Test: Chapters 25, 26, 27, 28

The table above depicts the cost and demand structure a natural monopoly faces. If regulators required the firm to practice marginal cost​ pricing, the quantity produced would be ______ and the price charged would be ​$______. What is the​ firm's profit under this regulatory​ framework? ​$______.

5 $75 $-31

Which of the following is true regarding the view of this type of business practice (versioning) by U.S. antitrust​ authorities? A. The services are viewed as separate and unique. B. This is not a form of price discrimination. C. The practice increases overall consumer satisfaction. D. All of the above are true

D. All of the above are true

For the producer of an information​ product, marginal cost is A. equal to average variable cost. B. less than average total cost. C. constant. D. All of the above.

D. All of the above.

Market solutions to the lemons problem entail A. product certification. B. product warranties. C. industry standards. D. All of the above.

D. All of the above.

Oligopolies may emerge in an industry because of A. economies of scale. B. mergers. C. barriers to entry. D. All of the above.

D. All of the above.

The effectiveness of regulation is mitigated when A. individuals reduce their vigilance toward safety when additional safety regulations are implemented. B. individuals generate a​ "feedback effect." C. firms engage in creative response. D. All of the above.

D. All of the above.

The government regulates monopolies because A. monopolies produce less than the socially desirable level of output. B. monopolies price their output above the marginal cost of production. C. monopolies generate inefficiency by creating a misallocation of resources. D. All of the above.

D. All of the above.

To address asymmetric information​ problems, governments may A. establish a regulatory apparatus to oversee all aspects of an​ industry's operations. B. enforce licensing requirements designed to provide minimum product standards. C. offer legal remedies to consumers. D. All of the above.

D. All of the above.

Which of the following will not shift the supply of​ labor? A. Changes in working conditions. B. Job flexibility. C. A large increase in the relative wages paid in a related industry. D. An increase in the wage rate

D. An increase in the wage rate

Consider a monopolistically competitive firm with the revenue and cost conditions depicted in the figure on the right. Which of the following statements best​ describe(s) the​ firm's behavior that it is charging a price greater than marginal​ cost? I. The firm is behaving anticompetitively and taking advantage of consumers. II. The firm is charging a price over and above the minimum average total cost to cover for the cost of product differentiation. III. Consumers willingly accept the increased production costs in return for more choice and variety of output. A. Only I. B. Only II. C. Only III. D. Both II and III.

D. Both II and III.

Which of the following characteristics applies to a monopolistically competitive​ industry? A. There are very few firms in the industry. B. Collusion is common. C. Firms in the industry each control a large share of the market. D. Firms act independently of each other.

D. Firms act independently of each other

For a​ monopsonist, the quantity of labor hired is determined by the intersection of the ​ ________ curves and the wage rate is determined by the​ ________ curve. A. labor supply and labor​ demand; MRP B. MRP and labor​ supply; labor demand C. MFC and labor​ supply; MRP D. MRP and​ MFC; labor supply

D. MRP and​ MFC; labor supply

When viewing unions as monopoly sellers of a​ service, the goals the unions may pursue include all of the following except A. maximizing profits for the employers of union members. B. maximizing gross income for its members. C. employment for all union members. D. maximizing wage rates for certain workers.

A. maximizing profits for the employers of union members.

When the FDA​ re-approved older medications as​ "new" drugs, firms were able to sell the drugs at​ __________ prices. A. monopoly B. marginal cost C. government-regulated D. perfectly competitive

A. monopoly

Protecting consumers from problems arising from asymmetric information is a rationale for A. the regulation of​ non-monopolistic industries. B. allowing corporate mergers. C. the regulation of natural monopolies. D. government ownership of the means of production.

A. the regulation of​ non-monopolistic industries

If unions are successful in establishing a wage rate above the competitive market equilibrium​ wage, then A. there will be an excess of labor supplied. B. there will be an excess demand for labor. C. employment of union members will increase. D. the union has a goal of employing all of its workers.

A. there will be an excess of labor supplied.

A game in which the players will not negotiate is a A. ​non-cooperative game. B. zero-sum game. C. cooperative game. D. negative-sum game.

A. ​non-cooperative game.

The amount of unemployment equals the quantity of labor at point ______ minus the quantity of labor at point _____ at a weekly wage rate tha is _______ than $600.

B A higher

The table above gives some data from the production function of a firm that is a perfect competitor in both the product and labor markets. The wage rate in the industry is ​$300 and the price of the good produced is ​$15. The​ profit-maximizing quantity of labor to hire is A. 102 workers. B. 103 workers. C. 104 workers. D. 105 workers.

B. 103 workers.

A purely competitive firm faces the marginal product schedule shown in the table below. The price of the product is ​$25 and the wage rate is ​$200 per worker. The firm should hire A. 12 workers B. 14 workers C. 15 workers D. 11 workers

B. 14 workers

Which of the following goods would most likely be advertised using largely informative ​advertising? A. A hair styling salon. B. A car. C. A legal firm. D. A fast food restaurant.

B. A car.

Critics argue that monopolistically competitive markets are wasteful because A. due to large economies of​ scale, there should only be one firm in the market. B. price exceeds marginal cost and minimum average total cost. C. there are too few firms in the industry. D. consumers do not benefit from product differentiation.

B. price exceeds marginal cost and minimum average total cost.

The marginal product of labor represents the extra output attributed to employing additional workers. A. False B. True

B. True

The percentage of sales contiributed by the leading four firms in an industry is known as the​ four-firm concentration ratio. A. False B. True

B. True

When network effects are important then an industry can experience A. a vertical merger. B. positive market feedback. C. a​ zero-sum game. D. price-leadership.

B. positive market feedback.

All of the following conditions will make it more likely that firms will be able to enforce a cartel agreement except A. there is little fluctuation in prices. B. prices are not easily observed. C. the firms sell nearly homogeneous products. D. there are a small number of firms in the industry.

B. prices are not easily observed.

Which of the following regulated industries is most likely to be considered a natural​ monoploy? A. communication B. public utilities C. insurance D. banking

B. public utilities

Marginal revenue product is calculated as A. (change in total​ product) /​ (change in labor​ input). B. ​(marginal product) × ​(marginal revenue). C. (marginal revenue) × ​(marginal cost). D. (change in total​ cost) /​ (change in amount of resource​ used).

B. ​(marginal product) × ​(marginal revenue).

If whatever one player in a game wins comes at the expense of the other​ player(s) in the​ game, this is known as a A. reactionary game. B. ​zero-sum game. C. positive-sum game. D. negative-sum game.

B. ​zero-sum game.

A perfectly competitive firm faces the marginal product schedule shown above. The price of the product is ​$20 and the wage rate is​ $320 per worker. The marginal revenue product of the 14th worker is A. $20. B. $320. C. $120. D. $200.

C. $120.

What is the appropriate type of​ two-sided market where WSJ.com operates as a platform​ firm? A. Transaction− based market. B. Shared−input market. C. Audience−making market. D. Matchmaking market

C. Audience−making market.

Which of the following is a provision of the Clayton Act​? A. Forbids restraint of trade and attempts to monopolize markets. B. Outlaws predatory pricing and deceptive business practices. C. Forbids price discrimination that substantially reduces competition. D. Forbids specific practices that restrain trade, exclusive dealerships, and some corporate stock ownership.

D. Forbids specific practices that restrain trade, exclusive dealerships, and some corporate stock ownership.

In order to raise wages above the market level for its​ workers, a union must A. have monopsony power. B. recruit better workers. C. limit the supply of labor in an industry. D.have the support of the government.

C. limit the supply of labor in an industry.

In the graph to the​ right, the marginal factor cost line of a monopsonist is A. line A. B. line B. C. line C. D. not pictured. n the graph to the​ right, the monopsonist will A. hire 15 workers and pay wage rate​ $45. B. hire 25 workers and pay wage rate​ $25. C. hire 25 workers and pay wage rate​ $12.50. D. hire 30 workers and pay wage rate​ $15.

C. line C. C. hire 25 workers and pay wage rate​ $12.50.

A game in which players as a group lose during the process of the game is called a A. positive-sum game. B. zero-sum game. C. negative-sum game. D. noncooperative game.

C. negative-sum game

Which of the following products is subject to network​ effects? A. Online DVD rental services. B. Broadcast T.V. services. C. Email services. D. Instant messaging services.

D. Instant messaging services.

Which of the following is a characteristic of a monopolistically competitive​ market? A. A single seller. B. Barriers to entry. C. Identical products. D. Long−run profits equal to zero.

D. Long−run profits equal to zero.

In a perfectly competitive labor​ market, firms are price takers. A. False B. True

B. True

Suppose that all firms in an industry collude to reduce​ output, which raises the product price to $6.37 and requires the perfectly competitive firm in the figure to the right to reduce its output from 500 units to 300 units. If this typical firm has agreed to participate in the proposed​ cartel, what is the total dollar amount of its economic incentive to cheat on the cartel​ agreement, assuming that all other firms continue to abide by the​ agreement? Explain your reasoning. If ATC​ = $5.73 at the reduced output of 300 units, then this typical​ firm's economic incentive to participate in the cartel is $_____ If ATC​ = $5.16 at the higher output of 600 units, then this typical​ firm's economic profits equal $______ if it regards the collusive cartel price as its available marginal​ revenue, and its economic incentive to cheat on the cartel agreement is ​$_____

$192 $726 $534

Suppose labor is available to a firm at a cost of ​$15 per hour. Also suppose that employing another hour of labor adds 2 units to output and that any amount of output can be sold for ​$10 per unit. An additional hour of labor would add ​$______in additional revenue to the firm. ​ This firm should hire _______ labor. Now suppose that the last hour of labor hired by the firm has a marginal product of 1 units of output. The marginal revenue product of labor is now ​$_______ In this​ case, assuming the wage rate is still ​$15 per​ hour, the firm can increase its profits by hiring _______ labor.

$20 more $10 less

Consider the table above and graph to the right. Suppose that after​ long-run adjustments take place in the​ used-book market, the business ends up producing 4 units of output. In the long​ run, the market price will be ​$______ and economic profits will be ​$______

$3.28 (ATC for that unit) $0.00

A firm hires labor in a perfectly competitive labor market. Its current​ profit-maximizing hourly output is 100​ units, which the firm sells at a price of ​$10 per unit. The marginal physical product of the last unit of labor employed is 5 units per hour. The firm pays each worker an hourly wage of ​$20. a. What marginal revenue does the firm earn from sale of the output produced by the last worker​ employed? ​$______ b. Does this firm sell its output in a perfectly competitive​ market? _______

$4 No

onsider the figure to the right. Suppose that the monopolist is contemplating hiring 14 units of​ labor, which it knows would cause the marginal product to decline to 142 units of output per unit of labor. The product price would also decrease to ​$4.40 per​ unit, and the​ firm's marginal revenue would decline to ​$3.20 per unit. What would be the​ firm's marginal revenue product if it hires the 14th unit of​ labor? If the firm hires the 14th unit of​ labor, the marginal revenue product of that unit of labor would be ​$______ per unit of labor.

$454.40 (mr x mp)

Pleasant Island has two natural gas​ wells, one owned by Mack and the other owned by Tom. Each well has a valve that controls the rate of flow of​ gas, and the marginal cost of producing gas is zero. The table below gives the demand schedule for gas on this island. If Mack and Tom form a cartel and maximize their joint​ profits, the price of gas on Pleasant Island will be ​$____ per unit. If Mack and Tom are forced to sell at the perfectly competitive​ price, the price of gas on Pleasant Island will be ​$____ per unit

$5 (TR is highest) $0

A firm that sells​ e-books - books in digital form downloadable from the Internet​ - sells all​ e-books relating to​ do-it-yourself topics​ (home plumbing,​ gardening, and so​ on) at the same price. At​ present, the company can earn a maximum annual profit of ​$35,000 when it sells 35,000 copies within a​ year's time. The firm incurs a 35​-cent expense each time a consumer downloads a​ copy, but the company must spend ​$140,000 per year developing new editions of the​ e-books. The company has determined that it would earn zero economic profits if price were equal to average total​ cost, and in this case it could sell 40,000 copies. Under marginal cost​ pricing, it could sell 120,000 copies. In the short​ run, to the nearest​ cent, what is the​ profit-maximizing price of​ e-books relating to​ do-it-yourself topics? ​$_____ At the​ profit-maximizing quantity, to the nearest​ cent, what is the average total cost of producing​ e-books? ​$______.

$5.35 $4.35

The manager of a Pittsburgh shop wishes to sell on eBay a used telescope that is in good condition. The manager knows that prospective buyers perceive a​ 50-50 chance that the telescope is in good condition. If it​ is, buyers are willing to pay ​$860​, but if it is in poor​ condition, they will pay only ​$220. What is the average amount a buyer will be willing to​ pay? Is there a lemons​ problem? Explain. The average amount that a prospective buyer will be willing to pay is ​$_____ Since the value of a used telescope that is in A. good condition exceeds the average amount that a prospective buyer will be willing to​ pay, there is not a lemons problem because only people with telescopes in poor condition will be willing to try to sell them on eBay. B. poor condition is less than the average amount that a prospective buyer will be willing to​ pay, there is a lemons problem because only people with telescopes in good condition will be willing to try to sell them on eBay. C. good condition exceeds the average amount that a prospective buyer will be willing to​ pay, there is a lemons problem because only people with telescopes in poor condition will be willing to try to sell them on eBay. D. poor condition is less than the average amount that a prospective buyer will be willing to​ pay, there is not a lemons problem because only people with telescopes in good condition will be willing to try to sell them on eBay.

$540 C. good condition exceeds the average amount that a prospective buyer will be willing to​ pay, there is a lemons problem because only people with telescopes in poor condition will be willing to try to sell them on eBay.

A​ profit-maximizing monopolist hires workers in a perfectly competitive labor market. Employing the last worker increased the​ firm's total weekly output from 110 units to 111 units and caused the​ firm's weekly revenues to rise from ​$25,250 to ​$25,875. What is the current prevailing weekly wage rate in the labor​ market? ​$______

$625

In the figure to the​ right, suppose that We is a wage rate of ​$31 per hour and Wu is a wage rate of ​$41 per hour. In​ addition, Qd is 11,000 workers per​ hour, Qe is 17,000 workers per​ hour, and Qs is 20,000 workers per hour. How much more or less do the firms in this industry​ spend, in​ total, on the labor employed each hour as a consequence of establishment of the union wage Wu above the equilibrium wage We​? Firms spend a total of ​$_____ per hour _____ on unionized labor.

