Micro - Unit 2

Price discrimination by a monopolist leads to the firm earning higher profits but it also delivers benefits to

consumers, because prices are lowered to potential consumers who otherwise might not have been able to buy the good

Which statement is TRUE about public and private-employee unions?

Only private-employee unions can call strikes, while public-employee unions tend to contribute less for their health insurance premiums

The National Football League (NFL) achieves market power through its ability to

control inputs

The industrial structure of cartels is an example of a(n):

cooperative game

Which characteristic does monopolistic competition NOT have in common with perfect competition?

Products of individual firms are different

If Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then:

Rosco's demand curve will shift to the right

If Tamara is given a $3-per-hour pay increase, and in response, she decides to work more hours, then

Tamara's work hours are represented on the upward-sloping portion of her labor supply curve

Which of these is NOT a condition necessary for price discrimination?

The product must be a durable good

Gary Becker's theory of economic discrimination argues that

employers who discriminate against women will lose profit opportunities

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is

an oligopoly

A Nash equilibrium:

assumes that each player chooses his or her best strategy

If the public utility commission allows a water company to earn a normal profit, then it is enforcing a(n)

average cost pricing rule

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand until each firm earns a normal profit.

exit; increasing

A Nash equilibrium always yields the best outcome for all participants in a game

false

Prisoner's dilemma outcomes are uncommon

false

Which action can help increase the stability of a cartel?

increase government protection

If a cartel member is considering cheating in order to earn profits, it should:

increase the quantity it sells at the quota price

Which of the following products is likely to be the MOST differentiated?

garments sold to a retail customer

Three barriers to entry that prevent firms from entering a market and competing in the market are control over inputs, economies of scale, and

government protection through patents and copyrights

According to the segmented labor market view, unions restrict the labor supply in order to increase wages. As labor migrates to non-union markets, non-union wage rates fall. Which of these actions would reduce the incentive for firms to substitute non-union workers for union members?

increasing the minimum wage in the non-union markets

If wages increase at a 5% rate and the quantity demanded of labor decreases by 10%, then the elasticity of demand for labor is

2

If an industry is made up of five firms with market shares of 25%, 20%, 20%, 20%, and 15%, respectively, its Herfindahl-Hirschman Index is

2,050

A monopolist has four distinct groups of customers: group A has an elasticity of demand of 0.2, group B has an elasticity of demand of 0.8, group C has an elasticity of demand of 1.0, and group D has an elasticity of demand of 2.0. The group paying the highest price for the product will be group

A

At movie theaters, lower prices are charged for matinees than for evening shows of the same film. The customers attending the matinees have

higher elasticities of demand than customers attending the evening shows

What types of industries have been outsourced from the United States because of international trade?

industries that require a large amount of labor

In recent years, the United States has produced a growing share of

intangible services

A deadweight loss

is the same as welfare loss

Derived demand suggests that

labor demand is derived from demand for the product it produces

One of the reasons that competition may fail to eliminate gender wage discrimination is

lack of mobility

To maximize profits, the monopolist produces at a level of output in which

marginal revenue equals marginal cost, and then the monopolist charges the highest price for that output indicated by the demand curve

Game theory is the study of how

people make decisions when each is acting in his or her own best interest, and have strategies that may yield different outcomes

A monopoly harms consumers because

prices are higher and output is lower than if the industry was perfectly competitive

Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then

profits will increase

When monopolies waste resources attempting to prevent other firms from competing with them, it is referred to as

rent seeking

Some prisoner's dilemma outcomes can be resolved when the players engage in

repeated games

Suppose a water utility company charges a residential customer $1.50 per 1,000 gallons for the first 30,000 gallons of water used and $1.00 per 1,000 gallons for any amounts used in excess of 30,000 gallons of water. The water utility is practicing

second-degree price discrimination

When a business offers its customers bulk discounts, they are practicing

second-degree price discrimination

When players in a game select a dominant strategy, they are

selecting the best strategy regardless of the strategies their opponents choose

Market power enables businesses to

set prices and reap profits

If the price of diesel fuel increases, the MRP curve for truck drivers will

shift to the left

A right-to-work law is a

state law making a union shop illegal

When the individual labor supply curve is positively sloped, the _____ effect dominates and higher wages lead to _____ hours worked

substitution; more

In an oligopoly, all the firms:

take their competitors into account when they make pricing decisions

The demand curve for a monopolist is

the industry demand curve

In a competitive labor market, if a new manufacturing plant seeks to build its labor force, it is assumed that

the quantity of workers available is greater than the quantity of workers that are required

While prisoner's dilemma outcomes may produce worse results for competing companies than other alternate outcomes, such dilemmas can benefit

third parties who do business with the competing companies

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n):

tit-for-tat strategy

Game theory can be applied in business, political science, military planning, and sports

true

The Federal Trade Commission Act prohibits

unfair competitive practices and deceptive acts

Prisoner's Dilemma

when a Nash equilibrium outcome results in a payoff for all players that is worse than another outcome

The act that makes it unlawful to refuse to hire a person based on their race, color, religion, sex, or national origin is the

Civil Rights Act of 1964

_____ in an industry can be so large that demand is able to support only one firm

Economies of scale

(T/F) All monopolies earn profits

False

(T/F) A profit-maximizing monopolist can charge any price to consumers

Fasle

An unregulated natural monopolist would produce to the point at which

MR = MC

(T/F) Market power reaches its maximum potential in a monopoly

True

Which statement about the relationship between a firm's demand curve under perfect competition and a monopoly is TRUE?

Under perfect competition, the demand curve is perfectly elastic; under a monopoly, the demand curve has elastic, unit-elastic, and inelastic portions

Assume that Coca-Cola has a market share of 40% and Pepsi has a market share of 30%. If Pepsi and Coca-Cola attempt to merge, will the Federal Trade Commission challenge that attempt in court?

Yes; the industry is concentrated

Which game does NOT describe a Prisoner's Dilemma outcome?

a game of chicken in which one player backs down while the other player does not

Barriers to entry into an industry

a patent. governmental restrictions. economies of scale. NOT relatively low marginal tax rates.

In many instances, competitive companies could agree with each other on key strategic items, and produce higher profits than what competition allows. Reasons this is not done include the _____, and the illegality of collusion

absence of trust between companies

A Nash equilibrium describes an outcome in which

all players in a game maximize their expected payoffs given the information they have

An example of x-inefficiency is

an executive, at the corporation's expense, hiring a limousine to drive him one block whenever it is raining

Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?

differentiated products

Robotic manufacturing has made labor demand for factory workers

more elastic

Factory jobs are no longer plentiful in the United States. This is due to all of these EXCEPT

more foreign direct investment into the United States

What percentage of families with small children are two-income households?

more than 50%