Microeconomics HW 7 & 8
In which of the following cases is the firm's demand curve the same as the market demand for the product?
In the monopoly's case.
When a firm lowers its price, and the revenue that is gained from selling more is smaller than the revenue that is lost from receiving a lower price, what can you say about marginal revenue?
It is negative.
When a firm's demand curve slopes down and the firm decides to cut price, which of the following happens?
It sells more units but receives less revenue per unit
When the patent expires on a pharmaceutical drug, what happens to the market?
It shifts from being a monopoly to being perfectly competitive.
The short-run profit maximizing position of an unregulated pure monopolist is characterized by:
MR = MC.
Please select the type of market structure for the following good or service: Bread
Monopolistic Competition
Please select the type of market structure for the following good or service: Kids' Shoes
Monopolistic Competition
Which is an important antitrust law?
The Sherman Act.
Refer to the figure below. Which represents the consumer surplus that is transferred to producers in a monopoly market (compared to perfect competition)?
The area of rectangle A.
If the concentration ratio in the battery industry is 94%, what does that mean?
The largest four firms account for 94% of sales.
Figure 12-3 shows cost and demand curves for a monopoly producer. Based on the diagram, one can conclude that
new firms would like to enter the market, but will be prohibited from doing so by barriers to entry.
In which of these continuums of degrees of competition (most competitive to least competitive) is oligopoly properly placed?
perfect competition, oligopoly, monopoly
Table 12-1 shows the demand and cost data facing a monopoly producer of canvas bags. Use the table to answer the following question(s).The profit maximizing price and quantity for the firm are:
price = $12; quantity = 4
Which of the following is not characteristic of long-run equilibrium under monopolistic competition?
price equals the minimum of average total cost
A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then:
price of the seventh unit is $11.
Refer to the diagram below for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:
profit of $480.
Table 12-1 shows the demand and cost data facing a monopoly producer of canvas bags. Use the table to answer the following question(s).At the profit-maximizing output level,
the firm makes a profit of $16.
If a pure monopolist is choosing an output level where marginal revenue is positive but smaller than marginal cost:
the firm should produce less output.
In the broad sense, "interdependence" refers to the decisions of firms in industries where the profits of each firm depend on:
the firm's interactions with other firms
Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. This pricing system occurs because:
the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults.
Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:
$.75 or less.
Figure 12-3 shows cost and demand curves for a monopolistically competitive producer of iced-tea. Use this Figure to answer the following question(s). Refer to Figure 12-3. What is the profit maximizing price that the firm will charge?
$16
Refer to Figure 12-1. What is the marginal revenue of the sixth unit of output?
$4
Refer to the figure below. How much is the amount of profit when the firm serves six subscribers per month?
(42-30) x 6
Refer to the table below. How much is the marginal revenue associated with serving seven subscribers per month? Enter your answer as a two digit integer, with no dollar sign.
21
Refer to the table below. How much is the marginal revenue associated with serving four subscribers per month? Enter your answer as a two digit integer, with no dollar sign.
39
Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be:
A
Which of the following statements is correct?
A cartel is usually a formal agreement among oligopolists that sets product price and determines each firm's market share.
A group of firms that colludes by agreeing to restrict output to increase prices and profits is called:
A cartel.
Which of the following are antitrust laws most likely to take exception to?
A merger between two large firms.
Which of the following are effects of monopoly?
All of the above.
Which of the following is a requirement for successful price discrimination?
All of the above.
What are laws aimed at promoting competition among firms called?
Antitrust laws.
Monopolistically competitive firms:
may realize either profits or losses in the short run but realize normal profits in the long run.
Match the following definition with one of the terms below: "When firms agree to charge the same price, or to otherwise not compete."
Collusion
Economies of scale help determine the extent of:
Competition in an industry
Refer to the diagram below. To maximize profits or minimize losses this firm should produce:
E units and charge price
Refer to the above diagram for a single-price monopolist. The profit maximizing output is output level R.
False
Which of the following are characteristics of monopolistic competition?
Firms sell similar, but not identical, products.
Refer to the figure below. How can the loss of economic efficiency be estimated?
From the size of the triangle B + C.
Please select the type of market structure for the following good or service: A Patented Pharmaceutical Drug
Monopoly
Please select the type of market structure for the following good or service: Atomic Weapons in the U.S.
Monopoly
Please select the type of market structure for the following good or service: First Class Mail
Monopoly
Which of the following is not a barrier to entry?
None of the above. All of the above are barriers to entry.
Please select the type of market structure for the following good or service: Gaming Systems (Playstation, X-Box, etc..)
Oligopoly
Please select the type of market structure for the following good or service: Private Universities in Houston
Oligopoly
Please select the type of market structure for the following good or service: Soft Drinks
Oligopoly
Which of the terms below is defined as follows: "A market structure in which a small number of interdependent firms compete"?
Oligopoly.
Figure 12-2 shows short run cost and demand curves for a monopolistically competitive firm in the footwear market. Use this diagram to answer the following question(s). Refer to Figure 12-2. If the diagram represents a typical firm in the footwear market, what is likely to happen in the long run?
Over time, some firms will exit the market causing the demand to increase for a firm remaining in the market.
Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?
P = ATC
Refer to the diagram below. Which price and output level gives you economic efficiency?
P2 and Q2.
Please select the type of market structure for the following good or service: Trucking
Perfect Competition
In which type of market can firms sell as much as they want to, without having to lower the price?
Perfect Competition.
Which of the following are key results of price discrimination?
Profits increase and consumer surplus decreases.
Which of the following rights is given to the holder of a patent?
The right to be the only legal provider of a product.
Refer to the diagram below for a pure monopolist. Suppose a regulatory commission sets the price at P4. What will happen?
There will be a shortage of the product.
Refer to the figure below. If a market changes from perfectly competitve to a monopoly, what happens to the price and output levels?
They move from point A to point B.
What do antitrust laws have to do with economic efficiency?
They promote economic efficiency.
Monopolistic competition resembles pure competition because:
barriers to entry are either weak or nonexistent.
Refer to the diagram below for a pure monopolist. Monopoly profit:
cannot be determined from the information given.
If a monopolist engages in price discrimination, it will:
charge a higher price to groups of customers with a higher willingness to pay for the product.
Marginal revenue can become negative for
monopoly firm but not for a perfectly competitive firm.
A significant benefit of monopolistic competition compared with pure competition is:
greater product variety.
Monopolistic competition is characterized by a:
large number of firms and low entry barriers.
