Final
what is the maximum value the HHI can take on
10,000
It is always true when demand elasticity is equal to -1, marginal revenue is equal to 0. This is...
Correct
In order to maximize its profit, a monopolist;
Decides price and output simultaneously
A firm must be able to _____ competition if it is to exercise control over the price of its product.
Limit
In a monopoly, the market demand curve is;
The same as the demand curve facing the firm
in 2000 Microsoft was
found guilty of violating US antitrust laws
voss calculator company has a monopoly on the sale of graphing calculators. if it sells two of these calculators its total revenue is $600, and if it sells three calculators its total revenue is $750. the marginal revenue of the third calculator sold is
$150
When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $630. When the monopolist sells three units of output, the price per unit is;
$210
when a monopolist sells two units of output its total revenue is $600. when a monopolist sells three units of output its total revenue is $630. when the monopolists sells three units of output, the price per unit is
$210
hi phi sound unlimited has a monopoly over the installation of surrounded systems. if hi phi unlimited's total revenue from installing 15 sound systems is $30,000 and its total revenue from installing 16 sounds systems is $33,000, what is the marginal revenue of the sixteenth sound sound system
$3000
XYZ computer company has a monopoly on the sale of a specialized color printer. if it sells two of these printers its total revenue is $1000, and if it sells three color printers it total revenue is $1600. the marginal revenue of the third color printer sold is
$600
when a monopolist sells two units of output its total revenue is $150. when a monopolist sells three units of output its total revenue is $210. when the monopolists sells three units of output, the price per unit is
$70
stereo sound unlimited has a monopoly over the installation of surrounded sound systems. if stereo sound unlimited's total revue from installing 10 sound systems is $20,000 and its total revue from installing 11 sound systems is $18000, what is the marginal revenue of the eleventh sound system?
-$2000
if there are two firms in an industry and each has 50 perfect market share, then the herfindahl-hirschman index equals
5,000
Unlike for perfectly competitive firms, whose marginal revenue curves are the same as their individual demand curves, a monopolist's marginal revenue curve differs form its demand curve because...
A monopoly must lower the price on all units to sell one more unit of output.
a monopolist suffers a loss if its ____ schedule is everywhere above its _____ schedule
ATC; MC
For a perfectly competitive firm, the marginal revenue curve has _____ point(s) in common with the firm's demand curve.
All
the two different administrative bodies responsible for initiating actions on behalf of the US government against individuals or companies violating antitrust laws are called the
Antitrust Division of the Justice Department and the Federal Trade Commission
The term "rent seeking" refers to;
Any actions taken to protect positive profits
Of the following, _____ is the best example of an oligopolistic industry
Automobiles production
In monopolistic competition, firms gain some degree of market power;
By differentiating their products from those of other firms in the industry.
In some oligopolies, two firms find themselves in what is known as "the prisoners' dilemma,' that is;
Each has a dominant strategy that results in both of them being worse off than they would be if they could collude.
Suppose we know that a monopolist is maximizing its profits. Which of the following is a correct inference? "The monopolist has....
Equated marginal revenue and marginal cost
A market where there is only one buyer for a good or service is called a monopoly (T or F)
False
congressed established the _____ to investigate "...the organization, business conduct, practices, and management" of companies that engage in interstate commerce
Federal Trade Commission
In game theory, if a game is repeated frequently, as is the case with airline pricing;
Firms can, in effect, collude without talking to each other.
Product differentiation can be used by firms to do all of the following EXCEPT:
Gain complete control over the price of their product
Firms with market power must decide all of the following EXCEPT;
How much to supply in each input market
Because a monopoly is the only firm in an industry, it can charge virtually any price for its product. The statement is...
Incorrect because a monopoly is constrained by consumer demand.
Fora monopoly, price is equal to marginal revenue because a monopoly has the power to control price. This statement is...
