Micro Econ hw chapter 14-15
Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs
The drugs would not have been developed.
Which of the following statements about market power is TRUE?
The extent of market power held by a seller can vary along a spectrum from none to a high level.
Which of the following conditions is NOT present in perfect competition?
The product price varies across the companies in the market
Which of the following is a characteristic of monopoly that is not present in other market structures?
There is only one seller
A characteristic of perfect competition that is not present in any other market structure is that there
are many sellers that produce identical products.
A price-taker is a seller that:
charges the current market price for its product
Patents have a positive impact of _____ and the negative impact of _____.
encouraging research; creating a monopoly
The basic idea of a natural monopoly is that there is one producer, and new sellers are discouraged from entering the market because
they would have significantly higher marginal costs than the existing seller in the market.
According to the Rational Rule for Sellers, this company should produce ____ of output and charge a price of _____.
three units; $200
According to the Rational Rule for Sellers, the manager of this company should choose to produce _____ of output and charge a price of _____.
two units; $450
As the quantity sold rises for a seller in imperfect competition, what happens to the difference between price and marginal revenue?
It gets larger and larger
Why would the owner of the following company decide NOT to produce and sell the fourth unit, even though it adds less to costs than the price he could get for it
It would add no additional revenue even though it sells for $150
Which of the following is NOT a characteristic of perfectly competitive markets?
Each seller sets its own price
Which of the following is consistent with current U.S. law on monopolies?
Gaining monopoly or market power through specified exclusionary business practices is illegal.
As the quantity sold rises, how does marginal revenue compare to price for a company with market power?
Marginal revenue falls further and further below price.
A company is the only one producing its type of product. The company's owner is able to set price at the most profitable level. This company is in what type of market?
Monopoly
A product market has only one seller, and that seller has a high level of market power. There are no close substitutes for the product. What type of market is this?
Monopoly
Based on the profit maximization rule for Sellers, how does a manager set price and quantity? If the company has no market power, the marginal cost _____ price. If the company has market power, the marginal cost is _____ than price.
equals; less
For a seller with market power, as the number of units sold increases, marginal revenue
falls further and further below the price.
The degree to which a market provides socially optimal outcomes depends on the degree to which it
is closer to the competition outcome than market power outcomes.
The change in total revenue from selling one additional unit of output is the
marginal revenue.
(Figure: Output Level) According to the rational rule, what output and price should the firm in the following example choose?
quantity = 4; price = $7.00
How does marginal revenue compare to price for a seller with market power?
Beyond the first unit sold, marginal revenue is below price
