Exam 3 questions

The demand experienced by a firm operating in a monopolistically competitive market is more elastic Correct than a monopoly due to the presence of more substitutes

Elastic, substitute

If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be A. $200. B. $800. C. $250. D. $3,200.

A. $200.

An industry with one seller producing and selling 100% of the output, a pure monopoly, would experience a Herfindahl-Hirschman Index of: A. 10,000. B. 100. C. 1,000. D. 10.

A. 10,000.

Use the table below to answer this question, which provides information on the production of a product that requires one variable input. Input: 0; 1; 2; 3; 4; 5; 6; 7; 8; 9 Total Product: 0; 5; 20; 32; 42; 50; 55; 58; 58; 56 With the addition of the second unit of input, the marginal product is __________ and the average product is __________. A. 15; 10 B. 15; 20 C. 10; 15 D. 25; 10

A. 15; 10

Which of the following statements about price discrimination is correct? A. Successful price discrimination will provide the firm with more total profits than if it did not discriminate. B. Successful price discrimination will generally result in a lower level of output than would be the case under a single-price pure monopoly. C. Successful price discrimination occurs when there are differences in the costs of producing for different groups of buyers. D. Successful price discrimination will provide the firm with lower total profits than if it did not discriminate.

A. Successful price discrimination will provide the firm with more total profits than if it did not discriminate.

Module 10: Monopoly

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Module 11: Oligopoly

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Module 8: Production

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Module 9: Perfect Competition

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The main difference between the short run and the long run is that A. in the short run, some inputs are fixed and some are variable. B. in the long run, all inputs are fixed. C. the long run always refers to a time period of one year or longer. D. the short run always refers to a time period of less than five years.

A. in the short run, some inputs are fixed and some are variable.

A perfectly competitive firm's output is currently such that its marginal revenue is $5 and marginal cost is $4. Assuming profit maximization, the firm should A. leave price unchanged and increase output. B. cut price and increase output. C. raise price and decrease output. D. leave price unchanged and decrease output.

A. leave price unchanged and increase output.

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to A. produce more than its output quota. B. raise its price above the cooperative price. C. establish competitive price and output levels. D. lower both its price and its output.

A. produce more than its output quota.

Pure monopolies are said to be allocatively inefficient because ____. A. price is less than marginal cost B. price is greater than marginal cost C. price is equal to marginal cost D. they produce where MR > MC

B. price is greater than marginal cost

Marginal cost can be defined as the change in A. total fixed cost resulting from the production of an additional unit of output. B. total cost resulting from the production of an additional unit of output. C. average variable cost resulting from the production of an additional unit of output. D. average total cost resulting from the production of an additional unit of output.

B. total cost resulting from the production of an additional unit of output.

The Herfindahl-Hirschman Index and four-firm concentration ratio are used to measure: A. wages and resource costs within an industry. B. competition within a firm. C. competition within an industry. D. wages and resource costs within a firm.

C. competition within an industry.

To an economist, the economic costs associated with the use of resources include A. explicit, but not implicit, costs. B. implicit, but not explicit, costs. C. explicit and implicit costs. D. neither implicit nor explicit costs.

C. explicit and implicit costs.

A major reason that firms form a cartel is to A. enlarge the market share for each producer. B. reduce the elasticity of demand for the product. C. maximize joint profits. D. minimize the costs of production.

C. maximize joint profits.

In which set of market models are there the most significant barriers to entry? A. oligopoly and monopolistic competition B. monopolistic competition and pure competition C. oligopoly and pure monopoly D. monopolistic competition and pure monopoly

C. oligopoly and pure monopoly

Suppose that the market for corn is perfectly competitive. If corn farmers are currently generating losses, then we would expect that in the long run the market A. demand curve will shift to the right. B. supply curve will shift to the right. C. supply curve will shift to the left. D. demand curve will shift to the left.

