MICRO-ECON EXAM 3

A duopolist faces the entire market demand for its product if ________. A)it charges a lower price than its rivalB)it charges the same price as its rivalC)it charges a price higher than its cost of productionD)it charges a higher price than its rival

A

Other things remaining the same, which of the following is likely to happen if an industry introduces labor-saving technology in production? A)Both the wage rate and the employment level will decrease in the industry.B)The wage rate will increase and the employment level will decrease in the industry.C)The wage rate will decrease and the employment level will increase in the industry.D)Both the wage rate and the employment level will increase in the industry.

A

A ________ is a formal organization of producers who agree on anticompetitive actions. A)duopolyB)monopolyC)cartelD)partnership

C

A ________ is the privilege granted to an individual or company by the government that gives them the sole right to produce and sell a good. A)brandB)copyrightC)patentD)trademark

C

A compensating wage differential is a wage premium paid to ________. A)recognize a more efficient employeeB)improve the goodwill of a firm hiring workersC)attract workers to otherwise undesirable occupationsD)attract workers who have a family to support

C

A network externality occurs when ________. A)the government interferes to prevent the concentration of market power in the hands of a few firmsB)a firm that has control over key resources auctions the resources off to other firmsC)the value of a product increases as more consumers start to use it D)firms collude to sell products at a price higher than the equilibrium market price

C

Collusion can work if ________. A)a colluder values future monopoly profits more than current profitsB)a colluder can cheat without being detectedC)a colluder charges a price higher than its partnersD)a colluder gives secret price discounts

A

Goods that are similar but are not perfect substitutes are called ________ goods. A)homogeneousB)normalC)differentiatedD)inferior

C

Fair-returns pricing describes a situation in which government regulation of price sets the monopolist's price at ________. A)average total costB)minimum average total costC)marginal costD)minimum average variable cost

A

If leisure is a normal good, how will an increase in the wage rate affect an individual's desired quantity supplied of hours worked? A)It may increase or decrease, depending on the relative magnitudes of the income and substitution effects.B)It will increase, because the income and substitution effects work in the same direction for normal goods.C)It will increase, because the opportunity cost of leisure has increased.D)It will decrease because of the income effect.

A

If workers are optimizing their total benefit, they will consume leisure until their ________. A)marginal benefit of leisure equals their wageB)value of marginal product of labor equals their wageC)marginal cost of leisure equals their wageD)marginal product of labor equals their wage

A

The Herfindahl-Hirschman Index is used to ________. A)estimate the degree of competition in an industryB)measure the price elasticity of market supply in an industryC)measure the price elasticity of demand faced by a firmD)estimate the profit earned by firms in an industry

A

The flatter (more relatively elastic) is the residual demand curve is, ________. A)the lower the deadweight loss in monopolistically competitive marketsB)the greater the markup of price over marginal cost in monopolistically competitive marketsC)the greater the deadweight loss in monopolistically competitive marketsD)none of the above

A

When price discrimination does not increase output, it increases a monopoly's profits because it ________. A)allows the firm to capture some consumer surplusB)increases the willingness of households to pay for a goodC)allows the firm to exploit economies of scale more fullyD)shifts the demand curve the firm faces

A

Which of the following statements is true? A)Under monopoly, prospective buyers may not be able to buy a good even if they have a willingness to pay above marginal costs.B)Under perfect competition, prospective buyers may not be able to buy a good even if they have a willingness to pay above marginal costs.C)Under perfect competition, sellers set the price of their goods below marginal costs.D)Under monopoly, the seller sets the price of its good below marginal costs.