Incorrect because price is greater than marginal revenue
If a monopolist is at a point on its demand curve such that marginal revenue is less than marginal cost, then it can increase profit by
Increasing price and decreasing output
A monopolistically competitive firm maximizes profit where;
MR = MC
when the addition to a monopolist's total profit is negative from selling another unit, then it follows that
MR<MC
a monopolistically competitive firm maximized profit where
MR=MC
a monopolistically competitive firm can minimize its losses by producing where ______ as long as ______
MR=MC; P>or equal to AVC
One widely watched government antitrust action involved Microsoft corporation. In that case;
Microsoft agreed to give computer manufacturers more freedom to install software written by Microsoft's competitors.
A(n) _____ industry has a single, unique product and blocked entry.
Monopolistic
What features distinguish monopolistically competitive firms from monopolies and oligopolies?
Monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can.
When ____ substitutes exist, a firm in an imperfectly competitive industry has ____ power to raise price.
More; less
The _____ broadly a market is defined; the more difficult it becomes to find _____.
More; substitutes
For a monopoly, the marginal revenue curve has _____ point(s) in common with the firm's linear demand curve.
One
In interpreting the Sherman Act, the Supreme Court developed the Rule of Reason, which says that a firm may be found guilty of violating the law;
Only if its conduct is unreasonable
we know that monopolistically competitive firms prevent the efficient use of resources because they produce where
P>MC
There is easy entry into the ____ and ____ industries
Perfectly competitive; monopolistically competitive
Market power refers to a firm's ability to;
Raise price without losing all sales of its product
Imperfect competition...
Results in a less efficient market outcomes
According to the Five Forces Model, _____ are the five competitive forces that determine the level of competition and profitability in an industry.
Rivals, buyers, suppliers, substitutes, and potential entrants
the criterion introduced by the supreme court in 1911 to determine whether a particular action was illegal or legal within the terms of the Sherman Act is called the
Rule of Reason
A coffee manufacturer raises the price of its coffee by 10%, and the quantity demanded of its coffee falls by only 12%. This firm has....
Some market power
A monopolistically competitive industry has all of the following characteristics EXCEPT:
Strategic behavior.
a monopolist is NOT guaranteed positive economic profits solely because it is a monopoly since there may be no output for which
TR>TC
One of the models of oligopoly behavior is called game theory. The key difference between it and other models is that in game theory, in planning its own actions, each firm;
Takes into account its rivals' reactions to its own price.
Suppose two firms plan a merger that will increase the Herfindahl-Hirschman index from 1,300 to 1,450. In this case;
The Justice Department will challenge the merger.
In a monopolistically competitive industry, at long-run equilibrium;
The average total cost curve is tangent to the demand curve.
One of the major characteristics of pure monopoly is...
There are severe barriers to entering the industry
One of the major characteristics of pure monopoly is;
There is only one firm in the industry
When a defendant is found guilty of violating the antitrust laws, the court may require the defendant;
To dispose of a subsidiary, create a competitor, divulge technical know-how, or sell goods or services.
Monopolistic competitions is a common form of market structure in the United States (T or F)
True
When the demand curve is a downward sloping straight line, the slope of the marginal revenue curve is;
Twice as steep at the demand curve.
A monopolistically competitive firm that is incurring a loss will produce in the short run as long as the revenue the firm receives is sufficient to cover;
Variable costs
_______ is a group of firms colluding to make price and output decisions
a cartel
a monopolist's supply of a good is
a dependent on the monopolist's demand curve and its marginal cost curve
A cartel is...
a group of oligopolists who make price and output decisions jointly.
