Microeconomics Final Exam

Must be rising

At the current level of output, Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve

average total cost is at its minimum.

If marginal cost is equal to average total cost:

There is not enough information given to answer this question

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should:

earns an economic profit in the long run.

The large barriers to entry are a reason a monopoly

marginal cost curve above its average variable cost curve.

The short-run supply curve for a perfectly competitive firm is its

a small number of interdependent firms

To be called an oligopoly, an industry must have

Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.

Which of the following statements about the differences between monopoly and perfect competition is INCORRECT?

$80

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much is consumer surplus when the monopolist maximizes profit?

8

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is in a perfectly competitive industry, how many subscriptions will it sell?

$320

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is in a perfectly competitive industry, how much is consumer surplus?

$0

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, consumer surplus will be

$0

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, deadweight loss will be:

6

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, then it will sell _____ subscriptions.

The Sherman Antitrust Act

was aimed at preventing the establishment of more monopolies and was the beginning of antitrust policy.

$45; $50

Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively, an increase of _____ and a decrease of _____.

higher; less elastic

Price discrimination leads to a _____ price for consumers with a _____ demand.

raise; tacit

If rival solar roof panel manufacturers in Reno limit production and _____ prices in a way that increases their profits without meeting with one another in a formal way, they are engaging in _____ collusion.

all firms produce at the minimum point of their average total cost curves.

In perfectly competitive long-run equilibrium

producing more than the quantity that maximizes joint profits

Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by:

Price is equal to average total cost.

Consider a perfectly competitive firm in the short run. Assume the firm produces the profit-maximizing output and earns economic profits. Which statement is FALSE?

produces output and earns zero economic profit.

In the short run, if P = ATC, a perfectly competitive firm:

is always equal to marginal revenue for the firm.

Price in a perfectly competitive industry:

have tacit agreements not to engage in price wars.

Product differentiation is most likely to occur when firms:

more elastic

The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a _____ demand for bus service than other passengers.

a standardized product

The market for breakfast cereal contains hundreds of similar products, such as Froot Loops, cornflakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of