Micro Exam: Unit 4/5: Ch 12,13,14
Which of the following is not a characteristic of a monopolistically competitive market structure? A) Each firm must react to actions of other firms. B) There is a large number of independently acting small sellers. C) There are low barriers to entry of new firms. D) All sellers sell products that are differentiated.
A) Each firm must react to actions of other firms.
The five competitive forces model was developed by A) Michael Porter. B) Michael Spence. C) Porter Smith. D) John Nash.
A) Michael Porter.
Refer to Figure 12-14. Consider a typical firm in a perfectly competitive industry which is incurring short-run losses. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium? A) Panel A B) Panel B C) Panel C D) Panel D
A) Panel A
To maximize their profits and defend those profits from competitors, monopolistically competitive firms must A) differentiate their products. B) lobby government to erect barriers to entry in their industries. C) limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions. D) achieve economies of scale.
A) differentiate their products.
A market comprised of only two firms is called a A) duopoly. B) monopoly. C) competitive market. D) monopolistically competitive market.
A) duopoly.
Collusion between two firms occurs when A) firms explicitly or implicitly agree to adopt a uniform business strategy. B) announce that each will match its rival's market price. C) firms act altruistically to bring about the economically efficient outcome. D) the firms independently pursue strategies that could hurt each other.
A) firms explicitly or implicitly agree to adopt a uniform business strategy.
An oligopolistic industry is characterized by all of the following except A) firms pursuing aggressive business strategies, independent of rivals' strategies. B) existence of entry barriers. C) the possibility of reaping long-run economic profits. D) production of standardized or differentiated products.
A) firms pursuing aggressive business strategies, independent of rivals' strategies.
The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called A) game theory. B) the prisoner's dilemma. C) dominant strategy equilibrium. D) Nash equilibrium.
A) game theory.
Both individual buyers and sellers in perfect competition A) have to take the market price as a given. B) have the market price dictated to them by government. C) can influence the market price by joining with a few of their competitors. D) can influence the market price by their own individual actions.
A) have to take the market price as a given.
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss. A) loss of $6,000 B) profit of $6,000 C) profit of $30,000 D) There is insufficient information to answer the question.
A) loss of $6,000
Refer to Figure 13-11. The firm represented in the diagram A) makes zero economic profit. B) makes zero accounting profit. C) should exit the industry. D) should expand its output to take advantage of economies of scale
A) makes zero economic profit.
The price of a seller's product in perfect competition is determined by A) market demand and market supply. B) the individual demander. C) a few of the sellers. D) the individual seller.
A) market demand and market supply.
With creation and growth of the internet,vacationers can now book their own flights, hotels, rental cars, and other travel logistics online. If this capability resulted in creative destruction, which if the following industries would have expected to decline the most as a result? travel agencies tourist information hotels airlines
travel agencies
The term oligopoly indicates many producers of a differentiated product. a few firms producing either a differentiated or a homogeneous product. an industry whose four-firm concentration ratio is low. a one-firm industry.
a few firms producing either a differentiated or a homogeneous product.
If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of an industry with a low four-firm concentration ratio. a purely competitive producer. a monopolistically competitive producer. a pure monopoly.
a pure monopoly.
The price elasticity of demand coefficient measures buyer responsiveness to price changes. the slope of the demand curve. the extent to which a demand curve shifts as incomes change. how far business executives can stretch their fixed costs.
buyer responsiveness to price changes.
The demand for a product is inelastic with respect to price if a drop in price is accompanied by an increase in the quantity demanded. consumers are largely unresponsive to a per unit price change. a drop in price is accompanied by a decrease in the quantity demanded. the elasticity coefficient is greater than one
consumers are largely unresponsive to a per unit price change.
The primary force encouraging the entry of new firms into a purely competitive industry is economic profits earned by firms already in the industry. government subsidies for start-up firms. a desire to provide goods for the betterment of society. normal profits earned by firms already in the industry.
economic profits earned by firms already in the industry.
Monopolistic competition means many firms producing a standardized or homogeneous product. a large number of firms producing a standardized or homogeneous product. a market situation where competition is based entirely on product differentiation and advertising. a few firms producing a standardized or homogeneous product.
many firms producing a standardized or homogeneous product.
The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is 26 units of utility 6 units of utility 8 units of utility 38 units of utility
8 units of utility
The music streaming industry, where a firm's profitability depends on its interactions with other firms, is an example of A) oligopoly. B) monopoly. C) monopolistic competition. D) perfect competition.
