ECON Final

Which of the following is NOT correct about how a Monopoly can transform Consumer Surplus into firm profit?

If the monopoly can use federal, state and local laws to seize 100% of consumer surplus.

Why do firms under monopolistic competition frequently use branding and extensive marketing?

To highlight how their goods is different from their competitors who offer similar goods.

Which of the following is NOT true?

Under Monopolistic Competition, there are many firms selling highly differentiated goods with low barriers to entry. Under this market, long run positive economic profit is common.

Which of the following is NOT correct about the relationship between the Demand Curve and Marginal Revenue Curve for the three major market types?

Under all three firm types, the marginal revenue curve always runs just above the demand curve faced by the firm.

Which general job category has the lowest quit rate?

Union Jobs

Why do union jobs pay more than similar non-union jobs?

Union wages are higher than nonunion wages because of the restricted number of union jobs and the increased supply of workers pushed into nonunion jobs as a result.

Which of the following is correct about union wages?

Union wages average 15% above nonunion wages.

Which of the following is NOT true about unions?

Union workers are more likely to quit their job than those working in nonunion environments.

The ability of a firm to raise the price without losing all its sales to rivals is called _____

market power.

If a firm has a downward-sloping long-run average cost curve over the entire range of market demand, it is a _____firm in an oligopolistic market.

natural monopoly.

The capture theory of regulation, espoused by George Stigler, asserts that _____

producers "capture" regulatory agencies so that regulations favor producers.

Government regulation aimed at improving health and safety is called _____

social regulation.

The Consumer Product Safety Commission is an example of _____

social regulation.

A natural monopoly exists when throughout the range of market demand, _____

there exist economies of scale.

Social regulation _____

tries to improve health and safety, such as by control of unsafe working conditions and dangerous products.

Which of the following is NOT correct about Long Run Economic Profit under a Monopoly?

A Monopoly can only earn Zero Long Run Economic Profit.

Which of the following is NOT a factor that can create the conditions for a monopoly to arise and persist?

A defiberated market in which only one firm can generate marginal revenue sufficient to offset market diseconomies.

Which of the following correct defines and describes a "Differentiated Oligopoly?"

A differentiated oligopoly is one that sells products that differ across suppliers, such as the American automobile market and breakfast cereal market.

Which of the following is NOT an example of Monopolistic Competition?

A local barber is the only provider of haircuts in his small New England town.

What results from state licensing of barbers, plumbers, electricians and other skilled crafts?

Barrier to Entry

Why is the demand curve faced by each firm in Monopolistic Competition downward sloping?

Because some consumers will pay more for the unique features of each firm's differentiated product, each firm faces a downward sloping demand curve.

Which of the following accounts for the greatest difference in wage rates?

Degree of risk of the job, education required to do the job and personal skills and ability needed to do the job.

What is the term for the demand for a resource that results from the demand for the product for which the resource provides a key input?

Derived Demand

The demand curve for a firm under perfect competition is horizontal. What is shape of the demand curve for a monopoly?

Downward sloping.

Which of the following correctly defines Economic Rent?

Economic rent is the term economists use for the portion of a resource's earnings above its opportunity cost.

What is the relationship between resource utilization and maximizing profit?

Firms maximize profits by hiring resources until their marginal revenue product(MRP) no longer exceeds their marginal resource cost(MRC) or in other words, when MRP=MRC.

Which of the following is NOT correct about Long Run Economic Profit?

Firms under Monopolistic Competition can earn Long Run Economic Profit.

Which of the following is NOT true about Marginal Revenue Product Curve?

For firms operating with some pricing power (monopoly, monopolistic competitive or oligopoly), the firm's marginal revenue product curve is always vertical at the average cost of the resource.

Which of the following does NOT correctly state a similarity or difference between Monopolistic Competition and Perfect Competition?

For firms under both Perfect Competition and Monopolistic Competition, Consumer Surplus is maximized because all units for which consumers maximum willing to pay price exceeds the marginal cost of production are in fact produced and sold.

If a worker begins working fewer hours which is correct about the relationship between her income effect and her substitution effect?

Her income effect is stronger than her substitution effect.

Which of the following can cause an increase in a resources'marginal product?

Improvement in technology.

In what way is a monopoly the same as perfect competition?

In both markets, profit is maximized art the output level where Marginal Revenue equals Marginal Cost.