All of the following are key characteristics of a monopolistically competitive industry except;
a homogeneous product
the cable industry is best characterized as _____
a natural monopoly
a barrier to entry that grants exclusive use of an invented product or process to the inventor is called _____
a patent
there is easy entry into the ______ and _______ industries
a perfectly competitive; monopolistically competitive
in an imperfectly competitive industry
a single firm has some control over the price of its output
a monopoly is an industry with
a single firm in which the entry of new firms is blocked
an oligopoly is an industry market structure with
a small number of firms each large enough to impact the market price of its output
which of the following is LEAST likely to be considered a firm in an imperfectly competitive industry
a wheat farmer in Kansas
the feature that distinguishes monopolistic competition from perfect competition from perfect competition is that monopolistically competitive firms are
able to differentiate their products
critics of advertising contend all of the following EXCEPT
advertising can easily turn into productive competition that increases welfare
in which of the four oligopolistic markets below is there considerable price competition?
airline industry
for a perfectly competitive firm, the marginal revenue curve has _____ point(s) in common with the firm's demand curve
all
the demand curve facing a dominant firm in the price leadership model is derived by subtracting
amount supplied by the smaller firms form market DEMAND
a market is defines as perfectly contestable if entry to it
and exit from it are both costless
as new firms enter a monopolistically competitive industry, the demand
and marginal revenue curves facing each firm begin to shift to the left
a monopolist who has a horizontal ATC schedule and perfectly price discriminates
appropriates all consumer surplus as profit
a monopolist who has a horizontal ATC schedule and charges the same monopoly price to all buyers
appropriates less consumer surplus as profit then a perfect price discriminator does
imperfect competition and maket power
are major sources of inefficiency
for a monopolistically competitive firm in long-run equilibrium,
at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve
of the following, ______ is the best example of an oligopolistic industry
automobiles production
which of the following is NOT an example of price discrimination
back to school sales
a _____ prevents new firms from entering and competing in a monopolistic industry
barrier to entry
although patents are a ____, they also provide _____
barrier to entry an incentive for invention and innovation
monopolies can ear positive economic profits in the long run while monopolistically competitive firms cannot due to
barriers to entry in monopoly but not in monopolistic competition
due to the network externalities in the game console market, we would expect this market to
be highly concentrated
suggests that consumers purchase health club memberships instead of paying per visit in an attempt to commit themselves to an exercise regime
behavioral economics
antitrust cases against Eastman Kodak, international Harvester, UnitedShoe Machinery, and US Steel resulted in the firms
being found not guilty of unreasonable conduct under the sherman act
an oligopoly with a dominant price leader will produce a level of output
between that which would prevail under competition and that which a monopolist would choose in the same industry
oligopolists must _____ to their strategy in order to determine their optimal strategy
both A and B are correct
in monopolistic competition, firms can have some market power
by producing differentiated products
Actions to enforce the antitrust laws are initiated...
by the Antitrust Division of the Justice Dept, the FTC, and private firms or citizens.
in oligopoly, firms
by virtue of their size, are able to influence price regardless of whether or not the product is differentiated or standardized
In oligopoly, firms;
by virtue of their size, are able to influence price regardless of whether or not the product is differentiated or standardized.
the herfindahl-hirschman index is
calculated by summing the squared market share percentages for all firms in the industry
the _____ act extended the government's authority to ban vertical and conglomerate mergers
celler-kefauver
a group of plaintiffs took the RIAA to court, claiming that record labels have agreed to set prices, with one of the major points of evidence being that the price of digital music is too similar of that of physical CDs, depute the drastic reduction in the price of distribution of digital music. with respect to setting prices, the record labels were accused of
collusion
the oligopolistic model in which firms produce exactly the same amount as would exist if a monopolist controlled the entire industry is called the _______ model
collusion
a _______ industry has a relatively small number of firms that dominate a market
concentrated
the ______ is the share of industry output insoles or employment accounted for by the larges four firms in an industry
concentration ratio
_____ are NOT a barrier to entry
consent decrees
courts must approve _____, that is, formal agreements on remedies between all parties to an antitrust case
consent decrees
if the herfindahl-hirschman index of an industry is less that 1000 then the antitrust division of the justice department
considers the industry inconcentrated
which model of oligopoly results in the greatest efficiency
contestable markets model
the speciality cake store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $17. at that production level ATC is $20, AVC is $15, and AFC is $5, and bother MR and MC are $8. this firm should
continue to produce 200 cakes, as price is grater than AVC
