Micro Ch. 14 + 15
Patents, tariffs, and quotas are all examples of
Government-imposed barriers.
An example of a monopoly based on control of a key resource is
Major League Baseball
Which of the following statements applies to a monopolist but not a perfectly competitive rim at their profit-maximizing outputs?
Marginal revenue is less than price.
The profit-maximizing output and price for the monopolist are
Output=62 ; price= $24
Refer to figure 15-6. The monopolist's total cost is
$1,240
A monopolist faces
A. a downward-sloping demand curve B. a perfectly elastic demand curve C. a horizontal demand curve D. a perfectly inelastic demand curve Answer: A
Which of the following is an example of a way in which an oligopolistic firm can escape the prisoner's dilemma?
Advertising that will match its rival's price
Refer to Table 14-4. If Alpha assumes that Beta would offer a student discount, what should it do?
Alpha should also offer a student discount.
Marginal revenue for an oligopolist is
Difficult to determine because the firm's demand curve is typically unknown.
Refer to figure 15-16. Suppose Plato Playhouse price discriminates. What is the price charged in the two markets?
Price in the student market= Pc; price in the non-student market= Pe
Refer to Table 14-4. Does Beta have a dominant strategy and if so, what is it?
Yes, Beta should offer a student discount.
Refer to Table 14-1. Is there a dominant strategy for LimoZeenz and if so, what is it?
Yes, LimoZeenz should not offer the mid-week discount.
Refer to Figure 14-1. If Lexus lowers its price, will this deter BMW from entering the market?
Yes, because BMW stands to lose $100 million if it competes with Lexus.
Refer to Table 14-2. Is the current strategy in which each firm charges the low price and earns a profit for $7,000 a Nash equilibrium? If not, why and what is the Nash equilibrium?
Yes, the current situation is a Nash equilibrium.
Refer to Table 14-3. Is there a dominant strategy for Saudi Arabia and, if so, what is it?
Yes, the dominant strategy is to produce a low output.
The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called
game theory
A patent or copyright is a barrier to entry based on
government action to protect a producer
A characteristic found in only oligopolies is
interdependence of firms
A dominant strategy
is one that is the best for a firm, no matter what strategies other firms use.
Refer to figure 15-6. The monopolist's total revenue is
$1,488
Refer to figure 15-4. What is the amount of the monopoly's profit.
$2,700
Refer to figure 15-6. The monopolist earns a profit of
$248
If a monopolist's price is $50 at 63 units of output and average total costs equals $43, then the firm's total profit is
$441
An oligopolist differs from a perfect competitor in that
there are no entry barriers in perfect competition but there are entry barriers in oligopoly.
A market comprised of only two firms is called a
Duopoly
A Nash equilibrium is
reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group.
A monopoly is a firm that is the only seller of a good or service that does not have
A close substitute
A cartel is
A group of firms that enter into a formal agreement to fix prices to maximize joint profits.
Refer to Table 14-4. What is the Nash equilibrium in this game?
Both Alpha and Beta offer a student discount.
Refer to figure 15-10. The deadweight loss due to a monopoly is represented by the area
FHE
If a firm charges different consumers different prices for the same product and the difference cannot be attributed to cost variations, then it is engaging in
price discrimination
Refer to figure 15-1. Which of the following statements about the firm depicted in the diagram true?
The fact that is firm is a natural monopoly is shown by the long-run average total cost curve still falling when in crosses the demand curve.
Because a monopoly's demand curve is the same as the market demand curve for its product
The monopoly must lower its price to sell more of its product.
If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then
To maximize profit the firm should continue to produce the output it is producing.
If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25, then
To maximize profit the firm should increase output
An oligopolist's demand curve is
Unknown because a response of firms to price changes by rivals is uncertain.
To be a natural monopoly, a firm must
have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms.
Oligopolies are difficult to analyze because
how firms respond to a price change by a rival is uncertain.
To maximize profit a monopolist will produce where
marginal revenue is equal to marginal cost
The DeBeers Company of South Africa was able to block competition through
ownership of an essential input.