Exam 3

charge a higher price and produce less output.

Assume that an industry that began as a perfectly competitive industry becomes a monopoly. Which of the following describes a change in the market as a result of becoming a monopoly? Compared to when the industry was perfectly competitive, the monopolist will charge a higher price and produce less output. charge a higher price and increase consumer surplus. produce less output and decrease producer surplus. produce more output and increase producer surplus.

collusion.

An agreement among firms to charge the same price or to otherwise not compete is a payoff matrix. collusion. a dominant strategy. a Nash equilibrium.

Q3

Refer to the graph below. At what level of output does this perfectly competitive firm maximize profit? Q1 Q2 Q3 0.

a price taker

A buyer or seller that is unable to affect the market price is called? a price maker a price taker an independent producer a monopoly

a cartel

A group of firms that colludes by agreeing to restrict output to increase prices and profits is called a duopoly. an oligopoly. a cartel. a conglomerate.

20 years

A patent typically gives the holder exclusive rights to a product for a period of 10 years. 20 years. 30 years. 40 years.

a dominant strategy.

A strategy that is the best for a firm, no matter what strategies other firms use is a payoff matrix. collusion. a dominant strategy. a Nash equilibrium.

Both firms charge $5

Domino's and Little Caesars are competing over the price of pizza. What is the dominant Strategy? Note: There will be a problem like this one the final. Both firms charge $10 Both firms charge $5 Domino's will charge $10 and Little Caesars will charge $5 Domino's will charge $5 and Little Caesars will charge $10

both explicit costs and implicit costs

Economic loss refers to a situation in which a firm's total revenue is less than its total cost. To calculate the amount of a loss, which of the following costs should be included? explicit costs only implicit costs only both explicit costs and implicit costs fixed costs only

long-run; increases

Economies of scale exist when a firm's_____average costs fall as it_____output. short-run; increases short-run; decreases long-run; increases long-run; decreases

competition in an industry.

Economies of scale help determine the extent of market failure in an industry. competition in an industry. product differentiation in an industry. product innovation in an industry.

rules, strategies, and payoffs

Every game has these characteristics: -winners, losers, and payoffs -rules, an intermediary, and payouts -rules, strategies, and payoffs -strategies and defeats.

difficult; produce more than

Fill in the blanks with the word and phrase that best describe the history of OPEC: Sustaining high prices has been_______because members often________their output quotas. easy; produce less than easy; produce more than difficult; produce less than difficult; produce more than

few; is

Fill in the blanks. Suppliers have more bargaining power when____firms can supply the input and the input____specialized. many; is many; is not few; is few; is not

perfect competition

For what type of market structure is demand curve the same as marginal revenue? monopolistic competition perfect competition both monopolistic and perfect competition neither monopolistic nor perfect competition

For all firm types it is the same process. Go to the point where MR = MC. Then find the quantity on the x-axis below MR = MC.

How do you find the profit maximizing quantity for a firm under monopoly? -Use a trained canine to sniff out the profits. -Stop at the nearest service station and ask. -For all firm types it is the same process. Go to the point where MR = MC. Then find the quantity on the x-axis below MR = MC. -Follow the instructions given to you from the back seat driver. -It depends on whether you have Boardwalk by itself or Boardwalk and Park Place

For all firm types it is the same process. Go to the point where MR = MC. Then find the quantity on the x-axis below MR = MC.

How do you find the profit maximizing quantity for a monopolistically competitive firm? For all firm types it is the same process. Go to the point where MR = MC. Then find the quantity on the x-axis below MR = MC. Ask Siri. Ask the Google Assistant. Ask Alexa.

For all firm types, it is the same process. Go to the point where MR = MC. Then find the quantity on the x-axis below MR=MC.

How do you find the profit maximizing quantity for perfectly competitive firm? For all firm types, it is the same process. Go to the point where MR = MC. Then find the quantity on the x-axis below MR=MC. Make a robust guess. Spin the bottle. Use a magic eight ball.

Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic.

How does the entry of new coffeehouses affect the profits of existing coffeehouses? -Entry will increase the profits of existing coffeehouses by shifting the market demand curve for coffee to the right. -Entry will increase the profits of existing coffeehouses by shifting each of their individual demand curves to the right. -Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic. -Entry will not affect the profits of existing coffeehouses.

The firm will have a marginal revenue curve that is below its demand curve.

