micro test 2 hw 8 9 10 hpu

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be

$16

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's total costs will be

$198.

Answer the question on the basis of the accompanying demand schedule faced by a monopoly firm.

$3.

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's total profit will be

$82.

Answer the question on the basis of the accompanying demand schedule faced by a monopoly firm.

1

The Herfindahl index for a pure monopolist is

10,000

Refer to the diagram. To maximize profits or minimize losses, this firm should produce

E units and charge price A.

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopoly firm in a highly concentrated industry?

Ford Motor Company

Game theory can be used to demonstrate that oligopoly firms

Game theory can be used to demonstrate that oligopoly firms

Which of the following is a measure of the degree of industry concentration (or market power of firms in an industry)?

Herfindahl Index

Which of the following statements concerning a monopolistically competitive industry is correct?

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms in the industry will shift to the right.

Which of the following is characteristic of a pure monopolist's demand curve?

It is the same as the market demand curve.

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

MR = MC

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

P exceeds minimum ATC.

Major Internet-related firms such as Google, Apple, Amazon, Microsoft, and Facebook each have an area of the market that they dominate. Which of the following is true about their interaction in the market?

They compete fiercely, as each looks for ways to increase profits by expanding into rivals' markets.

Which of the following industries is the best illustration of homogeneous oligopoly?

Which of the following industries is the best illustration of homogeneous oligopoly?

Which of the following is NOT an entry barrier to new firms in a merket?

X-inefficiency

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

a pure monopoly.

Pure monopoly market refers to

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

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

a very small number of firms producing a homogeneous product

In the long run, a profit-maximizing monopolistically competitive firm sets it price

above marginal cost of production

Nonprice competition refers to

advertising, product promotion, and changes in the real or perceived characteristics of a product.

Excess capacity refers to the

amount by which actual production falls short of the minimum ATC output.

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

an economic profit of ABHJ.

The firm described in the accompanying diagram is selling in

an imperfectly competitive market.

The Organization of Petroleum Exporting Countries (OPEC) provides an example of

an international cartel.

The industry characterized by these data is

an oligopoly.

The MR = MC rule

applies both to pure monopoly and pure competition.

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will

attract other firms to enter the industry, causing the existing firms' profits to shrink

Which of the following is the best example of oligopoly?

automobile manufacturing

To practice long-run price discrimination, a monopolist must

be able to separate buyers into different markets with different price elasticities.

If a monopolist engages in price discrimination, it will

charge a higher price where buyers' demand is price inelastic and a lower price where buyers' demand is price elastic.

The economic inefficiencies of monopolistic competition may be offset by the fact that

consumers have increased product variety.

Secret conspiracies to fix prices are examples of

covert collusion.

Refer to the diagram. Equilibrium price is

d

If competing oligopolists completely ignore oligopolist X's price changes, then X's

demand curve will be more elastic than if the other oligopolists matched X's price changes.

The mutual interdependence that characterizes oligopoly arises because

each firm in an oligopoly depends on its own pricing strategy and that of its rivals.

Oligopolistic firms engage in collusion to

earn greater profits.

In the long run, a representative firm in a monopolistically competitive industry will end up

earning a normal profit, but not an economic profit

Refer to the diagrams. Diagram (A) represents

equilibrium price and quantity in a purely competitive industry.

Refer to the diagram for a monopolistically competitive producer. This firm is experiencing

excess capacity of DE.

Consumers who clip and redeem discount coupons

exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons.

A purely monopoly producer (firm)

faces a downsloping market demand curve since it is the only seller in the market.

X-inefficiency refers to a situation in which a firm

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

If enforcement of antitrust laws caused the two largest firms in this table to be divided in half, with each half having equal market share, the industry's four-firm concentration ratio would ________ and its Herfindahl index would ________.

fall; fall

Compared to perfect competition, monopolistic competition is characterized by excess capacity because

firms incur additional marketing and advertising costs to create product differentiation.

Refer to the diagram. Equilibrium output is

g

Refer to the diagrams. In diagram (B) the profit-maximizing quantity is

g, and the profit-maximizing price is d.

