Micro test #2

Figure 15-4 shows the demand and cost curves for a monopolist. Refer to Figure 15-4. What is the amount of the monopoly's total cost of production?

$17,700

Figure 15-3 above shows the demand and cost curves facing a monopolist. Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level?

$68

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible.

Martin and Lewis each run one of the two bingo parlors in Schenectady. Both consider offering free rides to and from the parlors. Table 14-5 shows the payoff matrix containing the expected weekly profits for each bingo parlor. Refer to Table 14-5. What is the Nash equilibrium in this game?

Both Martin and Lewis offer free rides.

Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 14-8 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. Refer to Table 14-8. If the firms cooperate, what prices will they select?

Both firms will select a high price.

Refer to Figure 13-13. What is the area that represents the firm's total cost?

P2dQ40

Refer to Figure 13-17. What is the allocatively efficient output for the firm represented in the diagram?

Qh units

Plato Playhouse, a theatre company in the university town of Wegg, caters to two groups of customers:students and the non-student population. Figure 15-16 shows the demand curves for the two groups of customers. Refer to Figure 15-16. Suppose Plato Playhouse charges a single price of Pd for each performance. Which of the following statements is true?

The company is selling more than the profit-maximizing quantity in the non-student market and less than the profit-maximizing quantity in the student market.

Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 14-4 shows the payoff matrix for this game. Refer to Table 14-4. Does Alpha have a dominant strategy and if so, what is it?

Yes, Alpha should offer a student discount.

Suppose OPEC has only two producers, Saudi Arabia and Ecuador. Saudi Arabia has far more oil reserves and is the lower-cost producer compared to Ecuador. The payoff matrix in Table 14-3 shows the profits earned per day by each country. "Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota. Refer to Table 14-3. Is there a dominant strategy for Ecuador and, if so, what is it?

Yes, the dominant strategy is to produce a high output.

A set of actions that a firm takes to achieve a goal, such as maximizing profits, is called

a business strategy.

When an oligopoly is in a Nash equilibrium

a firm will choose its best pricing strategy, given the strategies that it observes other firms have taken.

Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. Refer to Figure 13-7. Which of the following is the area that represents the profit or loss experienced by the firm?

a loss represented by the rectangle P2uvP1

Price discrimination is possible in which of the following market structures? a.perfect competition b.monopoly c.oligopoly d.monopolistic competition

b, c, and d only

Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will

be equal to its demand curve.

Figure 15-19 shows the cost and demand curves for the Erickson Power Company. Refer to Figure 15-19. Why won't regulators require that Erickson Power produce the economically efficient output level?

because Erickson Power will sustain persistent losses and will not continue in business in the long run

Refer to Figure 15-5. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should

continue to produce because the price is greater than average variable cost.

For a firm that can effectively price discriminate, who will be charged a lower price?

customers who have an elastic demand for the product

Economists use game theory to analyze oligopolies because

game theory helps us to understand why interactions among firms are crucial in determining profitable business strategies.

If a monopolistically competitive firm breaks even, the firm

is earning an accounting profit and will have to pay taxes on that profit.

With perfect price discrimination, the marginal revenue curve

is equal to the demand curve.

Figure 15-12 shows the cost and demand curves for a monopolist. Refer to Figure 15-12. If this industry was organized as a perfectly competitive industry, the market output and market price would be

output = 83; price = $22.

Assume that a monopolist practices perfect price discrimination. The firm will produce an output

that is equal to the efficient level of output.

The marginal product of labor is

the additional output a firm produces as a result of hiring one more worker.

Refer to Figure 15-10. What is the area that represents producer surplus under a monopoly?

the area 0P1FH

Brand management refers to

the efforts to maintain the differentiation of a product over time.

The income effect of a wage increase is observed when

the higher wage income causes workers to take more leisure and work less.

An individual's labor supply curve shows

the relationship between wages and the quantity of labor that she is willing to supply.

In both monopolistically competitive and perfectly competitive industries

there are many buyers and sellers.

Monopolistically competitive firms can differentiate their products

through marketing.