micro econ

If the product price is $290, the per-unit economic profit at the profit-maximizing output is: $152

$119

Which of the diagrams correctly portrays the demand (D) and marginal revenue (MR) curves of a pure monopolist that is able to price discriminate by charging each customer his or her maximum willingness to pay?

A

Which of the following statements is true?

Accounting profit equals sales revenue minus explicit costs.

Which of the following would we expect to have the highest poverty rate?

African-American households headed by females.

What factor has contributed the most to increased income inequality since 1970?

An increase in the demand for high-skill and well-educated workers relative to lesser-skilled workers

Barriers to entry:

Can result from government regulation

Assess the economic desirability of collusive pricing.

Collusive pricing is economically desirable from the oligopoly's viewpoint because it results in monopoly profits.

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

Consumer and producer surplus will be maximized.

Refer to the above graph for a monopolist in short-run equilibrium. This monopolist:

Has a loss per unit equal to DE

If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is:

Less elastic in market X than market Y

In the short run, a purely competitive firm will always make an economic profit if:

P > ATC.

Which of the following is most likely to be a fixed cost?

Property insurance premiums.

Which of the following countries has the highest Gini ratio, as of 2011?

South Africa.

Shortcomings of the kinked-demand model include

a lack of explanation for how the initial price is set.

The difference between social insurance and public assistance programs is that social insurance programs provide

aid to those who are retired or suffering from temporary distress, whereas public assistance programs provide benefits for those who are unable to earn income.

The equality of P and MC means the firm is achieving

allocative efficiency since the industry is producing the amount of product that equates society's valuation of that product and the price of the product.

Refer to the data. Assuming total fixed costs equal to zero, the firm's:

economic profit is $16.

Aluminum competes with copper in the market for power transmission lines. This illustrates:

interindustry competition.

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called:

limit pricing.

U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. U.S. pharmaceutical companies, for profit reasons, oppose laws allowing reimportation of drugs to the United States because reimportation would

make it much more difficult to maintain the differing prices. correct

Pure monopolists may obtain economic profits in the long run because:

of barriers to entry.

An excise tax on an imported good that is not produced domestically is called a:

revenue tariff.

When foreign firms "dump" their products onto the U.S. market they

sell the product below cost and provide bargains to American consumers.

Consider the following statement: "The United States can make certain toys with greater productive efficiency than can China. Yet we import those toys from China." We import these toys from China because

the U.S. has an absolute advantage in producing toys, but China has a comparative advantage in producing toys.

Other things equal, if more firms enter a monopolistically competitive industry:

the demand curves facing existing firms would shift to the left.

If the law of diminishing returns applies to study time:

the tenth hour of study will likely be less productive than the third.

Monopolistically competitive industries are inefficient because:

they are overpopulated with firms whose plants are underutilized.

Which of the U.S. industries below has not seen major shutdowns and layoffs because of free foreign trade?

Financial Services

The crowding model of occupational segregation predicts that domestic output will increase if occupational segregation is ended.

True

The economic profits earned by monopolistically competitive sellers are zero in the long run.

True

The larger the number of firms and the less the degree of product differentiation, the greater will be the elasticity of a monopolistically competitive seller's demand curve.

True

Import competition can lead to

quality improvements and cost reductions by American firms.

Since its inception in 1996, the Temporary Assistance for Needy Families (TANF) program has:

reduced the number of people on welfare by more than one-half.

Offshoring of white-collar service jobs

refers to jobs relating to data entry, book composition, and software coding.

At equilibrium, the profit-maximizing monopolist facing the situation shown in the graph will face a negative:

Profit

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per-unit tariff in the amount PcPt, price and total quantity sold will be:

Pt and y

A profit-maximizing monopolist facing the situation shown in the graph above should:

Shut down in the short run

One feature of pure monopoly is that the demand curve:

Slopes downward

If a purely competitive firm is producing where price exceeds marginal cost, then:

the firm will fail to maximize profit and resources will be underallocated to the product.

A normal profit is considered a cost because

this is the amount required to ensure continued supply of the product.

"Even if a firm is losing money, it may be better to stay in business in the short run." This statement is

true if the loss is less than the fixed cost. correct

Suppose that the pen-making industry is perfectly competitive. Also suppose that each current firm and any potential firms that might enter the industry all have identical cost curves, with minimum ATC = $1.25 per pen. If the market equilibrium price of pens is currently $1.50, what would you expect it to be in the long run?

$1.25

Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is:

$3.40 or less.

Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10, and 10 percent. The Herfindahl index for this industry is:

2,200.

When discussing pure competition, the term long run refers to a period of time long enough to allow:

Both a and b.

Which of the following is not a major barrier to entry into an industry?

Diminishing marginal returns.

Suppose that as the output of mobile phones increases, the cost of touch screens and other component parts decreases. If the mobile phone industry features pure competition, we would expect the long-run supply curve for mobile phones to be:

Downward sloping.

Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run.

False

One characteristic of sequential games is that they all have first-mover advantages.

False

Which of the following statements is true?

If income is to be distributed purely on the basis of need, there would be a disincentive to engage in production.

Refer to the above cost and demand data for a pure monopolist. Suppose that this monopoly is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this industry, it should set the socially optimal price at:

P2

If this represents a typical firm in the industry and the firm is producing at the profit-maximizing level of output in the short run, then in the long run we would expect more firms to enter the market.

True

Which of the following is true?

Unfair competition is a barrier with no social justification.

Medicare is

a social insurance program that is part of the Social Security program, whereas Medicaid is a social assistance program for persons participating in other public assistance programs.

