micro final

(Table) In the table, what is the shape of the demand curve that faces John's Tricycle Company?

horizontal

Which of the following is a characteristic of an oligopoly market structure?

mutual interdependence

A constantly declining long-run average cost curve is a characteristic of what type of industrial structure?

natural monopoly

If Annie has sold 40 apples in a perfectly competitive market and her total revenue is $80, when she sells her 41st apple, her marginal revenue will be:

$2.

(Figure: Monopoly Pricing and Output Decisions) Using the graph, what is the equilibrium price for this monopolist?

$30

A firm in a perfectly competitive industry is maximizing its profits at 400 units. If the marginal revenue and marginal cost are each $35 and the firm's average total cost is $25, this firm's profit is:

$4,000.

Suppose a firm produces 20 units of output. At that level, ATC is 70, P = 50, MR and MC = 30. The firm is experiencing a loss of:

$400.

(Figure: Interpreting MC and Price Curves) The marginal cost of producing the 57th unit is:

$73.

(Table) Suppose a monopolist faces the demand relationship shown in the table. If marginal cost is $6, then the profit-maximizing output is:

2.

(Table) Boeing and Airbus can either comply with a cartel agreement or cheat. Using this table, if Boeing cheats on the cartel agreement and Airbus complies with the agreement, Boeing's profit will be:

3 MILLION

(Figure: Unicycle Production Costs) At a price of $20, how many unicycles will John produce?

44

(Figure: Interpreting MC and Price Curves) The profit-maximizing output is _____ units.

54

(Table) HH Gregg and Best Buy are competing for sales for its new GPS devices. Each has a pricing strategy of either a high or a low price. Profits for each store are listed in the payoff boxes. Using this table, does either store have a dominant strategy in this game?

Both stores have a dominant strategy.

A perfectly competitive firm should continue to produce until:

MC = P.

(Table) In this game table representing airfare pricing between Delta and JetBlue, does the Nash equilibrium represent a Prisoner's Dilemma, and why?

No, because one firm is earning the highest payoff possible

If a competitive firm can increase its profits by increasing its output, then the firm's:

P > MC.

Market structure analysis allows economists to:

Predict the behavior of firms

Which of the following characteristics does monopolistic competition NOT have in common with the model of perfect competition?

Products of individual firms are different.

A monopolist sells 2,000 units for $20 each. Total costs of 2,000 units are $30,000. If the price falls to $19, the number of units sold increases to 2,100. Total costs of 2,100 units are $30,075. When the monopolist moves from a price of $20 to $19, the marginal revenue will:

decrease.

(Figure: Monopolies Versus Competitive Industries) If the monopoly depicted in the graph were to become a competitive industry:

e would change from producer surplus to consumer surplus

(Figure: Determining Monopolist Profit) In the graph, the profit-maximizing price is found at point:

e.

A Nash equilibrium occurs when:

each player takes the best possible action, given the actions of the other players.

(Figure: Monopolistic Competition) Under monopolistic competition, the price for this good or service in the graph will be:

f.

(Figure: Monopolies Versus Competitive Industries) In the graph, consumer surplus, under monopoly, is _____, while under perfect competition, consumer surplus is

f; e + f + i

(Figure: Monopolistic Competition) Under monopolistic competition, economic profit is represented in this graph by rectangle:

feab.

The HHI of a pure monopoly:

is equal to 10,000.

The Herfindahl-Hirschman Index:

is the sum of squares of each market share of each company in the industry.

The demand curve faced by a firm in monopolistic competition is:

less elastic than the demand curve for a competitive firm.

A handful of firms that exhibit mutually interdependent decision-making are characteristics of what type of market structure?

oligopoly

Kellogg, General Mills, Post, and Quaker Oats dominate the ready-to-eat cereal market. This industry has consistently showed profits in the long run, and is difficult to enter due to brand proliferation. The ready-to-eat cereal industry is an example of what type of market structure?

oligopoly

(Figure: Kinked Demand Curves and Oligopolies) Using the graph, an oligopolistic firm facing a kinked demand curve will NOT increase its price when its marginal cost fluctuates between which two points?

points b and c

For a monopoly firm, if AVC = $20, P = $21, and ATC = $22, then the firm should:

produce at the point where MC = MR.

(Figure: Interpreting Short-Run Cost Curves) Using information from the figure, if price equals $0.40, the firm should:

shut down.

(Table) If the toy-making firm in the table faces a market price of $20 in the short run it should:

shut down.

(Figure: Interpreting Short-Run Cost Curves) Using information from the figure, if price equals $1.00, the firm should:

stay open because it is making an economic profit.

A natural monopoly could possibly arise when:

there are large economies of scale relative to the industry's demand.

A perfectly competitive firm has total revenues equal to $360 when it produces 40 units. What is the marginal revenue for the 41st unit?

$9

Figure: Determining Profit) Given the price of A, economic profit can be illustrated by which rectangle?

ACDF

(Figure: Monopolies Versus Competitive Industries) In the graph, if the monopoly depicted were to become a competitive industry, what would happen?

i would become consumer surplus

The kinked demand curve model assumes that if a firm raises its price, then its rivals will ______ the price increase, and if a firm lowers its price, its rivals will ______ the price decrease.

ignore; match

In oligopoly, all the firms:

take their competitors into account when they make pricing decisions.

