econ 102 final sample key

A monopolist's marginal revenue curve is

below the firm's demand curve

Products can be differentiated

by location and by brand name

Which of the following products is most likely to be sold in a monopolistically competitive market?

fast food

The monopolist determines the price and quantity combination that maximizes short-run profits by

finding the quantity at which marginal cost and marginal revenue are equal and then using the demand curve to find price

All of the following are assumptions of monopolistic competition EXCEPT

homogeneous product

For a firm in a perfectly competitive industry, the demand curve for its own product is

horizontal

A merger between firms that are in the same industry is called a

horizontal merger

Clothing retailers have faced greater competition in recent years as more firms have entered the clothing market. Some of the competition has come from foreign competitors, but much of it is domestic competition. As a result there is much competition in markets for many types of clothing and

individual buyers and sellers cannot affect the market price because it is determined by the market forces of demand and supply

The distinguishing of products by brand name, color, and other attributes

is known as product differentiation

Price discrimination is more likely in the case of services than in the case of goods because

it is more difficult to resell services

A monopoly will look for opportunities to price discriminate because the practice

leads to greater profits.

Perfect competition is characterized by

many buyers and sellers.

When price and marginal cost are equal for a perfectly competitive firm, the firm is

maximizing economic profit

A market situation in which a large number of firms produce similar but not identical products

monopolistic competition

To sell more units, a monopolist

moves down its demand curve to a lower price that will increase quantity demand

Monopoly producers face

no competitive producers of the same product

The demand curve for the product of a perfectly competitive firm is

perfectly elastic

To be able to engage in profit-maximizing price searching, a monopoly firm must be able to

prevent the entry of other firms into the market for its product

All firms in a perfect competition industry

produce identical products

The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm

raises its price, sales will fall to zero

Monopolistic competition is characterized by

relative ease of entry into the market

In general, the demand for the product of a monopolistic competitor is

relatively elastic

Price discrimination is the

selling of a given product at more than one price when the price difference is unrelated to cost differences

The major similarity between monopolistic competition and perfect competition is

that both assume many buyers and sellers

Product compatibility

the capability of a product sold by one firm to function together with another firm's complementary product

A profit-maximizing monopolist earns an economic loss whenever

the demand curve lies completely below the ATC curve

If a monopolist produces to a point at which marginal revenue is less than marginal cost then

the incremental cost of producing the last unit exceeds the incremental revenue

The demand for the product of a monopolistically competitive firm is highly elastic when

there are a lot of close substitutes

Firms in a monopolistically competitive market will advertise because

they want to differentiate their products

A pure monopolist is selling 7 units at a price of $12. If the marginal revenue of the 8th unit is $4, then the price of the 8th unit is

$11

Which of the following statements about concentration ratios is correct?

A high concentration ratio suggests that the industry is characterized by strategic dependence

By reducing the product compatibility of iPod, Apple can lower the price elasticities of demand for

Apple products that are complementary to the iPod

Which of the following is NOT a characteristic of a perfectly competitive industry?

Economic profits must be positive in the short run.

Which of the following is NOT a necessary condition for price discrimination?

Having a constant marginal cost

Which of the following is NOT a characteristic of a perfectly competitive market?

It is difficult for a firm to enter or leave the market

Which of the following is true of a perfectly competitive firm and a monopoly in the long run?

MR = MC

Which of the following is NOT a characteristic of monopolistic competition

Marginal cost pricing in the long run

Which of the following is an example of a horizontal merger?

Northeastern Illinois University merging with Roosevelt University

Which of the following is an example of a vertical merger?

Northeastern Illinois University merging with a training academy for new professors

Which of the following statements about the elasticity of demand for a monopolist is TRUE?

Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity

Which of the following is a characteristic of oligopoly?

Strategic dependence

Which of the following statements is correct about the demand curve of the perfectly competitive industry?

The market demand curve of the perfectly competitive industry is downward sloping while the demand curve facing an individual firm is horizontal

Which of the following is NOT a barrier to entry that would allow a monopolist to keep potential competitors out of its market?

The market price of the product is too high

What does it mean when the products sold by the firms in an industry are homogeneous?

The product sold by one firm is a perfect substitute of the product sold by another firm in the same industry

Which of the following statements is FALSE?

The profit-maximizing monopolist will always produce only along the inelastic portion of the demand curve, whereas equilibrium in a perfectly competitive industry always occurs along the elastic portion of the demand curve

Which of the following is NOT a characteristic of perfect competition?

There are substantial barriers to entry into the industry

Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?

Yes, competition from overseas firms can substantially limit domestic firms' market power

Monopolistic competition means

a large number of firms producing differentiated products

A situation where a consumer's willingness to use an item depends on how many others use it is

a network effect

A monopolist is defined as

a single supplier of a good or service for which there is no close substitute

A monopolistic competitor behaving in a profit-maximizing way will

advertise to the point where the additional revenue from one more dollar of advertising just equals the extra dollar cost of advertising

When managers in oligopolistic firms make decisions that affect output or price, they must

anticipate the reactions of their rivals and plan accordingly

Under which of the following forms of monopoly regulation does the monopolist have no incentives to keep costs low?

average cost pricing

A price taker is a firm that

cannot influence the market price

The measurement of industry concentration which calculates the percentage of all sales contributed by a specific number of leading firms is called the

concentration ratio

The demand curve for a perfectly competitive industry is

downward sloping

The most common reason for the existence of oligopolies is

economies of scale

An industry battle between incompatible product formats can occur if competing firms selling compatible products

fail to take into account network effects