A

If firms in a duopoly with homogeneous products compete on price, a Nash equilibrium is reached when each firm charges a price ________. A)higher than its average costB)lower than its marginal costC)equal to its marginal costD)equal to its average cost

C

A firm with market power ________. A)has long-run economic profits of zeroB)faces a horizontal demand curveC)has no ability to affect priceD)faces a downward-sloping demand curve

D

A skill-biased technological change is likely to ________. A)decrease the demand for skilled laborB)increase the wage of skilled laborC)increase the marginal productivity of unskilled laborD)increase the wage of unskilled labor

B

All firms in a monopolistically competitive industry face a ________ demand curve, so they have________. A)downward-sloping; no market powerB)downward-sloping; market powerC)flat; no market powerD)flat; market power

B

An industry is deemed concentrated when ________. A)each firm in that industry has a small market shareB)a few firms account for a large fraction of the total sales in that industryC)all the firms in that industry charge a price lower than the average cost of productionD)most of the firms in that industry earn zero economic profits in the long run

B

As the number of firms in an oligopolistic market increases, ________. A)prices tend to rise above marginal costB)prices tend to decline toward marginal costC)the market demand for a good tends to fallD)the profits earned by firms tend to rise

B

Encouraging the formation of monopolies provides firms an incentive to ________. A)increase social surplusB)innovateC)hire fewer resources in productionD)decrease deadweight loss

B

If the rental price of physical capital falls, the firm's ________. A)quantity demanded of physical capital will fallB)demand for physical capital will increaseC)quantity demanded of physical capital will increaseD)demand for physical capital will fall

C

Given that the market wage rate is $50 and both the labor and the goods market are perfectly competitive, a profit-maximizing firm should hire an additional worker if ________. A)the value of the marginal product of the worker is less than $50B)the value of the marginal product of the worker is at least $50C)the marginal product of the worker is 50 unitsD)the marginal product of the worker is less than 50 units

B

If firms in an oligopoly industry producing differentiated products collude, ________. A)they increase output and decrease price to deter entryB)they collectively produce the monopoly output level and divide the monopoly profitsC)they collectively produce up until Price = Marginal costD)they produce the same output level as non-collusive oligopoly, but deter entry

B

In the case of leisure, the substitution effect implies that ________. A)if people tend to work more and relax less, the price of leisure increasesB)when the price of leisure increases, people will work moreC)if people tend to work more and relax less, the price of leisure decreasesD)when the price of leisure increases, people will work less and relax more

B

The difference between an oligopoly with differentiated products and a monopolistic competition is ________. A)how many products firms produceB)how much influence firms have over pricesC)how many firms there are in the marketD)how many inputs firms use

B

When firms charge different prices to different consumers for the same good or service, it is referred to as________. A)shadow pricingB)price discriminationC)predatory pricingD)a price bias

B

Which of the following describes a feature of a monopolistically competitive market? A)Social surplus is maximized but at prices possibly above the competitive level.B)Social surplus is not maximized, but product diversity may add to consumer welfare.C)Social surplus is maximized, and some products will be priced below the competitive level.D)Social surplus is not maximized, but the prices will be lower than the competitive level.

B

Which of the following is true of a decrease in product prices? A)When the quantity effect dominates the price effect, total revenue decreases.B)When the price effect dominates the quantity effect, total revenue decreases.C)The price effect always dominates the quantity effect.D)The quantity effect always dominates the price effect.

B

Which of the following will happen if some firms in a monopolistically competitive market incur losses in the short run and the market conditions are not expected to change? A)New firms will enter the industry in the long run.B)Some firms will exit the industry in the long run.C)The existing firms will continue production in the long run.D)The demand for the goods produced by the firms will decrease.

B

At a certain level of production, the marginal revenue and the marginal cost of a monopolist are $8 and $6,respectively. Which of the following statements is true in this context? A)The monopolist should contract production.B)The profits of the monopolist are minimized.C)The monopolist should expand production.D)The profits of the monopolist are maximized.

C

Marginal revenue is less than the price for a monopolist because ________. A)there are no close substitutes for the firm's productB)the firm sets the priceC)a monopolist must lower its price to sell another unit of outputD)none of the above

C

Natural monopolies are characterized by facing a(n) ________. A)increasing average cost curveB)horizontal demand curveC)declining average cost curveD)constant average cost curve

C

Perfect price discrimination occurs when a firm charges ________. A)the same buyer different prices at different points of timeB)different buyers based on the characteristics of their purchaseC)each buyer exactly their willingness to payD)wealthier buyers a lower price

