econ topic 4 test

Which of the following best describes an oligopolistic market? Many sellers with identical products and no barriers to entry Many sellers, each with a clearly differentiated product, and no barriers to entry A few competing sellers with similar products and high barriers to entry A few competing sellers of identical products and no barriers to entry No competition among sellers and high barriers to entry

A few competing sellers with similar products and high barriers to entry

A monopolistically competitive firm's demand curve will be highly elastic if which of the following exists? A high degree of product differentiation A highly elastic supply curve for the firm High barriers to entry in this industry A high degree of product substitutability A small number of competitors

A high degree of product substitutability

Which of the following statements relating to a firm in an imperfectly competitive market and a firm in a perfectly competitive market is true? Firms in both types of markets will likely advertise the merits of their products to increase sales. Firms in both types of markets will increase price to increase total revenues when their demand is inelastic. An imperfectly competitive firm must lower its price to increase sales, while a perfectly competitive firm can increase sales by increasing ou

An imperfectly competitive firm must lower its price to increase sales, while a perfectly competitive firm can increase sales by increasing output at the current price.

All of the following characterize both perfectly competitive and monopolistically competitive markets EXCEPT: Price is equal to average revenue. Individual firms produce output where marginal cost equals marginal revenue. Firms can affect the selling price of their product. The market has a large number of firms. Firms can easily enter or exit the market.

Firms can affect the selling price of their product.

What happens to the outputs in imperfect and perfect competitive firms when the price is raised?

Imperfect markets will continue to sell some units of output even when they raise the price. This is because they are in control of their markets. When perfectly competitive firms raise their prices they will sell no outputs.

A well-known fast-food franchise substantially increases the price of its hamburgers, and loses only some of its customers. Which of the following best explains why the franchise has not lost all of its customers Its hamburgers are a perfect substitute for other types of fast food. Its hamburgers are differentiated. The demand for its hamburgers is perfectly elastic. The other competitive fast-food restaurants decrease the price for their hamburgers. The barriers to entry are very low for e

Its hamburgers are differentiated.

What happens to Monopolistic Competition? (MR and long run tangency)

MR is also less than P + When Monopolistic competition is in the long run, the ATC curve will be equal to (tangent to) the price.

Which of the following is true of a monopolistically competitive firm in long-run equilibrium? Price is greater than marginal cost, and marginal revenue is equal to average total cost. Price is greater than marginal revenue, and marginal cost is equal to average total cost. Price is greater than marginal revenue, and marginal cost is greater than average total cost. Marginal revenue is equal to marginal cost, and price is equal to average total cost. Marginal revenue is greater than margina

Marginal revenue is equal to marginal cost, and price is equal to average total cost.

Which of the following is true in the inelastic region of a monopolist's demand curve as output increases? Marginal revenue and total revenue are negative. Marginal revenue is increasing and total revenue is positive. Marginal revenue is decreasing and total revenue is negative. Marginal revenue is positive and total revenue is increasing. Marginal revenue is negative and total revenue is decreasing.

Marginal revenue is negative and total revenue is decreasing.

As the quantity of a good increases, which of the following is true in the elastic region of a monopolist's demand curve? Marginal revenue and total revenue are negative. Marginal revenue is increasing, and total revenue is positive. Marginal revenue is decreasing, and total revenue is negative. Marginal revenue is positive, and total revenue is increasing. Marginal revenue is negative, and average revenue is decreasing.

Marginal revenue is positive, and total revenue is increasing.

In which of the following market structures is firm interdependence and strategic behavior most commonly observed? Monopoly protected by a patent Short-run perfect competition Monopsony Oligopoly Monopolistic competition

Oligopoly

The use of game theory to explain strategic behavior among firms is most associated with which of the following market structures? Perfect competition Monopolistic competition Oligopoly Monopoly Monopsony

Oligopoly

Which of the following enables a seller to capture the entire consumer surplus in a market? Perfect price discrimination Perfect competition An excise tax on buyers Effective price ceiling Effective price floor

Perfect price discrimination

Which of the following is true for both a monopolistically competitive firm and a perfectly competitive firm in long-run equilibrium? Marginal cost is greater than marginal revenue. Price is greater than marginal cost. Price is equal to average total cost. Price is equal to marginal cost. Marginal revenue is equal to average revenue.