mama lena's, a frozen food producer, is a monopolistically competitive firm. mama lena's is currently selling frozen lasagna at a price of $10. mama lena's marginal cost is $5 and marginal revenue is $5. this firm should ______ to maximize profits in the short run
continue to produce the same output level
Ameritech has a monopoly over local telephone service. if Ameritech is producing where marginal revenue is less than marginal cost, the firm
could increase profits by reducing output
the ______ is (are) empowered to impose a number of ______ if it(they) find(s) that antitrust law has been violated
courts, remedies
in 1914, the US Congress
created the Federal Trade Commission
assuming demand is linear, the shape of a monopolist's total revenue schedule is a
curve from the origin with decreasing slope
when a monopolist sells two units of output its total revenue is $600. when a monopolist sells three units of output its total revenue is $630. in order to sell three units of output instead of only two, the monopolist must
decrease its price by $90 per unit
assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit. if the government forces the oligopolists to stop colluding, the price charges by the oligopolies will ______ and the goal output produces will_______
decrease, increase
the price-leadership model does NOT assume the
demand elasticity in response to an increase in price is different from the demand elasticity in response to a price cut
firms gain control over price in monopolistic competition by
differentiating their products
the demand curve facing a monopolistic firm is _____
downward-sloping
a two firm oligopoly is known as a ______
duopoly
in American Needle vs NFL, the US supreme court essentially ruled that
each team in the NFL is a separate business entity
a monopolist is currently maximizing profits. in addition, if P>ATC>MC, the the monopolist
earns positive economic profits
which type of barrier to entry allowed the electric company to maintain a monopoly over the production of electricity
economies of scale
for a monopoly to be a natal monopoly
economies of scale must be realized at a scales that is CLOSE to the TOTAL DEMAND in the market
The industry for athletic shoes is
either monopolistically competitive or an oligopoly depending on the number of firms, market power, and potential entry
firms will ______ a monopolistically competitive market until ______ are eliminated
enter, profits
hi phi sound unlimited has monopoly over the installation of surrounded sound systems. hi phi unlimited's total revenue from installing 15 sound systems is $30,000 and its goal revenue from installing 16 sound systems is $33,000. the marginal revenue received from selling the 16th sound system is
equal to the price of the 16th sound system
suppose we know that a monopolist is maximizing its profits. which of the following is a correct inference? the monopolist has
equated marginal revenue and marginal cost
from society's point of view, a monopolist produced too little because price
exceeds marginal cost
the cellar-kefauver act of 1950
extended the government's authority to ban vertical and conglomerate mergers
the major distinguishing characteristic of oligopoly is that
firms are interdependent
in a monopolistically competitive industry,
firms are small relative to the total market
the case AGAINST advertising includes the fact that
firms spend large sums of money to create artificial differences among products
if firms in a monopolistically competitive industry are incurring losses, in the long run
firms will leave this industry until the remaining firms are earning a NORMAL profit
which of the following best explains why cable television consist of local monopolies
fixed costs are high, but the marginal cost of serving additional customers is low
the concentration ratio is generally calculated for the largest ______ firms
four
product differentiation can be used by firms to do all of the following EXCEPT
gain complete control over the price of their product
in well functioning markets, all of the following reflect the degree of produce variety EXCEPT
gains from network externalities
the notion that the government becomes the tool of the rent seeker and makes the allocation of resources even less efficient than before is known as ____ and is described in_____
government failure, public choice theory
Unlike a monopolistic firm's product, a monopolistically competitive firm's product;
has many close substitutes
unlike a monopolistic firm's product, a monopolistically competitive firm's product
has many close substitutes
monopolies, oligopolies, and monopolistic competitive industries all
have market power
an oligopoly with a dominant price leader will produce an output level that is ______ than the output level that would prevail if the industry were a monopoly and sells it at a price that is _____ than the price that would prevail if the industry were a monopoly
higher, lower
product differentiation that makes the product better or some consumers and worse for others is
horizontal differentiation
firms with market power must decide all of the following except
how much to supply in each input market
which of the following is NOT an assumption of the cornet model presented in the text
if the first firm cuts price, the second firm will follow and if the first raises price, the second will not follow
a monopolist will not produce
in the inelastic portion of its demand curve, where marginal revenue is negative
because of a patent, alcoa is the only manufacturer of soda cans with a stay-put tab. alcoa can earn a profit on the sale of soda canes with stay-put tabs
in the long run because entry into the industry by new firms is blocked until the patent expires
the economist Joseph Schumpeter argued that industrial concentration, in which a relatively small number of firms control the market place, actually _____ the rate of _____
increased, technological advance
Rent seeking in the form of lobbying for an increase in import tariffs by domestic producers
increases the deadweight loss.
