Micro Final

Tucker Corporation sells its product for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:

$25.00 or less per hour.

An apple orchard currently hires 10 workers. The owner estimates that hiring an additional worker would increase apple yields by 20 bushels per day. The price of apples is $15 per bushel. The owner should hire the extra worker if the wage rate is no greater than:

$300 per day.

Currently, union membership in the United States is about:

15 percent.

Clayton Act was passed in

1914

Deregulation, especially for the transportation and telecommunication industries, was the trend in the United States during the:

1980s

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is:

2.99

The landmark antitrust case which established that size alone can be an antitrust violation is the:

ALCOA case

The per se rule was introduced in the:

Alcoa Case

Which of the following is a game theory strategy for oligopolists to avoid a low-price outcome?

All of these (tit-for-tat, price leadership, cartel.)

The rule of reason was applied in the:

All of these choices (Standard Oil Case, U.S. Steel case, American Tobacco Trust Case.)

Assume costs are identical for the two firms in Exhibit 10-7. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:

Camel charging the high price and Marlboro charging the high price.

If Microsoft merges with retail stores and computer makers, such that competition is substantially reduced, it would be in violation of the:

Celler-Kefauver Act.

Which of the following U.S. antitrust laws prohibits mergers through the acquisition of a firm's assets if the merger would lessen competition?

Celler-Kefauver Act.

Which of the following is often called the "Antimerger Act"?

Celler-Kefauver Act.

Which two pieces of legislation were passed in 1914?

Clayton Act and Federal Trade Commission Act

A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:

Decrease the factor price to hire more workers

We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':

Demand curves downard

Which of the following is not a type of merger?

Diversified merger.

Which of the following is true under natural monopoly?

Economies of scale exist.

If the price of a product falls below average total cost in the short run, the firm:

Experience a loss

Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?

Extra profit is enough to cover all of the variable costs of your next two trips.

A firm's demand curve for labor coincides with the marginal factor cost of labor curve. - T/F

False

A merger of firms that compete in the same market is classified as a conglomerate merger. - T/F

False

Easy entry and exit cause oligopoly profits to be zero in the long run. - T/F

False

In a competitive labor market, marginal revenue product equals marginal product times the wage rate. - T/F

False

Marginal cost is always rising. - T/F

False

Monopsony means a product market with single buyer. - T/F

False

Pure economic profit must be at a maximum for a monopolist who has a level of output in which total revenue is at a maximum. - T/F

False

The Utah Pie case is an example of a violation of the Celler-Kefauver Act. - T/F

False

The long-run supply curve for a competitive industry always has a positive slope. - T/F

False

The primary purpose of the Celler-Kefauver Act is to prevent unfair and deceptive business practices. - T/F

False

Which of the following is not a characteristic of the monopolistic competition market structure?

Few sellers.

Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium?

Free entry to reduce short-run profits, or free exit to reduce short-run losses.

What should a profit maximizing monopolist do if she is currently producing where MC < MR?

Increase output until MC = MR.

Under the Clayton Act, which of the following was illegal, even if it was not shown to lessen competition substantially?

Interlock Directorates

A monopolist faces a downward sloping demand curve that is equal to which of the following?

Its marginal cost curve.

The most profitable output level can be found by looking at which two curves?

MR and MC.

A competitive firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:

Marginal Cost

Monopolists are criticized because they are inefficient. What is meant by this statement?

Monopolists usually don't produce at the minimum of the ATC.

The demand for the product of a competitive price-taker firm is:

Perfectly Elastic

Under long-run perfect competition, which of the following are the same (equal) at all levels of output?

Price and marginal revenue.

Which of the following is true for a firm operating under perfect competition, monopolistic competition, and monopoly?

Profits are maximized when marginal cost equals marginal revenue.

Which of the following is the best example of a monopolistically competitive market?

Retail sales.

Competitive firms X, Y, and Z meet in secret and agree to charge the same price. The U.S. Justice Department discovers this agreement and would most likely file charges under the:

Sherman Antitrust Act.

The first major piece of antitrust legislation was:

Sherman Antitrust Act.

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Short-run profits are maximized when marginal cost equals marginal revenue.

Which of the following countries has the largest union membership measured as the percentage of civilian employees in unions?

Sweden

Which of the following is an amendment to the Clayton Act that strengthened it against price discrimination?

The Robinson-Patman Act.

According to the economic theory of labor markets, if unions are successful in raising wages, with no accompanying increase in labor productivity, then which of the following is true?

The quantity of labor demanded by profit-maximizing firms will decline.

Which of the following correctly explains why sellers in a perfectly competitive market are price takers?

There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process.

