Old Econ 3
Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45; MC = $35; MR = $35; P = $50. What is the monopoly's profit?
$500
Which following is a true statement regarding free trade?
- Free trade generally reduces the domestic prices of imports - Free trade may stimulate economic growth through export sales - Free trade promotes specialization and efficient production.
All of the following are true about a monopolist (3)
- Its produces a product with no close substitutes - Its demand curve is the same as the market demand for the industry - It is a single seller of a good or service
All of the following are characteristics of monopolistic competition (3)
- Product differentiation - Advertising - Many firms in the industry
Which of the following conditions is true for a monopolist? - MR < AVC - MR < P - MR = AFC - MR = P
MR < P
A monopoly will maximize profits at the level of output at which
MR = MC
In the short run, the profit-maximizing monopolistically competitive firm will produce the rate of output at which
MR = MC
Compared to perfect competition, a monopoly will produce _____ output, and charge a _____ price.
less; higher
In a monopolistically competitive market there are..
many firms producing similar but not identical products.
A monopolistically competitive firm finds its profit-maximizing rate of output by equating
marginal revenue and marginal cost.
The demand curve for a monopolistically competitive firm is
more elastic than for a monopoly firm.
In a oligopolistic market, each firm
must consider the reaction of rival firms when making a pricing or output decision.
A monopolist can earn economic profits in the long run because...
new firms are prevented from entering the industry.
In the long run, monopolistically competitive firms will not earn economic profits because
new firms will enter the industry.
Which of the following is a true statement about a monopoly?
A monopoly does not necessarily earn positive economic profits.
If country A exports good X to country B and country B exports good Y to country A, it is most likely that
B has a comparative advantage in the production of good Y.
An association of producers that fixes common prices output quotas is known as a
Cartel
What is true of the price elasticity of demand faced by a monopoly firm?
Demand becomes more elastic as the range of imperfect substitutes expands.
Other things being equal, which market structure would produce the least output and the highest average product price?
Monopoly
For which market structure do economists have the least precise model of price determination?
Oligopoly
A monopolistic firm will shut down if...
P < AVC for each level of output
In a long-run monopolistically competitive equilibrium,
P > LRAC, and LRAC is at its minimum value.
For a monopoly earning positive economic profits at the profit-maximizing output level, all of the following are true. (3) <, >, =
P > MR P > ATC P > MC
The model of perfect competition and the model of monopolistic competition differ in that
Perfect competition assumes the product is homogeneous and monopolistic competition assumes the product is differentiated.
In the short run, a monopolistically competitive firm can earn.
Zero, positive or negative profits.
Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in
a higher price and less output.
Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in.....
a higher price and less output.
In the long-run monopolistically competitive firm will result in...
a higher price and less output.
In oligopoly, any action by one firm to charge price, output, or quality causes
a reaction by other firms
Restricting imports usually leads to
a reduction in exports and employment
The monopolist's marginal revenue is less than price since
additional units can only be sold if the price is lowered on all units sold.
Firms face downward sloping demand curves in
all market structures except perfect competition.
Firms face downward sloping curves in
all market structures except prefect competition
Specialization and international trade lead to
an enhanced level of consumption
Specialization and international trade lead to
an enhanced level of consumption.
The net effect of regional trade agreements has been
an increase in the total amount of trade in the world.
If we observe firms earning zero economic profits in the short run, we know that
any market structure is possible since firms under any market structure can earn zero profits at some time.
A group of producers that agree to coordinate their production is called a
cartel
In a cartel, participating members can cheat by
charging a slightly lower price and raising production
A member in a cartel can earn more profits by
charging a slightly lower price and raising production.
The ability to produce a good service at a lower opportunity cost than other producers is called
comparative advantage
The ability to produce a good or service at a lower opportunity cost than other producers is called
comparative advantage.
The goal of advertising is to
differentiate a firm's product.
Personalized advertising that uses postal mailings, phone calls, and e-mail messages is known as
direct marketing.
If protective import-restricting quote are imposed by a country, all of the following groups benefit Except
domestic consumers in the affected industry
In the game theory, the strategy that always yields the highest benefit for the player using it is the
dominant strategy
The demand a monopoly faces is...
downward sloping
The number of firms in a monopolistically competitive market means that....
each firm has a relatively small share of the total market since there are many firms in the industry.
In the long run, firms in a monopolistically competitive market
earn zero economic profits.
The profit-maximizing monopolist will operate in a pricing range over where demand is.... (Elastic or Inelastic)
elastic
The demand curve for a monopolistically competitive firm is...
elastic because of product differentiation.
Restriction on imports
eventually reduce exports, too.
A product that must be actually consumed before the quality of the product can be determined is a(n)
experience good
The dominant strategy allows a firm to
obtain the highest benefit, regardless of its rivals' actions.
Long-run economic profits are possible under
oligopoly and monopoly
Advertising that is intended to alter a consumer's tastes and preferences and induce the customer to purchase a particular product is
persuasive advertising
Advertising that is intended to alter a consumer's tastes and preferences and induce the customer to purchase a particular product is
persuasive advertising.
Compared to a perfectly competitive industry, the monopolist will generally...
produce less output and charge a higher price.
A tariff placed on a foreign good will
reduce the price if a competing domestic good
Monopolistic competition is characterized by
relative ease of entry into the market.
When a tariff is imposed, the demand curve for the domestic substitute good
shifts upward and to the right.
A monopolist pricing decision is constrained by what?
the demand curve it faces.
In a monopoly
the firm and the industry are the same thing.
A difference between a quota and a tariff is that
the government collects revenues from a tariff, which does not necessarily happen with a quota.
A monopolist's demand curve is....
the industry demand curve.
A monopolist maximizes profits by finding
the rate of output where marginal revenue equals marginal cost.
A natural monopoly usually arises when
there are large economies of scale relative to the industry's demand.
A cartel will break down more easily if
there are many firms in the industry
Cartel agreement are more likely to break down when
there is a large number of firms due to the incentives to cheat.
A search good is a product
with characteristics that enable an individual to evaluate the product's quality in advance of a purchase.