Micro-Econ Exam #3 Flashcards Questions

Which of the following is true regarding brand-name products?

Brand names have to work harder to protect consumer demand.

The greater the number of prices the monopolist charges, the closer the lowest price a consumer will pay will be to the firm's _____.

Marginal Cost

The brand name McDonald's:

can create unjustified market power.

If the De Beers diamond monopoly lowers the price of a diamond from $800 to $750 and sales increase from four to five diamonds, the price effect is a(n):

decrease in total revenue of $200

The fact that it is a natural monopoly is revealed by the:

downward-sloping average total cost curve.

If firms in a monopolistically competitive industry have demand curves that lie above the average total cost curve, then in the long run:

existing firms will have a smaller share of the market.

When a monopolist practices price discrimination, the monopolist:

increases profits by capturing consumer surplus.

Firms have excess capacity if they produce a quantity:

less than the output at which average total costs are minimized.

In the long-run equilibrium of a perfectly competitive industry, production is efficient because costs are _____ and _____ resources are wasted.

minimized, no

Carolyn's Flower Shop was one of only two places to get flowers in town for several years until two more shops opened. Before these two new entries into the market, Carolyn's shop was:

more likely to earn a profit.

A long-run equilibrium in a monopolistically competitive industry is inefficient because:

price is greater than marginal cost.

In monopolistic competition, having more producers:

raises ATC (does not raise price)

If the two firms successfully form a cartel, they will:

restrict industry output to the monopoly level.