A) oligopoly.
Which of the following describes a situation in which a good or service is produced at the lowest possible cost? A) productive efficiency B) marginal efficiency C) profit maximization D) allocative efficiency
A) productive efficiency
A Nash equilibrium is A) reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. B) reached when an oligopoly's market demand and supply intersect. C) reached when each player chooses the best strategy for himself and for the group. D) an equilibrium comprising non-dominant strategies only.
A) reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.
In many business situations one firm will act first, and then other firms will respond. To help analyze these types of situations economists use A) sequential games. B) retaliation games. C) bargaining games. D) follow-the-leader-games.
A) sequential games.
When new firms are encouraged to enter a monopolistically competitive market A) some existing firms must be earning economic profits. B) the marginal cost curve facing an existing firm shifts downwards. C) they do so because there is insufficient product differentiation. D) the demand curve facing an existing firm shifts to the right.
A) some existing firms must be earning economic profits.
If a firm shuts down in the short run it will A) suffer a loss equal to its fixed costs. B) break even. C) suffer a loss equal to its variable costs. D) declare bankruptcy.
A) suffer a loss equal to its fixed costs.
Profit is the difference between A) total revenue and total cost. B) total revenue and total explicit cost. C) marginal revenue and marginal cost. D) total revenue and variable cost.
A) total revenue and total cost.
Refer to Figure 12-11. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long-run equilibrium, the firm represented in the diagram A) will reduce its output to 1,100 units. B) will reduce its output to 750 units. C) will continue to produce the same quantity. D) will cease to exist.
A) will reduce its output to 1,100 units.
Hogrocket, which developed the Tiny Invaders game for the iPhone, found that to maintain sales in a profitable competitive market, the price of a product A) will usually fall. B) will usually rise. C) will usually remain stable. D) will eventually fall to zero.
A) will usually fall.
The long-run supply curve for a perfectly competitive, constant-cost industry A) is upward-sloping. B) is horizontal. C) is found by adding up the marginal cost curves for all firms in the industry. D) is downward-sloping
B) is horizontal.
Refer to Figure 12-10. The total cost at the profit-maximizing output level equals A) $4,800. B) $3,300. C) $2,500. D) $1,800.
B) $3,300.
Refer to Table 13-1. What is the marginal revenue of the 3rd unit? A) $6.50 B) $5.50 C) $1.83 D) $0.50
B) $5.50
A dominant strategy A) involves colluding with rivals to maximize joint profits. B) is one that is the best for a firm, no matter what strategies other firms use. C) is one that a firm is forced into following by government policy. D) involves deciding what to do after all rivals have chosen their own strategies.
B) is one that is the best for a firm, no matter what strategies other firms use.
Refer to Figure 12-1. If the firm is charging a price of $12 per unit A)it breaks even. B) it is not selling any output. C) it is selling 700 units. D) it is making a profit.
B) it is not selling any output.
Refer to Figure 12-1. If the firm is producing 200 units A) it is making a loss. B) it should increase its output to maximize profit. C) it should cut back its output to maximize profit. D) it breaks even.
B) it should increase its output to maximize profit.
The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market? A) Both offer DSL internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million. B) Both offer internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million. C) Xenophone offers DSL internet service and earns a profit of $5 million while Gigacom offer internet service via cable line and earns a profit of $6.5 million. D) Xenophone offers internet service via cable line and earns a profit of $4 million while Gigacom offers DSL internet service and earns a profit of $4.5 million.
B) Both offer internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million.
Refer to Figure 12-2. What is the amount of profit if the firm produces Q2 units? A) It is equal to the vertical distance c to Q2. B) It is equal to the vertical distance c to g. C) It is equal to the vertical distance c to g multiplied by Q2 units. D) It is equal to the vertical distance g to Q2.
B) It is equal to the vertical distance c to g.
What is allocative efficiency? A) It refers to a situation in which resources are allocated to their highest profit use. B) It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it. C) It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost. D) It refers to a situation in which resources are allocated fairly to all consumers in a society.
B) It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.
The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. Refer to Figure 14-2. If the government delays Gigacom's entry and Xenophone moves first, is a threat by Gigacom that it will provide DSL service if Xenophone provides cable service a credible threat? A) Yes, Xenophone stands to lose $3 million in profit. B) No, because Gigacom will lose $4.5 million in profits if it carries out its threat. C) Yes, because Gigacom's DSL service will drive Xenophone out of business. D) No, because as a second mover, it has no choice but to abide by the choices of the first mover.
