Micro Economics final exam!!!! ch 12,13,14

The Herfindahl index for a pure monopolist is A.) 100,000. B.) 10,000. C.) 10 D.) 100

B.) 10,000

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is A.) 374. B.) 31 C.) 253 D.) 294

A.) 374

Which of the following best describes a Nash equilibrium? A.) An outcome that both competitors see as optimal, given the strategy of their rival. B.) An outcome from which one or both competitors can improve their position by adopting an alternative strategy. C.) The unstable outcome of a repeated game. D.) An outcome that is stable only because of credible threats.

A.) An outcome that both competitors see as optimal, given the strategy of their rival.

Nonprice competition refers to A.) advertising, product promotion, and changes in the real or perceived characteristics of a product. B.) reductions in production costs that are not reflected in price reductions. C.) competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. D.) price increases by a firm that are ignored by its rivals.

A.) advertising, product promotion, and change in the real or perceived characteristics of a product.

As a general rule, oligopoly exists when the four-firm concentration ratio A.) is 40 percent or more. B.) equals the Herfindahl index. C.) is 50 percent or more. D.) yields a Herfindahl index below 500.

A.) is 40 percent or more.

Game theory A.) is the analysis of how people (or firms) behave in strategic situations. B.) is best suited for analyzing purely competitive markets. C.) reveals that price-fixing among firms reduces profits. D.) reveals that mergers between rival firms are self-defeating.

A.) is the analysis of how people (or firms) behave in strategic situations.

Monopolistic competition means A.) many firms producing differentiated products. B.) a large number of firms producing a standardized or homogeneous product. C.) a few firms producing a standardized or homogeneous product. D.) a market situation where competition is based entirely on product differentiation and advertising.

A.) many firms producing differentiated products.

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of A.) pure monopoly. B.) monopolistic competition. C.) pure competition. D.) bilateral monopoly.

A.) pure monopoly.

If the four-firm concentration ratio for industry X is 80, A.)the four largest firms account for 80 percent of total sales. B.) the four largest firms account for 20 percent of total sales. C.) the industry is monopolistically competitive. D.) each of the four largest firms accounts for 20 percent of total sale

A.) the four largest firms account for 80 percent of total sales.

The demand curve confronting a nondiscriminating pure monopolist is A.) the same as the industry's demand curve. B.) derived by vertically summing the individual demand curves for the buyers. C.) more elastic than the demand curve confronting a competitive firm. D.) horizontal.

A.) the same as the industry's demand curve.

Price discrimination refers to A.) the selling of a given product to different customers at different prices that do not reflect cost differences. B.) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge. C.) selling a given product for different prices at two different points in time. D.) any price above that which is equal to a minimum average total cost.

A.) the selling of a given product to different customers at different prices that do not reflect cost differences.

A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should A.) increase product price. B.) increase the level of output. C.) decrease the level of output. D.) make no change in the level of output.

B.) increase the level of output.

Monopolistically competitive firms are similar to monopolies in that they have A.) high barriers to entry in their industry. B.) marginal revenues that are less than price. C.) close substitutes for their products. D.) inelastic demand for their products.

B.) marginal revenues that are less than price.

The product in an oligopolistic market A.) is always differentiated from one firm to another. B.) may be homogeneous or differentiated. C.) is assumed to be homogeneous. D.) has very many close substitutes.

B.) may be homogeneous or differentiated.

Monopolistically competitive firms A.) persistently realize economic profits in both the short run and long run. B.) may realize either profits or losses in the short run but realize normal profits in the long run. C.) realize normal profits in the short run but losses in the long run. D.) incur persistent losses in both the short run and long run.

B.) may realize either profits or losses in the short run but realize normal profits in the long run.

In long-run equilibrium, a monopolistically competitive producer achieves A.) productive efficiency but not allocative efficiency. B.) neither productive efficiency nor allocative efficiency. C.) both productive efficiency and allocative efficiency. D.) allocative efficiency but not productive efficiency.

B.) neither productive efficiency nor allocative efficiency.