If a firm has the ability to affect the price of the good or service it sells, what is the relationship between its marginal revenue curve and its demand curve? -The firm will have a marginal revenue curve that is above its demand curve. -The firm will have a marginal revenue curve that is below its demand curve. -The firm will have a marginal revenue curve that is the same as its demand curve. -The firm will have an upward-sloping marginal revenue curve and a downward-sloping demand curve.

none of the above

If an individual firm in a perfectly competitive market increases its price, the firm will experience -higher revenue. -lower average total cost. -increased sales. -none of the above

tire prices will be low.

If automobile companies have significant bargaining power when buying tires, you would expect that. tire prices will be low. tire prices will be high. the profitability of tire manufacturers is unlimited. tire suppliers also have significant bargaining power.

The market supply curve will shift to the right as firms enter the market, prices will fall, and profits will fall.

If firms in a perfectly competitive industry are earning positive profits, what would you expect to see in the long run? -The market demand curve will shift to the left as firms exit the market, prices will rise, and profits will rise. -The market supply curve will shift to the right as firms enter the market, prices will fall, and profits will fall. -The market supply curve will shift to the left as firms exit the market, prices will rise, and profits will rise. -The market demand curve will shift to the right as firms enter the market, prices will rise, and profits will rise.

as a natural monopoly

If increased competition leads to higher costs and higher prices in an industry, how should that market be characterized? as a perfectly competitive market as a monopolistically competitive market as an oligopoly as a natural monopoly

increases; decreases

If individual countries that are members of OPEC exceed their production quotas, the amount of oil supplied to the world____, and the price of oil_____. increases; decreases increases; increases decreases; increases decreases; decreases

The firm must decrease its price to sell a larger quantity.

If marginal revenue slopes downward, which of the following is true? -The firm must decrease its price to sell a larger quantity. -The firm must increase its price to sell a larger quantity. -The firm must decrease its price if it wants to continue selling the same quantity. -The firm is unable to adjust price when the quantity sold changes.

The firm will increase its output, and its profits will increase.

If market demand shifts to the right, how will a competitive firm's level of output change? -The firm will increase its output, and its profits will increase. -The firm will need to decrease its output and suffer losses. -The firm will keep its output constant, but its profits will increase. -The firm will decrease its output, which will increase its profit.

the firm's interactions with other firms.

In the broadest sense, game theory studies the decisions of firms in industries where the profits of each firm depend on -the ability of a firm to set up barriers to entry. -the firm's interactions with other firms. -agreements among firms to charge the same price. -the ability to achieve a dominant position in the industry.

monopoly

In which of the following market structures is the firm's demand curve the same as the market demand for the product? perfect competition monopolistic competition monopoly all of the above

when a firm can ignore the actions of all other firms

In which of the following situations can a firm be considered a monopoly? when a firm is surrounded by other firms that produce close substitutes when a firm can ignore the actions of all other firms when a firm uses other firms' prices in order to price its products when barriers to entry are eliminated

No; a firm could try to continue making a profit in the long run by reducing production costs and improving its products.

Is zero economic profit inevitable in the long run for a monopolistically competitive firm? -Yes; there is nothing the firm can do to avoid zero economic profit in the long run. -No; a firm could try to continue making a profit in the long run by producing a product identical to those of competing firms. -No; a firm could try to continue making a profit in the long run by reducing production costs and improving its products. -No; a firm could try to continue making a profit in the long run by simply offering goods that are cheaper to produce, even if they have less value than those offered by competing firms.

the situation in which the entry and exit of firms have resulted in the typical firm just breaking even.

Long-run competitive equilibrium is: -the situation in which the entry and exit of firms have resulted in the typical firm just breaking even. -a situation in which market price is at a level equal to the minimum point on the typical firm's marginal cost curve. -the end of a process during which firms are prevented from adjusting their production methods. -all of the above

Nash equilibrium

Match the following definition with one of the terms below: "A situation where each firm chooses the best strategy, given the strategies chosen by other firms." -payoff matrix -collusion -dominant strategy -Nash equilibrium

$250

Refer to the graph below. At which of the following prices is the perfectly competitive firm earning negative economic profit? $495 $250 both $250 and $495 any price above $495

Both Firms will charge $50

REI and Level 9 sports are competing over the price of gloves. What is the dominant strategy? Note: there will be a problem like this on the final. Both firms will charge $100 Both Firms will charge $50 REI will charge $100 and Level 9 will charge $50 REI will charge $50 and Level 9 will charge $100

The firm can sell any amount of output as long as it accepts the market price of $4.00.

