ECONN

(Figure: Demand and Supply of Sugar) Use Figure: Demand and Supply of Sugar. Given the initial equilibrium of S1 and D, any price below _____ will exert pressure for the price to _____.

$25; rise

(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company is a monopoly, how much total surplus is there when the monopolist maximizes profit?

$270

(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit. Given a market price of $3, the firm's total revenue per day is:

$900.

(Figure: Shifts in Demand and Supply II) Use Figure: Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose excessive rainfall destroys one-third of the nation's radish crop. Which panel BEST illustrates how this will affect the market for radishes?

C

(Figure: Supply of Bananas) Use Figure: Supply of Bananas. A rise in the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport bananas could be represented in the figure as a movement from:

C to A.

Which Antitrust Act toughened restrictions on mergers by prohibiting mergers that would reduce competition?

Cellar-Kefauver Act

(Figure: The Market for Designer Boots in Monopolistic Competition IV) Use Figure: The Market for Designer Boots in Monopolistic Competition. A positive economic profit will be earned if the profit-maximizing price is _____ in panel _____.

F; (A)

(Figure: Perfect Competition and Monopolistic Competition in the Long Run) Use Figure: Perfect Competition and Monopolistic Competition in the Long Run. Which statement is FALSE?

Firms in panel (a) cannot have profits in the long run, but those in panel (b) can.

A firm that has the market power to charge each customer their maximum reservation price is practicing what degree of price discrimination?

First degree

If there was a merger of Ford Motor Co and Toyota Motor Co this would be called a

Horrizontal Merger

In a perfectly competitive market, if we see a firm suffering an economic loss in the short run and not covering the average variable cost what would we see happen?

The firm would shut down in the short run

In relation to the Kinked Demand Curve theory, why would an oligopoly be reluctant to increase the price of it's product on it's own?

The price then would move into the elastic part of the demand curve and revenue would likely fall.

Which factor is MOST likely to shift the supply curve for milk to the left?

a tax on each gallon of milk produced

If a demand curve is downward sloping, a decrease in supply with no change in demand will lead to a(n) _____ in the equilibrium quantity and a(n) _____ in the equilibrium price.

decrease; increase

A Pigouvian subsidy is:

designed to encourage activities that generate external benefits.

(Figure: Monopolistic Competition in the Market for Couture Clothing) Use Figure: Monopolistic Competition in the Market for Couture Clothing. If the firm shown in the figure maximizes its returns, it will:

earn a positive economic profit.

The demand for air travel in the tourism industry tends to be relatively ______. Thus, small _____ in air fares will result in relatively _____ in air travel.

elastic; reductions; large increases

(Figure: Payoff Matrix for the United States and Canada) Use Figure: Payoff Matrix for the United States and Canada. Suppose that the United States and Canada both produce quinoa, and each country can earn more profit if output is limited and the price of quinoa is high. The dominant strategy for Canada is:

high output.

Spaghetti and lasagna are substitutes. Holding all other things constant, this means that if the price of spaghetti increases, the demand for:

lasagna will increase.

For a monopolistically competitive firm, marginal cost is _________ in long run equilibrium.

less than price

For a firm producing at a quantity of output below the profit-maximizing quantity of output, an increase in output adds:

more to total revenue than to total cost.

(Figure: CO2 Emissions, MSB and MSC of Pollution) Use Figure: CO2 Emissions, MSB and MSC of Pollution. Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society. If the current level of pollution is Q1, _____ pollution is being emitted because _____.

not enough; MSB > MSC

Generally, when preferences for a good rise, demand for the good rises. If a perfectly competitive market starts in long-run equilibrium, holding all else constant, this will result in a higher market price, which will lead to _____ in the industry and _____ the market. This causes price to _____.

positive economic profits; attracting new firms into; fall

To encourage consumption of a good that generates a positive externality, the BEST option for policymakers is to:

provide a subsidy to firms for each unit of the good consumed to achieve the socially optimal level of output.

Super Snacking Services is a typical monopolistically competitive firm. Initially, the market is in long-run equilibrium, and then there is an increase in the market demand for snacks. In the short run, the price of snacks will _____, and the market output of snacks will _____.

rise; rise

(Figure: Demand for Bananas) Use Figure: Demand for Bananas. If bananas are a normal good, an increase in the incomes of consumers could be represented as a:

shift from D1 to D2.

(Figure: Monopolistic Competition in the Market for Designer Clothing) Use Figure: Monopolistic Competition in the Market for Designer Clothing. The figure illustrates a firm in the _____; in the _____, the demand and marginal revenue curves will shift to the _____.

short run; long run; left

When firms in a particular industry informally agree to charge the same price as the largest firm in that industry, it is called:

tacit collusion.

Tools the government commonly uses to regulate activities that impact the environment include all the following EXCEPT:

the Environmental Protection Agency Action Plan.

(Figure: Monopoly Model in the Market for Electricity) Use Figure: Monopoly Model in the Market for Electricity. When the firm is in equilibrium—maximizing economic profit—its total cost is represented by:

0SBJ.