Game theory is:

the study of strategy and strategic behavior.

(Figure: Interpreting Cost and Revenue Curves) The graph shows the cost and revenue curves for a monopolist. Referring to the graph, the monopolist:

will not survive.

(Figure: Determining Long-Run Adjustments) The figure depicts the cost curves for a firm in a perfectly competitive industry. In the long run, the market price of this product will be:

40

(Figure: Unicycle Production Costs) In the long run, how many unicycles will John produce?

42

(Table) In the table, marginal revenue for the fifth unit is ____ dollars.

-5

(Figure: Long-Run Monopolistic Competition) Referring to the graph, this monopolistically competitive firm will earn _____ profit in the long run.

no economic

Suppose a firm produces 20 units of output. At that level of output, ATC = 35, P = 50, MR and MC = 30. The firm's economic profit is:

300

(Table) Assume that oligopolists, Firm A and Firm B both charge $20 for the product and face roughly the same costs. Firm A is considering a price decrease to $15. Profits for each firm are given in the payoff matrix (A's profits, B's profits) shown in the table. How will Firm B react?

Firm B will lower its price to $15 and earn $80,000.

Monopolistic competition is like perfect competition in that they both:

have numerous competitors.

(Figure: Monopoly Pricing and Output Decisions) Using the graph, which of the following statements is TRUE about this monopolist?

It is operating at a profit.

(Table) HH Gregg and Best Buy are competing for sales for their new GPS devices. Each has a pricing strategy of either a high or a low price. Profits for each store are listed in the payoff boxes. Using this table, the Nash equilibrium for this game is:

Low, Low = (50,50).

_____ is a market where there are no long-run economic profits, no barriers to entry or exit, some control over price, and differentiated products.

Monopolistic competition

(Figure: Effects of Monopolies on Markets) In the graph, which area represents the inefficiencies caused by a monopoly?

h

Compared with competitive markets, monopolies charge ______ prices and produce a ______ output.

higher; lower

The demand curve for a monopolist is:

the industry demand curve.

(Table) HH Gregg and Best Buy are competing for sales for their new GPS devices. Each has a pricing strategy of either a high or a low price. Profits for each store are listed in the payoff boxes. Using this table, why is the above game characterized as a Prisoner's Dilemma game?

There exists a mutually better outcome for both players; however, it is not rational to play this outcome (which requires collusion) in a one-time game

One way to achieve product differentiation is through:

These are all ways to achieve product differentiation.

(Table) Suppose a monopolist faces the demand relationship shown in the table. If the firm is currently selling 4 units per day and wants to sell 5 units, what is the effect on total revenue?

Total revenue drops by $5.

(Table) Suppose you and your best friend are each deciding whether to spend the weekend in Key West or to stay home and study for next week's exam. The payoffs for each of the four possible outcomes are shown in the table (where higher numbers are better, the first number in each box represents your payoff, and the second number represents your friend's payoff). Which of the following is the Nash equilibrium?

You travel but your friend studies for a payoff of (75, 70).

Which of the following is the BEST example of a barrier to entry?

a government franchise

A monopolist participates in price discrimination when they charge:

a lower price to consumers whose demand is more elastic.

When economies of scale are so large that the minimum efficient scale of operation is roughly equal to market demand, we have:

a natural monopoly.

(Figure: Unicycle Production Costs) If the market price is $18, John makes:

a normal profit or zero economic profit.

The perfectly competitive market structure assumes all of the following, EXCEPT:

a small number of buyers and sellers.

(Figure: Determining Monopolist Profit) In the graph, the profit earned by the monopolist is represented by the rectangle:

abfe.

Which of the following is the BEST example of a natural monopoly?

an electric utility

One of the similarities between monopolistic competition and oligopoly is that they both:

are examples of imperfect competition.

Which of the following regulatory schemes for a natural monopoly results in a normal profit for the firm?

average cost pricing rule

Which of the following is a characteristic of a monopoly firm?

barriers to entry

(Table) Boeing and Airbus can either comply with a cartel agreement or cheat. Using the table, if this game is played repeatedly and both firms adopt strategies such that the cooperative equilibrium emerges:

both Boeing and Airbus will comply.

The MAIN similarity between perfect competition and monopolistic competition is that:

both have many buyers

The key characteristic of monopolistic competition is:

18

If a firm experiences decreases in average total cost as its size increases, it is experiencing:

economies of scale.

A firm in a perfectly competitive industry is a price:

taker.

(Table) From the information given in the table, the four-firm concentration ratio is:

67.

(Table) In the table, what is the profit-maximizing output for John's Tricycle Company?

8

(Figure: Determining Long-Run Adjustments) The figure depicts the cost curves for a firm in a perfectly competitive industry in the long run. If the market price is $36, how many units of output should this firm produce?

9

(Table) If the toy-making firm in the table faces a market price of $36 in the short run, it will maximize its profits by producing ____ toys.

91

(Table) In this game table representing airfare pricing between Delta and JetBlue, what is the Nash equilibrium?

Delta = high; JetBlue = low