Refer to the graph below of the demand curve facing a firm in the perfectly competitive market for wheat. The fact that the demand curve is horizontal implies which of the following? -The firm must lower the price of wheat to increase the quantity demanded. -Increasing production of wheat from 3,000 bushels to 7,500 bushels results in an increase in marginal revenue. -The market demand for wheat is identical to the demand for wheat faced by an individual firm. -The firm can sell any amount of output as long as it accepts the market price of $4.00.

6 bushels

Refer to the graph below which shows the marginal cost and marginal revenue curves for a farmer in the perfectly competitive market for wheat. What is the profit-maximizing level of output if the producer can produce only whole units of output? 3 bushels 10 bushels 6 bushels 8 bushels

area A

Refer to the graph below. A decrease in price from $3.50 to $3.00 per cup results in a gain and a loss of revenue. Which area represents the loss of revenue? area A area B Areas A and B both represent revenue losses. an area not shown

area B

Refer to the graph below. A decrease in price from $3.50 to $3.00 per cup results in a gain and a loss of revenue. Which area represents the revenue gain? area A area B Both shaded areas represent revenue gains. an area not shown

It will lose some, but not all, of its customers.

Refer to the graph below. According to this graph, what will happen if Starbucks increases the price of caffè lattes? It will not lose any customers. It will lose all of its customers. It will lose some, but not all, of its customers. It will gain customers.

The firm should increase the level of output, because at 600 units, marginal revenue is greater than marginal cost.

Refer to the graph below. Assume that the firm is producing 600 units. What should the firm do in order to maximize profit? -The firm should increase output, because at 600 units, price is above marginal cost. -The firm should maintain output at 600 units, because at this output level, marginal revenue is greater than marginal cost, marginal cost is minimized, and price is the highest. -The firm should increase the level of output, because at 600 units, marginal revenue is greater than marginal cost. -The firm should increase the level of output until it reaches the minimum average total cost.

area A

Refer to the graph below. Assume that the firm represented by the cost and demand curves below is maximizing profit. Which area represents the formula: (P - ATC) × Q? area A area B area A + area B area B - area A

D2 and MR2

Refer to the graph below. Assuming the computer industry is monopolistically competitive, which set of demand and marginal revenue curves for a typical firm is more consistent with long-run equilibrium in the computer industry? -D1 and MR1 -D2 and MR2 -D1 and MR2 -D2 and MR1

marginal revenue remains constant as the quantity of bushels sold increases

Refer to the graph below. Based on the information on the graph, what is true about marginal revenue? marginal revenue increases as the quantity of bushels sold increases marginal revenue decreases as the quantity of bushels sold increases marginal revenue remains constant as the quantity of bushels sold increases marginal revenue is always greater than marginal cost

unimportant; large

Refer to the graph below. Fill in the blanks. When the level of output produced is Q1, economies of scale in the industry are relatively______and the industry will have a_____number of firms. important; small important; large unimportant; small unimportant; large

by estimating the size of the triangle B + C

Refer to the graph below. How can the loss of economic efficiency resulting from this market being a monopoly rather than being perfectly competitive be estimated? by estimating the size of the triangle B + C by estimating the size of the rectangle A by estimating the size of the area A + B + C None of the above; the loss of economic efficiency cannot be estimated using this graph.

rises from $0.04 to $0.06.

Refer to the graph below. If 30 billion kilowatt-hours of electricity are supplied by two firms who supply 15 billion kilowatt-hours of electricity each instead of by one firm, the average total cost of electricity rises from $0.04 to $0.12. rises from $0.04 to $0.06. rises from $0.02 to $0.03. falls from $0.06 to $0.02.

The firm earns zero economic profit.

Refer to the graph below. If a perfectly competitive firm is producing at point A, which of the following is true? The firm earns zero accounting profit. The firm suffers a loss. The firm earns zero economic profit. The firm earns positive economic profit.

It increases by area A and decreases by area C.

Refer to the graph below. If the industry changes from being perfectly competitive to being a monopoly, what happens to producer surplus? It increases by area A and decreases by area B. It increases by area A and decreases by area C. It increases by area B + C. It increases by area A and decreases by area B + C.

$15

Refer to the graph below. In order to maximize profit, what price should the firm charge? $18 $15 $8 $4

the demand curve

Refer to the graph below. In this graph, which curve is conceptually the same as average revenue? the demand curve the marginal revenue curve both curves neither curve

marginal revenue is negative.

