ARE final

Which of the following is a characteristic of a monopoly?

Barriers to entry are the key characteristic of a monopoly, and that's why they gain profit even in the long run.

For an imperfectly competitive firm, which of the following is true?

Both imperfect competition and perfect competition maximize profit by choosing the quantity where MR=MC.

Two restaurants with a focus on Mexican dining operate in Texama. Both Mitch's Mexican and Tim's Tacos need to decide whether to add Zesty Queso or Fresh Guacamole to their menus. The circumstances are that each firm wants to add only one of the two choices on their menu. You will find the profits for the stores, shown as: (1) the payoff to Mitch; (2) the payoff to Tim.

If they cooperate, they will choose "Fresh Guacamole" because each will earn 7.

If a perfectly competitive firm is producing a quantity where MC>MR, then profit can be increased by _____ production.

decreasing

In monopolistic competition as well as in monopoly,

price exceeds marginal revenue for each firm. Both in monopolistic competition and monopoly, we have a demand curve above the marginal revenue curve, and price is determined at the demand curve.

If a firm is earning positive economic profit, it must be the case that:

price is greater than average cost.

Based upon the information from the table, you can conclude that this game is an example of

prisoner's dilemma.

The monopoly's economic profit is maximized when it produces

15 units of output.

The monopoly's marginal revenue equals its marginal cost when it produces

15 units of output.

The figure shows a monopoly's total revenue and total cost curves. The monopoly's economic profit is positive if it produces between

5 and 20 units.

The monopoly's economic profit is zero if it produces

5 or 20 units of output.

Based upon the information from the table, if the two firms could coordinate the decisions about product introductions, how much profit would each firm make?

If Mitch's Mexican chooses Zesty Queso, then Tim's Tacos will choose Zesty Queso because 5 is better than 3 (profit if they choose Fresh Guacamole). If Mitch's Mexican chooses Fresh Guacamole, then Tim's Tacos will choose Zesty Queso because 9 is better than 7.

The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. Based upon the information shown, how many units will Bearclaws produce to maximize profits?

In order to maximize profit, we need to choose the quantity where MR=MC. In this question, the quantity is 70.

Given that Bearclaws chooses the profit maximizing price and quantity, what profit level will it obtain?

Profit = TR - TC = PxQ -ATCxQ = 14x70 - 10x70 = 4x70 = $280.

Which of the following statements is correct?

The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping.

If Mitch's Mexican chooses Zesty Queso then Tim's Tacos will select its best strategy and choose ____ ; if Mitch's Mexican chooses Fresh Guacamole then Tim's Tacos will select its best strategy and choose _____.

The equilibrium is 5, 5 (Zesty Queso, Zesty Queso), which is less than the best outcome (7, 7 - Fresh Guacamole, Fresh Guacamole). Therefore, this game is an example of the prisoner's dilemma.

Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits?

The total cost is ATCxQ = 10x70 = $700.

This figure depicts a situation in a monopolistically competitive market. This firm is operating

This firm is operating in the short run because they are earning a positive economic profit (P ($80) > ATC ($70)). In the long run, the monopolistically competitive market gain zero profit.

Based upon the information shown, what price will Bearclaws charge to maximize profits?

We can determine the price by reading off the demand curve—make sure to check the price where the quantity is 70. The answer is $14.

This figure depicts a situation in a monopolistically competitive market. Which of the following will occur in the long run in this industry?

When we have a positive economic profit, like in this question, firms will enter this industry until the profit goes to zero (in the long run).

Should a competitive firm keep producing even if it faces short-run losses (and is producing at a point on its MC curve that is above the minimum AVC curve)?

Yes, because it covers its variable costs and some fixed costs.

In an oligopoly, each firm knows that its profits

depend on both how much it produces and how much output its rival firms produce.

Which of the following markets is likely to be the most competitive?

farm commodities

In a monopolistically competitive market,

firms can enter or exit the market without restrictions.

For a firm producing at any level of output LOWER THAN the most profitable one, an increase in output adds:

more to total revenue than to total cost.

If a competitive firm produces where the marginal cost curve intersects with the average total cost curve at its minimum point, the firm will earn:

zero economic profits.