumer surplus is larger in a monopoly than in a perfectlv competitive marke
Which of the following is by definition illegal, according to the text?
© D. Price fixing
WTO, the World Trade Organization,
© D. replaced GATT.
Privatization is the opposite of
© E. a publicly owned enterprise is transferred to private ownership.
In the context of market structure, the characteristic that best describes a monopolistically competitive market is that
© E. firms spend a great deal on advertising and promotion.
When a cartel is successful,
A. it behaves as a monopolist in the market.
In the spring of 2003, Coke introduced a new drink called Vanilla Coke. In the summer of 2003, Pepsi responded by marketing its own brand of Pepsi Vanilla. Such moves by firms are known as
A. product differentiation.
If a monopolist is producing at a level of output at which marginal revenue equals marginal cost,
A. then the monopolist is maximizing profit.
In which of the following market structures do firms produce the output level at which P= MC?
Selected Answer: A. Perfect competition
The efficiency loss that occurs when a market is monopolized is known as
Selected Answer: A. a deadweight loss.
A monopolistically competitive market is characterized by
Selected Answer: A. many firms selling similar but differentiated products.
Perfect competition and monopolistic competition are alike in all the following ways except in
Selected Answer: A. the type of product produced.
Which of the following is a condition of monopolistic competition?
Selected Answer: B. A large number of independent sellers
When firms in an industry jointly make pricing and output decisions, they are
Selected Answer: B. colluding.
Because of the strategic interdependence of firms, a useful model to describe oligopolistic behavior is
Selected Answer: C. game theory.
A local monopolv is a firm that
Selected Answer: C. is a sole supplier without substitutes in a specific geographic area.
The reason that banks have historically occupied large, ornate buildings in central downtown areas is
Selected Answer: C. to create a brand name and inspire confidence in the stability of the bank.
What characteristic is unique to oligopolistic firms?
A. Interdependence of firms
In oligopoly,
A. each firm's pricing and output decisions depend on those of its rivals.
Monopolistic competition is similar to perfect competition in that
A. entry into and exit from the market is easy.
When oligopoly firms collude, they usually do so to
B, increase their profits.
Which of the following statements is true?
B. A monopolist's demand curve is the market-demand curve.
To maximize profits or minimize losses, a monopolist should act so that
B. MR = rising MC.
A monopolistically competitive firm's demand curve slopes downward because
B. a differentiated product gives the firm some monopoly power.
When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because of
B. barriers to entry provided by patents.
The oligopoly market structure model is characterized by
B. few firms in an industry with barriers to entry.
In the context of market structure, the characteristic that best describes a monopolistically competitive market is that
B. firms spend a great deal on advertising and promotion
The reason that banks have historically occupied large, ornate buildings in central downtown areas is
B. to create a brand name and inspire confidence in the stability of the bank.
If a firm is the only seller of a product with no good substitutes in a market with barriers to entry, then the firm is
a monopoly.
Martin is in the market for a new television set. He is deciding between two sets: one is rather expensive but offers a guarantee; the other has a lower price but offers no guarantee. Martin's decision to buy the more expensive set would indicate that
C. Martin interpreted the guarantee as a signal of the quality of the more expensive television.
Which of the following is not an example of nonprice competition?
C. Price discounts
When economists discuss product differentiation, they are referring to
C. consumer perceptions of products.
A most-favored customer is one who
C. is given a guarantee of receiving the lowest price.
A consumer can determine a product's reliability
C. only through experience with the product over a relatively long period of time.
In the long run, in a monopolistically competitive market,
C. resources are inefficiently allocated only because consumers desire a wide variety of products.
The reason that economies of scale can be a barrier to entry is that
C. the larger the production facility is, the lower the per-unit cost to produce is.
Because of incomplete information in markets, firms often use advertising to
D. convince consumers to try their product and that it is reliable and to build consumer loyalty.
Because each firm in monopolistic competition produces a unique product,
D. each has a "mini" monopoly over its product.
Under certain conditions, a firm operating in markets that are not perfectly competitive can increase profits by charging different customers different prices. This practice is called
D. price discrimination,
Because of their brand names, Kodak, IBM, Honda, Daimler-Chrysler, and other well-known firms are able to charge significantly higher prices for their products than their competitors without losing any business. Expenditures made by firms to create brand names
D. provide information to consumers.
Which of the following is an example of a monopoly?
E. All of the above
The shape of the demand curve for an oligopolist depends on
E. how rival firms react to price changes
When long-run average costs are declining for the entire range of demand, the firm is known as a
E. natural monopoly.
Advertising may provide information about a firm or product through
E. signals, such as brand names and guarantees
Marginal revenue is equal to
E. the change in total revenue divided by the change in quantity.
A monopolist can charge whatever price it wants and can therefore reap phenomenal profits.
False
Because a monopolist is the only firm producing in a market, it has no incentive to advertise.
False
Because a monopolist is the only producer in its market, it is not limited by the laws of demand and can set any price it desires.
False
Which of the following statements best describes the difference between economic regulation and social regulation?
O A. Economic regulation is concerned with price and output for a specific industry, whereas social regulation is concerned with health and safety matters that apply across several industries.
The text argues that one reason that governments may intervene in the operation of a business through regulation is to
O D. promote competitive behavior.
Barriers to entry to a monopoly include patents
True
Barriers to entry to a monopoly include patents.
True
Brand names may be signals of information that consumers associate with a specific firm.
True
Celebrity endorsements are often used by monopolistically competitive firms to boost the reputation of the product that is being endorsed.
True
Economies of scale, control over a scarce input, and patents are all examples of barriers to entry.
True
In order for customers to establish the reliability of a product, they must experience the product over a relatively long period of time.
True
Monopolistic competition is characterized by many firms selling differentiated products in a market with no barriers to entry or exit.
True
Monopolistic competitors may engage more in nonprice competition than in price competition.
True
Movie theaters are able to offer discounts to senior citizens because it is easy to distinguish them from other customers and prevent resale of tickets.
True
Often the best way for a firm to convey information to consumers about the quality of a product is to spend money on creating well-known brand names and the provision of guarantees.
True
Sometimes offering no guarantee on a product signals to consumers that the product is of lower quality than it really is
True
The efficiency loss that occurs when a market is monopolized is known as
a deadweight loss.
A natural monopoly
a monopoly resulting from economies of scale.
When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because of
barriers to entry provided by patents.
Successful product differentiation
c. reduces the price elasticity of demand and gives the firm more market power.