Refer to the graph below. The loss in revenue from decreasing price is greater than the gain in revenue from increasing price whenever -marginal revenue is positive. -marginal revenue is negative. -marginal revenue equals demand. -demand has a negative slope.

negative economic profit

Refer to the graph below. What does the shaded area in the graph represent for a perfectly competitive firm that produces at output level Q? positive economic profit accounting profit negative economic profit total cost of producing Q

$72

Refer to the graph below. What is firm's profit when it sells six subscriptions per month? $90 $72 $42 $18

$2,400

Refer to the graph below. What is the value of total fixed cost for this perfectly competitive firm? $3,400 $5,800 $2,400 None of the above; there is insufficient information to answer the question.

point A

Refer to the graph below. What point represents the price and quantity that will prevail when the industry is perfectly competitive? point A point B point C none of the above

The firm will suffer losses, but should continue to operate.

Refer to the graph below. When the perfectly competitive firm faces demand curve Demand3, which of the following is true? The firm is earning positive economic profit. The firm should shut down. The firm will suffer losses, but should continue to operate. The firm should go out of business.

area B + area C

Refer to the graph below. Which area is considered a reduction in economic surplus as a result of this industry being a monopoly rather than being perfectly competitive? area A area B area C area B + area C

area A

Refer to the graph below. Which area shows a reduction in consumer surplus that is transferred to producers as a result of this industry being a monopoly rather than being perfectly competitive? area A area B + area C area A + area B none of the areas indicated on the graph

area A + area B

Refer to the graph below. Which area shows the reduction in consumer surplus that results from this industry being a monopoly rather than perfectly competitive? area A area B + area C area A + area B none of the areas indicated on the graph

Demand2

Refer to the graph below. Which demand curve is associated with the shutdown point for this perfectly competitive firm? Demand1 Demand2 Demand3 Demand4

Q1

Refer to the graph below. Which level of output indicates excess capacity? Q1 Q2 both Q1 and Q2 neither Q1 nor Q2

the ATC curve

Refer to the graph below. Which of the curves in the graph is not necessary for determining the level of output that maximizes profit for a perfectly competitive firm? the MC curve the demand curve the ATC curve All three curves are needed to determine which level of output maximizes profit.

All three curves are needed to determine the level of profit earned by a perfectly competitive firm.

Refer to the graph below. Which of the curves is not necessary for determining the level of profit earned by a perfectly competitive firm? the marginal cost curve the demand curve the average total cost curve All three curves are needed to determine the level of profit earned by a perfectly competitive firm.

point A

Refer to the graph below. Which point corresponds to a natural monopoly serving this market and breaking even? -point A -point B -Both point A and point B are associated with a natural monopoly breaking even. -Neither point A nor point B is associated with a natural monopoly breaking even.

Q2

Refer to the graph below. Which quantity is more likely to be the quantity produced by the typical firm in an oligopoly? Q1 Q2 the sum of Q1 and Q2 the difference between Q2 and Q1

the distance between points A and B

Refer to the graph of costs for a perfectly competitive firm below. Which of the following best represents profit per unit? the shaded rectangle the distance between points A and B the market price none of the above

None of the above; there is insufficient information to answer the question.

Refer to the graph of monopoly below. What is profit when the firm sells six subscriptions per month? $90 $42 $27 None of the above; there is insufficient information to answer the question.

point B

Refer to the graph of monopoly below. What point represents the price and output level that a monopoly will choose?. point A point B point C none of the above

the graph on the right

Refer to the graphs below, which represent the situations facing typical firms in three different monopolistically competitive industries. Which graph best represents the situation where new firms are likely to enter the industry? -the graph on the left -the graph in the middle -the graph on the right -none of the above

The market supply curve will shift to the left.

Refer to the graphs below. After the market demand curve shifts to the left, which of the following would happen in this perfectly competitive market as it adjusts to long-run equilibrium? The market demand curve will shift back to the right. The market supply curve will shift to the right. The market supply curve will shift to the left. The market demand curve will shift further to the left.

The firm will decrease its output and suffer losses.

Refer to the graphs below. As market demand shifts to the left, how will the firm's level of output change? The firm will increase its output to increase its profits. The firm will decrease its output and suffer losses. The firm will maintain its output at the current level but suffer losses. The firm will decrease its output and earn higher profit.

both firms

Refer to the graphs below. Assuming both firms are producing 5 cups per week, which firm is maximizing profits? the firm on the left the firm on the right both firms neither firm

the market supply curve.

