Econ 342 Test 2

Long-run competitive equilibrium

results in zero economic profits

Price leadership represents a situation where oligopolistic firms n

(Secretly) tacitly collude

Which of the following is correct

A purely competitive firm is a "price taker" while a monopolist is a "price maker"

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that

A recognized interdependence exists between firms in one industry but not in the other

An increasing-cost industry is associated with

An upsloping long-run supply curve

The short-run shut-down point for a purely competitive firm occurs:

At any point where price is less than the minimum AVC

Monopolistic competition is a market structure in which

Barriers to entry are low

To practice long run price discrimination a monopolist must

Be able to separate buyers into different markets with different price elasticities

The stronger the product differentiation in monopolistic competition, the

Less the elastic the demand curve, and production will take place further to the left of minimum wage

Successful price discrimination requires that

Buyers with inelastic demand are charged higher prices than buyers with elastic demand

Mutual interdependence means that

Each firm must consider the possible reactions of rivals when establishing price policy

Assume a purely competitive increasing cost industry is initially in long run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be

Higher and total output will be larger than originally

The U.S. primary steel industry is best describes as a(n)

Homogeneous oligopoly

A monopolistically competitive firm faces a negative sloped demand curve because

If product differentiation

To be successful, collusion requires that oligopolists be able to

Increase barriers to entry that protect market power

A decreasing cost industry is one in which

Input prices fall as the industry expands

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond. This is evidence of

Interdependence

The kinked demand curve describes a situation in which an oligopolistic would be

Interested in maintaining the going price unless there is a rather large change in cost

Suppose that an industry's long-run supply curve is down sloping. This suggests that

It is a decreasing cost industry

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

Its demand curve is kinked

If a pure monopolist is producing at that output where P =ATC, then

Its economic profits will be zero

Some professional football teams maximize profits by charging

Lower prices for children because their demand for tickets is elastic

The short run supply curve of a purely competitive producer is based on its

MC curve

In the kinked demand model of oligopoly, there will be a vertical break in the firm's

Marginal revenue curve

A major reason that firms form a cartel is to

Maximize joint profits

In the short run, a monopolist's profits

May be positive, negative or zero

A unique feature of an oligopolistic industry is

Mutual interdependence

In monopolistic competition, there is

Neither allocative nor productive efficiency

If an oligopolit's demand curve has a kink in it then

Over some interval, a change in the oligopolist's marginal cost will not cause a change in the oligopolist's profit-maximizing price

One major barrier of entry under pure monopoly arises from

Ownership of essential resources

In the short run a purely competitive seller will shut down if

Price is less than average variable cost at all outputs

A constant-cost industry is one in which

Resource prices remain unchanged as output is increased

Which of the following statements is correct

The long-run supply curve for a purely competitive increasing-cost industry will be upsloping

One defining characteristic of pure monopoly is that

The monopolist produces a product with no close substitutes

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in the industry will be most accurately predicted by which of the following models

The pure monopoly model

The kinked demand curve model helps to explain price rigidity because

There is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry

A purely competitive firm's short-run supply curve is

Upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve

The kinked demand curve model of oligopoly is useful in explaining

Why oligopolistic prices might change only infrequently- prices are sticky

If the demand curve for a firm is downward-sloping, its marginal revenue curve

Will lie below the demand curve