industry A has two firms that each control 50 percent of the market. industry B has three firms, where one firm controls 70 percent of the market and the other firms control 15 percent of the market. according to the HHI, which industry is more concentrated
industry B
the demand for food will likely be price _____ while the demand for Brand X Burger will likely be price ______
inelastic, elastic
the antitrust division of the justice department
initiates action against those who violate antitrust laws and decided to prosecute
for a monopolist, price
is greater than marginal revenue
product differentiation that makes the product better than a rival's product from everyone's perspective
is know as vertical differentiation
the XYZ computer company has a monopoly over the production of a specialized color printer. the XYZ computer company will find it profitable to reduce output as ling as marginal revenue
is less than marginal cost
the XYZ computer company has a monopoly over the production of a specialized color printer. the XYZ computer company will find it profitable to increase the production of specialized color printers as long as marginal cost
is less than marginal revenue
The demand curve for the product or service produced by a monopolistic competitor;
is more elastic than the demand curve faced by a monopolist and less elastic than the demand curve faced by a perfectly competitive firm.
tacit collusion
is more likely to be successful in increasing industry profits when there are a few, similar firms in the industry
a monopolist
is protected from competition by barriers to entry
a weakness of the Cournot model is that
it assumes that firms do not anticipate the moves of their rivals
which of the following best describes the effect of the internet on the recording industry
it has shifted power away from record labels by making the distribution of recorded music much easier
the case for advertising include the fact that
it provided consumers with valuable information about product availability, quality, and price
the case for product differentiation does NOT include the fact that
it waste society's scarce resources
in the long run equilibrium for a monopolistically competitive firm, the firm's demand curve is ______ its average total cost curve
just tangent to
government failure
leads to a less efficient allocation of resources
relative to a competitively organized industry, a monopoly is more likely to produce
less output charges higher price earns economic profits
relative a a competitively organized industry, firms acting collusively are more likely to produce
less output charge higher prices earn and economic profit
compared to a perfectly competitive firm, the demand schedule of a monopolistically competitive firm faces is
less price elastic
monopolistically competitive firms in long-run equilibrium produce at _____ the optimal scale
less than
the rare bird company has a monopoly in the sale of macaws in Iowa. when the rare bird company sells three macaws its marginal revenue is $30. when the rare bird company sells four macaws it marginal revenue will be
less than $30
the fire forces me del helps illustrate the five competitive forces that determine the _______ in an industry
level of competition and profitability
the do it yourself hardware store is a monopolistically competitive firm. its marginal revenue curve
lies below the demand curve INTERSECTING the quantity axis midway between the origin and the point at which the dame curve intersect its
a firm must be able to _____ competition if it is to exercise control over the price of its product
limit
the pizza delivery industry is monopolistically competitive. little joe's pizzeria raises its prices by 10%, but all the other pizzerias in town keep their prices the same. which of the following is most likely to occur?