C

The ________ the Herfindahl-Hirschman Index, the ________ is. A)higher; less concentrated an industryB)lower; higher the profits earned in an industryC)higher; more concentrated an industryD)lower; more concentrated an industry

C

The policy that aims to regulate and prevent anti-competitive pricing in the United States is referred to as________ policy. A)monopoly regulationB)consumer protectionC)antitrustD)anti-competition

C

The value of the marginal product of labor is the ________. A)amount of output produced by the first unit of labor hired by a firmB)extra output that is produced by hiring an additional unit of laborC)contribution of an additional unit of labor to a firm's revenueD)value of the output produced by all the workers in a firm

C

Which of the following is a feature of an oligopoly?A)Each firm in this market earns zero economic profits.B)There are no barriers to entry in this market.C)Each firm's actions affect the decisions of its rivals in this market.D)There are a large number of sellers in this market.

C

Which of the following is true of monopolistic competition? A)The product sold by each seller in this market structure is identical.B)There is only one seller in this market structure.C)There are a large number of sellers, each selling a differentiated product.D)The firms in this market structure earn huge economic profits in the long run.

C

Which of the following statements is true? A)Firms are the suppliers in the market for labor as well as in the market for consumer goods.B)Firms are the suppliers in the market for labor, whereas they are the demanders in the market for consumer goods.C)Firms are the demanders in the market for labor, whereas they are the suppliers in the market for consumer goods.D)Firms are the demanders in the market for labor as well as in the market for consumer goods.

C

A factor of production refers to any good or service that is ________. A)produced in a competitive marketB)produced using scarce economic resourcesC)produced by the governmentD)used to produce other goods and services

D

A firm is said to have market power if it charges a price ________ of production. A)equal to the average fixed costB)equal to the marginal costC)lower than the marginal costD)higher than the marginal cost

D

An oligopoly market with identical products is similar to a ________, but the key difference is________. A)monopolistic competition; the oligopolist is a price-takerB)monopolistic competition market; oligopoly markets are more efficientC)perfect competition market; oligopoly markets are more efficientD)monopoly; the oligopolist must recognize the behavior of its competitors

D

Collusion occurs when firms ________. A)compete with one another by setting a price slightly lower than their rivals' pricesB)charge a price equal to their marginal cost of productionC)compete with one another by differentiating their productsD)conspire to set the quantity they produce or the prices they charge

D

Compared to a firm under perfect competition, a monopolist ________. A)charges less and produces lessB)charges less and produces moreC)charges more and produces moreD)charges more and produces less

D

Discrimination that occurs when people's preferences cause them to discriminate against a certain group is referred to as ________. A)group discriminationB)cultural discriminationC)special interest group discriminationD)taste-based discrimination

D

Goods that are used for the production of other goods are referred to as ________. A)public goodsB)consumer capitalC)consumer durable goodsD)physical capital

D

If a monopolist decides to charge a higher price for its product, it will yield a ________ revenue per unit sold and ________ number of units sold. A)lower; higherB)higher; higherC)lower; lowerD)higher; lower

D

If there is an increase in the price of the final good that an industry produces, the labor demand curve for the industry is likely to ________. A)become horizontalB)become verticalC)shift to the leftD)shift to the right

D

The optimal strategy of a goalie in penalty kicking is similar to that in ________. A)a symmetric gameB)the prisoners' dilemmaC)an extensive-form gameD)a zero-sum game

D

Which of the following is true of a Nash equilibrium?A)A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses.B)A game can have only one Nash equilibrium.C)A Nash equilibrium cannot occur if each player is aware of the strategies of other players.D)No player can improve his payoff by changing his strategy in a Nash equilibrium.

D

Which option correctly sorts different market structures in terms of competitiveness, from the most competitive to the least? A)Perfect competition, monopolistic competition, monopoly, oligopolyB)Perfect competition, oligopoly, monopolistic competition, monopolyC)Monopolistic competition, perfect competition, monopoly, oligopolyD)Perfect competition, monopolistic competition, oligopoly, monopoly

D

________ is a market structure where only one firm provides a good or service that has no close substitutes. A)Perfect competitionB)Monopolistic competitionC)An oligopolyD)A monopoly

D