At higher wage rates, which effect overpowers the other?

Income Effect

What is the name of the effect of a wage increase on the quantity supplied of labor that occurs as higher wages increase the demand for normal goods, including the demand for leisure?

Income Effect

What happens to the shape of the supply curve when the income effect overpowers the substitution effect at higher wage rates?

It becomes backward bending.

Which of the following does NOT accurately compare monopolies with firms under perfect competition?

Like firms under perfect competition, the profit maximizing level of output for a monopoly is where price is just equal to marginal cost.

Which of the following is NOT true about Monopolistic Competition?

Like perfect competition, firms under monopolistic competition achieve maximum profit by producing until marginal cost is just equal to price.

How are Monopolistic Competition and Perfect Competition similar and different?

Like perfect competition, firms under monopolistic competition maximize profits by producing to where marginal revenue equals marginal cost. But for Monopolistic Competition, price at the profit maximizing level of output is not equal to marginal cost.

Unlike a firm under Perfect Competition, what can a Monopoly earn?

Long Run Economic Profit

Which of the following does NOT correctly contrast a firm under Oligopoly and a firm under Monopolistic Competition?

Long Run Economic Profit is highly likely under Monopolistic Competition and Oligopolies.

What is measured by the change in total cost resulting from using one more unit of a resource?

Marginal Resource Cost

Which of the following correctly defines Marginal Resource Cost?

Marginal Resource Cost is measured by the change in total cost resulting from using one more unit of a resource.

Which of the following statements is NOT correct about marginal resource cost and marginal revenue product?

Marginal Resource Cost is measured by the firm's demand curve for a resource.

What is the term for the change in total product when an additional unit of a resource is employed?

Marginal Revenue Product

Which of the following is correct about Marginal Revenue Product?

Marginal Revenue Product measures the change in revenue from using one more unit of a resource.

What is the term for the change in total cost resulting from the employment of an additional unit of a resource?

Marginal resource Cost

Which of the following is NOT a Monopoly?

Microsoft is the largest provider of software, with just a handful of much smaller competitors.

For which market is the marginal revenue curve not equal to the horizontal demand curve but is rather a downward sloping curve that runs just beneath the downward sloping demand curve?

Monoopoly

Which of the following factors is NOT a cause of a monopoly?

Monopolies arise when one firm sells most of a good sold in a market.

Which of the following is NOT a factor contributing to the presence of a monopoly?

Monopolies arise when one large firm sells at least 65% of all output in a given industry.

In what market structure are cell phones and laptops sold?

Monopolistic Competition

The more successful a firm is able to create an image of unique superiority, the more inelastic the demand for its product and the greater its short run economic profit. Under what market structure is this strategy necessary?

Monopolistic Competition

Which market structure is short run economic profit possible but long run economic profit is impossible?

Monopolistic Competition

What market structure is a little like Monopoly in that an innovative firm can gain a short term near monopoly power if it creates a new and unique version of a product with sudden appeal?

Monopolistic Competiton

Which of the following correctly identifies the impact of marketing on the elasticity of a demand curve?

Monopolistically Competitive firms use extensive branding and marketing to differentiate their products. The more successful a firm is able to create an image of unique superiority, the more inelastic the demand for its product and the greater its short run economic profit.

Of the major forms of market structures, what is one that fails to maximize Consumer Surplus at the equilibrium level of output?

Monopoly

What market structure is created from government action such as creating a public franchise, providing a government license, a patent or a copyright?

Monopoly

What market structure results when a single firm faces a constantly downward sloping long run average cost curve?

Monopoly

What type of market results when one firm has long run economies of scale or complete control over a critical natural resource?

Monopoly

Which of the following is NOT correct about changes in marginal product?

No changes can occur in marginal product for low levels of output in a perfectly competitive market.

Which of the following is NOT correct about the occurrence of Consumer Surplus under a Monopoly?

Of the major forms of market structures, a monopoly is the only one that maximizes Consumer Surplus at the equilibrium level of output.

Which of the following is NOT true about how marketing is different under Perfect Competition, Monopolistic Competition and Monopoly?

Of the three major market structures, a monopoly is most likely to devote massive funds to marketing its product.

Which market structure involves breakfast cereal firms which provide roughly similar products with many variations in the texture and flavor of each unique cereal type?