Price is equal to average total cost.

The economic profit of the profit-maximizing monopolist is given by the area RSJI R0Q1I RULI RVNI U0Q4M

RULI

Is the firm in short-run or long-run equilibrium? Short run, because price is greater than marginal cost Short run, because the firm is earning a positive economic profit Long run, because price is greater than average total cost Long run, because marginal revenue is not equal to zero Either short run or long run, because the firm is producing where marginal revenue equals marginal cost

Short run, because the firm is earning a positive economic profit

Which of the following is true for a price-discriminating firm? The firm charges different prices to different consumers for the same product. The firm charges different prices for different products. The firm pays more per unit of labor than it pays per unit of capital. The firm pays more per unit of capital than it pays per unit of labor. The firm sells different quantities to its consumers but charges each of them the same price.

The firm charges different prices to different consumers for the same product.

What must be needed for a firm to engage in price discrimination?

The firm must be able to segregate the market

There are four firms in an oligopolistic industry. The four firms agree to collude and act like a monopoly. If one of the firms violates the agreement and charges a lower price or sells a larger quantity than what was agreed to, what will happen in the short run? The firm that cheats will earn higher profits, and industry profits will be lower. The firm that cheats will earn higher profits, and industry profits will be higher. The firm that cheats will earn lower profits, and industry profits

The firm that cheats will earn higher profits, and industry profits will be lower.

Which of the following is most likely to occur if the firm increases production beyond 10 units? Consumers would be willing to purchase more than 10 units at the price of $20 per unit. The firm would definitely experience a loss. The firm would have to lower its price to sell more than 10 units. The firm's average cost of production would initially increase. The firm's profits would increase.

The firm would have to lower its price to sell more than 10 units.

Which of the following is more likely to occur when there are high barriers to entry in an industry? The firm(s) in the industry earn economic profits in the long run. The industry will be characterized by diseconomies of scale. The firm(s) in the industry are price takers. The firm(s) in the industry will charge a price equal to average total cost. The firm(s) will charge a price on the inelastic portion of the demand curve.

The firm(s) in the industry earn economic profits in the long run.

What is the game theory?

The study of how people behave in strategic situations.

Which of the following is true for a firm in long-run equilibrium in monopolistic competition? Given barriers to entry, the firm earns economic profits in long-run equilibrium. The firm is productively efficient, producing at the minimum of long-run average total cost. Price equals marginal revenue and marginal cost. There is neither allocative nor productive efficiency. Price is greater than average total cost in long-run equilibrium.

There is neither allocative nor productive efficiency.

If Zeta, a single producer, had exclusive control of a key resource needed to produce good Z , a likely result would be which of the following? Good Z would be produced in a perfectly competitive market. Slight differences in output would lead to good Z being in a monopolistically competitive market. There would be a barrier to entry, and Zeta would have a monopoly on good Z. Only a few firms would produce good Z, so there would be an oligopoly. Zeta must have decreasing returns to scale an

There would be a barrier to entry, and Zeta would have a monopoly on good Z.

Are the firms in an oligopolistic market interdependent on each other?

Yes (means that they need each other in order to succeed and maintain their control in the market.)

