Micro Final

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. If the market for Good Y is monopolistically competitive, a firm producing Good Y will shut down production in the short run if price falls below −−−−−−−−−.

$120 (I think divide variable cost by # produced)

When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. What is the price effect of the price change?

$250 (250-0)*1

When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. What is the quantity effect of the price change?

$300 (325-250)*4

Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer?

$8,000

. There are four firms in the cement industry in Richland. Firm A has a market share of 30%, Firm B has a market share of 20%, Firm C has a market share of 25%, and Firm D has a market share of 25%. The Herfindahl-Hirschman Index for the cement industry is

2,550

When a monopolist sells positive levels of output, its demand curve:

Lies above its marginal revenue curve

A collusion breaks down if −−−−−−−−−.

A firm charges a price lower than the price set by the other colluding firms

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. If the equilibrium price charged by the firm in the short run is $170, the firm will earn −−−−−−−−−.

A profit of $0 per unit

In an oligopoly with differentiated products, firms _________ A. Make positive economic profits B. Incur losses C. Earn 0 economic profits D. Do not face competition from its rivals

A. Make positive economic profits

Which of the following statements is true? A. Network effects act as barriers to entry in a market. B. Economies of scale act as incentives for new firms to enter a market. C. If a firm is enjoying economies of scale, then its product must have network effects. D. If a firm's product has network effects, then the firm must be enjoying economies of scale.

A. Network effects act as barriers to entry in a market

Which of the following markets is an example of an oligopoly? A. Market for Premium Apparels B. Market for Books C. Market for Video Games D. Market for Wheat

A. Premium Apparels

At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context? A. The monopolist should expand production. B. The monopolist should contract production. C. The profits of the monopolist are maximized. D. The profits of the monopolist are minimized.

A. The monopolist should expand production

A market in which a firm emerges as a monopoly due to large economies of scale is referred to as:

An exclusive monopoly

Which of the following is true of a duopoly with differentiated products? A. A firm loses all its customers when its rival lowers the price of its product B. A firm does not lose all its customers when its rival lowers the price of its product C. A firm faces a perfectly elastic demand curve D. A firm faces a perfectly inelastic demand curve

B. A firm does not lose all its customers when its rival lowers the price of its product

Economies of scale in production act as a source of: A. legal market power. B. natural market power. C. restricted market power. D. regulated market power

B. Natural market power

If a monopolist owns or controls a key resource necessary for production, it is a source of: A. Legal market power B. Natural market power C. Regulated market power D. Restricted market power

B. Natural market power

There are 2 firms in an industry and their products are perfect substitutes for each other. Each firm had a market share of 50% and charged equal prices. However, when the demand for the good declined due to recession, Firm A lowered its price to increase sales. Firm B responded by lowering its price further. This is an example of the ___________ of oligopoly.

Bertrand Model

Which of the following statements is true? A. A monopolist faces an upward sloping demand curve. B. A perfectly competitive firm faces an upward sloping demand curve. C. A monopolist can increase the price of its product and not lose all of its business. D. A perfectly competitive firm can increase the price of its product without losing its business.

C. A monopolist can increase the price of its product and not lose all of its business

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. A firm producing Good Y will −−−−−−−−−. A. earn economic profits if it charges a price of 120 B. incur losses if it charges a price of $200 C. earn zero economic profits if it charges a price of $170 D. shut down production if price falls below $200

C. Earn 0 profits if it charges $170

Which of the following is an example of a monopolistically competitive market? A. Wheat Market B. Coffee Bean Market C. Shampoo Market D. Premium Car Market

C. Shampoo Market

Compared to a firm under perfect competition, a monopolist

Charges more and produces less

There are a few firms in the automobile industry in Poorland. In order to prevent a price war, these firms have secretly agreed to charge a price 20% above the marginal cost of production. This is an example of −−−−−−−−−.

Collusion

A musician was guaranteed by the government that no one else could replicate or sell his music CDs. This is an example of a:

Copyright

An oligopoly model in which sellers compete on quantities rather than prices is called a −−−−−−−−− model.

Cournot

Which of the following is a feature of an oligopoly market? A. Large number of sellers in the market B. No barriers to entry C. Firms earn 0 economic profits D. Firms actions affect decisions of its rival

D. Firms actions affect the decisions of its rival

Which of the following statements is true? A. Monopoly is characterized by no entry barriers. B. Perfect competition is characterized by high entry barriers. C. Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers. D. Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers.

D. Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers

Which of the following is true of monopolistic competition? A. There is only one seller in this market structure. B. The product sold by each seller in this market structure is identical. C. The firms in this market structure earn huge economic profits in the long run D. There are a large number of sellers each selling a differentiated product

D. Large number of sellers with differentiated products

Which of the following is an example of differentiated goods?A. Books/Cosmetics B. Fuel/Water C. Potatoes grown by different farmers D. Tea/Energy Drinks

D. Tea/Energy Drinks

In comparison to firms in other market structures, monopolists: A. maximize social surplus. B. encourage the entry and exit of new firms. C. set price lower than marginal revenue. D. produce goods that do not have close substitutes

D. produce goods that do not have close substitutes

Goods that are similar but are not perfect substitutes are called ______ goods.

Differentiated

A monopolistically competitive firm always faces a(n)−−−−−−−−−. (what kind of demand curve?)

Downward sloping demand curve

The Herfindahl-Hirschman Index is used to −−−−−−−−−.

Estimate the degree of competition in an industry

A firm is said to have market power if it charges a price −−−−−−−−− of production.

Higher than the marginal cost

La Dila and Swiss Pro are the only 2 firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly?

La Dila will face the entire market demand

The quantity produced in a monopolistically competitive market is −−−−−−−−− than the quantity produced in a perfectly competitive market, and the price charged in a monopolistically competitive market is −−−−−−−−− than the price charged in a perfectly competitive market

Lower, higher

A profit-maximizing monopolistic competitor continues production until −−−−−−−−−.

MR = MC

A monopolistic competitor exits the industry in the long run if −−−−−−−−−.

Marginal revenue equals marginal cost

_______________ is the market structure in which there are many rival firms producing differentiated products.

Monopolistic Competition

Sellers in which of the following market structures are likely to have the highest market power?

Monopoly

There are a few ship manufacturers in Polonia and each firm faces a downward sloping demand curve. The ship-building industry in Polonia is an example of a(n) −−−−−−−−−.

Oligopoly

__________ is the market structure in which there are few rival firms.

Oligopoly

The pricing rule for a monopolist is:

P > MR = MC

A −−−−−−−−− is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good.

Patent

Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a:

Patent

The effect of the invisible hand is likely to be the strongest under which market structure?

Perfect Competition

A monopolistically competitive firm makes positive economic profits if −−−−−−−−−.

Price is higher than ATC

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. Which of the following will happen if the equilibrium price charged by the firm in the short run is $130?.

The firm will incur a loss but continue production

Which of the following is a similarity between a monopoly and an oligopoly with differentiated products?

The long run equilibrium price in both markets exceeds marginal cost.

In a duopoly with homogenous products, the best response of a firm is to charge a lower price than its rival as long as _________.

The rival's price is above marginal cost

When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. What is the change in total revenue due to the price reduction?

The total revenue increases by $50

A network externality refers to a situation where:

The value of a product increases as more consumers start to use it

A monopolistically competitive firm shuts down in the short run if −−−−−−−−−.

Total revenues do not cover variable costs

The Herfindahl-Hirschman Index is calculated by −−−−−−−−−.

squaring the market share of each firm competing in the market and then summing the resulting numbers