MICRO FINAL

Which of the following statements is incorrect?

A) monopolistic firm produces a product having no close substitutes. b) A pure monopolist's demand curve is the industry demand curve. c) The monopolist's marginal revenue is less than price for any given output greater than d) A monopolist's 100 percent market share ensures economic profits. ANSWER:D

If a technological advance reduces the amount of variable resources needed

MC curve will shift downward

Which of the following holds true

When Ap is rising AVC is falling, and when AP is falling, AVC is rising

A perfectly competitive seller is:

a "price taker"

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of:

a pure monopoly

What are the characteristic of perfect competition?

a standardized product no barrier to entry a large number of sellers

Which of the following is correct?

a) A purely competitive firm is a "price maker," while a monopolist is a "price taker." b) Both purely competitive and monopolistic firms are "price makers." c) A purely competitive firm is a "price taker," while a monopolist is a "price maker." d) Both purely competitive and monopolistic firms are "price takers." ANSWER:C

Which of the following is not a barrier to entry to a monopoly

a.) ownership of essential resources b.) economies of scale c.) patents d.) X-inefficiency ANSWER:D

In the long run

all costs are variable costs

The main determinate of elasticity of supply is the:

amount of time the producers hats adjust inputs in response to a price change

A kink may exist in an oligopolist's demand curve because:

an abrupt change price elasticity occurs.

Fixed cost is:

any cost which does not change when the firm changes its output

The MR=MC rule:

applies both to pure monopoly and competition

the law of diminish returns indicate that:

as extra units of a variable resource are added to a fixed resource, marginal produce

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:

average total cost

Under pure competition in the long run:

both allocative efficiency and productive efficiency are achieved

Marginal cost is the:

change in total cost that results from producing one more unit of output

Assume a pure monopolist is currently operating at a price-quanity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should:

charge a higher price

The likelihood of a cartel being successful is greater when:

cost and demand curves of various participants are very similar.

The price elasticity of a monopolistically competitive firm's demand curve varies:

directly with the number of competitors, but inversely with the degree of product differentiation

Other things equal, cartels and similar collusive arrangements are easier to establish and maintain:

during periods of cyclical stability and full employment

Price is constant or given to the individual firm selling in a purely competitive market because:

each seller supplies a negligible/small fraction of total supply.

An important similarity between a monopolistically competitive firm and a purely competitive firm is that:

economic profit tends toward zero for both.

The kinked demand curve model of oligopoly:

embodies the possibility that changes in unit costs will have no effect on equilibrium price and output

Price elasticity of supply is:

greater in the long-run than in the short run

Accounting profits are typically:

greater than economic profits because the former do not take implicit costs

In long-run equilibrium a monopolistically competitive firm will:

have excess production capacity

An increasing-cost industry is the result of:

higher resource prices which occur as the industry expands

A monopolistically competitive firm has a:

highly elastic demand curve

A monopolistically competitive firm's marginal revenue curve:

is downsloping and lies below the demand curve

Marginal revenue for a purely competitive firm:

is equal to price

If a firm decides to produce no output in the short run, its costs will be:

its fixed cost

a competitive firm in the short run can determine the profit-maximizing ( or loss-minimizing) output by equating:

marginal revenue and marginal cost MR=MC

Cost to an economist:

may or may not involve monetary outlays

Assuming no change in product demand, a pure monopolist:

must lower price to increase sales

We would expect a cartel to achieve:

neither allocative efficiency nor productive efficiency.

At its profit-maximizing output, a pure nondiscrimination monopolist achieves:

neither productive efficiency nor allocative efficiency

In long-run equilibrium a monopolistically competitive producer achieves:

neither productive efficiency nor allocative efficiency

Pure monopolists may obtain economic profits in the long run because:

of barriers to entry

Oligopoly is more difficult to analyze than other market models because

of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models

A purely competitive firm is precluded from making economic profit in the long run because:

of unimpeded entry to the industry

The conclusion that oligopoly is inefficient relative to the perfectly competitive ideal must be qualified because:

over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive

The demand schedule or curve confronted by the individual purely competitive firm is:

perfectly elastic

Assume that a 4 percent increase in income in the economy produces an 8 percent increase. The coefficient of income elascity of demand is:

positive and therefore X is a normal good

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:

price and average total cost would be higher, but output would be lower

In the short run a perfectly competitive seller will shut down if:

price is less than average variable cost at all outputs

Non-price competition refers to:

product development, advertising, and product packaging.

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:

product differentiation

Other things equal, if more firms enter a monopolistically competitive industry:

the demand curves facing existing firms would shift to the left lowering market prices

One of the basic characteristics of the short run is that;

the firm does not have sufficient time to change the size of its plant

If regulatory commission imposes upon a non discriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then:

the firm must be subsidized or it will go bankrupt

The difference between implicit and explicit costs is that:

the former peers to non expenditure costs and the latter to out-of-pocket costs

marginal product is

the increase in total output attributable to the employment of one more ....

If a single price, nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be:

the price at which that unit is sold less the price reductions which apply to all other units of output

Price discrimination refers to:

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

The kinked demand curve model of oligopoly is useful in explaining:

why oligopolistic prices might change only infrequently

A pure monopolist:

will realize an economic profit if price exceeds ATC at the equilibrium output.