The supply curve for a monopolist is A.) upsloping. B.)nonexistent. C.) perfectly elastic. D.) that portion of the marginal cost curve lying above minimum average variable cost.

B.) nonexistent.

Game theory is best suited to analyze the pricing behavior of A.) monopolistic competitors. B.) oligopolists. C.) pure monopolists. D.) pure competitors.

B.) oligopolists.

The term oligopoly indicates A.) a one-firm industry. B.) many producers of a differentiated product. C.) a few firms producing either a differentiated or a homogeneous product. D.) an industry whose four-firm concentration ratio is low.

C.) a few firms producing either a differentiated or a homogeneous product.

Pure monopoly refers to A.)a standardized product being produced by many firms. B.) a large number of firms producing a differentiated product. C.) a single firm producing a product for which there are no close substitutes. D.) any market in which the demand curve for the firm is downsloping

C.) a single firm producing a product for which there are no close substitutes

The MR = MC rule A.) applies only to pure monopoly. B.) does not apply to pure monopoly, because price exceeds marginal revenue. C.) applies both to pure monopoly and pure competition. D.) applies only to pure competition.

C.) applies both to pure monopoly and pure competition.

Which set of characteristics below best describes the basic features of monopolistic competition? A.) easy entry, few firms, and standardized products B.) easy entry, many firms, and standardized products C.) easy entry, many firms, and differentiated products D.) barriers to entry, few firms, and differentiated products

C.) easy entry, many firms, and differentiated products

Industries X and Y both have four-firm concentration ratios of 70 percent, but the Herfindahl index for X is 2,500, while that for Y is 2,000. These data suggest A.) that X is more technologically progressive than Y. B.) that price competition is stronger in X than in Y. C.) greater market power in X than in Y. D.) greater market power in Y than in X.

C.) greater market power in X than in Y.

A monopolistically competitive firm has a A.) perfectly inelastic demand curve. B.) perfectly elastic demand curve. C.) highly elastic demand curve. D.) highly inelastic demand curve.

C.) highly elastic demand curve.

Economic profit in the long run is A.) impossible for both a pure monopolist and a pure competitor. B.) only possible when barriers to entry are nonexistent. C.) possible for a pure monopoly but not for a pure competitor. D.) possible for both a pure monopoly and a pure competitor.

C.) possible for a pure monopoly but not for a pure competitor.

When a monopolistically competitive firm is in long-run equilibrium, A.) P = MC = ATC. B.) MR > MC and P = minimum ATC. C.) MR = MC and minimum ATC > P. D.) MR = MC and P > minimum ATC.

D.) MR = MC and P > minimum ATC.

Mutual interdependence means that A.) a firm's costs are affected by other firms' costs. B.) a firm's profits are affected by other firms' entry or exit. C.) a firm's revenues are affected by other firms' demand for its product. D.) a firm's behavior is affected by other firms' actions.

D.) a firm's behavior is affected by other firms' actions.

One feature of pure monopoly is that the firm is A.) one of several producers of a product. B.) a price taker. C.) a producer of products with close substitutes D.) a price maker.

D.) a price maker.

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing A.) a loss that could be reduced by producing less output. B.) an economic profit that could be increased by producing less output. C.) a loss that could be reduced by producing more output. D.)an economic profit that could be increased by producing more output.

D.) an economic profit that could be increased by producing more output.

X-inefficiency refers to a situation in which a firm A.) fails to realize all existing economies of scale. B.) is not as technologically progressive as it might be. C.) encounters diseconomies of scale. D.) fails to achieve the minimum average total costs attainable at each level of output.

D.) fails to achieve the minimum average total costs attainable at each level of output.

A dominant strategy is a player's move or action that A.) gives the largest total payoff for the two players combined. B.) yields her a higher payoff than the other player. C.) results in the highest possible payoff, assuming a specific action by the other player D.) is better than any alternative option, regardless of what the other player does.

D.) is better than any alternative option, regardless of what the other player does.

A game where players choose their strategies at the same time is called a A.) zero-sum game. B.) positive-sum game. C.) one-time game. D.) simultaneous game.

D.) simultaneous game.