Econ exam 3
24. In the short run, a firm in a monopolistically competitive market operates much like a
monopolist
21. The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a
natural monopoly
47. Which of the following is an example of a monopolistically competitive industry?
restaurants in New York City
1. Because the goods offered for sale in a competitive market are largely the same
sellers will have little reason to charge less than the going market price
46. Price discrimination is the business practice of
selling the same good at different prices to different customers.
42. Suppose a firm in a perfectly competitive market produces and sells 8 units of output and has a marginal revenue of $8.00. What would be the firm's total revenue if it instead produced and sold 4 units of output?
32$
48. Which of the following statements is correct?
When oligopoly firms collude, they are behaving as a cartel.
45. In a perfectly competitive market, the process of entry and exit will end when
economic profits are zero.
11. Drug companies are allowed to be monopolists in the drugs they discover in order to
encourage research
34. the prisoners dilemma provides insights into the
difficulty of maintaining cooperation
19. If a monopolist is able to perfectly price discriminate
consumer surplus and deadweight losses are transformed into monopoly profits
8. The exit of existing firms from a perfectly competitive market will
decrease market supply and increase market price
43. Comparing marginal revenue to marginal cost
1. reveals the contribution of the last unit of production to total profit. 2. is helpful in making profit-maximizing production decisions.
50. A profit-maximizing perfectly competitive firm currently earning positive economic profits will...
Face competition from new entrants.
41. Which of the following is not a characteristic of a perfectly competitive market?
Free entry is limited.
4. Which of the following statements best expresses a firms profit-maximizing decision rule
If marginal revenue is greater than marginal cost, the firm should increase it output.
25. If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long run equilibrium?
a decrease in demand for each firm
2. which of the following firms is the closest to being a perfectly competitive firm
a hot dog vendor in New York
29. Firms that engage in extremely expensive advertising campaigns for a product are likely to be providing customers with
a signal of product quality
26. Excess capacity is
an example of the inefficiencies of monopolistically competitive markets
9. Profit maximizing firms in perfectly competitive industries with free entry and exit face a price equal to the lowest possible
average total cost of production
10. the fundamental source of monopoly power is
barriers to entry
33. In a typical cartel agreement, the cartel maximisez profit when it
behaves as a monopolist
18. a monopolist produces
less than the socially efficient quantity of output at a higher price than in a competitive market
13. In order to sell more of its product, a monopolists must
lower its price
35. Games that are played more than once generally
make collusive agreements easier to enforce
22. A monopolistic competitive industry is characterized by
many firms, differentiated products, and free entry
14. if a profit maximizing monopolist faces a downward sloping market demand curve, its
marginal revenue is less than the price of the product
44. When profit-maximizing firms in perfectly competitive markets are earning economic profits,
new firms will enter the market.
49. A profit-maximizing monopoly will... a. Always earn economic profits. b. Always earn economic losses. c. Face competition from new entrants
none of the above
20. Anti trust laws allow the government to
prevent mergers break up companies promote competition
30. On a vacation to Cancun, Mexico, you find yourself eating every meal at the local McDonald's rather than having a hamburger from one of the street vendors. Your traveling companion claims that you are irrational, since you never eat McDonald's hamburgers when you are home, and McDonald's hamburgers cost more than those prepared and sold by Cancun's street vendors. An economist would most likely explain your behavior by suggesting that
the McDonald's brand name suggests consistent quality, while the quality of the product from the street vendors is unknown.
6. Which of the following statements best reflects the production decision of a profit maximizing firm in a perfectly competitive market when price falls below the minimum of average variable cost
the firm will immediately stop producing to minimize its losses
23. Each firm in a monopolistic competitive firm faces a downward sloping demand curve because
the firms product is different from those offered by other firms in the market
7. Which of these curves is the perfectly competitive firms short run supply curve?
the marginal cost curve above average variable cost
31. An oligopoly is a market in which
there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market.
32. Cartels are difficult to maintain because
there is always tension between cooperation and self interest in a cartel
12. additional firms often do not try to compete with a natural monopoly because
they know they cannot achieve the same low costs that the natural monopolists enjoys
36. the practice of requiring someone to buy two or more items together, rather than seperately, is called
tying
37. From society's standpoint, cooperation among oligopolists is
undesirable, because it leads to output levels that are too low and prices that are too high