$76,000 less (41 x 11,000 = 451,000 31 x 17,000 = 527,000 527,000 (ununionized) - 451,000 (unionized) = 76,000)

Consider the figure to the right. The quantity Q1 is 1,900 units, the price P1 is $6 per​ unit, and the vertical distance to point C is $12 per unit. What is the dollar amount of the losses earned by this natural monopolist when its price is equal to its marginal cost of producing Q1 units? If the average cost AC1 is $10 per unit when Q1 units are​ produced, then the dollar amount of the losses earned by this natural monopolist when its price is equal to its marginal cost of producing Q1 units is $_____

$7600

Consider two strategically dependent firms in an oligopolistic​ industry, Firm A and Firm B. Firm A knows that if it offers extended warranties on its products but Firm B does​ not, it will earn​ $6 million in​ profits, and Firm B will earn​ $2 million.​ Likewise, Firm B knows that if it offers extended warranties but Firm A does​ not, it will earn​ $6 million in​ profits, and Firm A will earn​ $2 million. The two firms know that if they both offer extended warranties on their​ products, each will earn​ $3 million in profits.​ Finally, the two firms know that if neither offers extended​ warranties, each will earn​ $5 million in profits. Using the payoff matrix shown at​ right, fill in the values below for the situation faced by these two firms. Point 1 -- Value ____ Point 2 -- Value ___ Point 3 -- Value ____ Point 4 -- Value ____ Point 5 -- Value ____ Point 6 -- Value ____ Point 7 -- Value ____ Point 8 -- Value ____ What is the dominant strategy in this​ situation? A. Both firms offer extended warranties. B. Neither firm offers extended warranties. C. Firm A offers extended warranties but Firm B does not. D. Firm B offers extended warranties but Firm A does not. A dominant strategy A. always yields the unique best action for the decision maker no matter what action the other firms undertake. B. never results in the highest profits for both firms. C. cannot be evaluated. D. always results in the highest profits for both firms.

1 - 3 2 - 3 3 - 2 4 - 6 5 - 5 6 - 5 7 - 6 8 - 2 A. Both firms offer extended warranties. A. always yields the unique best action for the decision maker no matter what action the other firms undertake.

A single firm is the only employer in a labor market. The marginal revenue​ product, labor​ supply, and marginal factor cost curves that it faces are displayed in the diagram at the right. Use this information to answer the following questions. a. How many units of labor will this firm employ in order to maximize its economic​ profits? ______ units b. What hourly wage rate will this firm pay its​ workers? ​$______ c. What is the total amount of wage payments that this firm will make to its workers each​ hour? ​$______

1000 $10 $10000

Suppose the market wage it faces is ​$50. How many workers will the​ profit-maximizing firm​ hire? ______ workers

13

Suppose that for the​ firm, the goods market is perfectly competitive. The market price of the product is ​$4 at each quantity supplied by the firm. What is the amount of labor that this​ profit-maximizing firm will​ hire? _____ workers. What wage rate will this​ profit-maximizing firm​ pay? ​$______

13 workers $8

Suppose that the firm in the figure to the right is contemplating using 17 units of​ labor, and it knows that doing so would cause its total product to increase from 357 to 374 units. What would be the resulting marginal product of the 17th unit of labor​ employed? The marginal product of the 17th unit of labor employed would be _____ units of output per unit of labor

17

Consider the figure to the right. Suppose that we are willing to accept both federal regulatory spending per year and the annual number of Federal Register pages as measures of the extent of government regulation of businesses. Based on these​ measures, does any period unambiguously appear to stand out as one in which the extent of regulation declined​? Both measures unambiguously fell between the early and middle ______​, so according to these two​ measures, this was a period in which the extent of business regulation declined.

1980s

If this firm were allowed to operate as a​ monopolist, the quantity produced would be ____ and the price charged would be $_______ The amount of monopoly profit would be $_____

2 $90 $3

Consider the figure to the right. Suppose that during the relevant time​ period, the​ firm's marginal and average variable costs remain unchanged. If the firm had to set the price of its product equal to marginal​ cost, what would be the amount of its economic profit or​ loss, and how would this amount be related to its total fixed​ costs? If the firm were forced to use marginal cost​ pricing, it would produce ______ units at a price of ______ per unit. At this level of​ output, its ATC would be ​$______ per unit.​ Thus, the​ firm's total revenues​ (and total variable​ costs) would be ​$______ and its total costs would be ​$_______ so that the amount of its economic ______ would be $______ This economic _______ would be ______ the amount of its total fixed costs.

200 $2.50 $15.00 $500 $3000 loss $2500 loss equal to

For the combined book market that includes both the​ e-books and the physical​ books, the​ Herfindahl-Hirschman index is ______ Suppose that antitrust authorities have determined that the relevant market includes both​ e-books and physical books. These authorities perceive that a monopoly situation exists that can be challenged on legal grounds if the value of the​ Herfindahl-Hirschman index exceeds​ 5,000. On the basis of this​ criterion, do the antitrust authorities conclude that there are grounds for a legal​ challenge? A. Yes, because the​ Herfindahl-Hirschman index exceeds​ 5,000 in either of the two individual markets for​ e-books and physical books. B. Yes, since the​ Herfindahl-Hirschman index is just one indicator of the monopoly power. C. No, because the value of the​ Herfindahl-Hirschman index for the combined books market is less than​ 5,000. D. It cannot be determined based on the above information.

2728 C. No, because the value of the​ Herfindahl-Hirschman index for the combined books market is less than​ 5,000.

The table above depicts the cost and demand structure a natural monopoly faces. If regulators required the firm to practice average cost​ pricing, the quantity produced would be _____ and the price charged would be $85 What is the​ firm's profit under this regulatory​ framework? $_____

3 $85 $0

Suppose the graph on the right shows the cost curves for a monopolistic competitor producing an information good. Assume the marginal cost of production is​ $10. The​ profit-maximizing quantity is _____ thousand units. ​(Enter your response as a whole​ number.) The​ profit-maximizing price is ​$_____. ​ In this​ case, the firm is earning an economic loss of ​$_____ thousand

30 $52 $120

Use the graph on the right to answer the following questions. The monopoly will produce _____ units and charge a price of ​$_____ per unit. Suppose the monopoly is regulated. If the regulatory agency wants to achieve economic​ efficiency, it should require a price of ​$_____ per unit. At that​ price, the monopoly will produce _____ units. ​ At the regulated​ price, the monopoly will make a profit of ​$_____

48.00 $6.80 $6.40 56.00 $67.20

Manufacturing firms based in​ Columbus, Ohio, and​ Erie, Pennsylvania, have proposed a merger. If they were to​ merge, the resulting value of the​ Herfindahl-Hirschman Index​ (HHI) in the nationwide market for the product they produce would rise from 1,600 to 1,650. Under current U.S. antitrust​ guidelines, would this proposed merger raise concerns for the U.S. Justice Department or Federal Trade​ Commission? The change in the HHI is _____. Since the change in the HHI is _____ and the postmerger level of the HHI is _____​, this proposed merger ______ generate concerns on the part of one or both regulators.

50 less than 100 between 1,500 and 2,500 will not

Suppose the graph on the right shows the cost curves for a monopolistic competitor producing an information good. Assume the marginal cost of production is​ $10. Suppose that the firm decides to set the price equal to marginal cost. The quantity demanded would be _____ thousand units. The firm would earn _____ of ​$_____ thousand.

55 an economic loss $1,650

For the market for​ e-books, the​ Herfindahl-Hirschman index is ______ For the market for physical​ books, the​ Herfindahl-Hirschman index is ______. ​ Suppose that antitrust authorities have determined that there are separate relevant markets for​ e-books and physical books. In​ addition, these authorities perceive that a monopoly situation exists that can be challenged on legal grounds if the value of the Herfindahl Hirschman Index exceeds​ 5,000. On the basis of this​ criterion, in which​ market(s) do the antitrust authorities conclude that there are grounds for a legal​ challenge? A. physical book market only B. neither the​ e-book market nor the physical book market C. both the​ e-book market and the physical book market D. e-book market only

5750 3186 D. e-book market only

A monopoly firm hires workers in a perfectly competitive labor market in which the market wage rate is ​$60 per day. If the firm maximizes​ profit, and if the marginal revenue from the last unit of output produced by the last worker hired equals ​$10​, what is the marginal physical product of​ labor? ______ units

6

Suppose that in the figure to the​ right, the vertical distance to point F is ​$10 per​ unit, the vertical distance to point A is ​$4 per​ unit, and Qm is​ 1,000 units. To measure the degree of monopoly​ power, economists often examine the differential between price and marginal cost as a percentage of the price. What would be the value of this measure of monopoly power for the natural monopolist depicted in the​ figure? The value of this measure of monopoly power for the natural monopolist would be _____ percent

60%

Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are​ (as percentages of all hamburgers​ sold): 16 ​percent, 24 ​percent, 20 ​percent, 12 ​percent, 11 ​percent, 9 ​percent, and 8 percent. The​ four-firm concentration ratio for the hamburger industry in this town is _____ percent. The Herfindahl index for the hamburger industry in this town is _______. Suppose the top three sellers combined to form a single firm. The​ four-firm concentration ratio would be ______. Suppose the top three sellers combined to form a single firm. The Herfindahl index would be _______.

72% 1642 92% 4010

Industry Y is dominated by five large firms that hold market shares of 31 percent​, 24 percent​, 18 percent​, 14 percent​, and 13 percent. The​ four-firm concentration ratio for this industry is _____ percent. ​ The Herfindahl index for this industry is _____

87% 2226

The current wage rate is ​$20​, and the rental rate of capital is ​$400. A​ firm's marginal physical product of labor is 160​, and its marginal physical product of capital is 20,000. Is the firm maximizing profits for the given cost​ outlay? A. No. The marginal physical product of labor per dollar spent on wages is not equal to the marginal physical product of capital per dollar spent on capital. B. No. The marginal factor cost of labor is not equal to the marginal factor cost of capital. C. No. The marginal physical product of labor is not equal to the marginal physical product of capital. D. Yes. The firm is maximizing profits.

A. No. The marginal physical product of labor per dollar spent on wages is not equal to the marginal physical product of capital per dollar spent on capital.

In a​ six-firm industry, two firms each have sales shares of 30​ percent, two firms each have sales shares of 15​ percent, and two firms each have sales shares of 5 percent. What is the HHI value for this​ industry? A. 2,300 B. 2,250 C. 1,150 D. 100

A. 2,300

Suppose that a company based in​ Dallas, Texas, confronts only four other rival firms. Its own market share is 31 ​percent, which ties it with the other largest producer and seller in the industry. The other three firms each have a 12.67 percent market share. What is the value of the​ Herfindahl-Hirschman index? The value of the​ Herfindahl-Hirschman index is A. 2,403.6. B. 1,922.0. C. 2,994.9. D. 2,243.1. After the Cleveland​ firm's entry into the​ industry, the value of the​ Herfindahl-Hirschman index is A. 1,362.2. B. 2,323.2. C. 2,283.1. D. 2,162.7.

A. 2,403.6. B. 2,323.2.

Which of the following goods would most likely be advertised using largely persuasive ​advertising? A. A hair styling salon. B. A car. C. A clothing company. D. A legal firm.

A. A hair styling salon.

What is the appropriate type of​ two-sided market where NYTimes.com operates as a platform​ firm? A. Audience−making market. B. Matchmaking market. C. Transaction− based market. D. Shared−input market.

A. Audience−making market.

In​ 2003, the U.S. government created a​ "Do Not Call​ Registry" and forbade marketing firms from calling people who placed their names on this list.​ Today, an increasing number of companies are sending mail solicitations to individuals inviting them to send back an enclosed postcard for more information about the​ firms' products. What these solicitations fail to mention is that they are worded in such a way that someone who returns the postcard gives up protection from telephone​ solicitations, even if they are on the​ government's "Do Not Call​ Registry." In what type of behavior are these companies​ engaging? Explain your answer. A. Creative response behavior. Firms legally satisfy the terms of the regulation but evade its intent. B. Feedback effect behavior. Firms legally satisfy the terms of the regulation but evade its intent. C. Creative response behavior. Firms creatively but illegally evade the intent of the regulation. D. Feedback effect behavior. Firms illegally use​ consumers' feedback response to evade the intent of the regulation.

A. Creative response behavior. Firms legally satisfy the terms of the regulation but evade its intent.

A search good is a product with qualities that consumers lack the expertise to assess without assistance. A. False B. True

A. False

Definitive evidence of serious resource misallocation due to oligopolies exists in the United States. A. False B. True

A. False

In game​ theory, cooperation that continues as long as the other players continue to cooperate is known as opportunistic behavior. A. False B. True

A. False

Network effects are an infrequent feature of​ two-sided markets. A. False B. True

A. False

No individual firm in a monopolistically competitive market will advertise. A. False B. True

A. False

The market demand curve for labor is a simple horizontal summation of the labor demand curves of all individual firms. A. False B. True

A. False

Under both U.S. and EU antitrust​ rules, antitrust authorities are obliged to block any business combination that increases the dominance of any​ producer, regardless of what factors might have caused the​ business's preeminence in the marketplace or whether the antitrust action might have adverse implications for consumers. A. False B. True

A. False

Which of the following characteristics applies to an oligopoly​ market? A. Firms are interdependent. B. There is no competition. C. Firms in the industry each control a small share of the market. D. There are many firms in the industry.

A. Firms are interdependent.

In light of your answer to part​ (a), explain why many hog​ farmers, who in the past used corn as the main feed input in hog​ production, switched to​ cookies, licorice, cheese​ curls, candy​ bars, and other human snack foods instead of corn as food for their hogs. A. Human snack food is a relatively lower cost substitute for corn as hog feed. B. Human snack food is an absolutely lower cost complement for corn as hog feed. C. Human snack food is an absolutely lower cost substitute for corn as hog feed. D. Human snack food is a relatively lower cost complement for corn as hog feed.

A. Human snack food is a relatively lower cost substitute for corn as hog feed.

Which of the market structures has some ability to set the price and not earn​ long-run economic​ profits? A. Monopolistic competition. B. Monopoly. C. Perfect competition. D. Oligopoly

A. Monopolistic competition.

Does the presence of network effects guarantee that platform firms will be able to induce their products to​ "catch on" with​ consumers? A. No, while network effects can potentially improve the likelihood of favorable market​ feedback, platform firms must balance adding more customers with landing the​ "right" customers. B. Yes, if network effects are an important characteristic of an​ industry's product, it means that more people are using the​ product, and this guarantees the product will​ "catch on" with consumers. C. No, most consumers are not susceptible to network effects and instead choose to use products like Facebook or Twitter simply because they enjoy using them. D. Yes, by having a large base of​ customers, platforms are able to ensure that with any particular​ customer, they can find the​ "right match," thus guaranteeing their products to​ "catch on."

