micro final

If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is:

2,500

the following are the respective numbers for the four-firm concentration ratio and herfindahl index in an industry. which set of numbers would suggest that the industry was monopolistically competitive?

25 and 207

one feature of pure monopoly is that the firm is

a price maker

pure monopoly refers to

a single firm producing a product for which there are no close substitutes.

nonprime competition refers to

advertising, product promotion, and changes in the real or perceived characteristics of a product

collusion refers to a situation where rival firms decide to

agree with each other to set prices and output

If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there:

are constant returns to scale

barriers to entering an industry

are the basis for monopoly.

a profit-maximizing firm in the short run will expand output

as long as marginal revenue is greater than marginal cost

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:

at which the marginal cost curve intersects the demand curve

For a purely competitive seller, price equals:

average revenue, marginal revenue, total revenue divided by output

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that:

both relatively small and relatively large firms can be viable in the industry

barriers to entry

can result from government regulation

the kinked-demand model of oligopoly assumes that

Rivals will ignore price increases but will match price cuts

which of the following is not a barrier to entry?

X-inefficiency

Three major means of collusion by oligopolists are:

cartels, informal understandings, and price leaderships

marginal revenue is the

change in total revenue associated with the sale of one more unit of output.

suppose you find that the price of your product is less than than minimum AVC, you should

close down because, by producing, your losses will exceed your total fixed costs

the kinked-demand curve of an oligopolist is based on the assumption that

competitors will follow a price cut but ignore a price increase

a firm sells a product in a purely competitive market. the marginal cost of the product at the current output of 1,000 units is $2.50. the minimum possible average variable cost is $2.00. the market price of the product is $2.50. to maximize profits or minimize losses, the firm should

continue producing 1,000 units

if all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing

diseconomies of scale

price is constant to the individual firm selling in a purely competitive market because

each seller supplies a negligible fraction of total supply

oligopolistic firms engage in collusion to

earn greater profits

Which set of characteristics below best describes the basic features of monopolistic competition?

easy entry, many firms, and differentiated products

the incentive to cheat with a cartel increases with an increase in the following factors, except

economic performance and industry sales

When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

economies of scale

the larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. this is an example of one reason for

economies of scale

a monopoly is most likely to emerge and be sustained when

economies of scale are large relative to market demand

the four-firm sales concentration ratio for an industry measures the

extent to which the four largest firms dominate the production of a good

the four-firm concentration ratio for an industry measures the

extent to which the four largest firms dominate the sales of a good

a defining characteristic of an oligopolistic market is that there are

few seller

the monopolistic competition model assumes that

firms will engage in nonprime competition

a significant difference between a monopolistically competitive firm and a purely competitive firm is that the

former sells similar, although not identical, products

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:

herfindahl index

which of the following is a measure of the degree of the industry concentration?

herfindahl index

which of the following is not a source of economies of scales?

inelastic resource supply curves

as a general rule, oligopoly exists when the four-firm concentration ratio

is 40 percent or more

An industry having a four-firm concentration ratio of 85 percent

is an oligopoly

in the short run, a purely competitive seller will shut down if product price

is less than AVC

An industry having a four-firm concentration ratio of 30 percent

is monopolistically competitive

If a purely competitive firm shuts down in the short run:

it will realize a loss equal to its total fixed costs

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that:

its demand curve is kinked

advertising can impede economic efficiency when it

leads to greater monopoly power

In many large U.S. cities, taxicab companies operate as near monopolies because of:

licenses

a natural monopoly occurs when

long-run average costs decline continuously through the range of demand.

an argument for making regulated monopolies adopt marginal-cost pricing is that this would

make the marginal cost equal to society's valuation of the marginal benefit

monopolistic competition means

many firms producing differentiated products

a competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating

marginal revenue and marginal cost

in the long run, a firm will choose a plant size that has the

minimum average total cost of producing the target level of output

The restaurant, legal assistance, and clothing industries are each illustrations of:

monopolistic competition

if you want to enjoy a major league baseball game at the stadium in St. Louis, you must patronize the cardinals. this makes the cardinals organization a

monopoly firm in st. louis

Under monopolistic competition entry to the industry is:

more difficult than under pure competition but not nearly as difficult as under pure monopoly

a market where there are many firms, but one firm dominates and has the bulk (85 percent) of sales in the marker, is called a

near-monopoly

a monopolistically competitive industry is like a purely competitive industry in that

neither industry has significant barriers to entry

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

of barriers to entry

as industry comprising a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called

oligopoly

which of the following is a barrier to entry

patents and licenses

the demand schedule or curve confronted by the individual, purely competitive firm is

perfectly elastic

which of the following is characteristic of a purely competitive seller's demand curve?

price and marginal revenue are equal at all levels of output

the goal of product differentiation and advertising in monopolistic competition is to make

price less of a factor and product differences more of a factor in consumer purchases

differentiated oligopoly exists where a small number of firms are

producing goods that differ in terms of quality and design

a monopolistically competitive industry combines elements of both competition and monopoly. the monopoly element results from

product differentiation

in an oligopolistic market,

products may be standardized or differentiated.

an industry comprising a very large number of sellers producing a standardized product is known as

pure competition

If the several oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of:

pure monopoly

in which of the following market models do demand and marginal revenue diverge?

pure monopoly, oligopoly, and monopolistic competition

in which industry is monopolistic competition most likely to be found

retail trade

Which phrase would be most characteristic of pure monopoly?

sole seller

which of the following would contribute most to a firm experiencing "economies of scale?"

specialization of labor and management within the firm

in answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. for a purely competitive firm, total revenue graphs as a

straight, upsloping line

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?

subway

the short-run supply curve for a purely competitive industry can be found by

summing horizontally the segments of the MC curves lying above the AVC curve for all firms

economies of scale are indicated by

the declining segment of the long-run average total cost curve.

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:

the industry would more closely approximate our competition

a firm doubles the quantity of all resources it employs and, as a result, output doubles. which of the following is correct?

the long run average total cost curve is flat

one defining characteristic of pure monopoly is that

the monopolist produces a product with no close substitutes

what is the meaning of the phrase "dilemma of regulation"?

the socially optimal price achieves allocative efficiency but may produce economic losses

monopolistically competitive and purely competitive industries are similar in that

there are few, if any, barriers to entry

which of the following assumptions is part of the model of monopolistic competition?

there is no mutual interdependence among firms

one difference between monopolistic competition and pure competition is that

there is some control over price in monopolistic competition

one argument for having the government regulate natural monopolies is that without regulation,

these monopolies produce at a level where marginal benefit is greater than marginal cost\

What do economies of scale, the ownership of essential raw materials, and patents have in common?

they are all barriers to entry

suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 mil, $30 mil, and $30 mil, respectively. we can conclude that

this industry is monopolistically competitive

the MR=MC rule applies

to firms in all types of industries

firms seek to maximize

total profit

A FIRM REACHES A BREAK-EVEN POINT (NORMAL PROFIT POSITION) where

total revenue and total cost are equal

a natural monopoly exists when

unit costs are minimized by having one firm produce an industry's entire output.

In the short run a purely competitive firm that seeks to maximize profit will produce:

where total revenue exceeds total cost by the maximum amount

the kinked-demand curve model of oligopoly is useful in explaining

why oligopolistic prices might change infrequently

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

will also be $5

the herfindahl index for a pure monopolist is

10,000