Coors is a widely recognized brand name. During the World Series each year, this beer company has many of the most successful ads. Which statement is TRUE about advertising for Coors?

It is designed to increase the demand for Coors.

(Figure: Payoff Matrix for Alex and Sybil) Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are the only producers of frozen yogurt in their town. Every week, each decides how much frozen yogurt to produce for the week. The figure shows the profit per week earned by their two firms. In the game's Nash equilibrium, Alex produces a _____ level of output, and Sybil produces a _____level of output.

high; high

Florists in the town of Minerva, Illinois, operate in a monopolistically competitive market. The price in long-run equilibrium for a flower shop is _____, and output is _____, than would be the case for a perfectly competitive firm with an identical production function and cost curves.

higher; lower

For the Texas beef industry to be considered perfectly competitive, each rancher in Texas must have _____ on prices, and beef must be a _____ product.

no noticeable effect; standardized

Your college roommate has the right to practice her tuba during the day. You, however, find that studying during the day is most conducive to good grades, and her tuba-playing makes it difficult for you to concentrate. You make a deal with your roommate: you will clean the dorm room once a week if she will practice her tuba at other times or elsewhere. This is an example of

the Coase theorem.

The MAIN reason a monopoly engages in price discrimination is:

to increase its profits.

In relation to the Kinked Demand Curve theory, why would an oligopoly be reluctant to decrease the price of it's product on it's own?

The price would then move into the inelastic portion of the demand curve and revenue will likely decrease

A firm that has the market power to split their customer base according unique demographics such as students and or senior citizens and is able to prevent arbitrage is practicing which degree of price discrimination?

Third Degree

If you are a business owner in a very highly competitive market what could you do to get yourself in a position to be able to increase the price of your product on your own?

Create a brand for your product

(Figure: Supply and Demand in the Peach Market) Use Figure: Supply and Demand in the Peach Market. The market is in equilibrium at point C. Suppose most people drink peach juice in the afternoon with champagne. What will be the new equilibrium point in the peach juice market if a law banning alcohol passes?

D

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market.

Equilibrium price increases. Equilibrium quantity decreases.

Lumber and brick are substitutes in home construction. Consider the market for bricks depicted in the graph. Suppose the price of lumber increases due to new regulations for the logging industry. Shift one or both curves in the graph to illustrate the impact this change will have on the market for bricks.

Equilibrium price increases. Equilibrium quantity increases.

Assume that we are looking at a market that has 10 firms, 9 of these firms each have a 5% market share and the tenth firm has the remainder of the market. What is the HHI value and how would you classify this market?

HHI is 3250 and it is a very strong ologopoly situation.

During the Obama administration, the development of low‑cost batteries for electric cars received large amounts of federal funding via subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero‑emissions electric vehicles, where there is an upward‑sloping supply curve and a downward‑sloping demand curve.

In which direction will demand and supply shift? Both curves will shift right. What will happen to the equilibrium price? The price will change ambiguously.

(Figure: Fast Food Profits in Monopolistic Competition III) Use Figure: Fast Food Profits in Monopolistic Competition. The profit-maximizing quantity of output is determined by the intersection at point:

S.

Which of the following Antitrust laws dealt with price discrimination that resulted in reducing competition?

The Robinson Patman Act

One day, a local theme park charges $40 per person for admission, and 10,000 people visit the park. On another day, the park charges $60 per person, and 20,000 people pay to enter the park. Which explanation best describes why the park sees an increase in attendance when the price is higher?

The low-attendance day falls on an autumn Wednesday, while the high-attendance day falls on a summer Saturday.

The marginal social benefit of pollution:

is the benefit to society of one more unit of pollution.

(Figure: Oligopoly Pricing Strategy in Wireless TV Market II) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market II. The dominant strategy for Supreme Wireless:

is to charge a low price.

(Figure: The Quantity of Pollution in Coal Production) Use Figure: The Quantity of Pollution in Coal Production. When this economy produces 50 tons of emissions:

it is producing below the socially optimal level of output.

When we compare the long run conditions of a Perfectly Competitive firm to the long run conditions of a Monopolistically Competitive firm we see that the Perfectly Competitive firm is

more productive and cost efficient than the Monopolistically Competitive firm

(Figure: The Market for Designer Boots in Monopolistic Competition II) Use Figure: The Market for Designer Boots in Monopolistic Competition II. Which panel(s) in the figure show(s) a monopolistic competitor in long-run equilibrium?

panel (c) only

A(n) ______ gives an inventor a temporary monopoly on the use or sale of an invention.

patent

Each year, around Christmas, you decorate your home so elaborately that news crews come to film stories about your Christmas spirit. As a result, hundreds of people from all over the city drive by your house to see the "Christmas" home, creating noise and congestion that is a nuisance to your neighbors. As they have a right to not be bothered, you agree to pay your neighbors a modest sum to compensate them for the disturbance. This illustrates:

the Coase theorem.

(Figure: Efficiency and Pollution in the Market for Vehicle Emissions) Use Figure: Efficiency and Pollution in the Market for Vehicle Emissions. Assume that firms are the only beneficiaries of pollution and that costs are borne solely by others in the society. If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be:

too little pollution because the marginal social benefit would exceed the marginal social cost.