A. No, while network effects can potentially improve the likelihood of favorable market​ feedback, platform firms must balance adding more customers with landing the​ "right" customers.

The labor demand curve will shift for all of the following reasons except A. a change in wages in a competing industry. B. a change in demand for the final product. C. a change in labor productivity. D. a change in the price of a substitute or complementary resource.

A. a change in wages in a competing industry.

The possibility that asymmetric information can lead to a general reduction in product quality in an industry is known as A. the lemons problem. B. caveat emptor. C. market failure. D. the​ free-rider problem.

A. the lemons problem.

Consider the payoff matrix to the right. Firm 1 and Firm 2 are seeking to choose between Format A and Format B for their products. Which of the following statements best describes their​ profit-maximization? (up to $5 mil.) A. Since there are network​ effects, the firms would maximize profits if they both produced format B. B. Since there are network​ effects, Firm 1 would maximize profits by producing format A and Firm 2 would maximize profits by producing format B. C. Since there are no network​ effects, Firm 1 would maximize profits by producing format A and Firm 2 would maximize profits by producing format B. D. Since there are no network​ effects, the firms would maximize profits if they both produced format B.

A. Since there are network​ effects, the firms would maximize profits if they both produced format B.

Which of the following is not a key antitrust​ law? A. The Contestable Markets Act. B. The​ Robinson-Patman Act. C. The Sherman Act. D. The Federal Trade Commission Act. E. The Clayton Act.

A. The Contestable Markets Act.

Prices of tickets for seats on commercial passenger planes are typically in the hundreds of​ dollars, whereas trips can be made by automobile at much lower cost. Accident rates per person per trip in the airline industry are considerably lower than auto accident rates per person per trip. Based on these​ facts, discuss how regulatory costs and benefits may help to explain why government regulations require children to be placed in safety seats in automobiles but not on commercial passenger planes. A. The expected benefit of using child safety seats in automobiles is much higher than the expected benefit of using them on commercial passenger planes. B. The expected benefit of using child safety seats in automobiles is much lower than the expected benefit of using them on commercial passenger planes. C. The average benefit of using child safety seats in automobiles equals the average cost of installing​ them, but the average benefit of using them on commercial passenger planes exceeds the average cost of installing them on planes. D. The marginal benefit of using child safety seats in automobiles equals the marginal cost of installing​ them, but the marginal benefit of using them on commercial passenger planes exceeds the marginal cost of installing them on planes.

A. The expected benefit of using child safety seats in automobiles is much higher than the expected benefit of using them on commercial passenger planes.

A company with a registered trademark has the right to seek legal damages if someone makes unauthorized use of its brand name. A. True B. False

A. True

If a small number of firms in an industry are able to secure the bulk of the payoffs resulting from positive market​ feedback, oligopoly is likely to emerge as the prevailing market structure. A. True B. False

A. True

In a prefectly competitive​ market, firms will hire workers up to the point where the wage rate equals the marginal revenue product. A. True B. False

A. True

One rationale for government involvement in nonmonopolistic industries is the possibility of market failures. A. True B. False

A. True

Positive market feedback is the potential for a network effect to arise when an​ industry's product catches on with consumers. A. True B. False

A. True

Strategies that are generally successful no matter what action the other players undertake are called dominant strategies. A. True B. False

A. True

To minimize total costs for a particular rate of​ production, the firm will hire factors of production up to the point at which the marginal product per last dollar spent on each factor of production is equalized. A. True B. False

A. True

Under conditions of perfect competition in both product and labor​ markets, the demand for labor is a derived demand. A. True B. False

A. True

Consider the following fictitious sales data​ (in thousands of​ dollars) for books sold both over the Internet and in physical retail establishments. Firms have numbers instead of​ names, and Firm 1 generates book sales only over the Internet. Antitrust authorities judge that a single firm possesses​ 'monopoly power' if its share of sales in the relevant market exceeds 70 percent. Suppose that the antitrust authorities determine that bookselling in physical retail stores and Internet bookselling are individually separate relevant markets. Does any single firm have monopoly​ power, as defined by the antitrust​ authorities? A. Yes, Firm 1 has monopoly power in internet book sales. B. It is impossible to determine. C. No, because no firm has more than 70 percent of combined book sales. Suppose that in fact there is really only a single book​ industry, in which firms compete both in physical retail stores and via the Internet. According to the antitrust​ authorities' measure of monopoly​ power, is there actually cause for​ concern? A. There is a concern since Firm 1 has monopoly power in internet book sales. B. It is impossible to determine. C. No, because no firm has more than 70 percent of combined book sales.

A. Yes, Firm 1 has monopoly power in internet book sales. C. No, because no firm has more than 70 percent of combined book sales.

A new cancer treatment represents A. a credence​ good, with qualities that might be difficult for consumers lacking expertise to assess without assistance. B. a search​ good, since people must actually consume before they can determine their qualities. C. an experience​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. D. a credence​ good, since people must actually consume before they can determine their qualities. E. an experience​ good, since people must actually consume before they can determine their qualities. F. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

A. a credence​ good, with qualities that might be difficult for consumers lacking expertise to assess without assistance.

All of the following are key characteristics of a monopolistically competitive industry except A. a homogeneous product. B. a differentiated product. C. the existence of close substitutes. D. a large number of firms.

A. a homogeneous product

When the qualities of a good are relatively easy to assess in advance of their​ purchase, the good is known as A. a search good. B. an information product. C. an experience good. D. an interactive good.

A. a search good.

A negative market feedback refers to A. a tendency for a good or service to fall out of favor with more consumers because other consumers have stopped buying the item. B. a tendency for the consumers to buy a smaller quantity of the product when their income decreases. C. a tendency for a good or service to come into favor with additional consumers because other consumers have chosen to buy the item. D. a tendency for the consumers to buy a smaller quantity of the product when its price increases.

A. a tendency for a good or service to fall out of favor with more consumers because other consumers have stopped buying the item.

Average cost pricing by regulated monopolies A. allows the firm to make a​ "fair" rate of return. B. forces the firm to operate at a loss. C. permits​ long-run monopoly profits. D. None of the above.

A. allows the firm to make a​ "fair" rate of return.

Categorize each of the following as an experience​ good, a search​ good, or a credence good or​ service, and justify your answer. A restaurant meal represents A. an experience​ good, since people must actually consume before they can determine their qualities. B. a search​ good, since people must actually consume before they can determine their qualities. C. a credence​ good, possessing qualities that are relatively easy for consumers to assess in advance of their purchase. D. a credence​ good, since people must actually consume before they can determine their qualities. E. an experience​ good, possessing qualities that are relatively easy for consumers to assess in advance of their purchase. F. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

A. an experience​ good, since people must actually consume before they can determine their qualities.

The services of a carpet cleaning company represent A. an experience​ good, since people must actually consume before they can determine their qualities. B. a credence​ good, since people must actually consume before they can determine their qualities. C. a credence​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. D. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. E. an experience​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. F. a search​ good, since people must actually consume before they can determine their qualities

A. an experience​ good, since people must actually consume before they can determine their qualities.

A violation of the Sherman Act requires A. behavior that indicates intent to monopolize. B. that any​ size-related dominance was not achieved deliberately. C. the cooperation of all firms. D. firms to earn excessive profits.

A. behavior that indicates intent to monopolize.

The advertising of credence goods contains A. both informational and persuasive​ advertising, so as to provide detailed information and at the same time persuade the consumer to try the product. B. neither informational nor persuasive​ advertising, since the consumers are in general wary of misleading advertisement. C. only informational​ advertising, so as to provide detailed information about the various features of the product. D. only persuasive​ advertising, so as to induce the consumer to purchase this particular product.

A. both informational and persuasive​ advertising, so as to provide detailed information and at the same time persuade the consumer to try the product.

The dominant strategy for the​ prisoner's dilemma is for A. both players to confess. B. only one player to confess. C. neither player to confess. D. There is no dominant strategy for the​ prisoner's dilemma.

A. both players to confess

If the marginal productivity of labor​ increases, the​ ________ curve for labor will shift to the​ ________. A. demand; right B. supply; left C. supply; right D. demand; left

A. demand; right

Enforcing a cartel agreement is A. difficult because firms in the cartel have an incentive to cheat on the agreement. B. best accomplished with an implicit contract detailing​ prices, output, and the division of profits. C. difficult when there is only a few large firms making most of the economic profit. D. best accomplished with an explicit contract detailing​ prices, output, and the division of profits.

A. difficult because firms in the cartel have an incentive to cheat on the agreement.

For a monopolistic​ competitor, short-run profits will tend to​ ________ in the long run and​ short-run losses will tend to​ ________ in the long run. A. disappear; disappear B. ​grow; shrink C. grow; grow D. remain​ steady; remain steady

A. disappear; disappear

The monopolistically competitive firm in the diagram is A. earning positive economic profits. B. earning economic profits equal to zero. C. earning positive accounting profits but negative economic profits. D. earning negative economic profits.

A. earning positive economic profits.

Creating the first copy of an information product often entails incurring a relatively sizable​ up-front cost. A. False B. True

B. True

Firms will enter a monopolistically competitive industry when there are A. economic profits. This will shift demand to the​ left, thus reducing each​ firm's market share and economic profits. B. normal profits. This will shift demand to the​ left, thus reducing each​ firm's market share and economic profits. C. normal profits. This will shift demand to the​ right, thus reducing each​ firm's market share and economic profits. D. any profits. This will shift supply to the​ right, thus increasing each​ firm's market share and profits.

A. economic profits. This will shift demand to the​ left, thus reducing each​ firm's market share and economic profits.

It is estimated that the total annual social cost associated with satisfying​ federal, state, and municipal regulations in the United States A. exceeds​ $1.75 trillion. B. averages​ $1 trillion. C. is almost​ $300 billion. D. is roughly​ $700 billion.

A. exceeds​ $1.75 trillion.

Products that an individual must consume before the product's quality can be established are A. experience goods. B. search goods. C. credence goods. D. public goods.

A. experience goods.

The difference between monopolistic competition and perfect competition is that in comparison to perfect​ competition, monopolistic competition has A. fewer​ firms, product​ differentiation, some price​ control, and relatively easy but not​ barrier-free entry. B. more​ firms, product​ differentiation, some price​ control, and relatively easy but not​ barrier-free entry. C. fewer​ firms, no product​ differentiation, price​ control, and relatively​ easy, barrier-free entry. D. more​ firms, no product​ differentiation, some price​ control, and relatively​ easy, barrier-free entry.

A. fewer​ firms, product​ differentiation, some price​ control, and relatively easy but not​ barrier-free entry.

Price collusion is mutually profitable because each firm achieves A. higher profits. B. lower costs. C. higher productivity. D. increased sales.

A. higher profits.

A perfectly competitive firm determines that its MRP of labor divided the wage equals 1.2. This firm should A. hire more labor. B. pay a lower wage. C. purchase less labor. D. examine the MRP of the other inputs and divide them by their prices. If they are all equal to​ 1.2, the firm is maximizing profits.

A. hire more labor.

Monopolistic competition is similar to perfect competition because A. in both industry​ structures, there are no barriers to entry. B. both industry structures have a single seller. C. in both industry​ structures, long−run profits are likely to be positive. D. in both industry​ structures, the firm's demand curve is horizontal.

A. in both industry​ structures, there are no barriers to entry.

Cartels are difficult to maintain in the long run because A. individual members may find it profitable to cheat on agreements. B. cartels are illegal in all industrialized countries. C. entry barriers are insignificant in oligopolistic industries. D. it is more profitable for the industry to charge a lower price and produce more output.

A. individual members may find it profitable to cheat on agreements

According to the capture​ hypothesis, regulators must take into account A. industry special interests. B. legislators. C. consumers. D. All of the above.

A. industry special interests

For a​ monopolist, marginal revenue A. is less than price. B. is greater than price. C. is equal to price. D. may be greater​ than, less​ than, or equal to price.

A. is less than price.

The market demand curve for labor is A. less elastic than the horizontal summation of the individual​ firms' demand curves because output price changes as total output changes. B. the vertical summation of the individual​ firms' demand curves for labor. C. the horizontal summation of the individual​ firms' demand curves for labor. D. affected by the marginal factor cost of labor.

A. less elastic than the horizontal summation of the individual​ firms' demand curves because output price changes as total output changes.

For a monopolistic competitor experiencing a​ short-run loss, price is​ ________ average total cost and​ ________ marginal cost. A. less​ than; greater than B. greater​ than; greater than C. equal​ to; less than D. less​ than; less than

A. less​ than; greater than

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50​, price is $4.75​, marginal revenue is $2.50​, and marginal cost is $3.00. This firm is A. making positive profits and is producing too many units to maximize profits. B. operating at a loss and is producing too many units to maximize profits. C. operating at a loss and is producing too few units to maximize profits. D. making positive profits and is maximizing profits.

A. making positive profits and is producing too many units to maximize profits.

For the perfectly competitive​ firm, the marginal revenue product is A. marginal physical product times the product price. B. the same thing as marginal factor cost. C. marginal physical product times the wage rate. D. the same thing as marginal physical product.

A. marginal physical product times the product price.

Suppose that the objective of a union is to maximize the total dues paid to the union by its membership.​ Now, consider the case where union dues are a percentage of total earnings of the union membership. Then the​ union's strategy will be to A. negotiate for the wage level that is consistent with unit elastic demand for labor. B. negotiate for a higher than market wage hike every year through collective bargaining. C.negotiate for the maximum wage rate the employer is willing to pay for the number of workers belonging to the union. D. negotiate for limiting the entry of new workers over time. b. Suppose that the objective of a union is to maximize the total dues paid to the union by its membership. If union dues are paid as a flat amount per union member​ employed, the​ union's strategy will be to A. negotiate for the maximum wage rate the employer is willing to pay for the number of workers belonging to the union. B. negotiate for the wage level that is consistent with unit elastic demand for labor. C. negotiate for limiting the entry of new workers over time. D. negotiate for the wage level that is consistent with perfectly elastic demand for labor.

A. negotiate for the wage level that is consistent with unit elastic demand for labor. A. negotiate for the maximum wage rate the employer is willing to pay for the number of workers belonging to the union.

All of the following are possible reasons for the occurrence of oligopolies except A. no impediments to enter or exit the market. B. barriers to entry. C. mergers. D. economies of scale.