In order for a firm to engage in price discrimi- nation, it must be able to separate consumers into different groups based on demand elasticities producing in the inelastic portion of its demand curve to raise its price and increase total revenue a price taker experiencing economies of scale in the relevant range of production experiencing constant marginal cost

able to separate consumers into different groups based on demand elasticities

The cartel model of oligopoly predicts that all the firms in the industry act in unison to set a monopoly price each producer acts independently of others firms follow the low-price firm in the industry differences in cost of production discourage individual firms from cheating the markup on marginal cost should be the same for all firms

all the firms in the industry act in unison to set a monopoly price

If the four largest firms in a market produce 88 percent of total industry output, the market is perfectly competitive a pure monopoly a natural monopoly an oligopoly a monopsony

an oligopoly

If a firm engages in perfect price discrimination, it charges each customer the highest price the customer is willing to pay each customer the average cost of the product each customer the lowest price the customer is willing to pay different prices to customers based on how old they are different prices to customers based on how many units of output they buy

each customer the highest price the customer is willing to pay

A firm with market power engages in price discrimination to earn a higher profit increase consumer surplus decrease deadweight loss make its demand more elastic make its demand more inelastic

earn a higher profit

A monopoly is different from a perfectly competitive firm in that a monopoly does not have a U-shaped average total cost curve has an average fixed cost curve that is perfectly horizontal has a marginal revenue curve that lies below its demand curve always earns economic profits operates in the inelastic segment of its demand curve

has a marginal revenue curve that lies below its demand curve

For an unregulated monopolist, the profit- maximizing quantity will always be in the elastic region of the demand curve where marginal revenue equals price where price equals average total cost where price equals marginal cost where the marginal cost curve intersects the demand curve

in the elastic region of the demand curve

Generally, monopolies are considered inefficient because they produce at a point where marginal cost is less than marginal revenue produce at a point where marginal cost exceeds price produce more output than does a competitive industry with similar cost conditions lead to an overallocation of resources in the affected market lead to an under allocation of resources in the affected market

lead to an under allocation of resources in the affected market

A single-price monopolist's marginal revenue is equal to its price less than its price greater than its price negative when it maximizes revenues zero when it maximizes profit

less than its price

An industry consists of 100 small firms, and the largest firm accounts for only 2 percent of sales. Brand names are considered a signal of quality. The industry described is best classified as monopoly perfectly competitive monopolistically competitive oligopolistic monopsonistic

monopolistically competitive

The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's departure date rather than on the day of departure. This pricing strategy is based on the assumption that travelers are not aware of how airline prices change across time travelers do not have alternative modes of transportation travelers will pay any price to travel as the departure date approaches the marginal cost of the last few seats on an airplane is higher than that for

travelers' demand becomes less elastic as the departure date approaches

Which of the following is a source of monopoly power? Scarcity Elasticity of demand Barriers to entry Low profits Free markets

Barriers to entry

What does it mean if ATC is below price? above?

Below = economic profit Above = economic loss

Which of the following characteristics is prevalent in oligopolies? Allocative efficiency Low barriers of entry Consideration of rivals' reactions No deadweight loss Zero economic profit

Consideration of rivals' reactions

Characteristics of Imperfectly Competitive Firms

Fewer, large firms in the industry, Firms are "price makers", Higher barriers to entry, Firms earn long-run profits (EXCEPT monopolistic competition, which break even in the long-run), Products sold are differentiated, Non-price competition is used, Forms are inefficient in the long-run, Demand>MR

IMPORTANT ABT MONOPOLIES and PRICE DISCRIMINATION

Monopoly: They have very high barriers to entry. Price discrimination: More elastic demand will pay the price and vice versa + price discrimination makes consumer surplus to revenue.

An important difference between a monopoly and perfect competitive firm:

On a monopoly graph, D>MR

Which of the following best describes firms in an industry if all the firms are in a cartel? They produce the allocatively efficient quantity. They face a perfectly elastic demand curve. They have identical cost curves. They coordinate their production decisions. They agree to remove barriers to entry.

They coordinate their production decisions.

When is there nash equillibrium?

When at least one firm has a dominant strategy, then there is nash equilibrium (one firm or both having dominant strategy=nash)