little joe's pizzeria will lose some of its customers
when MR=MC and P+ATC for a monopolistically competitive firm, the firm is in
long run equilibrium
for a non-discriminating monopolistic to sell one more unit, it must _______
lower the price of the last as well as all previous units produced
the Sherman Antitrust Act of 1890
made illegal every conspiracy in restraint of trade or commerce among the several states
monopolistic competition is an industry market structure with
many firms each able to differentiate their product
the colluding oligopoly will face market demand and produce up until the point at which
marginal revenue and marginal cost are equal and price will be set above marginal cost
a monopolistically competitive firm produces where
marginal revenue equals marginal cost
a profit maximizing monopolist will produce the level of output where
marginal revenue equals marginal cost
to maximize profit, a monopolistically competitive firm will produce where
marginal revenue equals marginal cost
the government uses _____ figures contained in the herfindahl-hirschman index (HHI) to help determine whether or not it will challenge a proposed merger
market share
a player chooses a maximum strategy to ______ gain the player can earn
maximize the minimum
in the long run, a monopoly
may earn positive economic profits due to entry barriers
a(n) ______ industry has a single, unique product and blocked entry
monopolistic
In San Francisco there are many retail clothing stores. each store is slightly different from every other store. retail clothing stores are an example of what market structure?
monopolistic competition
monopolistic competitive differs from perfect competition primarily because in
monopolistic competition, firms can differentiate their products
a profit maximizing firm in a monopolistically competitive market structure shaves much like a _____ in the short run
monopolistic firm
the restaurant industry is an example of a(n) ________ industry
monopolistically competitive
The industry for restaurants is
monopolistically competitive because there are many firms with control over their own prices.
which of the following features distinguishes monopolistically competitive firms from monopolies and oligopolies?
monopolistically competitive firms cannot influence market price by virtue of their size alone while monopolies and oligopolies can
an important distinction between perfect competition and monopoly is that in
monopoly the firm faces the market demand curve
the demand facing a monopolistically competitive firm is _____ a monopolistic firm and _____ a perfectly competitive firm
more elastic than; less elastic than
relative to a monopolized industry, a competitively organized industry is more likely to produce
more output charges lower prices earns only a normal profit
the demand for ben and jerry's ice cream will likely be ____ the demand for dessert
more price elastic than
when _____ substitutes exist, a firm in an imperfectly competitive industry has _____ power to raise price
more, less
the _____ broadly a market is defined; the more difficult it becomes to find ______
more, substitutes
which of the following best supports the argument that calorie and fat labeling in restaurants will not reduce the percentage of people who are obese?
most consumers are already aware of the kinds of foods that are likely to cause weight gain
a monopolistically competitive firm
must lower price to sell more output
a(n) ______ occurs if all players in a game play their best strategies oven what their competitors do
nash equilibrium
an industry that realizes such large economies of scale introducing its product that single-firm production of that good or service is most efficient is called a(n) _____ monopoly
natural
it would be inefficient to break up a _____ monopoly
natural
when a firm's LRAC curve is still declining when it intersects the market demand curve, we call the the firm a(n)
natural monopolist
for a monopolist, if total revenue increases as output decreases, then the marginal revenue is
negative
if ATC>P, the a profit maximizing, monopolistically competitive firm earns ____ economic profits
negative
in the long run monopolistic competition equilibrium, there can be
neither economic profits nor losses
_____ present(s) a barrier to entry in the DVD player market
network externalities
if firms in a monopolistically competitive industry are earning economic profits, then in the long run
new firms producing close substitutes will enter the industry and this entry will continue until economic profits are eliminated
in long run equilibrium for a monopolistically competitive industry _____ firms earn ______ economic profits
no, positive or negative
you read that 25 firms that grow and export peanuts to the US decide to from a cartel. the cartel aims to raise the price of peanuts and reduce output to increase profits for the peanut growers. you predict that this cartel will probably
not be successful because the number of firms is unmanageable and there are a number of good substitutes for peanuts
oligopoly is difficult to analyze because
of the complex interdependence that usually exists among oligopolistic firms
A(n) _____ industry is characterized by strategic behavior
oligopolistic