A. no impediments to enter or exit the market.

One major difference between oligopoly and perfect competition is that A. oligopolistic firms act interdependently while competitive firms operate independently. B. oligopolistic firms act independently while competitive firms operate interdependently. C. There is no major difference in the two types of firms since they both act interdependently. D. There is no major difference in the two types of firms since they both act independently.

A. oligopolistic firms act interdependently while competitive firms operate independently.

In a​ zero-sum game A. one​ player's losses are offset by another​ player's gains. B. one player has a​ zero-value payoff while the other has a positive value payoff. C. every player has a​ zero-value payoff at the beginning of the game. D. every player finishes the game with a​ zero-value payoff.

A. one​ player's losses are offset by another​ player's gains.

Suppose that half of all used cars offered for sale are​ high-quality autos and the other half are lemons. A consumer is willing to pay​ $12,000 for a​ high-quality used car but only​ $4,000 for a lemon. People who own truly​ high-quality used cars are only willing to sell at a price of at least​ 12,000, but people who own lemons are willing to sell at any price at or above​ $4,000. Because there is a​ 50-50 chance that a given car up for sale is of either​ quality, the average amount that a prospective buyer is willing to pay equals​ $8,000. In this​ market, A. only lemons will be​ traded, at a price of​ $4,000. B. both​ high-quality cars and lemons will be​ traded, each at a price of​ $8,000. C. both​ high-quality cars and lemons will be​ traded, at prices of​ $12,000 and​ $4,000 respectively. D. only​ high-quality cars will be​ traded, at a price of​ $8,000.

A. only lemons will be​ traded, at a price of​ $4,000.

The fact that a monopolistically competitive firm does not produce at the minimum ATC can be viewed as the cost of generating A. product differentiation and variety. B. economies of scale. C. homogeneous products. D. All of the above.

A. product differentiation and variety.

Lemon problems are likely to be more common in industries that sell A. products that have qualities that are difficult for consumers to assess fully. B. products that have qualities that enable consumers to evaluate them even before purchasing. C. products with qualities that are guaranteed to consumers. D. products that consumers must consume regardless of their quality.

A. products that have qualities that are difficult for consumers to assess fully.

The​ prisoner's dilemma reveals that A. sometimes when individuals act independently in their own​ self-interest, everyone is worse off than if they had cooperated. B. collusive agreements will always fail. C. nonprice competition is more profitable than price competition. D. the price leadership model does not work.

A. sometimes when individuals act independently in their own​ self-interest, everyone is worse off than if they had cooperated.

At the beginning of each​ semester, the university cafeteria posts the prices of its sandwiches. Business students note that as soon as the university posts these​ prices, the area delis adjust their prices accordingly. This pricing practice may be due to all of the following except A. that the local delis are following a dominant strategy. B. that the university cafeteria and the local delis are engaged in a​ non-cooperative game, where the local delis are following a​ tit-for-tat strategy. C. that there may be a tacit collusion between the university cafeteria and the local delis. D. the university cafeteria may be acting as a price leader

A. that the local delis are following a dominant strategy.

The U.S. antitrust law which was the first to hold any person who attempts to monopolize trade or commerce criminally liable is A. the Sherman Antitrust Act of 1890. B. the​ Robinson-Patman Act of 1936. C. the Clayton Act of 1914. D. the Federal Trade Commission Act of 1914.

A. the Sherman Antitrust Act of 1890.

Why are brand names and advertising important features of monopolistic​ competition? A. Both of these techniques are needed to compute marginal cost. B. Both of these techniques can be used to increase the demand for the product. C. Both of these techniques will increase the price of the product and reduce the average cost of production. D. Both of these techniques can be used to increase the supply of the product.

B. Both of these techniques can be used to increase the demand for the product.

Which of the following is not true of both firms in monopolistic competition and firms in perfect​ competition? A. Both types of firms have the possibility of​ short-run economic profits or losses. B. Both types of firms produce at minimum ATC. C. Both types of firms can earn zero economic profits in​ long-run equilibrium. D. Both types of firms produce where MC​ = MR.

B. Both types of firms produce at minimum ATC

Which of the following is an example of social ​regulation? A. Rate regulation of natural monopolies. B. Clean water regulations. C. FAA supervision of the airline industry. D. Legislation against deceptive business practices in a specific industry.

B. Clean water regulations.

A bilateral monopoly refers to a monopolist that only sells two products. A. True B. False

B. False

A monopolistic competitor producing an information product will set the​ product's price using marginal cost pricing. A. True B. False

B. False

All U.S. businesses are subject to antitrust laws. A. True B. False

B. False

Changes in working conditions in an industry can affect its labor demand curve but not its labor supply curve. A. True B. False

B. False

Monopolistic competition is the most common industry structure in​ two-sided markets. A. True B. False

B. False

Once a cartel agreement has been​ made, it is rare for the agreement to break down. A. True B. False

B. False

Social regulation is designed to cover specific industries. A. True B. False

B. False

The marginal revenue curve for a monopolist always lies above the​ downward-sloping product demand curve. A. True B. False

B. False

The more it costs to enter a monopolistically competitive​ market, the more a firm currently in that market must worry about losing business. A. True B. False

B. False

The scope of the​ government's role as regulator of natural monopolies has increased with the expansion of natural monopolies in the​ electricity, natural​ gas, and telecommunications industries. A. True B. False

B. False

When firms engage in creative response to​ regulations, this amplifies the​ regulation's effects. A. True B. False

B. False

Which of the following is a provision of the Robinson−Patman Act​? A. Forbids restraint of trade and attempts to monopolize markets. B. Forbids price discrimination that substantially reduces competition. C. Outlaws predatory pricing and deceptive business practices. D. Forbids specific practices that restrain trade, exclusive dealerships, and some corporate stock ownership.

B. Forbids price discrimination that substantially reduces competition.

Which of the following is an example of a credence good​? A. A restaurant meal. B. Legal advice. C. A music CD. D. A t−shirt.

B. Legal advice.

For a firm facing a perfectly elastic supply of​ labor, the employment of workers will continue until A. marginal factor cost​ = wage rate. B. MRP​ = wage rate. C. MPP​ = MR. D. All of the above.

B. MRP​ = wage rate.

Each firm purchasing labor in a perfectly competitive market can purchase all of the input it wants at the going market wage. A. False B. True

B. True

Each time a monopsonist buyer of labor wants to hire more​ workers, it must raise wage rates. A. False B. True

B. True

If a perfectly competitive industry in the output market suddenly became one in which there is monopoly in the output​ market, the amount of employment would fall. A. False B. True

B. True

If all firms in an industry form a​ cartel, they act as a single producer and collude to charge the​ profit-maximizing price that would be charged by a monopoly. A. False B. True

B. True

It is a typical Christmas electronics shopping​ season, and makers of​ ultra-high-definition TVs​ (UHDTVs) are marketing the latest available models through their own websites as well as via retailers such as Best Buy and Walmart. Each manufacturer offers its own unique versions of UHDTVs in differing arrays of shapes and sizes. As​ usual, each is hoping to maintain a stream of economic profits earned since it first introduced these most recent models late last year or perhaps just a few months before Christmas.​ Nevertheless, as sales figures arrive at the headquarters of companies such as​ LG, Samsung,​ Panasonic, and​ Sony, it is clear that most of the companies will end up earning only a normal rate of return this year. How can makers of UHDTVs earn economic profits during the first few months after the introduction of new​ models? A. New models create product differentiation that increases demand and raises prices above average total cost.​ Thus, firms will earn positive economic profits in the long run. B. New models create product differentiation that increases demand and raises prices above average total cost.​ Thus, firms will earn positive economic profits in the short run. C. New models create product homogeneity that increases demand and raises prices above average total cost.​ Thus, firms will earn positive economic profits in the short run. D. New models create product homogeneity that increases demand and raises prices above average total cost.​ Thus, firms will earn positive economic profits in the long run.

B. New models create product differentiation that increases demand and raises prices above average total cost.​ Thus, firms will earn positive economic profits in the short run.

The current market wage rate is ​$20​, the rental rate of land is ​$200 per​ unit, and the rental rate of capital is ​$500. Production managers at the firm find that under their current allocation of factors of​ production, the marginal revenue product of labor is ​$160​, the marginal revenue product of land is ​$1,600​, and the marginal revenue product of capital is ​$1,500. Is the firm maximizing​ profit? A. No. The marginal factor cost of each input is not equal. B. No. The marginal revenue product per dollar spent on each input is not equal. C. No. The marginal revenue product of each input is not equal. D. Yes. The firm is maximizing profits.

B. No. The marginal revenue product per dollar spent on each input is not equal.

What economic forces result in the dissipation of economic profits earned by manufacturers of​ UHDTVs? A. Positive profits induce new firms to enter the market causing existing​ firms' demand to​ increase, which lowers prices toward average variable cost. B. Positive profits induce new firms to enter the market causing existing​ firms' demand to​ fall, which lowers prices toward average total cost. C. Positive profits induce new firms to enter the market causing existing​ firms' demand to​ fall, which lowers prices toward average variable cost. D. Positive profits induce new firms to enter the market causing existing​ firms' demand to​ increase, which lowers prices toward average total cost.

B. Positive profits induce new firms to enter the market causing existing​ firms' demand to​ fall, which lowers prices toward average total cost.

Which of the following characteristics applies to a monopolistically competitive​ industry? A. For the product being​ produced, consumers have few substitutes from which to choose. B. Products are​ similar, but not​ identical, to​ competitors' products. C. Firms face a horizontal demand curve. D. The products produced by competing firms are perfect subsitiutes for each other.

B. Products are​ similar, but not​ identical, to​ competitors' products.

Which of the following are exempt from antitrust​ regulation? A. The automobile industry. B. Professional baseball. C. The communications industry. D. The steel industry.

B. Professional baseball.

The payoff matrix to the right shows the profits two firms can make using alternative pricing strategies. What are the​ firms' pricing​ decisions? Does each firm have a dominant​ strategy? Explain briefly. A. The dominant strategy for each firm is to charge a high price because if one firm chooses either a high or low​ price, the other firm will always choose a high price to make more. B. The dominant strategy for each firm is to charge a low price because if one firm chooses either a high or low​ price, the other firm will always choose a low price to make more. C. Neither firm has a dominant strategy because it is unlikely they could act together to charge higher prices and make more. D. The dominant strategy for each firm is to collude and charge a high price so that each will make more.

B. The dominant strategy for each firm is to charge a low price because if one firm chooses either a high or low​ price, the other firm will always choose a low price to make more.

What does the​ long-run price equal for an informational​ product? A. The price is the same as it would be if the firm were a monopoly. B. The price equals average total cost. C. The price equals marginal cost. D. It is not possible to speculate because of the unique nature of an informational product.

B. The price equals average total cost.

What is the appropriate type of​ two-sided market where Paypal.com operates as a platform​ firm? ​(Hint: In some​ cases, you may wish to check out the​ firms' Web sites to assist in answering this​ question.) A. Shared−input market. B. Transaction− based market. C. Matchmaking market. D. Audience-making market

B. Transaction− based market.

A relevant market refers to a group of​ firms' products that are closely substitutible for one another and available to consumers in a particular geographic area. A. False B. True

B. True

At​ present, less than 7 percent of workers in the private sector in the United States belong to unions. A. False B. True

B. True

When assessing a potential horizontal​ merger, which of the following changes will raise antitrust concerns with federal enforcement​ agencies? A. a combined HHI change exceeding 150 and a postmerger HHI above​ 1,500 B. a combined HHI change exceeding 100 and a postmerger HHI above​ 2,500 C. a combined HHI change exceeding 200 and a postmerger HHI above​ 1,000 D. a combined HHI change exceeding 50 and a postmerger HHI above​ 2,000

B. a combined HHI change exceeding 100 and a postmerger HHI above​ 2,500

A positive market feedback refers to A. a tendency for the consumers to buy a larger quantity of the product when its price decreases. B. a tendency for a good or service to come into favor with additional consumers because other consumers have chosen to buy the item. C. a tendency for a good or service to fall out of favor with more consumers because other consumers have stopped buying the item. D. a tendency for the consumers to buy a larger quantity of the product when their income increases

B. a tendency for a good or service to come into favor with additional consumers because other consumers have chosen to buy the item.

The MRP curve of the monopolist is A. never less elastic than the MRP curve of the perfect competitor. B. always less elastic than the MRP curve of the perfect competitor. C. always more unit elastic than the MRP curve of the perfect competitor. D. None of the above.

B. always less elastic than the MRP curve of the perfect competitor.

Suppose conditions in the industry change in such a way that the amount that each firm makes if it charges a high price when the other firm charges a low price decreases from​ $2 million to ​$1 million. This is shown in the new payoff matrix to the right. Are the​ firms' pricing decisions altered by this change​ and, if​ so, in what​ way? Explain briefly. If the amount that each firm makes if it charges a high price when the other firm charges a low price decreases from​ $2 million to ​$1 ​million, then A. both firms will maintain their decisions to charge high prices because each can make more by doing so. B. both firms will maintain their decisions to charge low prices because each can make more by doing so. C. Firm 2 will continue to charge a low price to make​ more, while Firm 1 will make more if it charges a higher price. D. Firm 1 will continue to charge a low price to make​ more, while Firm 2 will make more if it charges a higher price.

B. both firms will maintain their decisions to charge low prices because each can make more by doing so.

Asymmetric information in a market transaction occurs when there is unequal knowledge possessed by the A. seller and the government. B. buyer and the seller. C. buyer and the government. D. taxpayer and the government.

B. buyer and the seller.

A firm that produces an information product will A. earn positive economic profits in the long run. B. earn zero economic profits in the long run. C. earn negative or zero economic profits in the long run. D. earn positive or zero economic profits in the long run.

B. earn zero economic profits in the long run.

The most common reason that oligopolies exist is A. diminishing marginal returns. B. economies of scale. C. there are a large number of firms. D. regulation.

B. economies of scale.

c. To regulate the problem of natural​ monopoly, a regulator could use A. only the​ cost-of-service regulation where price is set equal to a normal rate of return on investment and profit is lower. B. either the​ cost-of-service regulation where price is set equal to average​ cost, or a​ rate-of-return regulation where price is set equal to a normal rate of return on investment. C. neither the​ cost-of-service regulation where price is set equal to marginal cost nor a​ rate-of-return regulation where price is set equal to a high rate of return on investment. D. only the​ rate-of-return regulation where price is set equal to average cost and profit is zero.

B. either the​ cost-of-service regulation where price is set equal to average​ cost, or a​ rate-of-return regulation where price is set equal to a normal rate of return on investment.