Refer to the graphs below. Suppose the graph on the left represents a typical firm's supply curve in a perfectly competitive industry, and there are 100 identical firms in the industry. Then the graph on the right represents the market supply curve. the average total cost curve for the industry. the individual supply curve for each firm in the industry. the individual demand curve facing each firm in the industry.

Farmer Whapple is a price taker.

Refer to the graphs below. The graph on the left depicts demand and supply in the competitive market for wheat. The graph on the right depicts the demand curve facing Farmer Whapple, an individual producer in the market for wheat. The demand curve for Farmer Whapple's wheat is horizontal at the market price of $4.00 because Farmer Whapple is the only supplier of wheat in this market. Farmer Whapple is a price taker. Farmer Whapple has control over the price of wheat. Farmer Whapple can choose whether he faces a downward sloping demand curve or a horizontal demand curve.

a profit in the short run.

Refer to the graphs below. The perfectly competitive firm represented in the graph on the right is experiencing a profit in the short run. a profit in the long run. a loss in the short run. a loss in the long run

a shift to the right of the market supply curve as new firms enter

Refer to the graphs below. What do you expect to happen in this market as it approaches long-run equilibrium? a shift to the right of the market demand curve as new firms enter an upward shift of the firm's demand curve as new firms enter a shift to the left of the market demand curve as new firms enter a shift to the right of the market supply curve as new firms enter

The price will decrease until it is equal to the minimum of average total cost, and profits will become zero.

Refer to the graphs below. What do you expect to happen in this perfectly competitive market as it approaches long-run equilibrium? The price will increase and profits will become zero. The price will decrease until it is equal to the minimum of average total cost, and profits will increase. The price will decrease until it is equal to the minimum of average total cost, and profits will become zero. Firms will exit because economic profit will become zero.

the firm on the left

Refer to the graphs below. Which firm is a monopolistic competitor operating in the long run? -the firm on the left -the firm on the right -both firms -neither firm

the graph on the left

Refer to the graphs below. Which graph best depicts a firm in a monopolistically competitive industry that has an incentive to exit the industry in the long run? the graph on the left the graph in the middle the graph on the right none of the above

the graph in the middle

Refer to the graphs below. Which graph best depicts the profit or loss situation for a monopolistically competitive firm in the long run? the graph on the left the graph in the middle the graph on the right none of the above

the graph on the left

Refer to the graphs below. Which graph best depicts the relationship between price and average total cost in the long run for a monopolistically competitive firm? the graph on the left the graph in the middle the graph on the right none of the above

the graph in the middle

Refer to the graphs below. Which graph depicts a situation in which some firms will exit the industry? the graph on the left the graph in the middle the graph on the right none of the above

point A on both graphs

Refer to the graphs below. Which points on the graph coincide with productive efficiency? point A on both graphs point B on the graph on the right point C on the graph on the right points A, B, and C on the graph on the right

Both firms will charge $150.

Refer to the payoff matrix below. Suppose that Wal-Mart and Target are selling Sony flat-screen computer monitors for a price of either $150 or $200 each. Based on the information on the payoff matrix, what is the dominant strategy? Both firms will charge $150. Both firms will charge $200. Wal-Mart will charge $150, and Target will charge $200. Wal-Mart will charge $200, and Target will charge $150.

low; high

Refer to the payoff matrix below. The payoff matrix describes the payoffs to two members of the OPEC cartel. The Nash equilibrium of this game will occur with Saudi Arabia producing a _____ output and Nigeria producing a ______output. low; low high; high low; high high; low

6 bushels

Refer to the table below. Based on the numbers in the table, how much should this farmer produce in order to maximize profit? 10 bushels 9 bushels 6 bushels 4 bushels

$45

Refer to the table below. How much is the average revenue associated with serving five subscribers per month? $33 $45 $5 none of the above

$21

Refer to the table below. How much is the marginal revenue associated with serving seven subscribers per month? $39 $45 $21 None of the above

$3.00

Refer to the table below. What is the average revenue associated with the sixth unit of output produced and sold? $3.00 $2.00 $0.50 None of the above; there is insufficient information to answer the question.

