Midterm 3

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.

A monopolistically competitive firm will produce its product as long as the marginal revenue is:

above marginal costs.

For a given supply of a product, the _____ the price elasticity of demand, the _____ the share of the total tax burden borne by consumers, and the _____ the share borne by sellers.

greater; smaller; greater

If a competitive firm in the short run finds that its average total costs exceed its price, the firm:

has an economic loss.

Monopolistic competition is like perfect competition in that they both:

have numerous competitors.

For a perfectly competitive firm, if MR > AVC and MR > MC, then the firm should:

increase production.

When consumers are loyal to a particular product and the product's price increases, the producer's total revenue:

increases

What are the two types of advertising?

informational and persuasive

Total utility:

is the total satisfaction derived from the consumption of given quantity of a good.

For a perfectly competitive firm, total revenue is equal to:

marginal revenue × quantity.

Which condition will NOT contribute to a cartel's stability?

nonprice discounts

The demand curve for an individual perfectly competitive firm is:

perfectly elastic.

Trade based on comparative advantage leads to a result that is a:

positive-sum game.

All players within a game maximizing their expected outcome given the information they have is called a:

Nash equilibrium.

Assume that the ruby market shares of six different countries are: 30%, 25%, 20%, 15%, 6%, and 5%. However, the quality of the rubies and the mining costs vary across the six countries. Which statement accurately describes the likelihood of success for a cartel among the ruby mining companies in the six countries?

The likelihood of success is low because of uneven market shares, product quality, and costs of production.

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.

Players making decisions that improve their chances of achieving a defined goal, is called:

rational decision making.

Suppose that Joe sells fish in a perfectly competitive market. He can sell each fish for $5. Today he brought twenty fish to the fish market. If his total variable cost is $110 and his total fixed cost is $50, he:

should have stayed home.

Consider that the corn industry is a perfectly competitive industry with constant returns to scale. The price per bushel is $2. If the long-run, minimum ATC is $1.50 per bushel, it should follow that (ceteris paribus):

the long-run price will be $1.50 per bushel.

The fundamental constraint on a monopoly firm's exercise of market power is:

the market demand curve.

In the short run, the perfectly competitive firm will continue to produce even though it might experience an economic loss if:

the market price exceeds the average variable cost.

Marginal cost is equal to the change in:

variable cost divided by the change in total output.

How large is deadweight loss in equilibrium?

zero