C. supply curve will shift to the left.

Which of the following statements is correct? A. Both perfectly competitive and monopolistic firms are price makers. B. A perfectly competitive firm is a price taker, while a pure monopoly is a price maker. C. A perfectly competitive firm is a price maker, while a pure monopoly is a price taker. D. Both perfectly competitive and monopolistic firms are price takers.

B. A perfectly competitive firm is a price taker, while a pure monopoly is a price maker.

If marginal cost exceeds average total cost in the short run, then which is likely to be true? A. Average variable cost is decreasing. B. Average total cost is increasing. C. Average total cost is less than average variable cost. D. Marginal cost is less than average variable cost.

B. Average total cost is increasing.

Which of the following is true under conditions of perfect competition? A. The market demand curve is perfectly elastic. B. No single firm can influence the market price. C. There are differentiated products. D. Each individual firm has the ability to set its own price.

B. No single firm can influence the market price.

The larger the diameter of a natural gas pipeline is, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of one reason for A. constant returns to scale. B. economies of scale. C. diminishing marginal returns. D. diminishing returns to scale.

B. economies of scale.

When compared with a perfectly competitive market with identical costs of production, a pure monopoly will produce _____. A. less output and charge the same price B. less output and charge a higher price C. more output and charge a higher price D. more output and charge the same price

B. less output and charge a higher price

An industry with one seller producing and selling 100% of the output, a pure monopoly, would experience a four-firm concentration ratio of: A. 1,000% B. 10,000%. C. 100%. D. 10%.

C. 100%.

What is one difference between a firm in a perfectly competitive industry and a firm in a monopolistically competitive industry? A. A monopolistically competitive industry does not have a large number of sellers. B. A monopolistically competitive firm does not choose a level of output where marginal cost is equal to marginal revenue. C. A monopolistically competitive firm does not have the exact same product as other firms. D. A monopolistically competitive firm does not face entry from other firms.

C. A monopolistically competitive firm does not have the exact same product as other firms.

Which of the following statements about third-degree price discrimination is correct? A. Successful third-degree price discrimination does not require that the producer separates customers into easily identifiable groups. B. Successful third-degree price discrimination does not require that different groups of consumers have different demand elasticities. C. Successful third-degree price discrimination will generally result in a greater level of output than would be the case under a single-price pure monopoly. D. Successful third-degree price discrimination will not provide the firm with more total profits than if it does discriminate.

C. Successful third-degree price discrimination will generally result in a greater level of output than would be the case under a single-price pure monopoly.

Which of the following best represents the pricing behavior of firms in a monopolistically competitive industry? A. Looking Over Your Shoulder Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration. B. Unykdrugs Inc. knows it will not face competition due to patents it holds on its products, the company's pricing strategy is based on the market demand for the product. C. Stay*Put Clothespins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. D. Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profits due to other hardware stores also looking for niches.

D. Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profits due to other hardware stores also looking for niches.

Mutual interdependence means that a firm's A. profits are affected by another firms' entry or exit. B. revenues are affected by another firms' demand for its product. C. costs are affected by other firms' costs. D. behavior is affected by other firms' actions.

D. behavior is affected by other firms' actions.

Fixed costs of production in the short run A. are low in proportion to variable costs in the short run. B. increase as the firm produces more output. C. are a function of the level of variable costs. D. cannot be reduced by producing less output.

D. cannot be reduced by producing less output.

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of A. interindustry competition. B. limit pricing. C. price leadership. D. collusion.

D. collusion.

In perfect competition, the demand faced by a single firm is perfectly A. inelastic, because many other firms produce the same standardized product. B. elastic, because the firm produces a differentiated product. C. inelastic, because the firm produces a differentiated product. D. elastic, because many other firms produce the same standardized product.

D. elastic, because many other firms produce the same standardized product.

In perfect competition, each additional unit of output that a firm sells will yield a marginal revenue that is A. less than price. B. equal to average total cost. C. greater than price. D. equal to price.

D. equal to price.

Module 12: Monopolistic Competition

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