Chapter 10-14 Review

It shows the demand schedule facing Nina, a monopolist selling baskets. Price Number of Baskets Sold $20 3 18 5 16 7 14 10 12 15 10 30 Refer to the above table. What is the change in total revenue if she lowers the price from $20 to $18?

$30

It shows the demand schedule facing Nina, a monopolist selling baskets. Price Number of Baskets Sold $20 3 18 5 16 7 14 10 12 15 10 30 Refer to the above table. What is the change in total revenue if she raises the price from $10 to $12?

-$120

In pure competition, marginal revenue is:

Equal to product price

In the long-run, the price charged by a monopolistically competitive firm seeking to maximize profit will:

Exceed MC, but equal ATC

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

Have excess production capacity

The demand curve faced by a monopolistically competitive firm is:

Highly elastic

Answer the questions below on the basis of the following demand and cost data for a pure monopolists. Demand Data Cost Data Price Quantity Output Total Costs Demanded $2.75 3 3 $4.00 2.50 4 4 4.50 2.25 5 5 4.75 2.00 6 6 5.75 1.75 7 7 7.75 Refer to the above table. Equilibrium price of the monopolist will be:

$2.25

The table shows the total costs for a purely competitive firm. Output Total Cost 0 $2500 1 2700 2 3100 3 3700 4 4500 5 6000 Refer to the above table. If the firm shuts down in the short run, the total cost will be:

$2500

A unique feature of an oligopolistic industry is:

Mutual interdependence

Which is a feature of a purely competitive market?

Products are standard or homogenous

Answer the questions below on the basis of the following demand and cost data for a pure monopolists. Demand Data Cost Data Price Quantity Output Total Costs Demanded $2.75 3 3 $4.00 2.50 4 4 4.50 2.25 5 5 4.75 2.00 6 6 5.75 1.75 7 7 7.75 Refer to the above table. The monopolist will realize a:

Profit of $6.50

The production of agricultural products such as wheat or corn would best be described by which market model?

Pure Competition

Under which market model are the conditions of entry into the market model?

Pure Competition

A single seller, one firm dominates the market:

Pure Monopoly

Local telephone, electric, or gas utilities would best be described by which market model

Pure Monopoly

There would be a unique product for which there are no close substitutes under which market?

Pure Monopoly

Which market model has the least number of firms?

Pure Monopoly

exists when a single firm is the sole producer of a product for which there are no close substitutes.

Pure Monopoly

The market model with the largest number of firms is:

Pure competition

An example of a monopolistically competitive industry would be:

Retail clothing

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

Shift to the right

Which phase would be most characteristic of pure monopoly?

Single seller

Should the firm produce?

Yes, if price is equal to, or greater than, minimum average variable cost. This means that the firm is profitable or that its losses are less than its fixed cost.

Advertising can impede economic efficiency when it:

expands sales such that firms achieve substantial economies of scale

Industries X and Y both have four firm concentration ratios of 65 percent, but the Herffindahl index for X is:

greater market power in Y than in X.

Advertising can enhance economic efficiency when it:

increases consumer awareness of substitute products.

Assume six firms comprising an industry have market shares of 30, 30, 10, 10, and 10 percent. The Herfindahl Index for this industry:

is 2,200

The break even point

is an output at which a firm just makes a normal profit, total revenue = total costs.

Oligopolistic firms engage in collusion to:

earn greater profits

One feature of pure monopoly is that the demand curve:

Slopes downward

Industry Y is dominated by five large firms that hold market shares of 20, 20, 25, 25, and 10. The Herfindahl index for this industry is:

2150

The table shows the total costs for a purely competitive firm. Output Total Cost 0 $2500 1 2700 2 3100 3 3700 4 4500 5 6000 Refer to the above table. If the product sells for $1200 a unit, the firms profit maximizing output is:

4

Output Total Revenue Total Cost 1 $4 $2 2 8 3 3 12 6 4 16 9 5 20 14 Given the table, what is the short-run profit-maximizing level of output for the firm?

4 units

The characteristic most closely associated with oligopoly is:

A few large producers

TFC/Q=

AFC

TR/Q=

AR-Average Revenue

TC/Q=

ATC

TVC/Q=

AVC

The term "oligopoly" indicates:

An industry whose four firm concentration ratio is low.

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

Attract other forms to enter the industry, causing the existing firms profits to shrink.