The gains to monopolists from exercising market power:

are less than the losses to consumers in monopoly markets, resulting in a net loss to society.

Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. The limits of the terms of trade between these two countries will be

between 1 unit of good X for a unit of good Y and 4/3 a unit of X for a unit of good Y.

If income became more unequal, the Lorenz curve would

bow further away from the diagonal line.

In the United States trade adjustment assistance takes the form of

cash assistance for up to 78 weeks and relocation allowances.

The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of:

constant costs.

The export supply curve for a particular country is the

difference between quantity supplied and quantity demanded in the domestic market for a price above the domestic equilibrium price.

The import demand curve for a particular country is the

difference between quantity supplied and quantity demanded in the domestic market for a price below the domestic equilibrium price.

One cause of income inequality in the United States is:

differences in preferences for market work relative to nonmarket activities as well as differences in preferences for types of work.

Consider the following statement: "Capitalism and democracy are really a most improbable mixture. Maybe that is why they need each other—to put some rationality into equality and some humanity into efficiency." This statement recognizes that

each dollar has a vote in the marketplace, and each person has a vote at the ballot box. correct

The most common reason that oligopolies exist is

economies of scale.

The kinked-demand curve model of oligopoly:

embodies the possibility that changes in unit costs will have no effect on equilibrium price and output.

Refer to the diagrams. Diagram (A) represents:

equilibrium price and quantity in a purely competitive industry

Consider the following statement: "Endowing everyone with equal income will make for very unequal enjoyment and satisfaction." This statement is true if

everyone has identical diminishing-marginal-utility-of-money schedules.

The firm should produce in the short run so long as the price

exceeds the average variable cost.

Consider the statement: "The mob goes in search of bread, and the means it employs is generally to wreck the bakeries." Mobs behave in this way because they

exhibit a preference for present over future consumption. correct

Consider the following statement: "Ninety percent of new products fail within two years—so you shouldn't be so eager to innovate." This statement is

false because a firm could capture enough expected economic profit in the short run to cover the initial investment.

The less elastic a monopolistic competitor's long-run demand curve, the:

greater its excess capacity.

Medicaid:

helps finance medical expenses for those participating in the TANF and Supplemental Security Income programs.

"Competition in quality and service may be just as effective as price competition in giving buyers more for their money." This statement is true

if consumers value quality and service more than a lower price.

Over the past few decades offshoring has

increased to countries with an educated labor force such as India.

The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms only earn a normal profit in the long run, firms will develop new products or lower-cost production methods because they can

innovate and possibly earn an economic profit in the short run.

The Gini ratio:

is a numerical measure of the overall dispersion of income in a nation.

Price can be substituted for marginal revenue in the MR = MC rule when an industry is purely competitive because price

is constant regardless of the quantity demanded.

The demand curve faced by a pure monopolist:

is less elastic than that faced by a single purely competitive firm.

The earned-income tax credit is considered a public assistance program because it

is targeted at low-income families.

If a pure monopolist is producing at that output where P = ATC, then:

its economic profits will be zero.

The monopolistically competitive seller maximizes profit by producing at the point where:

marginal revenue equals marginal cost.

Dumping of goods abroad:

may be part of a firm's price discrimination strategy.

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. Sd + Q is the product supply curve after an import quota is imposed. Assuming there is no tariff, the import quota:

may either increase or decrease the total revenues of foreign producers, depending on the elasticity of domestic demand.

"Monopolistic competition is monopolistic up to the point at which consumers become willing to buy close-substitute products and competitive beyond that point." This statement recognizes that products of monopolistically competitive firms

may give them some monopoly power, given strong consumer preferences for their product. However, consumers will substitute away if prices become too high relative to similar products offered in the market.

Monopolistically competitive firms:

may realize either profits or losses in the short run but realize normal profits in the long run.

The demand curve of a monopolistically competitive producer is:

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

Assume that all workers are equally productive, but the wage rate for men is $12 compared to $9 for women. An employer who employs only male workers must have a discrimination coefficient of:

more than $3.

Price leadership is legal in the United States, whereas price fixing is not. This is because price leadership is

not an agreement, whereas price fixing is.

Government's impact on the distribution of income

occurs mainly through transfer programs, but these can discourage work efforts and the recipients may not be low income individuals. correct

All manufacturing is not done in Mexico and other low-wage countries because

of trade barriers.

A purely competitive firm is precluded from making economic profits in the long run because:

of unimpeded entry to the industry.

The difference between monopolistic competition and pure monopoly is that in comparison to monopolistic competition, pure monopoly has

one firm, a unique product, price control, and entry barriers.

When total product is increasing at a decreasing rate, marginal product is:

positive and decreasing.

Monopolistically competitive firms frequently prefer nonprice to price competition because

price competition can lead to lower economic profit or even loss.

Price collusion occurs in oligopolistic industries because

price competition can lower revenue for all firms.

Suppose that an industry is characterized by a few firms and price leadership. We would expect that:

price would exceed both marginal cost and average total cost.

In long-run equilibrium, P = minimum ATC = MC. The equality of P and minimum ATC means the firm is achieving

productive efficiency.

In an oligopolistic market:

products may be standardized or differentiated.

Assumptions: (1) the labor force is comprised of 9 million men and 9 million women workers; (2) the economy has 3 occupations, X, Y, and Z, each having identical demand curves for labor; (3) men and women workers are homogeneous with respect to their labor-market capabilities; (4) women are discriminated against by being excluded from occupations X and Y and are confined to Z; and (5) aside from discrimination, the economy is competitive, and workers seek to maximize their earnings. Refer to the diagram and list of assumptions. The elimination of gender discrimination:

will increase real domestic output.