ECON 101 Final Exam Study

The tool that economists use to analyze the mutual interdependence of oligopolies is

game theory.

When firms in a perfectly competitive market are earning an economic profit, in the long run

new firms will enter the market

One way to identify oligopoly is to

use the Herfindahl-Hirschman Index (HHI).

For a perfectly competitive syrup producer whose average total cost curve does not change, an economic profit could turn into an economic loss if the

market demand for syrup decreases.

In the short run, a perfectly competitive firm ________ make an economic profit and ________ incur an economic loss.

might; might

The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, Paul produces ________ pillows per hour, and if the market was perfectly competitive, ________ pillows per hour would be produced.

3,000; 4,000

A single-price monopoly can sell 2 units for $8.50 per unit. In order to sell 3 units, the price must be $8.00 per unit. The marginal revenue from selling the third unit is

$7.00

If we compare a perfectly competitive market to a single-price monopoly with the same costs, the monopoly sells

a smaller quantity at a higher price.

Which of the following is a legal barrier to entry? i. public franchise ii. government license iii. patent

i, ii, and iii

When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they can make a long-run economic profit similar to

Monopoly.

Which of the following is a characteristic of monopoly?

There are barriers to enter the market.

The above figure shows a perfectly competitive firm. If the market price is $5, the firm

might shut down but more information is needed about the AVC.

The above figure shows the market demand curve for telephone calls. Suppose the marginal cost of a telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry. If the firms in the industry operate as perfect competitors, there are ________ minutes of calls made per hour.

more than 7 million and less than or equal to 9 million

If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue

will also be $5.

A single-price monopoly transfers

consumer surplus to producers

A cartel is a collusive agreement among a number of firms that is designed to

decrease output and raise prices

In the long run, perfectly competitive firms will exit the market if the price is

less than average total cost

The graph shows the the LRAC facing a ________ where ________ of scale exist when 5 million units are produced.

natural monopoly; economies

In the above figure, the profit-maximizing output for this single-price monopoly is ________ units and the price is ________.

200; $30

Use the figure above to answer this question. Pam gives the only piano lessons in town. In order to maximize profit, Pam should give ________ per day and charge ________ per lesson.

4; $40

For a perfectly competitive rancher in Wyoming, if the price does not change, an economic profit could turn into an economic loss if the

average total cost curve shifts upward.

In an oligopoly, there are

barriers to entry and only a few firms

To be able to price discriminate, a firm must

be able to prevent resales of its good.

Elsie is a perfectly competitive dairy farmer. The market price of milk was $2.40 but just fell to $2.20 a gallon. Elsie

can sell as much milk as she wants at $2.20 a gallon.

When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will

decrease.

The graph shows a perfectly competitive market that was in a long-run equilibrium on demand curve D0. Due to a permanent change in demand to D2, the price in the market will ________ causing existing firms to ________ which means that ________ the market.

decrease; incur an economic loss; some firms will exit

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

greater than the average total cost of producing sugar.

Consider a perfectly competitive market that was in a long-run equilibrium when a permanent increase in demand occurs. Which of the following will occur as a result? i. The existing firms will start to earn an economic profit. ii. New firms will be motivated to enter the market. iii. Some firms that cannot meet the new demand will exit the market.

i and ii only

In the short run, a perfectly competitive firm can experience which of the following? i. an economic profit ii. an economic loss but it continues to stay open iii. an economic loss equal to its total fixed cost when it shuts down

i, ii, and iii

Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold. The above table shows costs for a perfectly competitive producer of computer memory chips. If the market price of a wafer is $2,400 dollars, the firm is

incurring an economic loss of $2,000 an hour.

In perfect competition, marginal revenue

is equal to the market price.

The above figure shows a perfectly competitive firm. If the market price is $15, the firm

is making an economic profit.

The above figure shows a perfectly competitive firm. If the market price is $10, the firm

is making zero economic profit.

Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter

is maximizing his profit and is making an economic profit.

Alice, Bud, and Celia can produce rubber bands in a perfectly competitive market. If they enter the market, the minimum average total cost for a bundle of rubber bands, for the three of them is $2, $3, and $4, respectively. If the market price is $2.10 per bundle, then

only Alice will enter the market.

The figure shows a perfectly competitive market that was in a long-run equilibrium on demand curve D0. Due to a permanent change in demand to D1, existing firms will begin to make an economic ________ which will result in ________ the market.

profit; new firms entering

Marginal revenue is

the change in total revenue from a one-unit increase in the quantity sold.

If firms in an oligopolistic industry consistently cut their price to sell more output, what price and output will result?

the competitive price and output

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's

total revenue increases, but total cost rises by more so that the farmer's total profit decreases.

For a perfectly competitive palm tree nursery in South Carolina, the total revenue curve is

upward sloping.