products may be homogeneous or differentiated in the _____ market structure
oligopolistic
the airline industry is an example of a(n) _______ industry
oligopolistic
in the count model the final level of output falls between the output that would prevail if the market were _____ and the output that would be set by a ______
oligopolistic, monopoly
a form of industry structure characterized by a few firms each large enough to influence market price is
oligopoly
the four larges firms account for approx 90% of US beer sales. the US beer industry would be best classified as a(n)
oligopoly
the market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is
oligopoly
a monopolist sets both price and quantity simultaneously, and the amount of output that it supplies depends
on both its marginal cost curve and the demand curve that it faces
in general, oligopolists compete
on price, R&D, and marketing and advertising
monopolists differ from perfectly competitive firms
on the demand side of the profit equation alone
for monopoly, the marginal revenue curve has ____ point(s) in common with the firm's linear demand curve
one
a non-discriminating monopolist's price equals its marginal revenue only when
output is zero
DeBeers' diamond monopoly results from
ownership of a scare factor of production
in 1890 the Unite States Congress
passed the Sherman Antitrust Act
slow the flow of benefits from research and development to consumers
patents
a rule enunciated by the courts declaring a particular action or outcome to be an intrinsic violation antitrust law is called
per se rule
which of the following statements regarding perfect price discrimination is FALSE
perfect price discrimination yields the same market price and output result as perfect competition
in contestable markets, large oligopolistic firms end up behaving like
perfectly competitive firms
a(n) _______ industry does NOT have price as a decision variable
perfectly competitively
the conclusion that firms in oligopoly produce where price exceeds marginal cost is true for all models of oligopoly except the
perfectly contestable market model
entry to an exit from a _____ market are ______
perfectly contestable, costless
if P>ATC, then a profit maximizing, monopolistically competitive firm earns ____ economic profits
positive
producers of Honest Tea stop adding sugar to their tea when the marginal utility to consumers of doing so is
positive
when monopolistically competitive firms earn _____ economic profits, other firms ______ an industry in the long run
positive, enter
_____ occurs when a large, powerful firm drives smaller firms out of the market by temporarily selling at an artificially low price
predatory pricing
For a purely competitive firm;
price is equal to marginal revenue because the firm can sell as much output as it chooses at the market price.
monopolistically competitive firms prevent the efficient use of resources because in long-run equilibrium
price is greater than marginal cost
in the short run, when a monopolist incurs a loss it will
produce as long as total revenue is sufficient to cover variable costs
the exclusive gift company has a monopoly over the sale of gold hula hoops. this company is currently pricing and producing where marginal revenue is equal to marginal cost. it is selling 50 gold hula hoops at a price of $5000 each. total costs for the company are $300,000 of which fixed costs are $100,000. you are hired as an economic consultant to this company. you should advise this monopolist to
produce in the short run but exit the industry in the long run if conditions do not change
the speciality cake store, a monopolistically competitive firm, is producing 200 decorated cakes per day and selling each cake for $12. at that production level ATC is $20, AVC is $15, and AFC is $5, and bother MR and MC are $8. this firm should
produce zero cakes and just pay fixed costs
in order to achieve market power, monopolistically competitive firms use_______
product differentiation
monopolistically competitive firms use a(n) ______ strategy to achieve market power
product differentiation
which of the following benefits associated with the oligopoly model
product variety and innovation
the classic example of natural monopolies over the years have been
public utilities
market power refers to a firm's ability to
raise price without losing all sales of its product
in the cornet model, each firm's ______ shows the firm's optimal profit maximizing output given its rival's output
reaction function
compared to a perfectly competitive firm having the dame cost curves, a monopolistically competitive firm _____ output and _____ prices
reduces, raises
AARP lobbies aggressively for the interests of retired persons. for example, AARP has been instrumental in obtaining medical benefits for senior citizens. such behavior on the part of AARP is called ______
rent-seeking behavior
there is a bill pending before the Kansas state legislature that would prohibit private companies from selling health insurance and would make the state the single payer of health care bills. private health insurance companies that have made above normal profits have spent large sums of money trying to prevent this bill from being passed into law. this is an example of
rent-seeking behavior
imperfect competition
results in less efficient market outcomes