Local cable television companies are sometimes granted monopoly rights to service a particular territory of a metropolitan area. The companies typically pay special taxes and licensing fees to local municipalities. A local municipality gives monopoly rights to a cable company because these industries A. have constant average cost of production as their output​ increases; a characteristic of monopolistic competition. B. experience declines in their average cost of production as their output​ increases; a characteristic of natural monopoly. C. experience increases in their average cost of production as their output​ increases; a characteristic of a​ single-price monopoly. D. experience declines in their marginal cost of production as their output​ increases; a characteristic of duopoly.

B. experience declines in their average cost of production as their output​ increases; a characteristic of natural monopoly.

Suppose that a business has developed a very​ high-quality product and operates more efficiently in producing that product than any other potential competitor. As a​ consequence, at present it is the only seller of this​ product, for which there are few close substitutes. This firm A. is in violation of U.S. antitrust laws because there have been​ "unfair or deceptive acts or practices in​ commerce." B. is not in violation of U.S. antitrust laws because there has not been any​ "willful acquisition or maintenance of monopoly​ power" in the relevant market. C. is in violation of U.S. antitrust laws because there has been an attempt to monopolize and willfully acquire monopoly power. D. may or may not be in violation of U.S. antitrust laws because antitrust laws are so vague that their correct interpretation can only come from the Supreme Court.

B. is not in violation of U.S. antitrust laws because there has not been any​ "willful acquisition or maintenance of monopoly​ power" in the relevant market.

In the long​ run, monopolistically competitive firms A. make zero accounting profits. B. make zero economic profits. C. make positive economic profits. D. can make either positive economic profits or zero economic​ profits, and always make positive accounting profits.

B. make zero economic profits.

The legal system typically defines monopoly by looking at a​ firm's A. advertising budget. B. market share. C. sales revenues. D. adjusted taxable income.

B. market share.

A local cable​ company, the sole provider of cable television​ service, is regulated by the municipal government. The owner of the company claims that she is normally opposed to regulation by​ government, but asserts that regulation is necessary because local residents would not want a large number of different cable crisscrossing the city. The owner is defending the regulation by the city because A. regulation will automatically lower prices bringing about an efficient allocation of resources. B. regulation will prevent other competing firms from entering the market. C. regulation will keep price less than marginal cost and make cable services more affordable. D. regulation will ensure that only firms that provide the best service will remain in the market.

B. regulation will prevent other competing firms from entering the market.

In which industry is monopolistic competition most likely to be​ found? A. agriculture B. retail trade C. utilities D. mining

B. retail trade

In the short​ run, a monopolistically competitive firm will A. not advertise because the effects will not be realized until the long run. B. select the rate of output where marginal revenue equals marginal cost. C. select the rate of output where price equals marginal cost. D. make a profit.

B. select the rate of output where marginal revenue equals marginal cost.

A​ monopolist's demand curve for labor A. slopes upward because monopolists use more capital than do perfectly competitive firms. B. slopes down because of the law of diminishing marginal returns and because the monopolist must lower prices to sell additional units of the good. C. is horizontal even though the demand curve for labor for a competitive firm is downward sloping. D. slopes down for the same reason as the demand curve for labor of a perfectly competitive firm.

B. slopes down because of the law of diminishing marginal returns and because the monopolist must lower prices to sell additional units of the good.

A profit maximizing firm will hire inputs in combinations A. that minimize the prices of inputs. B. such that the marginal physical product per last dollar spent on each factor of production is equalized. C. that equate marginal revenue products of each input. D. that equate marginal physical products of each input.

B. such that the marginal physical product per last dollar spent on each factor of production is equalized.

The federal regulatory agency that has jurisdiction over labor markets is A. the Occupational Safety and Health Administration. B. the Equal Employment Opportunity Commission. C. the Federal Trade Commission. D. the Securities and Exchange Commission.

B. the Equal Employment Opportunity Commission.

A firm complains that another​ firm's advertising is misleading. The firm would send its complaint to A. the Justice Department. B. the Federal Trade Commission. C. the​ Robinson-Patman Agency. D. the EPA.

B. the Federal Trade Commission.

A few years​ ago, a food retailer called Whole Foods sought to purchase Wild​ Oats, a competitor in the market for organic foods. When the Federal Trade Commission​ (FTC) sought to block this merger on antitrust​ grounds, FTC officials argued that such a merger would dramatically increase concentration in the market for​ "premium organic​ foods." Whole​ Foods' counterargument was that it considered itself to be part of the broadly defined supermarket industry that includes retailers such as​ Albertson's, Kroger, and Safeway. The key issue of antitrust regulation involved in this​ dispute, is A. predatory pricing. B. the definition of the market. C. unfair business practices. D. the restraint of trade.

B. the definition of the market.

If the average total costs are the same for a perfectly competitive firm and a monopolistically competitive​ firm, then we know that A. both will produce at the minimum points of their average total cost curves. B. the monopolistically competitive firm will produce fewer units than the perfectly competitive firm. C. the monopolistically competitive firm will produce more units than the perfectly competitive firm. D. Any of the above are possible.

B. the monopolistically competitive firm will produce fewer units than the perfectly competitive firm.

The primary purpose of economic regulation is A. to control the quality of service provided by a monopolist. B. to control the price that regulated enterprises are allowed to charge. C. to force a firm to produce at the point where marginal cost equals marginal revenue. D. to focus on the impact of production on the environment and​ society, the working conditions under which goods and services are​ produced, and sometimes the physical attributes of goods.

B. to control the price that regulated enterprises are allowed to charge.

When a firm is selling an experience good it is more likely to A. be an information product. B. use persuasive advertising. C. earn a positive economic profit. D. use informational advertising.

B. use persuasive advertising.

A package delivery company provides both overnight and​ second-day delivery services. It charges almost twice as much to deliver an overnight package to any world location as it does to deliver the same package to the same location in two days.​ Often, second-day packages arrive at company warehouses in destination cities by the next​ day, but drivers intentionally do not deliver these packages until the following day. This business practice is called A. bundling. B. versioning. C. price discrimination. D. tie-in sales.

B. versioning.

Using the payoff​ matrix, and assuming no collusion between X and​ Y, what is the likely pricing​ outcome? A. Both firms will set the price at​ $40. B. Firm X will charge​ $35 and firm Y will charge​ $40. C. Both firms will set the price at​ $35. D. Firm X will charge​ $40 and firm Y will charge​ $35.

C. Both firms will set the price at​ $35.

Network effects can cause the demand for a product either to expand or to contract relative to what it would be if there were no network effects because of A. negative market feedback in which a downward spiral of product sales occur. B. positive market feedback when an​ industry's product catches on with consumers. C. Both of the above. D. None of the above.

C. Both of the above.

What is a​ cartel? A. It is an association of producers in an industry that agree to set common prices to prevent competition. B. It is an association of producers in an industry that agree to set common prices to promote competition. C. It is an association of producers in an industry that agree to set common prices and output quotas to prevent competition. D. It is an association of producers in an industry that agree to set common prices and output quotas to promote competition.

C. It is an association of producers in an industry that agree to set common prices and output quotas to prevent competition.

Which of the following is not an issue in enforcing antitrust​ laws? A. International competition. B. The laws are vague. C. Marginal cost pricing. D. Defining the relevant market.

C. Marginal cost pricing.

What is the only market structure that does not have​ non-price competition? A. Monopoly. B. Monopolistic competition. C. Perfect Competition. D. Oligopoly.

C. Perfect Competition.

What is the appropriate type of​ two-sided market where FreeBSD.com operates as a platform​ firm? ​(Hint: In some​ cases, you may wish to check out the​ firms' Web sites to assist in answering this​ question.) A. Audience−making market. B. Matchmaking market. C. Shared−input market. D. Transaction-based market

C. Shared−input market

Consider the following payoff matrix. Firm 1 and Firm 2 are seeking to choose between Format A and Format B for their products. Which of the following statements best describes their​ profit-maximization? (up to 4 mil.) A. Since there are network​ effects, the firms would maximize profits if they both produced format A. B. Since there are network​ effects, Firm 1 would maximize its profit by producing format B and Firm 2 would maximize its profit by producing format A. C. Since there are no network​ effects, Firm 1 would maximize its profit by producing format B and Firm 2 would maximize its profit by producing format A. D. Since there are no network​ effects, the firms would maximize profits if they both produced format A.

C. Since there are no network​ effects, Firm 1 would maximize its profit by producing format B and Firm 2 would maximize its profit by producing format A.

Which of the following is not a characteristic of an​ oligopoly? A. A small number of sellers. B. Some barriers to entry. C. Strategic independence. D. Some market power.

C. Strategic independence.

Which of the following statements explains why the MRP curve is the​ firm's labor demand​ curve? A. The MRP curve shows how many units of labor will be hired at different product prices. B. The MRP curve shows how many units of the product will be produced at different wage rates. C. The MRP curve shows how many units of labor will be hired at different input prices. D. All of the above.

C. The MRP curve shows how many units of labor will be hired at different input prices.

In a perfectly competitive​ market, price equals marginal​ cost, but this condition is not satisfied for the firm with the revenue and cost conditions depicted in the figure on the right. In the long​ run, what would happen if the government decided to require the firm in the figure to charge a price equal to marginal cost at the​ firm's long-run output​ rate? A. The firm will expand its output to 160 units. B. The firm will earn zero economic profit. C. The firm will incur a loss of​ $8 per unit and this and other firms will leave the industry. D. The firm will increase its profit to​ $8 per unit and new firms will enter the industry.

C. The firm will incur a loss of​ $8 per unit and this and other firms will leave the industry.

One consequence of asymmetric information in the​ used-car market, if left​ unresolved, is the higher probability of A. a rising quality of used cars in the market. B. used-car buyers willing to pay higher prices. C. a declining quality of used cars in the market. D. no used cars being sold.

C. a declining quality of used cars in the market.

All of the following are a fundamental characteristic of oligopoly except A. economies of scale. B. horizontal mergers. C. a homogeneous product. D. barriers to entry.

C. a homogeneous product.

A silk necktie represents A. a credence​ good, since people must actually consume before they can determine their qualities. B. an experience​ good, since people must actually consume before they can determine their qualities. C. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. D. an experience​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. E. a search​ good, since people must actually consume before they can determine their qualities. F. a credence​ good, with qualities that might be difficult for consumers lacking expertise to assess without assistance.

C. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

All of the following can cause the demand curve for labor to shift to the right except A. an increase in the productivity of labor. B. an increase in the price of the final product. C. an increase in the supply of labor. D. an increase in the demand for the final product.

C. an increase in the supply of labor.

The type of​ two-sided market in which media platforms link advertisers to potential customers is called A. a​ shared-input market. B. a​ transaction-based market. C. an​ audience-seeking market. D. a matchmaking market.

C. an​ audience-seeking market.

A natural monopoly exists when A. a firm is able to make​ long-run profits without inducing entry by other firms. B. there is pure monopoly and the government grants an exclusive license to the firm. C. a​ firm's long-run average cost curve is sloping down when it intersects the market demand curve. D. a​ firm's demand curve is downward sloping.

C. a​ firm's long-run average cost curve is sloping down when it intersects the market demand curve.

A​ cost-benefit test of proposed regulation should A. be eliminated since regulation has no costs. B. be eliminated since regulation has no benefits. C. be made to demonstrate net positive benefits or else the regulation should not be enacted. D. None of the above.

C. be made to demonstrate net positive benefits or else the regulation should not be enacted.

A firm that sells both​ Internet-security software and computer antivirus software will sell the antivirus software as a​ stand-alone product. It will only sell the​ Internet-security software to consumers in a combined package that also includes the antivirus software. This business practice is called A. versioning. B. entry limit pricing. C. bundling. D. price discrimination.

C. bundling.

If the MRP of labor is less than the wage​ rate, the perfectly competitive firm will A. increase employment. B. raise the wage rate. C. decrease employment. D. maintain the current level of employment.

C. decrease employment.

Advertising targeted at specific​ consumers, typically in the form of mail via the postal​ service, telephone​ calls, or​ e-mail messages, is categorized as A. global marketing. B. interactive marketing. C. direct marketing. D. mass marketing.

C. direct marketing.

The number of firms in a monopolistically competitive market means that A. all firms will have substantial monopoly power since there are so few firms in the industry. B. firms will be dependent on other firms to make output and price changes since there are many firms in the industry. C. each firm has a relatively small share of the total market since there are many firms in the industry. D. firms will likely collude since there are only a few firms in the industry.

C. each firm has a relatively small share of the total market since there are many firms in the industry.

A perfectly competitive firm that hires labor and sells its product in purely competitive markets will A. have a horizontal supply curve for its product. B. face a​ downward-sloping demand curve for its product. C. have a​ downward-sloping demand curve for labor. D. have a horizontal demand curve for labor.

C. have a​ downward-sloping demand curve for labor.

Information products use​ information-intensive inputs and are characterized by A. no​ short-run fixed​ costs, and low marginal costs. B. low fixed costs and low marginal costs. C. high fixed costs but low marginal costs. D. low fixed costs but high marginal costs. E. high fixed costs and high marginal costs.

C. high fixed costs but low marginal costs.

Under bilateral​ monopoly, the wage rate is A. equal to the competitive wage rate. B. lower than the competitive wage rate. C. indeterminate. D. higher than the competitive wage rate.

C. indeterminate.

The monopolistically competitive firm at a level of output of Q1 in the diagram is A. not in​ long-run equilibrium. B. earning a positive economic profit. C. in​ long-run equilibrium. D. earning negative economic profits.

C. in​ long-run equilibrium.

The table at the right shows recent data regarding worldwide market shares of producers of inkjet printers. Use the table to answer the following questions. a. Suppose that consumer demands for inkjet​ printers, the prices of which are readily observable in office supply outlets and at Internet​ sites, are growing at a stable pace. Discuss whether circumstances are favorable to an effort by firms in this industry to form a cartel. As long as their products are A. not too​ similar, conditions are favorable to form a cartel since there are relatively large number of firms and prices are observable. B. not too​ differentiated, conditions are favorable to form a cartel since there are relatively large number of firms and prices are observable. C. not too​ differentiated, conditions are favorable to form a cartel since there are relatively few firms and prices are observable. D. not too​ similar, conditions are favorable to form a cartel since there are relatively few firms and prices are observable. b. If the firms successfully establish a​ cartel, why will there naturally be pressures for the cartel to break​ down, either from within or from​ outside? A. in the​ cartel, especially the large​ ones, have an incentive to cheat by expanding output at the higher cartel​ price, and positive economic profits will induce non cartel firms to enter the market. B. Firms in the​ cartel, especially the small​ ones, have an incentive to cheat by expanding output at the higher cartel​ price, and positive economic profits will induce non cartel firms to enter the market. C. Firms in the​ cartel, especially the small​ ones, have an incentive to cheat by expanding output at the higher cartel​ price, and positive economic profits will induce non cartel firms to start a price war. D. Firms in the​ cartel, especially the large​ ones, have an incentive to cheat by expanding output at the higher cartel​ price, and positive economic profits will induce non cartel firms to start a price war.