A decrease in the price of the output will decrease the firm's demand for labor. - T/F

True

A major cartel problem is that member firms cheat by attempting to steal customers from one another. - T/F

True

A monopolist always earns an economic profit. - T/F

True

A monopolist maximizes total revenue. - T/F

True

A monopsonist can set the wage rate and hire any desired number of workers at that wage. - T/F

True

A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost. - T/F

True

According to critics, the Utah Pie case represents a failure by the Supreme Court to distinguish between injury to competition that benefits consumers and injury to a specific competitor. - T/F

True

If a perfectly competitive firm charges more than the market price, then it loses all of its customers. - T/F

True

Imperfect information is a rationale for regulation. - T/F

True

In a monopolistically competitive market like retail trade, firms can easily enter and exit the market. - T/F

True

In the short run, the profit maximizing (or minimizing) quantity of output for any firm to produce exists at that output level at which marginal revenue equals marginal cost. - T/F

True

The Celler-Kefauver Act was passed because the Clayton Act had not been effective against mergers. - T/F

True

The Federal Trade Commission is charged with protecting consumers from false and misleading advertising. - T/F

True

The Robinson-Patman Act strengthened the merger provisions of the Clayton Act. - T/F

True

The Sherman Antitrust Act was not specific enough to eliminate monopolies in the United States. - T/F

True

The per se rule was applied in the Alcoa case. - T/F

True

Union membership as a percentage of the civilian labor force is lower in the United States than in Germany or Japan. - T/F

True

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

Yes (even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.)

The act of buying a commodity in one market at a lower price and selling it in another market at a higher price is known as:

arbitrage.

A profit-maximizing firm will continue to expand output:

as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit.

The market price for wallets is $20. Your technology is such that at your most efficient production point, the average total cost of producing a wallet is $2.50. Your manager runs into your office and shouts, "Boss!!! Average costs are rising!! Average costs are rising!!" To make a profit-maximizing decision, you should:

ask the manager about the marginal cost.

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

average variable cost curve.

Suppose a monopolist and a perfectly competitive firm have the same cost curves. The monopolistic firm would:

charge a lower price than the perfectly competitive firm.

If, at the point where MR = MC, the firm incurs losses, in the short run the firm should:

continue at its current output if P > AVC.

A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is:

derived demand.

The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:

economic profits are $20,000.

The entry of new firms into a monopolistic competitive industry will shift the:

existing firm's demand curve to the left.

In a competitive labor market a firm will continue to employ workers for as long as an additional worker's marginal revenue product is below the wage rate. - T/F

false

A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as:

featherbedding

Which of the following is true about long-run equilibrium in a monopolistically competitive market?

firms earn zero economic profit because price equals long-run average cost, but the equilibrium is not allocatively efficient because price exceeds the marginal cost of the last unit produced

If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:

firms in the industry earn zero economic profits.

Assume the short-run average total cost for a perfectly competitive industry increases as the output of the industry expands. In the long run, the industry supply curve will:

have a positive slope.

Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a:

higher price and sell more.

A merger between firms that compete in the same market is called a:

horizontal merger.

The monopolist's demand curve is:

identical to the market demand curve.

Under both perfect competition and monopoly, a firm:

is a price maker.

In the short run, a firm should shut down its operation if:

its losses are greater than TFC at the MR=MC Point

In a constant cost industry:

long run supply curve will be perfectly elastic

A perfectly competitive firm maximizes profits or minimizes losses in the short-run by producing at the output level at which:

marginal revenue equals marginal cost.

At the point where the marginal revenue equals zero for a monopolist facing a straight-line demand curve, total revenue is:

maximum.

The Sherman Antitrust Act of 1890 is the federal antitrust law that prohibits:

monopolization and conspiracies to restrain trade.

When oligopolists take into account their competitors' behavior, this situation is called:

mutual interdependence.

One reason the supply of carpenters is greater than the supply of physicians is because: ,

of differences in human capital.

Mutual interdependence applies to actions of:

oligopolists.

Under a rule of reason approach, an act is illegal:

only if it is shown to result in an anticompetitive outcome.

In order to obtain a conviction for price fixing under the Sherman Antitrust Act, the government needs to prove:

only that an attempt to fix prices was made.

Because a competitive firm is a price taker, it faces a demand curve that is:

perfectly elastic.

The practice of firms temporarily reducing prices in order to eliminate competition is called:

predatory pricing.

When the price of a good is a constant, the marginal revenue per unit of output is the same as:

price.

If a firm decreases output when MR < MC, then:

profit will increase

An exclusive contract:

requires a buyer not to purchase any requirements from the competitor of a specified supplier.

Suppose a previously competitive labor market turns into a monopsony. The labor supply curve faced by the new monopsonist is:

the market supply curve of labor

A monopoly is:

the only seller of a good for which there are no good substitutes in a market with high barriers to entry.

Perfect competition and monopolistic competition are similar because under both market structures,

there are zero economic profits in the long run.

Firms that place their assets in the custody of a board of trustees is called a(n):

trust. (or trust. combination. cartel. *all of these)

A manufacturer will sell its product only to retailers who agree to buy its brand. This is an example of:

tying contract

The optimal hiring rule is to employ labor up to the point where:

wage = MRP

In the long-run, surviving firms in monopolistic competition earn:

zero pure economic profits.