(Figure: The Optimal Quantity of Pollution in the Market for Benzene Waste) Use Figure: The Optimal Quantity of Pollution in the Market for Benzene Waste. The figure shows the marginal social cost (MSC) and marginal social benefit (MSB) for firms that pollute the air with benzene fumes. Using the figure, the optimal Pigouvian tax per unit of pollution is:

$167.

In a pure Monopoly situation what would be the value of the HHI?

10,000

In the cereal market advertising can account for about how much of the retail price of a box of cereal?

30%

In a pure Duopoly situation where each firm has equal share of the market, what would be the value of the HHI?

5,000

In a perfectly competitive market, if we see the average firm suffering an economic loss in the short run but covering the variable cost what would we see happen as we move into the long run?

A few firms would leave the market causing the market price to increase and causing the economic loss to decline.

Which of the following is not a reason why firms who have market power choose to price discriminate?

All of these 3 other listed options here are reasons why firms choose to price discriminate.

Which market type is known to have many firms, a differentated product and will likely not make a profit in the long run?

Monopolistic Competition

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

P = ATC.

(Figure: Short Run and Long Run Profit in Monopolistic Competition) Use Figure: Short Run and Long Run Profit in Monopolistic Competition. In monopolistic competition, long-run equilibrium is characterized by:

P > MR.

(Figure: Computing Monopoly Profits for Exxon Mobile Gas) Use Figure: Computing Monopoly Profits for Exxon Mobile Gas. At the profit-maximizing output, total cost is:

P20QF.

A firm that has the market power to charge different prices to different groups of buyers based on how much they buy, is practicing what degree of price discrimination?

Second degree

Markets for the right to pollute are:

established by governments when they issue tradable pollution permits.

A Pigouvian tax is designed to reduce:

external costs.

Facebook is subject to network externalities because:

its value to an individual increases when the number of other people using it increases.

The effect of product differentiation is to:

reduce the intensity of competition among firms in an oligopoly.

James is one of two producers of doodads in the city of Hooville. Because the industry consists of two firms, he is operating in:

a duopoly.

A market in which there is one buyer is:

a monopsony.

In which market type will a firm be able to make an economic profit in the long run?

Oligopoly

If there was a merger of Ford Motor Co and Goodyear Tire Co this would be considered a

Vertical Merger

Which of the following Antitrust laws prohibited firms from buying the stock of it's rivals and prohibited directors from serving on the boards of competing firms?

The Clayton Act

The efficient rate of emissions occurs when:

MSB = MSC.

(Figure: Pollution and Efficiency in the Market for Coal Fired Electricity) Use Figure: Pollution and Efficiency in the Market for Coal Fired Electricity. In this market, in which carbon dioxide emissions result from production, at a price of $10, ______. In this situation, price will ______ the socially optimal amount of pollution is reached.

MSB > MSC; increase until

Which market type is known to have a few firms, high barriers to entry and firms in this market are able to make an economic profit in the long run?

Oligopoly

Comparing firms in a perfectly competitive market with a monopoly, what basic differences are there in the long run?

Perfectly competitive firms make 0 economic profit and produce at minimum long run ATC and a monopoly can make economic profit and produce at some point other that minimum long run ATC.

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

can be increased by decreasing production.

Suppose the GoLogos logo monopoly is broken up. and the logo industry becomes perfectly competitive. We would expect _____ surplus to increase and _____ surplus to decrease after the breakup.

consumer and total; producer

(Figure: Profit-Maximization for Fabulous Finn's Flower Firm in the Short Run) Use Figure: Profit-Maximization for Fabulous Finn's Flower Firm in the Short Run. Which statement is TRUE?

AFC is represented by the vertical distance between curve N and curve O at any level of output.

(Figure: Shifts in Demand and Supply III) Use Figure: Shifts in Demand and Supply III. The figure shows how supply and demand might shift in response to specific events. Suppose a wet and sunny year increases the nation's strawberry crop by 20%. Which panel BEST illustrates how this event will affect the market for strawberries?

B

In which situation does overt collusion occur?

Coke and Pepsi openly agree on production and price in an effort to achieve monopoly profits.

(Figure: Joshua's Lawn Mowing Business) Use Figure: Joshua's Lawn Mowing Business. If Joshua's lawn mowing firm's MR curve is MR2, then the firm's optimal output is _____ units of output, and its economic profit will be _____.

Q2; negative

(Figure: The Existential Monopolist) Use Figure: The Existential Monopolist. If this market became perfectly competitive, total market output in the long run would be _____ units, and the market price would be _____.

Q3; P3

(Figure: Short-Run Monopoly in the Market for Electricity) Use Figure: Short-Run Monopoly in the Market for Electricity. The profit-maximizing rule is satisfied by the intersection at point:

R.

In a perfectly competitive market, if we see the average firm making an economic profit in the short run what would we see happen as we move into the long run?

We would see new firms enter the market causing the market price and short run economic profits to decrease.

The price of good X falls and the demand for good Y decreases. We can conclude that:

X and Y are substitutes.