MICRO FINAL EXAM pt.2
The price elasticity of demand is calculated using percentage changes in order to:
avoid problems associated with units of measurement
the market demand curve in a perfectly competitive market is downward sloping:
because of the law of demand
at very high wage rates, it is likely that na individual's labor-supply curve:
bends backward
a market that experiences both strikes and lockouts at different times is most likely characterized by:
bilateral monopoly
if a perfectly competitive firm can sell 400 computers at $800 each, in order to sell one more computer, the firm:
can sell the 41st computer at $800
the marginal wage is
change is total wage paid/ change in quantity of labor employed
when officers of firms in an industry get together to discuss how they can improve their mutual well-being, the result is
collusion
Greater labor productivity means:
higher output per worker
if a firm can change market prices by altering its output, then:
it has market power
An essential characteristic of perfectly competitive firm is that:
it is a price taker
which of the following characterizes monopolistic competition?
price discrimination
Carla buys one soft drink a day regardless of the price. Which of the following is correct with respect of Carla?
price elasticity of demand for soft drinks is O
the kinked-demand curve explains:
price fixing along the elastic part of the demand curve and predatory pricing on the inelastic portion
A market in which a single seller is required for efficient production is
pure monopoly
the refusal to work by unionized labor is an example of
strike
If marginal utility is negative:
total utility decreases with additional consumption of a good
t/f: Colluding oligopolists face the conflict between maximizing joint-market profit or their own market share
true
t/f: The opportunity cost of working is the amount of leisure time that must be given up in order to work.
true
t/f: a monopsonist must raise the wage rate if it desires to hire additional workers
true
t/f: antitrust laws can restrain the abuse of monopoly power
true
t/f: duopoly is an oligopoly with only two firms
true
t/f: if close substitutes are available with have only slight product differentiation, a firm is not a monopoly
true
t/f: if the long run, a firm will leave the market if it is not covering all of its fixed costs.
true
t/f: if, at the optimum level of output, a typical perfectly competitive firm;s price is greater than its ATC, the firm should increase output
true
t/f: in a monopoly labor market, the optimal union wage can be read off the marginal revenue product curve
true
a clothing store can sell two shirts for $20 each or three shirts for 18$ each. At a quantity of three shirts sold, marginal revenue is
$14
which of the following is equivalent to ATC?
(FC+VC)/ Q
compared with eh profit-maximizing choice of a natural monopolist, output regulation will result in:
A higher level of output and a lower price
the production function:
All of the Above
Monopolistically competitive industries are characterized by :
All of the above
When there is market failure:
Government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost
the law of diminishing returns states that , ceteris paribus, the :
MPP of labor declines as more labor is employed
Which of the following rules will always be satisfied when any firm (i.e. perfectly competitive or monopoly) has maximized profits?
MR= MC
Oligopolistic firms will maximize total profits for all of the firms in the market at the rate of output where:
MR=MC for the market
When the MPP of labor is zero, ceteris paribus
No further increases in output can be achieved by using additional units of labor
Which market structure is characterized by a few interdependent firms?
Oligopoly
in a contestable market
a few firms use predatory prices to achieve market share
A gap in the marginal revenue curve results from
a kinked demand curve
Which of the following is least likely to occur during the long run in a perfectly competitive market experiencing economic profits?
a rightward shift in the market supply curve
Suppose a monopsonist must pay $10 per hour to attract 10 workers. If the same monopsomist must raise its wage to $11 per hour to attract the 11th worker, what is its marginal factor cost for labor?
$21 per hour
Suppose tha ta monopoly firm produces tables and can sell 10 tables per month at price of $400 per table. In order to increase sales by one table per month, the monopolist must lower the price of its tables by $30 to $370 per table. The marginal revenue of the eleventh table is:
$70
profit is:
(PxQ)-TC
which of the following is equivalent to ATC?
AFC + AVC
If economic profits are earned in a competitive market, then in the long run:
All of the above
rising marginal costs results from:
All of the above
the entry of firms into a market:
All of the above
which of the following is a characteristic of a perfectly competitive market?
All of the above
an individual's labor-supply curve reflects his or her:
Choice between work and leisure
a monopolistic who does not practice price discrimination should never produce in the
Inelastic portion of its demand curve because it can increase total revenue by more than it increases total cost by reducing the price
A production function:
Is a technological relationship between factors of production and output
according to the text, what type of market failure provides the best case for government regulation?