The price of a good is:

Average Revenue

A firm will earn economic profits whenever:

Average revenue exceeds average total costs

Competitive firms are assumed to?

Be price takers

MC=

Change in TR

The classic example of a private, unregulated monopoly is:

DeBeers

Mutual interdependence means that:

Each firm must consider the possible reactions of rivals when establishing price policy.

Which is a barrier to entry in an industry?

Economies of scale

In pure competition, the demand for the product of a single firm is perfectly:

Elastic because many other firms produce the same product

Under conditions of pure monopoly:

Entry is blocked

Change in TR / Change in Q=

MR- Marginal Revenue

When a monopolistically competitive firm is in long-run equilibrium:

MR=MC and P> minimum ATC

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:

Marginal Cost = Marginal Revenue

The extra revenue from selling one more unit:

Marginal Revenue

When total revenue is increasing:

Marginal revenue is positive

The retail trade for clothing would be an example of which market model?

Monopolistic Competition

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

Monopolistic competition

In pure competition, the elasticity pf demand for the product of a single firm is:

Perfectly elastic

The total economic profit is

Price - ATC x Output

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.

The firm has considerable control over the price because it can control the quantity supplied.

Price maker

TFC + TVC =

TC

How to determine profit?

TR-TC

PxQ=

TR-Total Revenue

What are the two ways to use output determination?

Table or graph

If you sum the squares of he market shares of each firm in an industry (as measured by percent of industry sales), you are calculating:

The Herfindahl Index

Which of the following approximates a pure monopoly?

The diamond market

Patents give firms:

The exclusive right to produce or control a product for 20 years.

If P < AVC:

The firm will Shutdown!

If the four-firm concentration ratio for industry X is 80, this means that:

The four largest firms account for 80% of total sales.

The demand curve confronting a non-discriminating pure monopolist is:

The same as the industry's demand curve

Firms seek to maximize:

Total profit

Total amount of money that the firm collects for the sale of all the units of their goods:

Total revenue

Average revenue is:

Total revenue divided by the quantity of output

If P > ATC:

We will Produce with a profit!

If AVC < P < ATC

We will produce or operate at a loss!

The Herfindahl index for a pure monopolist:

Would be about 10,000

Will production result in economic profit?

Yes, if price exceeds average total cost (TR will exceed TC). No, if average total cost exceeds price(TC will exceed TR).

Assume the xyz corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit total fixed costs are $100 and its average variable cost is $3 at 20 units of output. On the basis of this information we can say that the corporation:

is realizing an economic profit of $40

Monopolistic competition means:

many firms producing differentiated products

When a monopolistically competitive firm is in long run equilibrium:

marginal revenue equals marginal cost and price equals average total cost.

In the short run a monopolistically competitive firm's economic profit:

may be positive, zero, or negative.

Under monopolistic competition entry to the industry is:

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

We would expect a cartel to achieve:

neither allocative efficiency nor productive efficiency

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because:

over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive.

One major barrier to entry under pure monopoly arises from:

ownership of essential resources

Other things equal, if more firm enter a monopolistically competitive industry:

the demand curves facing existing firms would shift to the left

Monopolistically competitive and purely competitive industries are similar in that:

there are few, if any, barriers to entry.

One feature of a pure monopoly is that the monopolist is:

A price maker

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

A pure monopoly

A major characteristic of monopolistic competition is:

A relatively large number of forms selling the product

In an oligopolistic market there are:

Few buyers

The steel and automobile industries would be examples of which market model?

Oligopoly

The data below relates to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist? Price Quantity Total Cost $22 0 $20 20 1 24 18 2 27 16 3 32 14 4 40 12 5 49 10 6 59

P=$14; Q=4

A exclusive right granted by government for twenty years to an inventor of a product is a:

Patent

Which is a barrier to entry?

Patents

Legal barriers to entry into a monopolistic industry also exist in the form of:

Patents and barriers

What quantity should the firm produce?

Produce where MR(=P)=MC; there , profit is maximized (TR exceeds TC by a maximum amount)or loss is minimized.

Suppose the only three existing manufacturers of video game players signed a written contract 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. The best describes:

a cartel

A break-down in price leadership leading to successive rounds of price cuts is known as:

a price war

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

Monopolistic competition resembles pure competition because:

barriers to entry are either weak or nonexistent.