Microeconomics - Exam 3

If duopoly firms that are not colluding were able to successfully collude, then

price would rise and quantity would fall.

Total revenue equals

price × quantity

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level.

Which of the following examples illustrates an oligopoly market?

A city with two firms who are licensed to sell school uniforms for the local schools

Which of the following firms is the closest to being a perfectly competitive firm?

A grain farmer in Illinois

Which of the following would be most likely to have monopoly power?

A local cable TV provider

Which of the following is not an example of a barrier to entry?

An entrepreneur opens a popular new hair salon

For an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output

Which of the following is not a characteristic of a competitive market?

Entry is limited

Which of the following is true about a monopolistically competitive firm?

It can earn an economic profit in the short run, but not the long run.

Two CEOs from different firms in the same market collude to fix the price in the market. This action violates the

Sherman Antitrust Act of 1890.

Which of the following represents the firm's short-run condition for shutting down?

Shut down if TR < VC

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

The firm is the sole seller of its product

Which of the following is an example of public ownership of a monopoly?

U.S. Postal Service

Which of the following statements about oligopolies is not correct?

Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs.

If a firm produces nothing, which of the following costs will be zero?

Variable cost

Which of the following expressions is correct?

accounting profit = economic profit + implicit costs

In monopolistically competitive markets, free entry and exit suggests that

all firms earn zero economic profits in the long run

The average fixed cost curve

always declines with increased levels of output

For a monopolistically competitive firm,

at the profit-maximizing quantity of output, marginal revenue equals marginal cost.

Marginal cost is equal to average total cost when

average total cost is at its minimum

When marginal cost is less than average total cost,

average total cost is falling

The fundamental source of monopoly power is

barriers to entry

A monopoly can earn positive profits because it

can maintain a price such that total revenues will exceed total costs.

Price discrimination

can maximize profits if the seller can prevent the resale of goods between customers.

The product-variety externality is associated with the

consumer surplus that is generated from the introduction of a new product

The social cost of a monopoly is equal to its

deadweight loss.

Monopoly firms face

downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

The equilibrium quantity in markets characterized by oligopoly is

higher than in monopoly markets and lower than in perfectly competitive markets

A benefit to society of the patent and copyright laws is that those laws

encourage creative activity

When new firms enter a perfectly competitive market,

existing firms may see their costs rise if more firms compete for limited resources.

For any competitive market, the supply curve is closely related to the

firms' costs of production in that market

Competitive markets are characterized by

free entry and exit by firms

In both perfect competition and monopolistic competition, each firm

has many competitors

A difference between explicit and implicit costs is that

implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.

Assuming the firm is maximizing profit, this firm is operating

in the short run and earning a positive economic profit

In the long run,

inputs that were fixed in the short run become variable.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs.

Economies of scale occur when

long-run average total costs fall as output increases

A monopolistically competitive industry is characterized by

many firms, differentiated products, and free entry

The minimum points of the average variable cost and average total cost curves occur where the

marginal cost curve intersects those curves.

The two types of imperfectly competitive markets are

monopolistic competition and oligopoly

Selling the same good at different prices to different customers is known as

price discrimination.

When buyers in a competitive market take the selling price as given, they are said to be

price takers.

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

price will exceed marginal cost

A similarity between monopoly and monopolistic competition is that in both market structures

sellers are price makers rather than price takers

In monopolistically competitive markets, economic losses

suggest that some existing firms will exit the market

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs

A government-created monopoly arises when

the government gives a firm the exclusive right to sell some good or service.

A cooperative agreement among oligopolists is more likely to be maintained

the more likely it is that the game among the oligopolists will be played over and over again.

As the number of firms in an oligopoly increases,

the total quantity of output produced by firms in the market gets closer to the socially efficient quantity.

A central issue in the Microsoft antitrust lawsuit involved Microsoft's integration of its Internet browser into its Windows operating system, to be sold as one unit. This practice is known as

tying

Cartels are difficult to maintain because

​each firm has an incentive to deviate from its agreed output level.

Whenever a cartel in a duopoly breaks down,​

​total output in the market will rise.