Micro Unit 3B

A MC firm is producing at an output level in the SR where ATC is $3.50, P is $3, MR is $1.50, and MC is $1.50. This firm is operating A. with an econ loss in SR B. with an econ profit in SR C. at the break even level of output in the SR D. at an inefficient level of output in the SR

A

A barrier to entry that significantly contributes to the establishment of a monopoly would be A. Economies of scale B. Price-taking behavior C. Technological Progress D. X-inefficiency

A

At an equilibrium level of output, a monopolist is not productively efficient because: A. The ATC of producing the product is not a min B. The MC of producing the last unit is equal to its P C. It is earning a profit D. Average revenue is less than the cost of producing an extra unit of output

A

If a monopolist engages in price discrimination rather than charging all buyers the same price, its A. Profits and its output are greater B. Profits and its output are smaller C. Profits are greater and output is smaller D. Profits are smaller and its output is greater

A

Market shares in oligopoly are typically determined on the basis of A. Product development and advertising B. Covert collusion and cartels C. Tactic Understandings D. Joint profit maximization

A

Past successes in developing products often mean that entrepreneurs and innovative firms A. Have access to more private resources for further innovation B. Have access to more public resources for further innovation C. Have access to more public support for further innovation D. Experience no change in the availability of private or public resources for further innovation

A

Which is a typical tactic that has been used by the price leader in the price leadership model of oligopoly? A. Limit pricing B. Frequent price changes C. Starting a price war with competitors D. Giving no announcement of a price change

A

A MC industry in LR equilibrium, a firm in that industry might be able to increase its econ profit by A. Increases the P B. Increasing the amounts it spends to advertise its product C. Decreasing P D. Decreasing output

B

At present output a monopolist determines that its MC is $18, and MR is $21. The monopolist will max profit or min losses by A. Increase P, keep Q constant B. Decrease P, Increase Q C. Decrease P and Q D. Increase P and Q

B

One legal protection for taking the lead in innovation is A. Venture capital B. Trademarks C. Trade secrets D. Mergers

B

Technological progress is a three-step process of A. Creation, pricing, and marketing B. Invention, innovation, and diffusion C. Manufacturing, venturing, and promotion D. Start-ups, imitation, and creative destruction

B

Average fixed cost is shown as the distance between (A) marginal cost and average variable cost. (B) marginal cost and average total cost. (C) average variable cost and average total cost. (D) average total cost and the horizontal axis. (E) marginal cost and the horizontal axis.

C

From the time of application, patents have a uniform duration of A. 10 years B. 15 years C. 20 years D. 25 years

C

Industry A is composed of 4 large firms that hold market shares of 40, 30, 20 and 10. The Herfindahl Index for this industry is: A. 100 B. 1000 C. 3000 D. 4500

C

Productive efficiency is not realized in MC b/c production occurs where A. MR is greater than MC B. MR is less than MC C. ATC is greater than min ATC D. ATC is less than MR and greater than MC

C

The modern view of technological advance is that it is A. Rooted in the independent advancement of science B. Best stimulated through government R&D spending C. A result of intense rivalry among individuals and firms D. A random outside force to which the economy adjusts

C

When the monopolist is maxing total profits or mining losses, A. Total revenue is greater than total cost B. Average revenue is greater than ATC C. Average revenue is greater than MC D. ATC is less than MC

C

Which of the following is true of monopolists who practice price discrimination? (A) They charge all customers the same price. (B) They earn a smaller profit than those who do not practice price discrimination. (C) They charge customers different prices according to different elasticities of demand. (D) They produce lower quantities than pure monopolists.(E) They produce the same quantity of output as pure monopolists.