The Herfindahl index

gives much greater weight to larger firms than to smaller firms in an industry.

Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

greater market power in Y than in X

In the long run, economic theory predicts that a monopolistically competitive firm will

have excess production capacity.

Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a

higher price and lower output.

Refer to the diagrams. The price will be ________ and the quantity will be ________ with the industry structure represented by diagram (B) compared to the one represented in (A).

higher; lower

In the United States cartels are

in violation of the antitrust laws.

A monopolistically competitive firm is producing at a short-run output level where average total cost (ATC) 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

increase the level of output.

In monopolistic competition, which of the following would make an individual firm's demand curve less price elastic?

increased brand loyalty toward the firm's product

Advertising can enhance economic efficiency when it

increases consumer awareness of substitute products.

Advertising can reduce economic efficiency when it

increases entry barriers to entry of new firms in the industry, and leads to greater market power for incumbent firms.

Cartels are difficult to maintain in the long run because

individual members may find it profitable to cheat on agreements.

As a general rule, oligopoly exists when the four-firm concentration ratio

is 40 percent or more.

An industry having a four-firm concentration ratio of 85 percent

is an oligopoly.

At the point where 3 units are being sold, the coefficient of price elasticity of demand

is greater than unity (one).

The ability of personalized pricing by online retailers to price discriminate

is limited by buyers' willingness and ability to easily search out lower prices at other online sites.

Refer to the diagram. In equilibrium the firm

is making an economic profit of ad per unit (of output produced).

An industry having a four-firm concentration ratio of 30 percent

is monopolistically competitive.

The demand curve of an oligopolist can be viewed to have different levels of elasticity (describbed by a kinked-demand curve). This is based on the assumption that

its competitors will follow its price cut but ignore a price increase.

Monopolistic competition is characterized by a

large number of firms and low entry barriers.

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

limit pricing.

A natural monopoly occurs when

long-run average costs decline continuously through the range of demand.

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

low entry barriers to entry of new firms in the industry.

A monopolistically competitive firm is operating at a short-run level of output where price is $21, average total cost (ATC) is $15, marginal cost is $13, and marginal revenue is $13. In the short run this firm should

make no change in the level of output.

Monopolistic competition means

many firms producing differentiated products

he monopolistically competitive seller maximizes profit by producing at the point where

marginal revenue equals marginal cost of production

In the long run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to

marginal revenue.

Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that

market power is greatest in industry C.

We would expect a cartel to achieve

neither allocative efficiency nor productive efficiency.

The diagram portrays

noncollusive oligopoly.

In the US market, people often refer to the "Big Three" in autos and the "Big Four" in accounting.These terms suggest that these two industries are

oligopolies.

Economic profit in the long run is

possible for a pure monopoly but not for a perfectly competitive firm.

The goal of product differentiation and advertising in monopolistic competition is to make

price less of a factor and product differences more of a factor in consumer purchases.

Differentiated oligopoly exists where a small number of firms are

producing goods that differ in terms of quality and design.

Homogeneous oligopoly exists where a small number of firms are

producing virtually identical products.

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic

profit of $480

Compared to pure competition, monopolistic competition

provides greater product differentiation at the cost of lower productive efficiency.

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

pure competition, monopolistic competition, oligopoly, pure monopoly

Refer to the diagrams. Firm A is a

pure competitor, and Firm B is a pure monopoly.

In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?

pure monopoly, oligopoly, monopolistic competition, pure competition

Refer to the diagram for a monopolistically competitive producer. The firm is

realizing a normal profit in the long run

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

reduce price and raise output.

Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as

rent-seeking.

If firms E and Fin this table merged into a single firm, the Herfindahl index would

rise, but the four-firm concentration ratio would remain unchanged.

Refer to the diagram. This firm's demand and marginal revenue curves are based on the assumption that

rivals will ignore a price increase but match a price decrease.

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will

shift to the right.

The prisoner's dilemma game reveals that

sometimes when individuals act independently in their own self-interest, everyone is worse off than if they had cooperated.

The likelihood of a cartel being successful is greater when

the cost curves and demand faced by various participants are very similar.