C. not too​ differentiated, conditions are favorable to form a cartel since there are relatively few firms and prices are observable B. Firms in the​ cartel, especially the small​ ones, have an incentive to cheat by expanding output at the higher cartel​ price, and positive economic profits will induce non cartel firms to enter the market.

The difference between monopolistic competition and pure monopoly is that in comparison to monopolistic​ competition, pure monopoly has A. at least one​ competitor, a patented​ product, little price​ control, and few entry barriers. B. at least one​ firm, a patented​ product, some price​ control, and few entry barriers. C. one​ firm, a unique​ product, price​ control, and entry barriers. D. one​ firm, a patented​ product, some price​ control, and entry barriers.

C. one​ firm, a unique​ product, price​ control, and entry barriers.

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.75​, price is $4.50​, marginal revenue is $2.00​, and marginal cost is $2.50. This firm is A. operating at a loss and is maximizing profits. B. making positive profits and is producing too few units to maximize profits. C. operating at a loss and is producing too many units to maximize profits. D. making positive profits and is producing too many units to maximize profits.

C. operating at a loss and is producing too many units to maximize profits.

If there is no product differentiation at​ all, then the individual firm has a demand curve that is A. slightly downward sloping and identical the firm in monopolistic competition. B. perfectly inelastic and identical to the firm in perfect competition. C. perfectly elastic and identical to the firm in perfect competition. D. unit elastic and identical to the firm in perfect competition.

C. perfectly elastic and identical to the firm in perfect competition.

Which of the following is true regarding the view of this type of business practice (bundling) by U.S. antitrust​ authorities? A. Antitrust authorities are very tolerant of this practice. B. This is viewed as similar to versioning. C. practice enables a company to engage in price discrimination by charging different prices to different groups. D. All of the above are true.

C. practice enables a company to engage in price discrimination by charging different prices to different groups.

The greater the monopolistically competitive​ firm's success at product differentiation the lower is​ (are) the​ firm's A. opportunities for collusive behavior. B. options for altering product price. C. price elasticity of demand. D. None of the above are correct.

C. price elasticity of demand.

In​ practice, regulators generally A. allow firms to do whatever they want. B. require firms to make losses. C. require firms to set price equal to average cost. D. require firms to set price equal to marginal cost

C. require firms to set price equal to average cost.

Research into genetically modified crops has led to significant productivity gains for countries such as the United States that employ these techniques. Countries such as the European Union member​ nations, however, have imposed controls on the import of these​ products, citing concern for public health. The European​ Union's regulation of genetically modified crops is an example of A. capture​ hypothesis, if their goal is to protect their population from potential health hazards. B. moral hazard problem if they want to reduce their risks of getting ill. C. share-the-gains, share-the-pains​ hypothesis, if they have genuine health concerns. D. lemons problem because there is a potential for asymmetric information.

C. share-the-gains, share-the-pains​ hypothesis, if they have genuine health concerns.

In order to reduce the lemons​ problem, government regulation should be in the form of A. neither social nor economic regulation because the lemons problem cannot be eliminated. B. a combination of social and economic regulation to get rid of all the lemons from the market. C. social​ regulation, so as to minimize adverse market spillovers. D. economic​ regulation, so as to improve the quality of the products sold.

C. social​ regulation, so as to minimize adverse market spillovers.

The downward slope of the demand curve of a monopolistically competitive firm implies that the firm has A. no monopoly power over​ price, and therefore advertising will not increase profits. B. constant returns to scale. C. some monopoly power over​ price, and therefore advertising may increase profits. D. increasing returns to scale.

C. some monopoly power over​ price, and therefore advertising may increase profits.

The first legislation enacted to control the creation and growth of monopoly in the U.S. was A. the Federal Trade Commission Act. B. the​ Robinson-Patman Act. C. the Sherman Antitrust Act. D. the Clayton Act.

C. the Sherman Antitrust Act.

The theory that regulators often end up adopting the views of the regulated is known as A. the deregulation hypothesis. B. the​ share-the-gains, share-the-pains hypothesis. C. the capture hypothesis. D. None of the above.

C. the capture hypothesis.

According to game​ theory, the strategic interaction between two or more individuals can take the form of A. a cooperative game. B. a​ zero-sum game. C. a​ non-cooperative game. D. All of the above are correct.

D. All of the above are correct.

The monopolist hires fewer workers than the perfect competitor because A. the MRP curve for the monopolist is above the MRP curve of the perfect competitor. B. product price must rise for the monopolist to sell more. C. the monopolist produces less than the perfect competitor and needs less​ labor, other things being equal. D. None of the above.

C. the monopolist produces less than the perfect competitor and needs less​ labor, other things being equal.

The largest components of federal regulation are A. consumer safety and workplace conditions. B. finance and banking and the environment. C. the transportation sector and the environment. D. the transportation sector and the banking sector.

C. the transportation sector and the environment.

If a firm is selling a search good it is more likely to A. earn a positive economic profit. B. use persuasive advertising. C. use informational advertising. D. be an information product.

C. use informational advertising.

Selling products in slightly altered forms to different groups of customers is known as​ ________, and it is​ ________ to constitute a form of price discrimination by U.S. antitrust authorities. A. bundling; perceived B. bundling; not perceived C. versioning, not perceived D. versioning; perceived

C. versioning, not perceived

A​ positive-sum game occurs A. when the gains received by one player are exactly offset by the losses of the other. B. whenever any of the values in the payoff matrix are positive. C. when the sum of the two​ players' outcomes is positive. D. whenever the payoffs to the two players are equal.

C. when the sum of the two​ players' outcomes is positive.

Margianl Physical Product

Change in total physical output

Classify each of the following as an example of direct​ (D), interactive​ (I), and/or mass marketing​ (MM). A mortgage company targets a list of specific low risk borrowers for a barrage of​ e-mail messages touting its low interest rates and fees. _____ The sales force of a pharmaceutical company visits​ physicians' offices to promote new medications and to answer​ physicians' questions about treatment options and possible side effects. _____ An online bookseller pays fees to an Internet search engine to post banner ads relating to each search topic chosen by someone conducting a​ search; in part this helps promote the​ bookseller's brand, but clicking on the banner ad also directs the person to a Web page displaying books on the topic that are available for purchase. _____ A national rental car chain runs advertisements on all of the​ nation's major television networks. _____

D D I MM

A firm is minimizing costs of production. The wage rate is ​$125 per​ worker, and the relevant price of capital is ​$ 500 per unit. The price of the final product is ​$25​, and the marginal product of labor at the​ cost-minimizing quantity of labor is 50. The marginal product of capital is A. 5,000 units. B. 50 units. C. 5 units. D. 200 units.

D. 200 units

How many workers will this firm employ if the weekly wage is ​$300​? A. 0 B. 27 C. 28 D. 29

D. 29

Suppose that a company based in​ Dallas, Texas, confronts only four other rival firms. Its own market share is 26 ​percent, which ties it with the other largest producer and seller in the industry. The other three firms each have a 16.00 percent market share. What is the​ four-firm concentration ratio for this​ industry? The​ four-firm concentration ratio for this industry is A. 32.0 percent. B. 74.0 percent. C. 52.0 percent. D. 84.0 percent.

D. 84.0 percent.

Suppose that a company based in​ Dallas, Texas, initially confronts only four other rival firms. Its own market share is 31 ​percent, which ties it with the other largest producer and seller in the industry. The market share of each of the other three firms is 12.67 percent. Then a sixth​ firm, located in​ Cleveland, Ohio, enters the same industry. The new firm captures 6.33percent market​ share, and the market share of one of the smallest three original incumbents declines to 6.33 percent as well. After the Cleveland​ firm's entry into the​ industry, what are the values of the​ four-firm concentration ratio and of the​ Herfindahl-Hirschman index? After the Cleveland​ firm's entry into the​ industry, the​ four-firm concentration ratio for this industry is A. 62.7 percent. B. 81.0 percent. C. 74.7 percent. D. 87.3 percent.

D. 87.3 percent.

How can an oligopoly form when there are network effects and market​ feedback? A. Firms will engage in limit pricing. B. Firms will successfully drive out their competitors when they pick a market leader and match any price changes made by the leader. C. Firms will invest in excess productive capacity to signal other firms that they can outlast their competitors in a price war. D. A few firms may be able to capture most of the growth in demand that is caused by positive market feedback.

D. A few firms may be able to capture most of the growth in demand that is caused by positive market feedback.

Which of the following is not one of the conditions that make it more likely that firms will be able to coordinate their efforts to restrain output and detect​ cheating? A. Prices are easily observable. B. Firms in the industry produce nearly identical products. C. A small number of firms in the industry. D. Market demand tends to be volatile.

D. Market demand tends to be volatile.

What is the appropriate type of​ two-sided market where Realtor.com operates as a platform​ firm? A. Audience−making market. B. Transaction− based market. C. Shared−input market. D. Matchmaking market

D. Matchmaking market

Which of the following is an explanation of the share−the−gains, share−the−pains theory​? A. People who have been in an industry are most likely to be asked to be regulators of the industry. B. In some​ markets, sellers have more information about products than buyers. C. When products have too many warning labels, consumers may not read any of them. D. Regulators who are interested in keeping their jobs must please both the industry and consumers

D. Regulators who are interested in keeping their jobs must please both the industry and consumers

Which antitrust law has two main​ provisions, one against conspiring with others to restrict competition and the other making it a felony to monopolize or attempt to​ monopolize? A. Federal Trade Commission Act B. Robinson-Patman Act C. Clayton Act D. Sherman Act

D. Sherman Act

Which of the following statements explains why the marginal cost pricing rule results in an economic loss for a natural​ monopoly? A. Marginal cost is constant and equal to price. B. The demand curve is downward​ sloping; therefore, price falls as quantity increases. C. A​ firm's marginal revenue is always less than its price. D. The ATC curve is downward​ sloping; therefore, marginal cost is lower than average total cost.

D. The ATC curve is downward​ sloping; therefore, marginal cost is lower than average total cost.

Separation of the production of electricity from its delivery has led to considerable deregulation of producers. a. Which of the following statements is true regarding the monopoly power in electricity​ industries? A. The production of electricity is most susceptible to natural monopoly because the producers of electricity have exclusive ownership of the wire networks. B. The distribution of electricity has no economies of scale but the production of electricity has significant economies of scale. C. The electricity industries are treated as network monopolies as the average cost of producing and distributing electricity declines as the output increases. D. The distribution of electricity is most susceptible to natural monopoly because there are economies of scale associated with the distribution networks or grids.

D. The distribution of electricity is most susceptible to natural monopoly because there are economies of scale associated with the distribution networks or grids.

Which of the following characteristics is true for both perfectly competitive and monopolistically competitive firms in the long​ run? A. Price elasticity of demand is infinite. B. Price equals marginal cost. C. Price equals minimum average total cost. D. There are zero economic profits.

D. There are zero economic profits.

Psychotherapy represents A. an experience​ good, since people must actually consume before they can determine their qualities. B. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. C. a search​ good, since people must actually consume before they can determine their qualities. D. a credence​ good, one with qualities that might be difficult for consumers lacking expertise to assess without assistance. E. an experience​ good, possessing qualities that are relatively easy for consumers to assess in advance of their purchase. F. a credence​ good, since people must actually consume before they can determine their qualities.

D. a credence​ good, one with qualities that might be difficult for consumers lacking expertise to assess without assistance.

A situation where a​ consumer's willingness to use an item depends on how many others use it is A. price-leadership. B. a​ positive-sum game. C. a vertical merger. D. a network effect.

D. a network effect.

Asymmetric information refers to a situation in which A. producers and consumers exchange information. B. producers and consumers have identical information. C. a consumer has product information that the producer lacks. D. a producer has product information that the consumer lacks.

D. a producer has product information that the consumer lacks.

A wool overcoat represents A. an experience​ good, since it possess qualities that are relatively easy for consumers to assess in advance of their purchase. B. a search​ good, since people must actually consume before they can determine their qualities. C. a credence​ good, since people must actually consume before they can determine their qualities. D. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. E. an experience​ good, since people must actually consume before they can determine their qualities. F. a credence​ good, since it possess qualities that are relatively easy for consumers to assess in advance of their purchase.

D. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

Research into genetically modified crops has led to significant productivity gains for countries such as the United States that employ these techniques. Countries such as the European Union member​ nations, however, have imposed controls on the import of these​ products, citing concern for public health. Given the​ situation, the European​ Union's regulation of genetically modified crops is A. an economic regulation. B. a rate of return regulation. C. a cost of service regulation. D. a social regulation.

D. a social regulation.

The marginal factor cost curve is​ ________ whenever the supply curve is upward sloping. A. the same as the supply curve B. below the supply curve C. nonexistent D. above the supply curve

D. above the supply curve

Athletic socks represent A. an experience​ good, since people must actually consume before they can determine their qualities. B. a search​ good, since people must actually consume before they can determine their qualities. C. a credence​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. D. an experience​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. E. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. F. a credence​ good, since people must actually consume before they can determine their qualities.

D. an experience​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

Assume that every time you wanted to take this quiz you were charged a fee. The​ publisher's cost for developing the quizzes and making them available does not vary with the number of times you or anyone else takes the quizzes. These quizzes A. will have increasing marginal cost for the publisher. B. are a search good. C. will have a​ U-shaped average total cost curve for the publisher. D. are known as an informational product.

D. are known as an informational product.

The four types of ​two-sided markets are​ _________ markets,​ __________ markets,​ __________ markets, and​ __________ markets. A. health​ services; matchmaking;​ transaction-based; shared-input. B. ​audience-making; wholesalers;​ transaction-based; shared-input. C. ​audience-making; matchmaking;​ transaction-based; government services. D. audience-making; matchmaking;​ transaction-based; shared-input

D. audience-making; matchmaking;​ transaction-based; shared-input

b. Suppose there is an actual natural monopoly in the electricity industry. In that​ case, the preferred method of regulating these industries should be A. marginal cost pricing because the natural monopolies will have no incentive to produce if price is equal to average cost. B. the marginal cost pricing because marginal cost is less than average cost and so the market price remains low. C. marginal cost pricing because marginal cost is more than average cost and the firms make a higher profit. D. average cost pricing because the firms will cover all their costs if the price is set equal to average cost.