Oligopoly

Which of the following market structures has just a handful of firms that make up the vast majority of a market?

Oligopoly

What does the area under the supply curve of a resource depict?

Opportunity Cost

Which market structure does NOT have significant barriers to entry?

Perfect Competition

Which of the following is NOT correct about Price Discrimination?

Price Discrimination is illegal because discrimination of any kind is illegal and immoral.

Which of the following is NOT a major source of wage rate differences?

Racial and gender differences.

Which of the following is NOT true about resource markets?

Resource demand is a revived demand that revives when the product demand is equal to the resource demand.

At lower wage levels, which effect overpowers the other?

Substitution Effect

What is the name of the effect of a wage increase on the quantity supplied of labor that occurs as higher wages make the opportunity cost of leisure higher?

Substitution Effect

Which of the following is NOT true about resource markets?

The MRP-MRC profit maximization formula only applies for firms in perfectly imperative markets.

Which of the following is NOT true about barriers to entry?

The Sherman Antitrust Law restricts government from granting any legal status to a firm that reduces competition.

Which of the following correctly defines and describes derived demand?

The demand for a resource is said to be a derived demand, meaning it arises from the demand for the products it can produce.

Why is the demand for a resource said to be a "derived demand?"

The demand for a resource is said to be a derived demand, meaning it arises from the demand for the products it can produce.

Which of the following is a possible outcome if a monopolist is allowed to maximize profit?

The equilibrium price-output combination is inefficient.

Which of the following is correct about quit rates?

The incidence of workers quitting their jobs (quit rate) is significantly lower in union jobs than nonunion ones.

Which of the following correctly defines and describes the income effect?

The income effect of a wage increase occurs as a higher wage increases the demand for all normal goods (including leisure).

Which of the following is NOT true about marginal revenue product and marginal resource cost?

The margin on the resource product is always greater than the margin on the revenue produced.

How is the market price for a resource determined?

The market price for a resource occurs at the equilibrium price and quantity for that resource in the open market.

Which of the following is NOT true about oligopoly?

The oligopoly market is characterized by a large number of firms producing a highly undifferentiated product.

Which of the following is NOT correct about unions?

The percent of private sector jobs covered by unions is nearly twice the level it was in 1960.

The Labor Supply Curve shows how the quantity supplied of labor varies directly with the real wage rate. What happens when the real wage rate rises?

The quantity supplied of labor increases.

Which of the following is NOT a nonwage determinant of labor supply and therefore will NOT shift the labor supply curve?

The real wage rate adjusted for inflation.

Which of the following is correct about the substitution effect?

The substitution effect of a wage increase occurs as higher wages make the opportunity cost of leisure higher.

Which of the following is NOT correct about the supply curve?

The supply curve for a resource shows the economic rent of its opportunity cost.

Which of the following is correct about the backward bending shape of the labor supply curve?

The supply curve of labor becomes backward bending when the income effect eventually overpowers the substitution effect of higher wages.

What happens to the supply of labor when the difficulty of a particular job reduces and its status rises in society?

The supply of labor increases, which means the labor supply curve shifts to the right.

Which of the following is the best example of a natural monopoly?

a company providing electrical service to homes in Seattle

Which of the following is a likely result of the deregulation of the airline industry that might benefit consumers?

an increase in the number of airline companies

Government regulation aimed at preventing monopoly and fostering competition in markets where competition is desirable is called _____

antitrust policy.

For a natural monopolist, _____ throughout the range of market demand.

average cost decreases

In which of the following ways can the government increase social welfare in an unregulated monopoly?

by forcing the monopolist to lower the price and expand output

Government oversight of a natural monopoly, such as local electricity transmission or a subway system, is an example of _____

economic regulation.

Government regulation of natural monopoly, where average production cost is lowest when a single firm supplies the market is called _____

economic regulation.

A natural monopoly, such as a local telephone company, is characterized by _____

economies of scale.

A natural monopoly usually faces _____

huge initial capital costs.

Economic regulation leads to a(n) _____

increase in the market power of existing firms.

Antitrust policy _____

is government regulation aimed at preventing monopoly and fostering competition in markets where competition is desirable.

Economic regulation _____

is government regulation of natural monopoly, where, because of economies of scale average production cost is lowest when a single firm supplies the market.