B) No, because Gigacom will lose $4.5 million in profits if it carries out its threat.
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged? A) P = $55; Q = 5 cases B) P = $50; Q = 6 cases C) P = $45; Q = 7 cases D) P = $40; Q = 8 cases
B) P = $50; Q = 6 cases
Refer to Figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium? A) Panel A B) Panel B C) Panel C D) Panel D
B) Panel B
Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing output? A) Q1 units B) Q2 units C) Q3 units D) Q4 units
B) Q2 units
Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen? A) The firm's revenue will increase. B) The firm will not sell any output. C) The firm will sell more output than its competitors. D) The firm's profits will increase.
B) The firm will not sell any output.
A cartel is A) an example of a group of firms that collectively regulate a competitive industry. B) a group of firms that enter into a formal agreement to fix prices to maximize joint profits. C) a temporary storage facility for automobiles. D) a group of firms that enter into an informal agreement to fix prices to maximize joint profits.
B) a group of firms that enter into a formal agreement to fix prices to maximize joint profits.
The delivery of first-class mail by the U.S. Postal Service is an example of A) monopolistic competition, because mail delivery is a differentiated product provided by many firms. B) a monopoly. C) perfect competition because consumers have access to other methods of written communication; for example, email and text messaging. D) an oligopoly because a few other firms provide delivery of letters and packages.
B) a monopoly.
What is productive efficiency? A) a situation in which firms produce as much as possible B) a situation in which resources are allocated such that goods can be produced at their lowest possible average cost C) a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it D) a situation in which resources are allocated to their highest profit use
B) a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it? A) productive efficiency B) allocative efficiency C) profit maximization D) marginal efficiency
B) allocative efficiency
A monopolistically competitive industry that earns economic profits in the short run will A) experience a rise in demand in the long run. B) experience the entry of new rival firms into the industry in the long run. C) experience the exit of existing firms out of the industry in the long run. D) continue to earn economic profits in the long run.
B) experience the entry of new rival firms into the industry in the long run.
If Panera Bread's "clean food" strategy succeeds and customers are willing to pay higher prices for their menu items, the company will A) continue to earn substantial economic profits in the long run. B) likely attract competitors that offer the same kind of food, and all else equal, eventually economic profits will be competed away. C) no longer be monopolistically competitive. D) eventually suffer economic losses, as do all fast-casual restaurants.
B) likely attract competitors that offer the same kind of food, and all else equal, eventually economic profits will be competed away.
Marginal revenue is A) total revenue divided by the total quantity of output. B) the change in total revenue divided by the change in the quantity of output. C) the change in profit divided by the change in the quantity of output. D) the change in total revenue divided by the change in total cost.
B) the change in total revenue divided by the change in the quantity of output.
Brand management refers to A) efforts to reduce the cost of production. B) the efforts to maintain the differentiation of a product over time. C) selling the right to use a brand name in a particular market. D) picking a brand name for a new product that will attract attention.
B) the efforts to maintain the differentiation of a product over time.
Which of the following is not one of the five competitive forces? A) the threat from potential entrants B) the firm's ability to differentiate its product C) the bargaining power of buyers D) the bargaining power of suppliers
B) the firm's ability to differentiate its product
A four-firm concentration ratio measures A) how the four largest firms became so concentrated. B) the fraction of an industry's sales accounted for by the four largest firms. C) the production of any four firms in an industry. D) the fraction of employment of the four largest firms in an industry.
B) the fraction of an industry's sales accounted for by the four largest firms.
The larger the number of firms in an industry A) the larger the potential number of market segments. B) the more intense the rivalry among firms. C) the greater the need for a price enforcement mechanism. D) the easier it is to implicitly collude to fix prices.
B) the more intense the rivalry among firms.
Refer to Table 12-2. What is Margie's total revenue if she sells 250 pounds of apples? A) $250 B) $500 C) $750 D) There is not enough information in the table to determine Margie's total revenue.