D. average cost pricing because the firms will cover all their costs if the price is set equal to average cost.

Last​ weekend, Bob attended the university football game. At the opening​ kickoff, the crowd stood up. Bob therefore had to stand up as well to see the game. In this​ case, Bob was participating in A. a dynamic game of​ strategy, which is played over time. B. a cooperative game of​ strategy, where participants collectively choose their strategy to maximize their joint payoffs. C. an NCAA football game. D. a​ non-cooperative game of​ strategy, where participants independently choose their strategy to maximize their payoffs. When Bob stood up as a response to the standing​ crowd, he was A. following a​ tit-for-tat strategy. B. following a dominated strategy. C. following a dominant strategy. D. perfecting a​ "wave."

D. a​ non-cooperative game of​ strategy, where participants independently choose their strategy to maximize their payoffs. A. following a​ tit-for-tat strategy.

If the industry shown in the graph to the right​ unionizes, the wage rate will be A. $25. B. ​$15. C. ​$45. D. between​ $12.50 and​ $25.

D. between​ $12.50 and​ $25.

Search goods are goods that consumers A. find difficult to locate. B. must consume in order to assess properly. C. find difficult to assess properly. D. can easily evaluate before consumption.

D. can easily evaluate before consumption.

The main objective of advertising for a monopolistically competitive firm is to A. earn​ long-run profits. B. eliminate competitors. C. reduce costs. D. differentiate its product from those of other firms and boost demand

D. differentiate its product from those of other firms and boost demand

Why have U.S. companies opted to increase the amount of advertising in digital​ formats? A wide variety of industries utilize digital ads in order to A. ease the entry of new firms into their respective markets. B. persuade viewers to spend more time on Internet sites and social network pages. C. signal that it intends to stay in business for a long time. D. differentiate their products.

D. differentiate their products.

An individual firm in a monopolistically competitive industry faces a​ ________ demand curve and​ a(n) ________ marginal revenue curve. A. horizontal; vertical B. horizontal; downward-sloping C. downward-sloping; upward-sloping D. downward-sloping; downward-sloping

D. downward-sloping; downward-sloping

Two oligopolists have to decide on their pricing strategy. Each can choose either a high or a low price. If they both choose a high​ price, each will make​ $12 million, but if they both choose a low​ price, each will make only​ $8 million. If one sets a high price and the other a low​ one, the​ low-priced firm will make​ $16 million, but the​ high-priced firm will make only​ $4 million. In the absence of​ collusion, A. each will choose the high price. B. one will choose the low price and the other will choose the high price. C. only the first to choose the high price will be willing to keep the high price. D. each will choose the low price.

D. each will choose the low price

A bank in​ Austin, Texas, has allowed its state banking​ license, under which it had been regulated by the Federal Deposit Insurance​ Corporation, a U.S. bank​ regulator, to expire. It has switched to a federal banking​ license, under which it is now regulated by the Office of the Comptroller of the​ Currency, another bank regulator. Do these regulators subject the bank to social or economic​ regulation? These regulators subject the bank to A. economic regulation because they have the power to regulate the activities of all firms throughout the economy. B. social regulation because they regulate only the activities of banks. C. social regulation because they have the power to regulate the activities of all firms throughout the economy. D. economic regulation because they regulate only the activities of banks.

D. economic regulation because they regulate only the activities of banks.

A monopolistic competitor producing an information product will set price A. greater than average total cost. B. equal to average variable cost. C. equal to marginal revenue. D. equal to average total cost.

D. equal to average total cost.

Other things​ equal, an increase in the productivity of labor will lead to A. fewer workers being hired. B. no change in the number of workers being hired. C. lower wages. D. higher wages.

D. higher wages.

Is each of the following items more likely to be the subject of an informational or a persuasive​ advertisement? For an office copying machine a firm is more likely to use A. persuasive advertising intended to induce a consumer to try the product. B. a mix of informational and persuasive advertising. C. informational advertising intended to induce a consumer to try the product. D. informational advertising that emphasizes the features of its product. E. persuasive advertising that emphasizes the features of its product.

D. informational advertising that emphasizes the features of its product.

The market demand curve for labor A. is vertical. B. is horizontal. C. is upward sloping. D. is downward sloping.

D. is downward sloping.

If the natural monopoly shown in the accompanying graph uses marginal cost​ pricing, then A. it will make​ short-run economic losses but​ long-run economic profits. B. it will make zero economic profit. C. it will reap​ long-run positive economic profit. D. it will make an economic loss.

D. it will make an economic loss.

An unregulated natural monopolist will produce to the point where A. price equals​ long-run average cost. B. marginal revenue equals demand. C. price equals marginal cost. D. marginal revenue equals marginal cost.

D. marginal revenue equals marginal cost.

Advertising intended to reach as many consumers as possible, typically through television, newspaper, or magazine ads is A. interactive marketing. B. direct marketing. C. credible marketing. D. mass marketing

D. mass marketing.

The Sherman Act outlaws A. mergers. B. the existence of monopolies. C. price discrimination. D. monopolization.

D. monopolization.

Nonprice competition is a characteristic of all of the following market structures except A. oligopoly. B. pure monopoly. C. monopolistic competition. D. perfect competition.

D. perfect competition.

For a deodorant a firm is more likely to use A. informational advertising that emphasizes the features of its product. B. a mix of informational and persuasive advertising. C. informational advertising intended to induce a consumer to try the product. D. persuasive advertising intended to induce a consumer to try the product. E. persuasive advertising that emphasizes the features of its product.

D. persuasive advertising intended to induce a consumer to try the product.

For a soft drink a firm is more likely to use A. a mix of informational and persuasive advertising. B. persuasive advertising that emphasizes the features of its product. C. informational advertising intended to induce a consumer to try the product. D. persuasive advertising intended to induce a consumer to try the product. E. informational advertising that emphasizes the features of its product.

D. persuasive advertising intended to induce a consumer to try the product.

Evidence shows that many young men substitute time that otherwise could be spent on​ wage-earning work with leisure time devoted to playing video games. Use the accompanying figure to determine the new equilibrium that will occur if more young men continue playing video games instead of supplying labor. The new equilibrium will occur at A. point A B. point B C. point C D. point D

D. point D

For the purely competitive​ firm, the marginal revenue product is A. the same thing as marginal factor cost. B. the same thing as marginal product. C. the marginal product times the wage rate. D. the marginal product times the product price.

D. the marginal product times the product price.

Suppose technological change occurs so that a regulated firm could produce the product at substantially lower costs.​ Further, the regulatory agency requires the firm to lower prices to​ consumers, but the reduction in price is less than the reduction in costs so that profits for the firm increase too. This would be evidence in support of A. the capture theory of regulation. B. no current theory of regulation. C. a public interest theory of regulation that says regulators always act in the best interests of consumers. D. the​ share-the-gains, share-the-pains theory of regulation.

D. the​ share-the-gains, share-the-pains theory of regulation

Using the United States as a whole would be inappropriate as the relevant geographic market when an antitrust case involved A. two auto producers. B. two oil producers. C. CNN and FOX. D. two homebuilders.

D. two homebuilders

Which of the following are products or services of oligopolists that you regularly purchase or​ own? A. ovens, refrigerators, and hair salon services B. ​refrigerators, bakery​ goods, and courier services C. ​automobiles, office​ supplies, and personal computers D. ​automobiles, personal​ computers, and gasoline

D. ​automobiles, personal​ computers, and gasoline

A​ heavy-duty filing cabinet represents A. a credence​ good, since it possess qualities that are relatively easy for consumers to assess in advance of their purchase. B. an experience​ good, since people must actually consume before they can determine their qualities. C. an experience​ good, since it possess qualities that are relatively easy for consumers to assess in advance of their purchase. D. a credence​ good, since people must actually consume before they can determine their qualities. E. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase. F. a search​ good, since people must actually consume before they can determine their qualities.

E. a search​ good, since it possesses qualities that are relatively easy for consumers to assess in advance of their purchase.

For an automobile loan a firm is more likely to use A. a mix of informational and persuasive advertising. B. informational advertising intended to induce a consumer to try the product. C. persuasive advertising intended to induce a consumer to try the product. D. persuasive advertising that emphasizes the features of its product. E. informational advertising that emphasizes the features of its product.

E. informational advertising that emphasizes the features of its product.

_____ regulation applies to specific​ industries, whereas ____ regulation applies to businesses throughout the economy. Governments commonly regulate the prices and quality of services provided by​ electric, gas, and other​ utilities, which traditionally have been considered ______ monopolies. Governments also single out various nonmonopolistic​ industries, such as the financial and transportation​ industries, for special forms of ______ regulation. Among the common forms of _______ regulation covering all industries are the​ occupational, health, and safety rules that federal and state governments impose on producers.

Economic social natural economic social

Maximum wage payed

Equal to marginal revenue product

Explain how the following events would affect the demand for labor. a. A new education program administered by the company increases​ labor's marginal product. The demand for labor would ________. b. The firm completes a new plant with a larger workspace and new machinery that workers can utilize and that does not substitute for the functions provided by​ workers' labor. The demand for labor would _______.

Increase Increase

Classify each of the following as an example of direct​ (D), interactive​ (I), and/or mass marketing​ (MM). A cosmetics firm pays for​ full-page display ads in a number of top​ women's magazines. _____ A magazine distributor mails a​ fold-out flyer advertising its products to the addresses of all individuals it has identified as possibly interested in magazine subscriptions. _____ An online gambling operation arranges for​ pop-up ads to appear on the computer screen every time a person uses a media player to listen to digital music or play video​ files, and clicking on the ads directs an individual to its web gambling site. _____ A car dealership places advertisements in newspapers throughout the region where potential customers reside. _____

MM D I MM

Marginal Revenue Product

Marginal physical product x price

______ effects exist when a​ consumer's demand for an item depends in part on how many other consumers also use the product. _____ market feedback arises if consumption of a product by a sufficient number of individuals induces others to purchase it. _____ market feedback can take place if a falloff in usage of a product by some consumers causes others to stop purchasing the item. In an industry with differentiated products subject to network​ effects, an oligopoly may arise if a few firms can reap most of the sales _____ resulting from _____ market feedback. In ​two-sided markets, an intermediary firm called a _____ provides services that link other groups of producers and consumers that are known as _____

Network Positive Negative gains positive platform end users

The first national antitrust law was the ______ Antitrust Act of​ 1890, which made illegal every contract and combination in restraint of trade. It remains the single most important antitrust law in the United States. The ______ Act of 1914 made illegal various specific business​ practices, such as price discrimination. The ______ of 1914 and its 1938 amendment established the Federal Trade Commission and prohibited​ "unfair or deceptive acts or practices in​ commerce." The ______ of 1936 aimed to prevent large producers from driving out small competitors by means of selective discriminatory price cuts. As part of the enforcement of antitrust​ laws, officials at the U.S. Department of Justice and the Federal Trade Commission typically define a ______ market and compute the change in and new level of the ______ to assess whether to legally challenge a proposed merger. Antitrust enforcers must decide whether producers seek to monopolize the relevant​ market, which involves determining both the relevant ______ market and the relevant ______ market. Antitrust authorities generally have not considered product ______​, or offering different versions of essentially the same product for sale at different​ prices, to be illegal price discrimination. U.S. authorities​ have, however, raised antitrust concerns about product ______​, which they view as a method of engaging in ​tie-in sales that require consumers to purchase one product in order to obtain another.

Sherman Clayton Federal Trade Commission Robinson-Patman relevant Herfindahl-Hirschman Index product geographic versioning bundling (practice says versioning but that is incorrect)

______ such as​ words, symbols, and logos distinguish​ firms' products from those of other firms. Firms seek to differentiate their brands through​ advertising, via ______ marketing, ______ ​marketing, or ______ marketing. A firm is more likely to use ______ advertising that emphasizes the features of its product if the item is a search good with features that consumers can assess in advance. A firm is more likely to use ______ advertising to affect​ consumers' tastes and preferences if it sells an experience good. This is an item that people must actually consume before they can determine its qualities. A firm that sells ______ ​good, which is an item possessing qualities that consumers lack the expertise to fully​ assess, typically uses a combination of informational and persuasive advertising.

Trademarks direct mass interactive information persuasive a credence

Consider the accompanying​ table's fictitious sales data ​(in thousands of dollars​) for books sold both over the Internet and in physical retail establishments. Firms have numbers instead of​ names, and Firm 1 generates book sales only over the Internet. Antitrust authorities judge that a single firm possesses​ "monopoly power" if its share of sales in the relevant market exceeds 70 percent. Suppose that the antitrust authorities determine that bookselling in physical retail stores and Internet bookselling are individually separate relevant markets. Does any single firm have monopoly​ power, as defined by the antitrust​ authorities? _____ Firm _____ has monopoly power in the ______ market. Suppose that in fact there is really only a single book​ industry, in which firms compete both in physical retail stores and via the Internet. According to the antitrust​ authorities' measure of monopoly​ power, is there actually cause for​ concern? _____

Yes 1 Internet No

Characterize each of the following as a​ positive-sum game​ (P), a​ zero-sum game​ (Z), or a​ negative-sum game​ (N). Office workers contribute​ $10 each to a pool of​ funds, and whoever best predicts the winners in a professional sports playoff wins the entire sum. _____ After three years of fighting with large losses of human lives and​ material, neither nation involved in a war is any closer to its objective than it was before the war began. ______ Two collectors who previously owned incomplete and nearly worthless sets of trading cards exchange several​ cards, and as a result both end up with completed sets with significant market value. ______

Z N P

You play a card game in your dorm room with three other students. Each player brings​ $5 to the game to bet on the​ outcome, winner take all. ___ A thousand people buy​ $1 lottery tickets with a single payoff of​ $800. ____ Two nations exchange goods in a mutually beneficial transaction. ____

Z N P

When unions set wage rates ______ market clearing​ prices, they face the problem of ______ a restricted number of jobs to workers who desire to earn the higher wages. Unions may pursue any one of three​ goals: (1) to employ ______ union​ members, (2) to maximize total ______ of the​ union's members, or​ (3) to ______ wages for​ certain, usually​ high-seniority, workers. Unions can increase the wage rate of members by engaging in practices that shift the union labor supply curve ______ or shift the demand curve for union labor ______ ​(or both).