$0.50

Refer to the table below. What is the marginal revenue associated with the sixth unit of output produced and sold? $3.00 $2.00 $0.50 none of the above

5 units of output

Refer to the table below. What level of output should be produced in order to maximize profit? 1 unit of output 5 units of output 6 units of output 10 units of output

at 6 units of output

Refer to the table below. When is average total cost minimized? at 1 unit of output at 5 units of output at 6 units of output at 10 units of output

Both firms will charge $50

Suppose Autozone and O'Reilly Auto are competing over the price of car batteries. What is the dominant strategy? Note: There will be a problem like this on the final. Both firms will charge $100 Both firms will charge $50 Autozone will charge $100 and O'Reilly will charge $50 Autozone will charge $50 and O'Reilly will charge $100

an economic cost.

Suppose you invest $200,000 in a business. The return you could earn each year on a similar investment using that money is 10 percent, or $20,000. In an economic sense, the $20,000 is an economic cost. economic profit. an accounting cost. both economic profit and accounting profit.

network externalities.

The more cell phones in use, the more valuable they become to consumers. This is an example of what happens when a firm is granted a patent. network externalities. what happens when a firm has control of a key resource. natural monopoly.

find the largest difference between total revenue and total cost

To maximize profit, which of the following should a firm attempt to do? maximize revenue minimize cost find the largest difference between total revenue and total cost all of the above

if Macintosh and Linux were not considered close substitutes for Windows

Using the broader definition of monopoly, in which of the following cases could we argue that Microsoft has a monopoly in computer operating systems? -if Macintosh and Linux were not considered close substitutes for Windows -if Microsoft charged prices similar to those that Macintosh and Linux charge for their operating systems in order to compete -if Macintosh and Linux started to produce operating systems similar to Windows -if there are no barriers to entry in the market for computer operating systems

antitrust laws

What are laws aimed at promoting competition among firms called? collusion antitrust laws laws of comparative advantage merger legislation

a horizontal merger

What is a merger between firms in the same industry called? a horizontal merger a vertical merger a conglomerate a divestiture

the increase in total cost resulting from producing one more unit of output

What is marginal cost? -the cost per unit of output produced -the increase in total cost resulting from producing one more unit of output -the impact of additional output on total fixed cost -the cost of production that is independent of the level of output produced

Market power is the ability of a firm to charge a price greater than marginal cost.

What is the definition of market power? -Market power is the same as inefficiency as measured by the amount of deadweight loss from a monopoly. -Market power is the ability of a firm to eliminate competition. -Market power is the ability of one firm to control other firms in the market. -Market power is the ability of a firm to charge a price greater than marginal cost.

to place a bid equal to the maximum value you place on the item

What is the dominant strategy of eBay auction participants? -to place a bid well below the subjective value you place on the item -to place a bid equal to the maximum value you place on the item -to place a bid well above the subjective value you place on the item -There is no dominant strategy on eBay auctions.

natural monopoly

What is the name given to the situation where economies of scale are so large that one firm can supply the entire market at a lower average total cost than two or more firms? network externalities productive efficiency natural monopoly market power

Price is equal to both average revenue and marginal revenue.

What is the relationship between price, average revenue, and marginal revenue for a firm in a perfectly competitive market? -Price is equal to average revenue and greater than marginal revenue. -Price is greater than average revenue and equal to marginal revenue. -Price is equal to both average revenue and marginal revenue. -Price, average revenue, and marginal revenue usually all have different values.

sunk cost

What is the term given to a cost that has already been paid and cannot be recovered? unrecoverable cost variable cost sunk cost implicit cost

Consumers pay a price greater than marginal cost but also have choices more suited to their tastes.

What trade-offs do consumers face when buying a product from a monopolistically competitive firm? -Consumers pay a lower price but also have fewer choices. -Consumers pay a price greater than marginal cost but also have choices more suited to their tastes. -Consumers pay a higher price but are happy knowing that the industry is highly efficient. -Consumers pay a price as low as the competitive price but have difficulty finding and buying the product.

It sells more units but receives lower revenue per unit.