C) $750
The government of a developing country plans to award two firms, Gigacom and Xenophone, the exclusive rights to share the market for high speed internet service. Gigacom and Xenophone can both provide the service either via television cable lines or via direct subscriber line (DSL). Suppose the government is considering a proposal to delay one firm's entry into the market on the grounds that it wants to prevent "harmful" competition. Figure 14-2 shows the decision tree for this game. Refer to Figure 14-2. If the government delays Gigacom's entry and Xenophone moves first, what is the likely outcome in the market? A) Both offer internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million. B) Xenophone offers DSL internet service and earns a profit of $5 million while Gigacom offer internet service via cable line and earns a profit of $6.5 million. C) Both offer DSL internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million. D) Xenophone offers internet service via cable line and earns a profit of $4 million while Gigacom offers DSL internet service and earns a profit of $4.5 million.
C) Both offer DSL internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million.
LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount. Refer to Table 14-1. Is there a dominant strategy for AirPorter and if so, what is it? A) Yes, AirPorter's dominant strategy is to collude with LimoZeenz. B) Yes, AirPorter should offer the mid-week discount. C) No, its outcome depends on what LimoZeenz does. D) Yes, AirPorter should not offer the mid-week discount.
C) No, its outcome depends on what LimoZeenz does.
Refer to Figure 13-11. What is the allocatively efficient output for the firm represented in the diagram? A) Q1 units B) Q2 units C) Q3 units D) Q4 units
C) Q3 units
Which of the following is not a characteristic of a perfectly competitive market structure? A) All firms sell identical products. B) There are no restrictions to entry by new firms. C) There are restrictions on exit of firms. D) There are a very large number of firms that are small compared to the market.
C) There are restrictions on exit of firms.
Which of the following is a characteristic of a monopoly? A) The product is not unique. B) It is easy for new firms to enter the market. C) There is only one seller in the market. D) The firm has no control over price.
C) There is only one seller in the market.
LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount. Refer to Table 14-1. Let's suppose the game starts with each firm offering the mid-week discount so that LimoZeenz earns a profit of $6,000 and AirPorter earns a profit of $12,000. Is there an incentive for any one firm to stop offering the mid-week discount? A) Yes, both firms have an incentive to stop offering the discount. B) Yes, AirPorter has an incentive to stop offering the discount, but LimoZeenz does not. C) Yes, LimoZeenz has an incentive to stop offering the discount, but AirPorter does not. D) No, neither firm has an incentive to stop offering the discount.
C) Yes, LimoZeenz has an incentive to stop offering the discount, but AirPorter does not.
LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount. Refer to Table 14-1. Is there a dominant strategy for LimoZeenz and if so, what is it? A) Yes, LimoZeenz dominant strategy is to collude with AirPorter. B) Yes, LimoZeenz should offer the mid-week discount. C) Yes, LimoZeenz should not offer the mid-week discount. D) No, its outcome depends on what AirPorter does.
C) Yes, LimoZeenz should not offer the mid-week discount.
A set of actions that a firm takes to achieve a goal, such as maximizing profits, is called A) a payoff matrix. B) game theory. C) a business strategy. D) the Porter's Competitive Forces plan.
C) a business strategy.
A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called A) an earnings table. B) a strategic matrix. C) a payoff matrix. D) a payoff table.
C) a payoff matrix.
One reason why the "fast-casual" restaurant market is competitive is that A) it is trendy and therefore is likely to have a customer following. B) demand for "fast -casual" food is very high. C) barriers to entry are low. D) consumption takes place in public.
C) barriers to entry are low.
In the long run, the entry of new firms in an industry A) harms consumers by forcing prices up above the level of average cost B) benefits consumers by forcing prices down to the level of total cost. C) benefits consumers by forcing prices down to the level of average cost. D) harms consumers by forcing prices up above the level of total cost
C) benefits consumers by forcing prices down to the level of average cost.
The long-run equilibrium in a monopolistically competitive market is similar to the long-run equilibrium in a perfectly competitive market in that in both markets, firms A) produce where price equals marginal revenue. B) produce at the minimum point of their average total cost curves. C) break even. D) produce where price equals marginal cost
C) break even.
What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone apps? A) few firms in the market B) identical products C) ease of entry D) blocked entry
C) ease of entry
Suppose James and Katherine are successful in establishing a profitable market for their "ghost restaurants" in what is a monopolistically competitive industry. In the long run, James and Katherine will most likely find it ________ to remain profitable as they face ________ competition in the "ghost restaurant" market. A) easier; less B) harder; less C) harder; more D) easier; more
C) harder; more
A perfectly competitive firm faces a demand curve that is A) vertical. B) perpendicular to the quantity axis. C) horizontal. D) perfectly inelastic.
