Study Guide Test 3

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The graph illustrates an unregulated, profit-maximizing monopolist that cannot price discriminate. This profit-maximizing firm will produce:

800 units of output and charge a price of $9.00 per unit.

The graph illustrates an unregulated, profit-maximizing monopolist that cannot price discriminate. This profit-maximizing firm will earn profit equal to:

$1,200.

Based on the graph below and assuming no externalities, the deadweight loss in this market is approximately equal to:

$1,500.

Which of the following statements is true for a pure, unregulated monopolist that cannot price discriminate in short-run equilibrium?

P > MR, but MR = MC

A monopolistically competitive firm:

all of the above are true

Barriers to entry:

are obstacles that make it impossible or unprofitable for new firms to enter a market in the long run.

From society's perspective:

competition leads to lower prices, higher output, and greater efficiency than monopoly.

Ceteris paribus, an increase in the marginal product of manufacturing workers causes the:

demand for labor to shift to the right

The market for ______ is most likely monopolistically competitive.

dental services

A firm gains monopoly power when barriers to entry can be _____ and _____.

erected; maintained

A firm in a monopolistically competitive market is similar to a monopoly firm in that the firm:

maximizes profit by producing the quantity where marginal revenue equals marginal cost.

A market with many firms, product differentiation, and easy entry in the long run is best classified as:

monopolistically competive

Oligopoly is characterized by all of the following except:

no price-setting ability

A concentration ratio measures the:

percentage of sales going to the largest firms in an industry.

If a monopolist is able to engage in perfect price discrimination:

price is equal to marginal revenue.

To be successful in increasing the price of their product, members of a cartel must:

restrict market output.

Government addresses the inefficiency associated with monopoly by:

restricting market power through antitrust laws and regulation.

The Herfindahl-Hirschman Index is a measure of industry concentration that is calculated by:

summing the squares of the market shares of each firm in the industry.

A natural monopoly can:

supply the entire market at a lower cost than many competing firms.

Game theory helps explain:

the strategic behavior of firms in oligopoly markets

If a monopolistically competitive firm is earning economic profits in the short-run, then:

these profits will be eliminated in the long-run as new firms enter the industry.

The demand for labor:

is derived from the demand for the output that labor helps produce.

A competitive, profit-maximizing firm will choose to hire workers up to the point where the value of the marginal product:

is equal to the wage.

A firm is a pure monopoly when:

it is the only seller of a unique product and barriers to entry prevent other sellers from entering the market in the long run.

The market for _____ is most likely a monopoly.

local utilities

The monopolistically competitive firm represented in the graph is in:

long-run equilibrium since it is earning zero profit.

A monopolist maximizes short-run profit by producing the level of output where:

MR = MC.

Assume perfectly competitive markets with product price equal to $2 and the wage rate equal to $7.50. If the firm follows the profit-maximizing hiring rule, it will pay total variable costs equal to:

$30.

Suppose the demand for a monopolist's output is represented by the data below: A monopolist that must charge each customer the same price will earn total revenue equal to _____ and marginal revenue equal to _____ if the price charged is $9.50.

$47.50; $9.10

Suppose the demand for a monopolist's output is represented by the data below: A monopolist that is able to engage in first degree or perfect price discrimination will earn total revenue equal to _____ and marginal revenue equal to _____ if the quantity sold is 5 units.

$48.50; $9.50

Assume the firm is selling output in a perfectly competitive market, the price of the product is $2, total fixed costs are equal to $5 and the wage rate paid to workers is $7.50. If labor is the only variable input and this firm hires the profit-maximizing number of workers, it will earn profit equal to ________.

$5

The graph illustrates an unregulated, profit-maximizing monopolist that cannot price discriminate. Assuming the firm produces the profit-maximizing level of ouput, it will earn total revenue equal to _____ and pay total costs equal to _____.

$7,200; $6,000

Assume perfectly competitive markets with product price equal to $2 and the wage rate equal to $7.50. Based on the data in the table below, hiring the third worker adds $____ to revenue and $____ to cost.

10; 7.50

Assume perfectly competitive markets with product price equal to $2 and the wage rate equal to $7.50. Based on the data in the table below, a profit-maximizing firm would hire ____ workers.

4

Which of the following best represents a derived demand for labor?

The demand for the services of teachers by school districts

A monopolist that earns positive economic profit in the short run will:

earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand.

In a competitive labor market, a decrease in the supply of labor, ceteris paribus, will:

increase the market wage rate.

The market for _____ is most likely an oligopoly.

soda

The demand curves of firms in monopolistically competitive markets are relatively elastic compared to market demand due to:

the existence of close substitutes.

If DeBeers has a monopoly in the diamond market, then:

the marginal revenue of selling one more diamond is less than the price of that diamond if DeBeers cannot price discriminate.


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