When a firm's demand curve slopes downward and the firm decides to cut price, which of the following happens? It sells more units and receives higher revenue per unit. It sells more units but receives lower revenue per unit. It sells fewer units and receives lower revenue per unit. It sells fewer units but receives higher revenue per unit.

the price effect

When a monopolistically competitive firm decreases price, good and bad things happen. Which of the following is considered a bad thing for the firm? the price effect the output effect the revenue effect all of the above

the output effect

When a monopolistically competitive firm decreases price, good and bad things happen. Which of the following is considered a good thing for the firm? the price effect the output effect the revenue effect all of the above

all price makers

Which firms face a downward-sloping demand curve and a downward-sloping marginal revenue curve? all price takers all price makers monopolies only monopolistically competitive firms only

all of the above

Which of the following are characteristics of a perfectly competitive industry? firms are unable to control the prices of the products they sell firms are unable to earn an economic profit in the long run firms sell identical products all of the above

firms sell similar, but not identical, products

Which of the following are characteristics of monopolistic competition? high barriers to entry few firms compete firms sell similar, but not identical, products all of the above

all of the above

Which of the following are effects of monopoly? Monopoly causes a reduction in consumer surplus. Monopoly causes an increase in producer surplus. Monopoly causes a reduction in economic efficiency. all of the above

There must be many buyers and many sellers, all of whom are small relative to the market.

Which of the following conditions must exist in order to have a perfectly competitive market? -There must be many buyers and many sellers, all of whom are small relative to the market. -The products sold by firms in the market must be different from each other. -There must be some barriers to entry in order to protect perfect competition. -all of the above

all of the above Previous

Which of the following is a barrier to entry? economies of scale ownership of a key input patents all of the above

horizontal mergers

Which of the following is most likely to increase market power? horizontal mergers vertical mergers stricter enforcement of antitrust laws divestitures

A business strategy refers to actions taken by firms to attain their objectives.

Which of the following is the definition of business strategy? -A business strategy refers to the rules that determine what actions are allowable. -A business strategy refers to actions taken by firms to attain their objectives. -A business strategy is a study of how people make decisions. -A business strategy is an agreement among firms to charge the same price.

average revenue

Which of the following measures is conceptually the same as price? marginal revenue total revenue average revenue none of the above

the exclusive right to a new product

Which of the following rights is given to the holder of a patent? -the exclusive right to a new product -control over a key resource used in production of a good or service -the right to earn profits from creation of the product indefinitely -a public franchise

Natural monopoly is most likely to occur in markets where fixed costs are very large relative to variable costs.

Which of the following statements regarding natural monopoly is true? -One firm can supply twice as much output as two smaller firms at the same average total cost. -One firm can supply the entire market at a lower fixed cost than two or more firms. -The source of monopoly power is the control of a key natural resource. -Natural monopoly is most likely to occur in markets where fixed costs are very large relative to variable costs.

productive efficiency

Which of the following terms best describes how the result of the forces of competition drives the market price to the minimum average cost of the typical firm? allocative efficiency productive efficiency decreasing-cost industry competitive markdown

marginal revenue

Which of the following terms best describes the additional revenue associated with selling an additional unit of output? price average revenue marginal revenue total revenue

both perfectly competitive and monopolistically competitive firms

Which of the following types of firms use the marginal revenue equals marginal cost approach to maximize profits? -perfectly competitive firms -monopolistically competitive firms -both perfectly competitive and monopolistically competitive firms -neither perfectly competitive nor monopolistically competitive firms

all of the above

Which of the following types of firms use the marginal revenue equals marginal cost approach to maximize profits? perfectly competitive firms monopolistically competitive firms monopolies all of the above

oligopoly

Which of the terms below is defined as "A market structure in which a small number of interdependent firms compete?" game theory barriers to entry oligopoly economies of scale

barriers to entry

Which of the terms below is defined as "Anything that keeps new firms from entering an industry in which firms are earning economic profits?" game theory barriers to entry oligopoly economies of scale

opportunity cost

Which term best describes the minimum amount that a firm needs to earn on a $100,000 investment to be willing to remain in a perfectly competitive industry in the long run? explicit cost opportunity cost economic profit economic loss

entry blocked by government action

Which type of barrier to entry is the granting of a patent or copyright to an individual or firm considered? entry blocked by government action entry blocked by externalities entry blocked by economies of scale entry blocked by natural or technical constraints

neither allocative nor productive efficiency

Which type of efficiency is achieved by a monopolistically competitive firm in the long run? allocative efficiency productive efficiency both allocative and productive efficiency neither allocative nor productive efficiency

because changing the price will affect the quantity sold

Why does a monopolistically competitive firm have a downward-sloping demand curve? -because its customers only buy goods that are being discounted from their original prices -because changing the price will affect the quantity sold -because the firm is a price taker, like a wheat farmer -because the firm's level of output produced depends on its cost structure