Unit 4 Test

If Total Cost = $100,000 when Quantity = 0, then...

Fixed Cost = $100,000.

A firm operating as a monopoly tends to supply at a level where...

MC < P.

Firms operating in highly competitive markets tend to supply at a level where...

MC = P.

The profit-maximizong supply level for a competitive firm is where...

MR=MC.

When we assume firms want to maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

Output will be too small and its price too high.

The supply decision for a perfect competitor is where...

Price = Total Cost.

Revnue - Expenses =

Profit

What should a company do in the short run if it sells 5,000 items at $60 each, has a total cost of $140,000 when production is 0, and has a total cost of $400,000 when it produces those 5,000 items?

Stay open to minimize loss since its revenue of $300,000 covers its variable cost of $260,000.

An example of a horizontal merger would be..

Wilson Tennis Balls merging with Penn Tennis Balls.

When a monopoly is the only supplier within 200 miles, we often call this type of monopoly...

a geographic monopoly.

When a monopoly's costs are minimized because of economies of scale, we often call this type of monopoly...

a natural monopoly.

In order to try to convince consumers that their product is better than the competition's product, a monopolistic comeptitor would likely...

advertise about product differentiation.

In the long run, a firm can...

change all inputs

If a company with 10% market share merges with a company with 5% market share, the HHI will...

change by 100 points.

In the short run, a firm can...

change only variable inputs.

The Department of Justice and the US Federal Trade Commission justify their records of approval of most mergers by claiming that, even though competition is diminished by consolidating two firms into one, mergers usually benefit:

competition and consumers by allowing firms to operate more efficiently.

Let's pretend there is a perfectly competitive market with many firms selling identical products, then, in this type of competition,

each of these firms must act as a price-taker.

Which of the following is most unlikely to present a barrier to entry into a market?

economies of scale

A perfect competitor's demand curve is...

horizontal.

If a perfect competitor raises its price,...

it will lose business

Which of the following is most likely to be a monopoly?

local electricity distributor

Perfect competition features...

many small companies

Perfect competition has these characteristics:

many small companies with little or no control over price.

Monopolistic competition has these characteristics:

many varying sized companies with some control over price.

If a company makes 9 items and sells all of them for $10 each, and then the company makes a 10th item and sells it for $10, we know for sure that its...

marginal revenue for the 10th item is $10.

Following the Shutdown Rule enables a company to...

maximize profit or minimize loss.

Monopoly has these characteristics:

one company with much control over price.

Farmers producing and then selling field corn at an agricultural elevator could be used as a legitimate example of...

perfect competition

The four main market structures are...

perfect competition, monopolistic competition, oligopoly, and monopoly.

Major arguments against monopolies are that they tend to ________________ supply and _________________ price.

reduce; increase

Monopolies tend to worry consumers because of...

restricted supply and higher prices.

If a firm cannot cover its variable cost, it should...

shut down to minimize loss

If the HHI changes by 400 as the result of a horizontal merger,...

the Department of Justice is unlikely to approve the merger.

Oligopoly has these characteristics:

usually 4-6 companies with some control over price.

The Shutdown Rule states that a company should stay open in the short run as long as it can cover its...

variable cost.