Market power
In which of the following types of markets does a single from have the most market power:
Monopoly
The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is:
Monopoly
the correct ranking of barriers to entry (from highest to lowest) in the market is :
Monopoly, monopolisitc competition, oligopoly, perfect competition
a consumer maximized his or her satisfaction fro a given amount of income when
Mua/Pa=MUb/Pb=... MUn/Pn
a firm should shut down production when:
P< minimum AVC
economic profit equals zero where :
P= Minimum ATC
in which of the following cases would a firm enter a market?
P> short-run ATC
Economists assume the principal motivation of producers is:
Profit
The exit of firms from a market, ceteris paribus:
Reduces the economic losses of remaining firms in a market
The collapse of AT&T's natural monopoly in long distance telephone service was caused by:
Satellite technology which made it easier and less expensive for new companies to provide long distance- service
Which of the following prohibits price discrimination, certain types of mergers, and interlocking boards of directors among competing companies?
The Sherman Act
which of the following markets best illustrates the practice of discrimination
The airline market
the creation of another antitrust agency besides the justice department was accomplished through:
The federal trade commission act
When an individuals MRP is not measurable, his or her market wage is usually determined by:
The individual's MPP
the law of diminishing returns states that beyond some point, ceteris paribus:
The marginal physical product of a factor of production diminishes as more of that factor is used
which of the following firms is most likely to have more market power?
The only airline serving tow cities (assume this is a contestable market)
The demand curve faced by a monopoly firm is
The same as the market demand for the product
firms in a monopolistcally competitive market will:
Use the profit-maximizing rule MC=MR
in a perfectly competitive market economy, business failures can benefit society by causing:
a decline in market prices as remaining firms attempt to increase sale and stay in business
which of the following is likely to be monopolist?
a drug firm that has a patent granting it the exclusive right to produce a drug
in the long run
all of a firm=s resources are variable
the doctrine of laissez faire is consistent with
all of the aboce
The danger of experimenting with pricing for an oligopoly is:
all of the above
economies of scale of the entire range of market output:
all of the above
the most common form of non-price competition is :
all of the above
which of the following influences the price elasticity of demand?
all of the above
which of the following may characterize oligopolistic behavior
all of the above
which of the followings an example of government failure?
all of the above
marginal cost is equal to :
change in total cost- change in total output
The marginal revenue product of labor is equal to:
change in total revenue/ change in quantity of labor supplied
one could argue that advertising
creates barriers to entry
in making a production decision, an entrepreneur:
decides what level of output will maximize profits
Which of the following is barrier to entry in a monopoly market?
difficulty in obtaining resources
The demand for labor is downward sloping because of:
diminishing returns to labor
The supply curve for a monopolist
does not exist
When total utility is at a maximum, marginal utility is
equals to zero
t/f: A monopolist has market power because it faces a downward-sloping demand curve
false
t/f: Monopolists can charge any price and sell any amount of output they want since no competition exists
false
t/f: Monopolists in the labor market equate the marginal wage with the marginal revenue product
false
t/f: a multiplant monopolist produces more than if each of its plants were a separate firm in a competitive market
false
t/f: an attempt by one oligopolist to increase its market share by cutting prices will leave competitors unaffected
false
t/f: entry and exit barriers are highest in a perfectly competitive industry
false
t/f: if marginal revenue product is declining, the marginal physical product must decline.
false
t/f: individual farmers face a horizontal demand curve
false
t/f: the concept of laissez faire calls for government intervention if market failure is evident
false
t/f: the marginal physical product of a factor is equal to the additional revenue generated from employing 1 additional unit of the factor.
false
t/f: unlike most monopolies, unions do not attempt to use their market power to raise the equilibrium wage above its competitive level
false
t/f: unregulated natural monopolists produce sub-optimal rates of output
false
t/f: when the minimum wage is set above the market equilibrium wage, it has no effect on wages in that market
false
t/f: when there are economies of scale, a firm can simply increase production rates in the long run, and the unit costs will rise
false
t/f: unions do not need to control the labor supply in order to have market power
fase
Typical goals of a labor union in the united states include:
higher wages, better working conditions, more job security
jane loves to work. She does not receive any enjoyment fro leisure time. The last dollar that she earns each year means just as much to her as the first dollar. Which of the following best describes the shape of Jane's labor supply curve?