C

Which would be most characteristic of monopolistic competition? A. Collusion among firms B. Firms selling a homogeneous product C. A relatively large # of firms D. Difficult entry into and exit from the industry

C

At which combination of price and MR is the price elasticity of demand less than 1? A. P= $102, MR=$42 B. P= $92, MR= $22 C. P= $82, MR =$2 D. P= $72, MR= -$18

D

Characteristics of an oligopolistic market include which of the following? I: Easy entry and exit of firms II: Few firms III: Interdependence among firms (A) I only (B) II only (C) III only (D) II and III only (E) I, II, and III

D

Given a representative firm in a typical MC industry, in the LR, A. The firm will produce that output at which MC and P are equal B. The elasticity of demand for the firm's product will be less than it was in the SR C. The # of competitors the firm faces will be greater than it was in the SR D. The econ profit being earned by the firm will tend to equal zero

D

In the SR, a typical MC firm will earn a A. Only a normal profit B. Only an econ profit C. Only an econ or normal profit D. An econ or normal profit or suffer an econ loss

D

Many economists think that relative to PC, oligopoly is A. Allocatively efficient B. Productively efficient C. Allocatively efficient and Productively efficient D. Neither

D

One major advantage of being the first to develop a product is the A. Use of the fast-second strategy B. Increase in retained earnings C. Lower interest-rate costs of funds D. Potential for profitable buyouts

D

Some dominant firms in an industry use a fast-second strategy that involves A. Developing two products to compete with rivals B. Cutting the development time for the introduction of a new product C. Moving quickly to buy the second largest firm in the industry to gain larger market share D. Letting smaller firms initiate new products and then quickly imitating the success

D

The first discovery of a product or process through the use of imagination, ingenious thinking, and experimentation and the first proof that it will work is A. Process innovation B. Product innovation C. Creative destruction D. Invention

D

The period in which technology can change and in which firms can introduce entirely new products is the A. SR B. Very SR C. LR D. Very LR

D

When compared with the PC industry with identical costs of production, a monopolist will charge a A. Higher P and produce more Q B. Lower P and produce more Q C. Lower P and produce less Q D. Higher P and produce less Q

D

The inverted-U theory suggest that R&D effort is at best weak in (A) low-concentration industries only (B) low- to middle-concentration industries (C) high-concentration industries only (D) Scranton (E) low- and high-concentration industries

E

Which of the following is true of a pure monopolist's demand curve? (A) It is a perfectly inelastic (B) It is perfectly elastic. (C) It coincides with its marginal revenue curve. (D) It lies below its marginal revenue curve. (E) It lies above its marginal revenue curve.

E

The region of demand in which the monopolist will choose a price-output combination will be the A. Elastic one b/c TR will increase as P declines and output increases B. Inelastic one b/c TR will increase as P declines and output increases C. Elastic one b/c TR will decrease as price declines and output increases D. Inelastic one b/c TR will decrease as price declines and output increases

A

The under-allocation of resources in MC means that at the profit-maxing level of output, price is A. greater than MC B. Less than MC C. Less than MR D. Greater than min ATC

A

If a perfectly competitive industry were monopolized without any changes in cost conditions, the price and quantity produced would change in which of the following ways? Price Quantity (A) Increase Increase (B) Increase Decrease (C) Increase May increase or decrease (D) Decrease Increase (E) Decrease Decrease

B

If firms enter a MC industry, we would expect the typical firm's D curve to A. Increase and firm's P increase B. Decrease and firm's P decrease C. Same, but firm's P increase D. Same, and firm's P remain same

B

Innovation is a major factor in competition because it can A. Be patented to protect the investment of the developers B. Enable firms to make competitors' products obsolete C. Guarantee the monopoly position of innovative firms D. Reduce research and development costs for firms

B

Process innovation produces a(n) A. Downward shift in the total-product curve and an upward shift in the average-cost curve B. Upward shift in the total-product curve and an downward shift in the average-cost curve C. Upward shift in both the total-product and average cost curves D. Downward shift in both the total-product and average cost curves

B

Product innovation tends to increase the profits of firms primarily by A. Decreasing the firm's average costs B. Increasing the firm's total revenue C. Decreasing the marginal utility per dollar spent D. Increasing the success of R&D spending

B

The analysis of monopoly indicates that the monopolist A. will charge the highest P it can get B. Will seek to max total profit C. Is guaranteed an economic profit D. Is only interested in normal profit

B

To be successful, collusion requires that oligopolists be able to A. Keep P and profits as low as possible B. Block or restrict the entry of new producers C. Reduce legal obstacles that protect market power D. Keep the domestic econ from experiencing high inflaction

B

What idea is best illustrated by the example of McDonald's successfully introducing the fast-food burger and then that idea being adopted by other firms such as Burger King and Wendy's? A. Start-ups B. Diffusion C. Invention D. Fast-second strategy

B

Which is one of the conditions that must be realized before a seller finds that price discrimination is workable? A. The demand for the product is perfectly elastic. B. The seller must be able to segment the market. C. The buyer must be able to resell the product. D. The product must be a service.