C) horizontal.
Refer to Figure 12-1. If the firm is producing 500 units A) it is making a loss. B) it should increase its output to maximize profit. C) it should maintain its output to maximize profit. D) it is making a profit.
C) it should maintain its output to maximize profit.
Oligopolies exist and do not attract new rivals because A) of competition. B) the firms keep profits and prices so low that no rivals are attracted. C) of barriers to entry. D) there can be no product differentiation.
C) of barriers to entry.
When plasma television sets were first introduced prices were high and few firms were in the market. Later, economic profits attracted new firms and the price of plasma televisions fell. This example illustrates A) an industry with a low minimum efficient scale. B) a decreasing-cost industry. C) that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost. D) how fickle consumer demands are.
C) that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost.
For a perfectly competitive firm, average revenue is equal to A) marginal cost. B) total revenue. C) the market price. D) average fixed cost.
C) the market price.
The minimum point on the average variable cost curve is called A) the break-even point. B) the point of diminishing returns. C) the shutdown point. D) the loss-minimizing point.
C) the shutdown point.
In the long run, if price is less than average cost A) there is no incentive for the number of firms in the market to change. B) the market must be in long-run equilibrium. C) there is an incentive for firms to exit the market. D) there is profit incentive for firms to enter the market.
C) there is an incentive for firms to exit the market.
Monopolistically competitive firms can differentiate their products A) by producing where marginal revenue equals marginal cost. B) by producing at minimum efficient scale. C) through marketing. D) by equating price and average total cost.
C) through marketing.
Which of the following is not a reason why government officials are willing to impose entry barriers? A) to increase economic efficiency B) to raise revenue C) to promote an equitable distribution of income D) to encourage innovation which may improve the standard of living in the long run
C) to promote an equitable distribution of income
A perfectly competitive firm's short-run supply curve is A) perfectly elastic at the market price. B) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. C) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. D) horizontal at the minimum average total cost.
C) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve.
Refer to Figure 12-10. Total revenue at the profit-maximizing level of output is A) $1,200. B) $2,500. C) $4,800. D) $6,000.
D) $6,000.
LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount. Refer to Table 14-1. What is the Nash equilibrium in this game? A) There is no Nash equilibrium. B) Both LimoZeenz and AirPorter do not offer the discount. C) LimoZeenz offers the discount, but AirPorter does not. D) AirPorter offers the discount, but LimoZeenz does not.
D) AirPorter offers the discount, but LimoZeenz does not.
Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing price? A) P1 B) P2 C) P3 D) P4
D) P4
Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium? A) Price is equal to average revenue. B) The firm has excess capacity. C) Marginal revenue is equal to marginal cost. D) Price is equal to marginal cost.
D) Price is equal to marginal cost.
Refer to Figure 13-11. What is the productively efficient output for the firm represented in the diagram? A) Q1 units B) Q2 units C) Q3 units D) Q4 units
D) Q4 units
Refer to Figure 12-2. The firm breaks even at an output level of A) Q1 units. B) Q2 units. C) Q3 units. D) Q4 units.
D) Q4 units.
What is always true at the quantity where a firm's average total cost equals average revenue? A) The firm's revenue is maximized. B) Marginal cost equals marginal revenue. C) The firm's profit is maximized. D) The firm breaks even.
D) The firm breaks even.
In 2011, Red Robin announced that it would open 12 fast-casual restaurants, and in 2016 the company decided to abandon the fast-casual restaurant business. Which of the following reasons relating to the characteristics of monopolistic competition did the company give for getting out of the fast-casual restaurant business? A) Standardized pricing in the industry gave them no potential to earn a profit. B) There were very few buyers and sellers in the market. C) Barriers to entry were too high. D) The restaurants were not differentiated enough from their full-service restaurants.
D) The restaurants were not differentiated enough from their full-service restaurants.
Which of the following is a characteristic of an oligopolistic market structure? A) It is easy for new firms to enter the industry. B) Each firm need not react to the actions of rivals. C) Each firm sells a unique product. D) There are few dominant sellers.
D) There are few dominant sellers.
Refer to Figure 12-1. If the firm is producing 700 units, what is the amount of its profit or loss? A) loss of $280 B) loss equivalent to the area A C) profit equivalent to the area A D) There is insufficient information to answer the question.