horizontal
with greater consumption, total utility always:
increases as long as marginal utility is positive
the long-run average total cost curve of a natural monopolist:
is U-shaped
the marginal utility of additional units consumed of any good
is always positive
monopoly power
is the ability of a firm to influence the price of its product
price discrimination
is the sale o an identical good at different prices to different consumers by a single seller
if a firm can raise market price by reducing it output, then:
it faces a downward-sloping demand curve
the responsiveness of workers to a change in wage rates, ceteris paribus, is measured by the:
labor-demand curve
the change is total revenue that results from a 1-unit increase in the quantity sold is:
marginal revenue
a profit-maximizing monopsonist wilier workers at the point where the marginal factor cost curve intersects the
marginal revenue product curve
market failure includes:
marke power resulting in reduced output and higher prices
Competitive firjms and monopolies both face downward-sloping
market demand curves
when firms have the power to restrict output, raise prices, stifle competition, and inhibit innovation the market failure involves is:
market power
in which of the following market structures are entry barriers the highest?
monopoly
president Bush once claimed, "i wouldn't eat broccoli if you paid me" we can assume that for hi the marginal utility of broccoli is
negative
if the equilibrium price in a perfectly competitive market for strawberries is $1.50 per pound, then an individual firm in this market could:
not sell additional strawberries unless the firm lowers its price
the soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as:
oligopoly
the pricing strategy in which one firm is allowed by its rivals to establish the market price for all firms in the market is called
overt collusion
To maximize profits or minimize losses, a monopolist should at so that
p=AC
oligopolists have a mutual interest in coordination production decisions in order to maximize combined:
profits
the labor-supply curve depicts the:
quantities of labor supplied at alternative wage rates
price discrimination allows a producer to
reap the highest possible average price for the quantity supplied
technical efficiency
requires getting maximum output from the resources used in production
labor, land, and capital used in production are
resources
other things being equal, as more firms enter a market, the market supply curve:
shifts to the right
assume MUx=30 utils, MUy15, Px=$2, and Py=$0.50. this consumer
should buy less of X and more of Y
the number of firms in an oligopoly must be:
small enough so that tone firms decisions have a significant impact on the decisions of the other
which of the following determinants of demand is most directly an indication of a consumer's utility for a good?
tastes
which of following is the same for monopoly and competition under the same cost ad demand conditions?
the amount of output that is produced
which of the following is likely to be a monopolist?
the boeing company, which is one of the largest producers of airplanes
when a monopolistically competitive firm advertises, it is attempting to increase:
the demand and decrease the price elasticity of demand for its product
if more firms enter a monopolistically competitive market, we would expect:
the demand curves facing existing firms to shift to eh left and become more price elastic
ceteris paribus, if immigration to the united states increases the number of workers:
the labor-supply curve will shift to the right and the equilibrium wage rate will fall.
the change in total output associated with one additional unit of input is:
the marginal physical product
the best measure of the economic cost of doing your homework is
the most valuable opportunity you give up when you do your homework
the law of demand implies that, ceteris paribus:
the quantity demanded increases at lower prices
a demand curve is described as perfectly inelastic if:
the same quantity is purchased regardless of price
the slope of the production function with respect to an input is:
the unit cost of the input
To be successful in changing wage rates and employment conditions, labor unions need to have over only:
their own members
to maximize profits, a competitive firm will seek to expand output until:
total revenue equals total cost
t/f: monopoly and mopsony are basically explaining the same thing
true
t/f: the intersection of labor market supply and market demand curves establishes the minimum wage
true
as long as additional workers are attracted into the labor force by higher wages, the market labor supply curve is:
upward-sloping
economic costs and economic profits are:
usually greater and smaller, respectively, than their accounting counterparts
The quantity of labor demanded can change without shifting labor demand curve when there is a change in:
wage rate
what will happen to wages and the level of employment in a competitive market when the government eliminates a minimum wage, ceteris paribus
wages will fall but employment will rise
if the sellers of labor in a competitive market decided to unionize, ceteris paribus, then:
wages would rise and employment would fall
total utility will be maximized:
when marginal utility zero
Price-discriminating firms which sell in two markets will charge higher prices in the market, ceteris paribus:
with the more price- inelastic demand