B

Which is true with respect to the demand data confronting a monopolist? A. MR is greater than average revenue. B. MR decreases as average revenue decreases. C. Demand is perfectly price elastic. D. Average revenue (or price) increases as the output of the firm increases.

B

Which will tend to increase the inefficiencies of the monopoly producer? A. Price-taking behavior B. Rent-seeking behavior C. Economies of scale D. Technological progress

B

Which would be defining characteristics of a pure monopoly? A. The firm does no advertising and it sells a standardized product. B. No close substitutes for the product exist and there is one seller. C. The firm can easily enter into or exit from the industry and profits are guaranteed. D. The firm holds a patent and is technologically progressive.

B

Which would be most characteristic of oligopoly? A. Easy entry into the industry B. A few large producers C. Product standardization D. No control over price

B

Why did Joseph Schumpeter view capitalism as a process of "creative destruction"? A. Innovation would lead to monopoly power and thus destroy the economy B. The creation of new products and production methods would destroy the market for existing products C. Invention would create new products, but diffusion would destroy many potentially good ideas D. Firms are being creative with learning by doing, but this spirit is destroyed by the inability of firms to finance R&D expenditures

B

Which firm has a strong incentive for product development and differentiation? (hint- 2 answers) A. MC firm B. PC firm C. Oligopolistic firm D. PM

B, D

Excess capacity occurs in a MC industry b/c firms A. Advertise and promote their product B. Charge a P that is less than MC C. Produce at an output level short of the least cost output D. Have a perfectly elastic demand for the products that they produce

C

Mutual interdependence means that A. Each firm produces a product similar but not identical to the products produced by its rivals B. Each firm produces a product identical to the products produced by its rivals C. Each firm must consider the reactions of its rivals when it determines its price policy D. Each firm faces a perfectly elastic D curve

C

The concern that monopolistically competitive firms express about product attributes, services to customers, or brand names are aspects of A. allocative efficiency in the industry B. collusion in the industry C. product differentiation D. concentration ratios

C

The demand curve for the pure monopolist is A. Perfectly price elastic B. Perfectly price inelastic C. Downsloping D. Upsloping

C

The inverted-U theory suggests that R&D effort is at best weak in A. Low concentration industries only B. High concentration industries only C. Low and High concentration industries D. Low to middle concentration industries

C

The major difference between entrepreneurs and other innovators is A. Innovators work in teams, but entrepreneurs do not B. Innovators manage start-ups, but entrepreneurs do not C. Entrepreneurs bear personal financial risk, but innovators do not D. Entrepreneurs invent new products and processes, but innovators do not

C

The optimal market structure for technological advance seems to be an industry in which there A. Are manly PC firms B. Are monopolists closely regulated by gov't C. Is a mix of large oligopolistic firms with several small and highly innovative firms D. Is a mix of MC firms and a few large monopolists in industries with high capital costs

C

Consumers will buy a new product only if A. It has a lower marginal utility per dollar spent than another product B. There is a substantial budget for promotion and marketing C. It can be sold at a lower price than that for a competing product D. It increases the total utility they obtain from their limited income

D

Technological advances as embodied in process innovation typically A. Decrease allocative efficiency B. Increase allocative efficiency C. Decrease productive efficiency D. Increase productive efficiency

D

The D curve a MC firm faces is A. Perfectly Elastic B. Perfectly Inelastic C. Highly, but not perfectly inelastic D. Highly, but not perfectly elastic

D

The S curve for a pure monopolist A. Is the portion of the MC curve that lies above AVC curve B. Is perfectly price elastic at the market price C. Is upsloping D. Does not exist

D

What is the situation called whenever firms in an industry reach an agreement to fix prices, divide up the market, or otherwise restrict competition? A. Interindustry competition B. Incentive to cheat C. Price leadership D. Collusion

D

When oligopolists collude the results are generally A. Greater Q and Higher P B. Greater Q and Lower P C. Smaller Q and Lower P D. Smaller Q and Higher P

D