Chapters 11 and 13

True

A firm will continue to produce additional output, as long as marginal revenue is greater than marginal cost.

False

A firm with no competition faces a perfectly inelastic demand curve.

True

A firm's short-run supply curve is its marginal cost curve.

False

A firm's total profit is equal to the marginal cost of production multiplied by the quantity produced.

inelastic; demand

A monopolist can raise its price further above marginal cost, the more ______ is the ______ for its product.

MR2

In this figure, the monopolist's marginal revenue curve is:

True

A competitive firm maximizes profits when price equals marginal cost.

II and III only

A market is considered perfectly competitive if:I. there is a lot of product differentiation among sellers.II. there are many sellers, each small relative to the total market.III. the product sold is similar across sellers.IV. there are only a few buyers.

True

A monopolist maximizes profits where marginal revenue equals marginal cost.

True

A monopolistic industry will have lower output and higher prices than a competitive industry.

True

A monopoly is a firm with market power, and market power may arise from economies of scale, patent protection, and innovation.

False

A monopoly maximizes profit by finding the output level where the difference between marginal revenue and marginal costs is as large as possible.

there are economies of scale over the relevant range of output.

A natural monopoly occurs when:

the existence of industry clusters.

Economists study decreasing cost industries in order to explain:

False

Explicit costs incurred by firms include the firm's opportunity costs.

total revenue minus total cost

Firm profit is defined as:

greater than average cost

Firms are profitable when price is:

less than average cost.

Firms earn negative profit when price is:

False

Firms have less pricing power if their firm-level product is more unique.

setting a price equal to the market price.

Firms in a perfectly competitive industry maximize profits by:

$60

If this figure represents the demand and cost curves for a firm with market power, what price should the firm charge to maximize profits?

28*117= $3276

Refer to the figure. A profit-maximizing monopolist faces the market environment described by the figure shown. What is the monopolist's total revenue? Your Answer:

$96

Refer to the figure. If you are one of literally thousands of maple syrup producers and you wanted to increase your maple syrup production from 100 gallons to 110 gallons, what price would you charge?

$0

Refer to the figure. In the long run, what do you expect this firm's economic profit or loss to be?

80

Refer to the figure. The competitive industry level of output is:

b - d

Refer to the figure. The monopolist's price markup is:

area A

Refer to the figure. Which of the following answers correctly indicates the profit earned by this monopolist at the profit-maximizing quantity?

Panel A

Refer to the set of four panels in the figure. Which panel shows the typical shape of the average cost curve in a competitive market?

Q2

(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by producing at output equal to:

$100

(Figure: Maximum Willingness to Pay) Refer to the figure. What is the maximum price that the consumer is willing to pay for 100 units?

14 units of output

(Figure: Monopoly 8) If the government set price equal to average cost, the natural monopolist in this figure would produce:

False

A firm should always shut down if it is earning negative profits.

True

A firm should exit an industry if price is less than average cost.

P- AC < 0.

A firm should exit an industry if:

False

A firm will attain more monopoly power as demand for its product becomes more elastic.

True

A government can maximize efficiency in monopoly markets by setting prices equal to the monopolist's average cost of production albeit at the cost of reduced long term innovation.

True

Average cost is equal to total cost divided by quantity.

False

For a monopoly, the entire consumer surplus is transferred to the monopolist as profit.

A; C

(Figure: Monopoly 6) If the market in this figure is a monopoly, the consumer surplus is area ______, and the deadweight loss is area ______.

triangle adf

(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under competition is represented by:

triangle abc

(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under monopoly is represented by:

triangle cef.

(Figure: Monopoly Markup) Refer to the figure. The deadweight loss attributable to monopoly is:

$420

(Figure: Monopoly Profits) Refer to the figure. The monopolist earns a profit of:

P = $16.50; Q = 40

(Figure: Monopoly Profits) Refer to the figure. What is the monopolist's optimal price and output level?

$160

(Figure: Costs of Oil Production) Refer to the figure. Assuming that price equals marginal cost, the profit of producing eight barrels of oil is:

$75

(Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:

9 units of output

(Figure: Monopoly 8) The natural monopolist in this figure would produce:

the long run.

Economists call the time after all exit or entry has occurred:

def

Refer to the figure. Deadweight loss caused by monopoly pricing is represented by the area:

profit; supply curve to shift to S2

(Figure: Industry Firms) Refer to the figures. The market is characterized by demand curve D2 and supply curve S1. The firms in the industry are earning ________, which will cause the______________.

P2

(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by charging a price equal to:

110

(Figure: Maximum Willingness to Pay) Refer to the figure. What is the profit-maximizing quantity for this monopolist?

$45

(Figure: Monopolist 3) In this figure, the monopolist's maximum profit is:

9 units of output at $11 per unit.

(Figure: Monopolist 3) In this figure, the profit-maximizing monopolist sells:

A + B + C

(Figure: Monopoly 6) If the market in this figure is a competitive market, consumer surplus is given by area(s):

not change

(Figure: Paint Market 2) If the fixed costs were halved, deadweight loss would:

$125,000

(Figure: Paint Market 2) What is the deadweight loss (if any) from the monopoly in this diagram relative to its optimum quantity?

Panel A

(Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which panel shows a competitive firm making an economic loss?

Panel C

(Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which panel shows a competitive firm making positive economic profits?

Panel B

(Figure: Profits and Competitive Firms) Refer to the four panels in the figure. Which panel shows a competitive firm making zero economic profits?

15 units.

(Figure: Two-Firm Industry) Refer to the figures. At a market price of $20, the total quantity supplied in the industry is:

45 units

(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

False

A profit-maximizing monopolist chooses the output level where MR = MC and chooses the corresponding price from the marginal revenue curve.

False

Average total cost is equal to total cost divided by profit.

natural

Economists call a single firm that can supply the entire market at a lower cost than two or more firms a __________ monopoly.

False

Deadweight loss is present in both competitive and monopoly markets.

False

Decreasing cost industries have supply curves that slope downward forever.

implicit costs

Economic profit differs from accounting profits because of its inclusion of:

False

Economic profit is equal to total revenue minus explicit costs.

I, II, and III

Firms in competitive industries:I. can only charge a price equal to the market price.II. cannot charge any more than the market price.III. will earn less profit if they charge less than the market price.

price falls below the average cost.

Firms should exit the market if:

twice the slope

For a linear demand curve, the marginal revenue curve has:

when a monopolist lowers the price to sell more units, it must lower the prices of all units sold.

For a monopolist, MR is always less than P because:

the firm has no ability to influence the market price.

For a small firm in an extremely competitive industry, marginal revenue is always equal to price because:

a profit of $300

How much profit is the firm making at the profit-maximizing quantity?

False

If P = $20, AC = $16, and Q = 100, then profit = $3,600.

6

Use the figure. The profit-maximizing output for this firm is:

$100,000

What is the profit or loss for this monopoly?