D) There is insufficient information to answer the question.
What is a prisoner's dilemma? A) a game that involves no dominant strategies B) a game in which prisoners are stumped because they cannot communicate with each other C) a game in which players collude to outfox authorities D) a game in which players act in rational, self-interested ways that leave everyone worse off
D) a game in which players act in rational, self-interested ways that leave everyone worse off
Consider a U-shaped long-run average cost curve that has a minimum efficient scale at 6,000 units of output. In this case, this industry would be A) perfectly competitive if the market quantity demanded is 20,000 units. B) monopolistically competitive if the market quantity demanded is 12,000 units. C) an oligopoly if the four-firm concentration ratio is more than 10 percent. D) an oligopoly if the market quantity demanded is 18,000 units.
D) an oligopoly if the market quantity demanded is 18,000 units.
Firms use two marketing tools to differentiate their products. What are these two tools? A) lobbying and word of mouth B) consumer surveys and market experiments C) market research and demand estimation D) brand management and advertising
D) brand management and advertising
Perfect competition is characterized by all of the following except A) sellers are price takers. B) homogeneous products. C) a horizontal demand curve for individual sellers. D) heavy advertising by individual sellers.
D) heavy advertising by individual sellers.
The key characteristics of a monopolistically competitive market structure include A) barriers to entry are strong. B) sellers have no incentive to advertise their products. C) all sellers sell a homogeneous product. D) many small (relative to the total market) sellers acting independently.
D) many small (relative to the total market) sellers acting independently.
A monopolistically competitive firm faces a downward-sloping demand curve because A) there are few substitutes for its product. B) it is able to control price and quantity demanded. C) its market decisions are affected by the decisions of its rivals. D) of product differentiation.
D) of product differentiation.
Interdependence of firms is most common in A) monopolistically competitive industries. B) monopolistically competitive and oligopolistic industries. C) monopolistic industries. D) oligopolistic industries.
D) oligopolistic industries.
The reason that the "fast-casual" restaurant market is monopolistically competitive rather than perfectly competitive is because A) there are many firms in the market. B) barriers to entry are very low. C) entry into the market is blocked. D) products are differentiated.
D) products are differentiated.
The key characteristics of a monopolistically competitive market structure include A) few sellers. B) high barriers to entry. C) sellers acting to maximize revenue. D) sellers selling similar but differentiated products.
D) sellers selling similar but differentiated products.
In a graph that illustrates a perfectly competitive firm, the marginal revenue curve is A) a line that intersects the firm's average total cost curve from below at its lowest point. B) a diagonal line that lies below the firm's demand curve. C) a line that intersects the firm's demand curve from below at its lowest point. D) the same as the firm's demand curve.
D) the same as the firm's demand curve.
What is the profit-maximizing rule for a monopolistically competitive firm? A) to produce a quantity such that price equals marginal cost B) to produce a quantity that maximizes market share C) to produce a quantity that maximizes total revenue D) to produce a quantity such that marginal revenue equals marginal cost
D) to produce a quantity such that marginal revenue equals marginal cost
Pure monopoly refers to a single firm producing a product for which there are no close substitutes. a large number of firms producing differentiated product. any market in which the demand curve for the firm is downsloping. a standardized product being produced by many firms.
a single firm producing a product for which there are no close substitutes.
The Law of Diminishing Returns results in a total product curve that eventually increases at a decreasing rate. a total product curve that rises indefinitely. an eventually rising marginal product curve. an eventually falling marginal cost curve.
a total product curve that eventually increases at a decreasing rate.
Economists would describe the U.S. automobile industry as a pure monopoly. an oligopoly. purely competitive. monopolistically competitive.
an oligopoly.
Other things equal, in which of the following cases would economic profit be the greatest? an unregulated monopolist that is able to engage in price discrimination. a regulated monopolist charging a price equal to average total cost. a regulated monopolist charging a price equal to marginal cost. an unregulated, non-discriminating monopolist.
an unregulated monopolist that is able to engage in price discrimination.
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating marginal revenue and marginal cost. price and marginal revenue. price and average fixed cost. price and average total cost
marginal revenue and marginal cost.
We would expect the cross elasticity of demand between Papsi and Coke to be positive, indicating inferior goods. negative, indicating substitute goods. positive, indicating normal goods. positive, indicating substitute goods.
positive, indicating substitute goods.