Micro Test #3

Which of the following is not characteristic of pure competition?

price strategies by firms

OPEC provides an example of:

An international cartel

Economists would describe the U.S. automobile industry as:

An oligopoly

The MR=MC rule:

Applies both to pure monopoly and pure competition

Barriers to entering an industry:

Are the basis for monopoly

In long run equilibrium, production for the firm shown in the diagram above is:

Less efficient than in a purely competitive market

An unregulated pure monopolist will maximize profits by producing that output at which:

MR=MC

Oligopolistic industries:

Many produce either standardized or 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 which of the following market structures is there clear- cut mutual interdependence with respect to price- output policies?

Oligopoly

Refer to the above diagram for a pure monopolists. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set the price at:

P1

The lowest price at which the firm should produce is:

P2

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

P>ATC

Refer to the above diagram for a pure monopolists. If the monopolist is unregulated, it will maximize profits by charging:

Price P3 and producing output Q3

Which of the following is characteristic of a purely competitive sellers demand curve?

Price and marginal revenue are equal at all levels of output

Refer to the above diagram. If this somehow was a countless product (that is, the total cost of any level of output is zero), the firm would maximize profits by:

Producing Q2 units and charging a price of P2

A one-firm industry is known as:

Pure Monopoly

In which of the following industry structures is the entry of new firms the most difficult?

Pure Monopoly

An industry comprised of a very large number of sellers producing a standardized product is known as:

Pure competition

Refer to the diagram. The firm is selling its product in a(n):

Purely competitive market

Refer to the above diagram for a pure monopolist. Monopoly price will be:

c

Refer to the above profits- payoff table for a duopoly. If the firms are acting independently and firm X sets its price at $6, firm Y will achieve the largest profit by selecting:

$4

A purely competitive seller is:

A "Price Taker"

Which of the following statements is incorrect?

A Monopolist's 100 percent market share ensures economic profits

Which of the following industries most clearly approximates pure competition?

Agriculture

Excess capacity refers to the:

Amount by which actual production falls short of the minimum ATC output

Which of the above diagrams correctly portray a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

B

Diagram. The firm will produce at a loss at all prices:

Between P2 and P3

If form a firm P= minimum ATC =MC, then:

Both allocative efficiency and productive efficiency are being achieved

Refer to the above profits-payoff table for a duopoly. If initially firms X and Y are charging $5 and $4 respectively:

Both firms would find its advantageous to collude to raise their prices by $1 each

If a monopolist engages in price discrimination, we can expect:

Both profits and output to increase

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

C

Which of the following is not a basic characteristic of pure competition?

Considerable non-price competition

Refer to the above diagram. To maximize profits or minimize losses this firm should produce:

E units will charge price A

The MR=MC rule can be restated for a purely competitive seller as P= MC because:

Each additional unit of output adds exactly to total revenue

Price is constant or given to an individual firm selling in a purely competitive market because:

Each seller supplies a negligible fraction of total supply

In long run equilibrium, the firm in the diagram above will:

Earn a normal profit

Monopoly power ensures that a firm will earn economic profits.

False

A Monopolistically competitive firm has a:

Highly elastic demand curve

A Monopolistically competitive firm's marginal revenue curve:

Is downsloping and lies below the demand curve

The marginal revenue curve of a purely competitive firm:

Is horizontal at the market price

The nondiscriminating monopolists demand curve:

Is less elastic than a purely competitive firm's demand curve

Refer to the diagram above. The profit- maximizing output is:

Is n

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. The corporation:

Is realizing an economic profit of $40

Monopolistic competition is characterized by a:

Large number of firms and low entry barriers

If at the MC=MR output, AVC exceeds price:

The firm should shut down in the short run

A perfectly discriminating pure monopolist will charge each buyer:

The maximum price each would be willing to pay

The MR=MC rule applies:

To firms in all types of industries

Firms seek to maximize:

Total profit

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

Will also be $5

Assume the above figure applies to a perfectly discriminating pure monopolist, that is, to a monopolist who is able to extract from each buyer the maximum price that buyer is willing to pay. The profit- maximizing output:

Will be k

A pure monopolist:

Will realize an economic profit exceeds ATC at the equilibrium output

Refer to the above diagram for a pure monopolist. Monopoly output will be:

f