a monopolistically competitive firm that is incurring a loss will shut down if
revenues are less than variable costs
according to the five forces model, _____ are the fire competitive forces that determine the level of competition and profitability in an industry
rivals, buyers, suppliers, substitutes, and potential entrants
as new firms enter a monopolistically competitive industry, the demand curve facing each existing firm will
shift to the left and become more elastic because there are now more substitutes for its product
when some firms exit a monopolistic competitive industry, the demand curves of the reaming firms in the industry ______
shift to the right
in imperfectly competitive markets,
some competition may exist in the markets
a coffee manufacturer raised the price of its coffee by 10%, and the quantity demanded of its coffee falls by only 12%. the firm has
some market power
the biggest problem with the Sherman Antitrust Act of 1890 was that it was unclear what
specific acts were to be considered "restraints of trade"
in 1911 two major antitrust cases were brought before the supreme court involving
standard oil and american tobacco
_____ is (are) protected by barriers to entry, specifically ______
state lotteries; government rules
a monopolistically competitive industry has all of the following characteristics EXCEPT
strategic behavior
which of the forced from the five forces model help explain why record labels are losing profits
suppliers, substitutes, and buyers
_______ occurs when price and quantity fixing agreements among producers are implicit
tacit collusion
a company selling iced tea discovers that as sugar is added to tea, consumers' opinions of the fast of the tea rises for the first few grams of sugar and then drops. even so, the company chooses not to add the amount sugar that would result in the best-tasting tea. which if the following would explain why adding less sugar could be a wise decision?
teas with less sugar are more likely to appeal to health-conscious consumers
which should below is an argument that more technological change occurs in more competitive market structures
the "high-tech revolution" gee out of many tiny start up operations
which of the following made tying contracts illegal and banned price discrimination with the intent to monopolize
the Clayton Act
which of the following declares monopoly and trade restraints illegal
the Sherman Act
the internet has had a significant influence on advertising in all of the following ways EXCEPT
the internet has reduced the level of transparency of informational advertising
in the cornet model, when a new firm begins production it assumes its demand curve is
the market demand less the amount the other firm is selling
if a monopolist earns positive economic profits in the long run,
the monopolist will not change its behavior
in an oligopolistic industry, the price firms charge and the quantity they produce would be the same as if the industry was a monopoly if
the oligopolists collude
predatory pricing is
the practice by which a large, power firm attempts to drive its competitors out of the market by temporarily setting and artificially low price
for a monopolist to sell more units of output
the price must be reduced
a form of oligopoly in which a dominant firm sets the price and a all smaller firms in the industry follow the dominant firm's pricing policy is called
the price-leadership model
If all firms in an industry successfully engage in collusion, the resulting profit-maximizing price and output would be;
the same as if the industry was a monopoly.
in monopoly, the market demand curve is
the same as the demand curve facing the firm
economists no longer attack industry concentration with the same fervor they once did because
the theory of contestable markets shows that even firms in highly concentrated industries can be pushed to produce efficiently under certain market circumstances
the right answer to the debate regarding the welfare effects of advertising is that
there is no right answer
to the extent that oligopolies differentiate their products
there is the promise of new and exciting products
why do price discriminating firms often offer lower prices to children and elderly?
they have a lower willingness to pay than other consumers
_______ is a repeated game strategy in which a player responds in kind to an opponent's play
tit-for-tat
when the demand curve is a downward sloping straight line, the quantity at which the demand curve intersects the horizontal (quantity) axis is _____ the quantity at which the marginal revenue curve intersects the horizontal (quantity) axis
twice
when the demand curve is a downward sloping straight line, the slope of the marginal revenue curve is
twice a steep as the demand curve
the prisoner's dilemma games presented in the text involves _____ players each with _____ strategies
two, two
a monopolistically competitive firm that is incurring a loss will produce in the short run as long as the revenue the firm receives is sufficient to cover
variable costs
the key issue surrounding the US supreme court case of American Needle vs NFL was
whether the NFL's exclusive deal withReebok violated antitrust laws
a non-discriminating monopolist maximizes total revenue when its marginal revenue is ______
zero