If the four-firm concentration ratio for industry X is 80,

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

If an industry evolves from monopolistic competition to oligopoly, we would expect

the four-firm concentration ratio to increase.

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation decreases,

the industry would more closely approximate pure competition.

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers)

the maximum price each would be willing to pay.

Price discrimination refers to

the selling of a given product to different customers at different prices that is not warranted due to differences in production costs.

Which of the following is the best illustration of differentiated oligopoly?

the soft drink industry

Firms in an industry will not earn long-run economic profits if

there is free entry and exit of firms in the industry.

Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that

this industry is monopolistically competitive

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are

underallocated because price exceeds marginal cost.

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

why oligopoly firms do not change their prices frequently.

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

will be equal to ATC, but not the minimum ATC.

A pure monopolist

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

A monopolistically competitive firm is producing at an output level in the short run where average total cost (ATC) is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating

with a loss.

Refer to the diagram. At the profit-maximizing level of output, total revenue will be

0 AJE.

Refer to the diagram. At the profit-maximizing level of output, total cost will be

0 BHE.

Refer to the data. The Herfindahl index for the industry is

1,800

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be

160.

If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is

2,500

The following are the respective numbers for the four-firm concentration ratio and Herfindahl index in an industry. Which set of numbers would suggest that the industry was monopolistically competitive?

25 and 207

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's total revenue will be

280

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

average total cost.

Suppose that firms A and F in this table merged into a single firm. The four-firm concentration ratio and the Herfindahl index would

both rise.

Three major means of collusion by oligopolists are

cartels, informal understandings, and price leadership.

The economic incentive for price discrimination is based upon

differences among buyers' elasticities of demand.

"Variety is the spice of life" is best applied to which market structure?

monopolistic competition

The practice of price discrimination is associated with pure monopoly because

monopolists have considerable ability to control output and price.

Which of the following is a unique feature of oligopoly?

mutual interdependence among firms in the industry

At its profit-maximizing output, a pure nondiscriminating monopolist achieves

neither productive efficiency nor allocative efficiency.

Pure monopolists may obtain economic profits in the long run because

of barriers to entry of new firms in the industry.

Pricing and output decisions of firms are more difficult to analyze in oligopoly than other market models because

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

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

price exceeds marginal cost.

With respect to the pure monopolist's demand curve, it can be said that

price exceeds marginal revenue at all outputs greater than 1.

Because the monopolist's demand curve is downsloping,

price must be lowered to sell more output.

Oligopolistic industries are characterized by

a few dominant firms and substantial entry barriers to new firms in the industry.

The term oligopoly indicates

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

If there are significant economies of scale in an industry, then

a firm that is large may be able to produce at a lower unit cost than can a small firm.

Confronted with the same unit (average) cost data, a monopolistic producer will charge

a higher price and produce a smaller output than a competitive firm.

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

product differentiation.

Mutual interdependence among firms means that each oligopoly producer

must consider the reactions of its rivals when it determines its own pricing policy.

Concentration ratios measure the

percentage of total industry sales accounted for by the largest firms in the industry.

Suppose that an industry is characterized by a few firms and price leadership. We would expect that

price would exceed both marginal cost and average total cost.

In the long run, the economic profits for a monopolistically competitive firm will be

the same as the profits for a purely competitive firm.

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by ________ and its average total cost by ________.

$30; $20.50

Refer to the data for a (non price-discriminating) monopolist. This firm will maximize its profit by producing

4 units.

Which of the following is correct?

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

Which of the following statements best describes the Internet market structure?

There are a few large firms, such as Google, Facebook, and Amazon, each dominating a particular sector but always trying to gain market share in another sector.

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry of new firms in an industry.

Excess capacity in an industry implies

productive inefficiency

In monopolistic competition, a firm has a limited degree of "price-making" ability. This means that the profit-maximizing firm will

set price above marginal cost.

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the 10th unit of sales per week is

$1,000.

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract. This best describes

a cartel

A breakdown in price leadership leading to successive rounds of price cuts is known as

a price war.

In the short run, a profit-maximizing monopolistically competitive firm sets it price

above marginal cost of production

The restaurant, legal assistance, and clothing industries are each illustrations of

monopolistic competition.