Final Exam

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. At Q = 500, the firm's profit is

$13,000.

Firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

A decrease in demand for each firm

Which of the following is not an example of a barrier to entry?

An entrepreneur opens a popular new restaurant.

Identify which of the following is not an example of price discrimination?

An ice cream parlor charges a higher price for ice cream than for sherbet.

Which of the following is not a characteristic of monopolistic competition?

Firms are price takers.

Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true?

Meatball prices will exceed marginal cost.

For a profit maximizing monopolist,

P>MR=MC

For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

both the short run and the long run.

In economics, products are considered "differentiated" only if

buyers think that they are different

Drug companies are allowed to be monopolists in the drugs they discover in order to?

encourage research

Compared to perfect competition, monopolistic competition is characterized by

excess capacity.

When a firm's demand curve is tangent to its average total cost curve, the

firm's economic profit is zero.

Because monopolistically competitive firms produce differentiated products, each firm

has some control over product price.

A monopolistically competitive industry is characterized by

many firms selling products that are similar but not identical.

The DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of the wholesale diamonds $10,000 per carat?

marginal cost equals price, while a monopolist produces where price exceeds marginal cost.

If firms in a monopolistically competitive market are earning positive profits, then

new firms will enter the market.

For monopolistically competitive markets, economic losses

suggest that some existing firms will exit the market.