above rationing all income maximize inward outward

For each product listed​ below, indicate whether you think all or just a few firms within the industry that produces each product experience market feedback effects. In​ addition, indicate whether the feedback effects are positive or negative. ​Product: Cell phone capable of text messaging Number of firms that experience market feedback​ effects: _____. The market feedback effects are _____. ​ Product: Traditional wire​ long-distance service Number of firms that experience market feedback​ effects: _____. The market feedback effects are _____. ​ Product: Internet service Number of firms that experience market feedback​ effects: _____. The market feedback effects are _____.

all positive most negative most positive

A _____ is a group of firms in an industry that agree to set common prices and output quotas to restrict competition. Characteristics of an industry that make it more likely that firms can coordinate efforts to restrain output and earn economic profits are a _____ number of​ firms, relatively _____ products, easily _____ ​prices, and little _____ in prices. Factors that contribute to the breakdown of a cartel are the _____ of firms seeking the economic profits earned by the cartel members and _____ in economic activity.

cartel small undifferentiated observable variation entry variations

Product compatibility is the capability of an item sold by one firm to function with another​ firm's _____ product. Product compatibility is an​ industry-wide issue for _____ firms selling two or more complementary products subject to _____ effects.

complementary multiproduct network

An industry battle between incompatible product formats can occur if competing firms selling sets of ____ products fail to take into account _____ effects.

complementary network

At every point along the AFC curve in the figure to the​ right, what is true of the dollar amount of this​ firm's total fixed costs at any given point that one might​ select? Total fixed cost is _____ by definition. If the output rate is 50 units in the​ figure, then AFC equals ​$_____ per unit so that TFC equals ​$_____. It follows then​ that, if 324 units are produced per time​ period, AFC must equal ​$______ per unit

constant $50 $2500 $7.72

Since marginal revenue product is _______ along the MRP1 curve and equals the marginal product times the _______​, a rise in the product price to ​$7 per unit causes the MRP curve to shift _______ to MRP2

constant product price up (or right)

The capture hypothesis holds that regulatory agencies will eventually be captured by industry special interests because ______ individually are not greatly influenced by​ regulation, whereas regulated ______ are directly affected. According to the ​share-the-gains, share-the-pains theory of​ regulation, regulators must take into account the interests of three​ groups: the​ __________, __________, and​ __________. A. government; legislators; consumers B. industry; legislators; consumers C. firms; government; consumers D. ​industry; legislators; government Regulation has benefits that are difficult to quantify in dollars. The costs of regulation include direct ______ expenditures on regulatory agencies and ______ explicit and implicit opportunity costs of complying.

consumers firms B. industry; legislators; consumers government firms'

In the figure to the​ right, suppose that We is a wage rate of ​$28 per hour and Wu is a wage rate of ​$41 per hour. In​ addition, Qd is 12,000 workers per​ hour, Qe is 15,000 workers per​ hour, and Qs is 18,000 workers per hour. If each worker hired corresponds to a job available within the unionized​ industry, how many jobs must the union ration at the wage rate Wu​? What is the shortage of​ jobs? The quantity of jobs that the union must ration across its membership at the wage rate Wu ​= ​$41 per hour equals the quantity of labor ______​, which is ______ workers per hour. The shortage of jobs at this wage rate is ______ jobs per hour

demanded by firms 12,000 6,000

The individual perfectly competitive firm faces a perfectly ______ labor supply curve—it can hire all the labor it wants at the going market wage rate. The industry supply curve of labor slopes _______. By plotting an industrywide supply curve for labor and an industrywide demand curve for labor on the same​ graph, we obtain the _______ wage rate in the industry. The labor demand curve can shift because the​ __________ the final product​ shifts, labor​ __________ changes, or the price of a related​ (__________ or​ __________) factor of production changes. A. supply​ of; productivity;​ substitute; complementary. B. demand​ for; productivity;​ substitute; complementary. C. supply​ of; supply;​ substitute; complementary. D. demand​ for; supply;​ substitute; complementary.

elastic upward equilibrium B. demand​ for; productivity;​ substitute; complementary.

Governments tend to regulate industries in which they think market _____ and _____ information problems are most severe. A common justification for government regulation is to protect consumers from adverse effects of _____ information. To address the _____ ​problem, or the potential for _____​-quality products to predominate when asymmetric information is​ widespread, governments often supplement private​ firms' guarantees,​ warranties, and certification standards with liability laws and licensing requirements.

failures asymmetric asymmetric lemons low

The effect of the supply shift is that the market wage rate ______ and equilibrium employment _______

falls rises

When a firm produces an information​ product, the initial or fixed costs are _____. Consequently the average fixed cost and average total cost _____ as the volume of output increases. Since most of the costs are the initial fixed costs of​ development, once the product is​ developed, the _____ cost of producing more units of the product are typically low and _____. In this​ case, then, the low and constant marginal cost is _____ the average cost.

high decrease marginal constant below

Firms that sell information products experience relatively _____ fixed​ costs, but once they have produced the first​ unit, they can sell additional units at a relatively _____ ​per-unit cost.​ Consequently, the manufacturer of an information product experiences​ short-run ______. If a firm sets the price of an information product equal to marginal​ cost, it earns only sufficient revenues to cover its ______ costs. In a​ long-run equilibrium outcome under monopolistic​ competition, the price of an information product equals ______ cost. The​ seller's total revenues exactly cover _____ ​costs, including the opportunity cost of capital.

high low economies of operation variable average total total

In a monopolistically competitive​ industry, a relatively ______ number of firms interact in a _______ competitive market. Because monopolistically competitive firms sell ______ ​products, sales promotion and advertising are common features of a monopolistically competitive industry. There is ______ entry​ (or exit) of new firms in a monopolistically competitive industry.

large highly differentiated easy

When a firm sells its output in a monopoly​ market, marginal revenue is _______ than price. Just as the MRP is the perfectly competitive​ firm's input demand​ curve, the MRP is also the _______ input demand curve. The​ profit-maximizing combination of factors will occur when each factor is used up to the point at which its MRP is equal to its unit _______. To minimize total costs for a given​ output, the​ profit-maximizing firm will hire each factor of production up to the point at which the ______ product per last dollar spent on each factor is equal to the _______ product per last dollar spent on each of the other factors of production. To maximize​ profits, the _______ product of each resource must equal the​ resource's _______

less monopolist's price marginal marginal marginal revenue price

Under the​ Capper-Volstead Act of​ 1922, U.S. farmers are permitted to form cooperative organizations aimed at influencing aggregate production and market prices of their crops.​ Today, many of the​ nation's 10,000 potato farmers are aiming to expand the United Potato Growers of America​ (UPGA), an organization dedicated to restricting potato​ production, pushing up potato​ prices, and boosting profits. The UPGA includes farmers from​ California, Colorado,​ Idaho, Oregon,​ Texas, Washington, and Wisconsin. Members sign an agreement to restrict their production of potatoes. The UPGA uses satellite photography and​ global-positioning-system technology to enforce the agreement and fines members who are caught cheating. Based on the discussion of the factors favoring the organization and enforcement of a​ cartel, what aspects of U.S. potato farming make the ultimate success of the​ UPGA's potato cartel more or less​ likely? The number of firms makes it _____ likely the​ UPGA's cartel will be successful. Being that the product is potatoes makes it _____ likely the​ UPGA's cartel will be successful. The fact that potatoes are publically traded in large highly organized markets makes it _____ likely the​ UPGA's cartel will be successful. If the demand for potatoes suddenly became more​ volatile, that would make it _____ likely the​ UPGA's cartel will be successful.

less more more less

A natural monopoly arises when one firm can produce all of an​ industry's output at a _____ per-unit cost than other firms. A​ profit-maximizing natural monopolist produces to the point at which marginal _____ equals​ long-run marginal _____ and charges the price that people are willing to pay for the quantity produced. Because a natural monopolist that is required to set price equal to​ long-run marginal cost will sustain​ long-run losses and shut​ down, regulators typically allow natural monopolists to charge prices that just cover _____ costs.​ Normally, regulators have done this through ​cost-of-service regulation​, in which prices are based on actual production​ costs, or ​rate-of-return regulation​, in which prices are set to yield a rate of return consistent with _____ economic profits. Technological and regulatory innovations have made the concept of natural monopoly less relevant. In the​ electricity, natural​ gas, and telecommunications​ industries, production increasingly is accomplished by numerous competing firms that _____ their products through regulated _____

lower revenue cost average zero deliver networks

The figure to the right depicts both monopolistically competitive and perfectly competitive firms. In what fundamental ways do these two types of firms behave similarly in a​ long-run equilibrium? In what fundamental ways does the monopolistically competitive firm behave​ differently? Key similarities are that both the monopolistically competitive firm and the perfectly competitive firm face competition from ______ other​ firms, produce at the point where ______​, and have a price ______ average total cost and hence earn ______ economic profits in a​ long-run equilibrium. The key differences are that the demand curve for the monopolistically competitive firm slopes downward because of product ______​, and that its price _______ MR ______ the minimum feasible ATC.

many MR=MC equal to zero differentiation exceeds and exceeds

The ______ economic profits would cause existing firms to ______ the market and could cause the demand curves​ (and marginal revenue​ curves) for exisitng firms to shift ______ substantially. ​Thus, in the long​ run, the typical monopolistically competitive firm would earn ______ economic profits because the​ firm's demand curve would be ______ the ATC curve at the​ profit-maximizing level of output.

negative exit outward

A monopsonist is the only _____ in a market. The monopsonist faces ______​-sloping supply curve of labor. Because the monopsonist faces ______​-sloping supply curve of​ labor, the marginal factor cost of increasing the labor input by one unit is ______ than the wage rate.​ Thus, the marginal factor cost curve always lies ______ the supply curve. A monopsonist will hire workers up to the point at which marginal ______ cost equals marginal _______ product. Then the monopsonist will find the lowest necessary wage to attract that number of​ workers, as indicated by the supply curve.

only buyer an upward an upward greater above factor revenue

The change in total _____ due to a​ one-unit change in one variable _____​, holding all other ______ ​constant, is called the marginal product​ (MP). When we multiply marginal product times _______​, we obtain the marginal revenue product​ (MRP). A firm will hire workers up to the point at which the additional cost of hiring one more worker is equal to the additional revenue generated. For the individual​ firm, therefore, its MRP of labor curve is also its ______ labor curve. The demand for labor is ______ ​demand, _______ from the demand for final output.​ Therefore, a change in the price of the final output will cause ______ the MRP curve​ (which is also the​ firm's demand for labor​ curve).

output input inputs marginal revenue demand for a derived derived a shift in

Industry concentration can be measured by the combined ______ of total _____ accounted for by the top four firms in the industry.

percentage sales

The ______ economic profits would cause new firms to ______the market and could cause the demand curves​ (and marginal revenue​ curves) for exisitng firms to shift ______ substantially.​ Thus, in the long​ run, the typical monopolistically competitive firm would earn ______ economic profits because the​ firm's demand curve would be ______ the ATC curve at the​ profit-maximizing level of output.

positive enter inward zero tangent to

Each oligopolist has a _____ function because oligopolistic competitors are interdependent. They must therefore engage in ______ behavior. One way to model this behavior is to use game theory. Games can be either cooperative or noncooperative. In a ______​-sum ​game, one​ player's losses are exactly offset by another​ player's gains. In a ______​-sum ​game, all players collectively​ lose, perhaps one player more than the others. In a ______​-sum ​game, the players as a group end up better off. Decision makers in oligopolistic firms must devise a strategy. A ______ strategy is one that is generally successful no matter what actions competitors take.

reaction strategic zero negative positive dominant

Evidence shows that many young men substitute time that otherwise could be spent on​ wage-earning work with leisure time devoted to playing video games. What effect will this trend have on the equilibrium labor​ market? If more young men choose to play video games instead of supplying​ labor, the labor supply curve will ______. This will cause the market clearing wage rate to ______ and the equilibrium quantity of labor to ______.

shift to the left rise fall

In the _____ ​run, it is possible for monopolistically competitive firms to make economic profits or economic losses. In the _____ ​run, monopolistically competitive firms will make _____ economic profits—that ​is, they will make a _____ rate of return. Because the monopolistic competitor faces a​ downward-sloping demand​ curve, it does not produce at the minimum point on its average ______ cost curve.​ Hence, we say that a monopolistic competitor has higher average _____ costs per unit than a perfect competitor would have. Chamberlin argued that the difference between the _____ cost of production for a monopolistically competitive firm and the _____ average total cost at which a perfectly competitive firm would produce is the cost of producing​ "differentness."

short long zero normal total total average total minimum

An oligopoly is a market situation with a _____ number of _____ sellers. Oligopoly may result from _____ of​ scale, barriers to​ entry, and _____. _____ mergers involve the merging of one firm with either the supplier of an input or the purchaser of its output. _____ mergers involve the joining of firms selling a similar product.

small interdependent economies mergers Vertical Horizontal

Suppose that all firms in an industry collude to reduce​ output, which raises the product price to ​$6.94 and requires the perfectly competitive firm in the figure to the right to reduce its output from 500 units to 300 units. What is the total dollar amount of this typical perfectly competitive​ firm's economic incentive to join the proposed​ cartel, assuming​ that, after the​ fact, no firms cheat on the specified cartel​ agreement? Explain your reasoning. In the absense of collusion among the​ firms, the typical perfectly competitive​ firm's economic profits are _____ because price _____ average total cost. If ATC​ = ​$5.58 at the reduced output of 300 ​units, then the typical​ firm's economic incentive to participate in the cartel is ​$_____

zero equals $408

Differences in network effects across different groups of end users can induce platforms to establish positive prices to one group but to establish ______ prices or even ______ ​prices, or​ subsidies, for another group.

zero negative

The key characteristics of a monopolistically competitive industry​ are: ​[A] A large number of firms that sell differentiated products that are close substitutes. ​[B] Firms can easily enter or exit a monopolistically competitive industry. ​[C] Because monopolistically competitive firms can increase their profits if they can successfully distinguish their products from those of their​ rivals, they have an incentive to engage in sales promotions and advertising. There are a number of​ fast-food restaurants in​ town, and they compete fiercely. Some restaurants cook their hamburgers over open flames. Others fry their hamburgers. In​ addition, some serve broiled fish​ sandwiches, while others serve fried fish sandwiches. A few serve ice cream cones for​ dessert, while others offer frozen ice cream pies. ______ There is a vast number of colleges and universities across the country. Each competes for top students. All offer similar courses and​ programs, but some have better programs in​ business, while others have stronger programs in the arts and humanities. Still others are academically stronger in the sciences. ______

​[A] A large number of firms that sell differentiated products that are close substitutes. [A] A large number of firms that sell differentiated products that are close substitutes.