Econ Final
In monopolistic competition, if a firm produces a highly desirable product relative to its competitors, the firm will be able to raise its price without losing any customers.
False
In the short run, if price falls below a firm's minimum average total cost, the firm should shut down. T/F
False
How are sunk costs and fixed costs related? Sunk costs cannot be recovered and fixed costs can be avoided by shutting down. In the short run they are equal to each other. They are not related in any way In the long run they are equal to each other.
In the short run they are equal to each oth
Rent seeking behavior, unlike profit maximizing behavior in competitive markets, wastes society's scarce resources.
true
Which of the following characterizes the market that Starbucks competes in? Barriers to entry are low All coffeehouses face horizontal demand curves. There are a small number of firms. Coffeehouses sell identical products.
Barriers to entry are low
Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly? Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. Each sets a price for its product that will maximize its revenue. Each must lower its price to sell more output. Each maximizes profits by producing a quantity for which price equals marginal cost.
Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost.
A decrease in the amount of human capital acquired by workers will lead to decrease in the supply of labor.
False
A monopoly is defined as a firm that has the largest market share in an industry.
False
A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.
False
Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run. T/F
False
Dell Computers allows potential consumers to customize personal computers to their desires. Dell's strategy is successful because offering bundles that more exactly meets a consumer's preference allows Dell to extract more consumer surplus.
False
Entrepreneurs who earn arbitrage profit are able to do so by extracting the total consumer surplus from buyers.
False
If price is equal to average variable cost, a perfectly competitive firm breaks even. T/F
False
Logrolling refers to attempts by individuals to use government action to make themselves better off at the expense of others.
False
Maximizing average profit is equivalent to maximizing total profit. T/F
False
Monopolistically competitive firms face a perfectly elastic demand curve.
False
Technological advancements that increase labor's productivity shift the labor supply curve to the right.
False
The Walt Disney Company uses cost-plus pricing to determine the prices it charges for admission and rides at Disneyland and Walt Disney World.
False
There is no evidence that odd pricing succeeds in convincing consumers that prices are lower than they really are.
False
When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect. T/F
False
Which of the following statements is true about marginal revenue? If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. Marginal revenue increases as price falls and quantity sold increases. If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price.
If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price.
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. Max's explicit cost amounts to $3,000 per month more than his revenue. Should Max continue operating his business? Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. Max should continue to run the tattoo parlor until his lease runs out. This cannot be determined without information on his revenue.
Max should continue to run the tattoo parlor until his lease runs out.
Peet's Coffee and Teas produces some flavorful varieties of Peet's brand coffee. Is Peet's a monopoly? Yes, there are no substitutes to Peet's coffee. Yes, Peet's is the only supplier of Peet's coffee in a market where there are high barriers to entry. No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes. No, Peet's is not a monopoly because there are many branches of Peet's.
No, although Peet's coffee is a unique product, there are many different brands of coffee that are very close substitutes.
Which of following is the best example of a monopoly if we use a broader definition of monopoly? Santos Tacos, the only taqueria in the small town of Santosville Cheap Gas, one of two gasoline stations in a large rural community Spuds McKenzie, a wealthy potato farmer in Idaho Zippie Rentals, a sports car rental service in the downtown Boston area
Santos Tacos, the only taqueria in the small town of Santosville
A profit-maximizing firm should hire workers up to the point where labor's marginal revenue product equals the wage rate.
True
An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run. T/F
True
An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor.
True
For a downward-sloping demand curve, marginal revenue decreases as quantity sold increases dy> T/F
True
For a natural monopoly, the marginal cost of producing an additional unit of its product is relatively small.
True
For a perfectly competitive firm, at the profit-maximizing output average revenue equals marginal cost. T/F
True
If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.
True
If marginal costs differ quite substantially from average total costs, then using a cost-plus pricing schedule will not lead to the profit maximizing price.
True
In a perfectly competitive market, in the long run, arbitrage profits will be bid away.
True
In an optimal two-part tariff pricing schedule, consumer surplus is zero.
True
Labor demand is considered a derived demand because producers do not demand labor for itself but only because labor is used to produce output that consumers desire.
True
New firms are able to enter monopolistically competitive markets because there are low barriers to entry.
True
The National Football League has long-term leases with the stadiums in major cities. Control of these stadiums is an entry barrier to a potential new football league.
True
The act of buying a product at a low price in one market and reselling the product at a higher price in another market is called arbitrage.
True
The public choice model asserts that the self-interest of policymakers is likely to cause them to take actions that are inconsistent with the preferences of voters, even where those preferences are clear.
True
To successfully price discriminate, a firm must ensure that there are no opportunities for arbitrage.
True
Unlike a perfect competitor, a monopolist faces the market demand curve.
True
Unlike the market process, in the political market it is possible for some individuals to receive very large benefits from the political process without any significant impact on their tax bills.
True
The marginal revenue of a monopolistically competitive firm can be negative if the firm charges a low price. will equal average revenue. can be negative if the firm charges a high price. cannot be negative because the price the firm charges will always be greater than zero.
can be negative if the firm charges a low price.
The U.S. government would never approve a proposed merger between two firms that could significantly increase the newly merged firm's market power even if the efficiency gains from the newly merged firm could make consumers better off.
false
The market demand curve facing a monopolist is more elastic than the market demand curve facing a monopolistic competitor.
false
When the majority of voters have preferences very different from those of the median voter, then the median voter theorem will lead to accurate predictions of the outcomes of elections.
false
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. The lease is a variable cost of operating the tattoo parlor. is part of the marginal cost of operating the tattoo parlor. is an implicit cost of operating the tattoo parlor. is a fixed cost of operating the tattoo parlor.
is a fixed cost of operating the tattoo parlor.
If a firm shuts down in the short run its loss equals its fixed cost. its loss equals zero. its total revenue is not large enough to cover its fixed cost. is makes zero economic profit.
its loss equals its fixed cost.
In the United States, the average person mostly patronizes firms that operate in oligopoly markets. monopoly markets. monopolistically competitive markets. perfectly competitive markets.
monopolistically competitive markets
When a monopolistically competitive firm cuts its price to increase its sales, it experiences a gain in revenue due to the price effect substitution effect output effect. income effect
output effect.