Bank (Econ)
A monopolistically competitive firm is like a monopoly firm insofar as
both have MR curves that lie below their demand curves.
For a single-price monopolist that is maximizing profit, the price is
greater than marginal cost.
An industry in which economies of scale allow one firm to supply the entire market at the lowest possible cost is called a
natural monopoly
A monopolistically competitive firm is like a perfectly competitive firm insofar as
neither is protected by high barriers to entry.
Other things being equal, higher wage rates will
decrease the quantity demanded of labor
Suppose a monopoly pharmaceutical company produces a drug and sells 100 prescriptions for $80 each. In order to sell 101 prescriptions, the monopolist must lower the price to $79 per prescription. The marginal revenue of the 101st prescription is:
$-21.
In Table 15.1, the marginal revenue product of the second worker hired is:
$24 per hour.
Identify two reasons why an individual's labor supply curve is typically upward-sloping
(1) As the amount of labor that a worker supplies increases, the marginal utility of the worker's leisure time increases. As a result, the worker will require higher wages to compensate for giving up increasingly valuable leisure time. (2) For most workers, the marginal utility of additional income decreases. When this happens, workers will not be willing to work more hours unless wages increase
A perfectly competitive market structure requires that
1. there will be enough buyers and sellers so that no party has any control over price 2. the product will be homogeneous 3. There be good information 4. there be no inappropriate regulation
Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In Table 30.1, the contribution to total revenue of the fourth worker hired is
16 per hour
Assume the marginal revenue equals a rising marginal cost at 30 units of output. At this output the average total cost is $20. If the products price is $70, the competitive firm will maximize profit by producing ______ units of output and its short run-profit will be____ dollars
30; 1500
Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In Table 30.1, how many workers should be hired?
5
In Table 15.1, how many workers should be hired?
5
Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output.
5 units per hour.
.If the elasticity of labor demand is -0.60, a 15 percent increase in the wage rate will induce a:
9 percent decrease in the quantity of labor demanded.
Explain why a perfectly competitive firm can sell as much as it wants at the market price but a monopolist must lower its price to sell more
A perfectly competitive firm is so small compared to the total market that any changes in output by the firm will have no perceivable impact on the market price. It follows that the firm can sell as much, or as little, as it wants at the market price. However, the demand for a monopolist's product is the same as the downward-sloping market demand, so the monopolist will have to lower its price to increase quantity demanded.
In Figure 24.1, total revenue is represented by the area
ABFE
The competitive firm's total revenue curve is:
An upward sloping straight line from the origin
The market supply curve for labor curve is upward-sloping because
As the wage rises, most workers are willing to work more hours
Monopolistically competitive firms have a "monopoly" element to them because
Brand loyalty gives them a captive audience
In Figure 24.1 total cost is represented by the area
CDFE.
A group of firms that bands together and behaves like a monopoly is:
Cartel
Other things being equal, higher wage rates will:
Decrease the quantity demanded of labor.
If the price is currently less than MC, the competitive firm can improve profit by:
Decreasing output
As labor productivity increases, which of the following shifts in the labor market should occur?
Demand for labor should shift to the right
If consumers decide to buy fewer strawberries, then the:
Demand for strawberry pickers will fall.
The demand for labor is downward-sloping because of
Diminishing returns to labor
When oligopoly firms collude to raise prices
Each firm benefits, but society loses
In the long run, an oligopolist is most likely to
Experience economic profits because of barriers to entry
A perfectly competitive firm faces a demand curve that is perfectly inelastic
False
Which one of the following statements is TRUE for BOTH perfect competition and monopolistic competition?
In the long run, firms in both industries make zero economic profit
Workers typically require higher wages in order to work additional hours because of the
Increasing opportunity cost of labor
Which of the following is true about the kink in the demand curve for oligopolies?
It is the result of different rival responses to price increases and reductions
Which of the following is true for a monopolist?
It must lower its price on all of its units in order to sell any additional units.
Compared with a competitive market with the same cost and market demand circumstances, a monopolist has
Less pressure to reduce costs and less reason to improve quality
In the short run, a firm in monopolistic competition produces where
MR = MC
For a monopolist, the profit-maximizing rate of output occurs where:
MR = MC.
At the profit-maximizing output for a perfectly competitive firm:
Marginal cost= price
The additional revenue a firm gets from selling an extra unit of output is:
Marginal revenue
In monopoly and perfect competition, a firm should expand production when
Marginal revenue is above marginal cost
In elastic region of the non-discriminating monopolist's demand curve
Marginal revenue is positive and total revenue is rising
As new firms enter a constant-cost industry:
Market output increases
The demand curve will be kinked if rival oligopolists
Match price reductions but not price increases.
The profit-maximizing rate of output in Figure 24.1 is
Point c
A monopolist faces a downward-sloping demand curve which lies above its marginal revenue
True
WaveHouse is the only place in San Diego where this service is offered. You can ride B. Max for $40 for the first hour, $33 for the second hour, and $26 for the third hour. Charging a different price for subsequent hours is a form of:
Price discrimination among units of a good
Which of the following is true regarding the long run for a firm in monopolistic competition?
Price equals average total cost.
A firm experiencing economic losses will still continue to produce output in the short run as long as:
Price is above average variable cost
Ceteris paribus, if immigration to the United States increases the number of workers, the market labor-supply curve will shift to the:
Right and the equilibrium wage rate will fall
Which of the following is not a characteristic of a purely competitive industry?
Substantial differences in the products of sellers
If there are economies of scale that are so extensive that a single firm can serve the entire market at a lower cost than multiple firms could, then:
That firm is a natural monopoly
Other things being equal, a profit-maximizing employer will employ additional labor as long as:
The MRP of labor exceeds the wage rate.
The marginal revenue product of labor is equal to:
The marginal physical product multiplied by the marginal revenue of the output.
The pure monopolist's demand curve is:
The market demand curve
For a monopoly practicing the price discrimination, the lowest price will be charged to the customer group with:
The most elastic demand
An industry's market structure refers to
The number and size of the firms in the industry
A major difference between monopoly and monopolistic competition is
The number of firms in the market
A firm cannot maintain above-normal profits over the long run
Unless barriers to entry exist
The individual labor supply curve will be negatively sloped if the substitution effect of wages
Weaker than the income effect of wages.
When producers agree to restrict output, raise the price, and increase profits, the agreement is called ________
a collusive agreement
Regulation of a natural monopoly will maximize the sum of consumer surplus and producer surplus if the firm is regulated with
a marginal cost pricing rule.
Of the following, consumer surplus is largest for
a perfectly competitive industry.
There is a deadweight loss if a natural monopoly is regulated to use
average cost pricing and if it is allowed to be unregulated and maximize its profit.
In an oligopoly with a collusive agreement, the total industry profits will be smallest when
all firms cheat on the agreement.
A patent grants
an exclusive right to an inventor of a product.
Marginal product of labor MP
change in Q/change in L
If a monopolist can perfectly price discriminate, it will
charge a different price for every unit sold.
A perfect price discriminator
charges the maximum price for each unit that consumers are willing to pay.
Tris owns the only auto repair shop on Lonely Island. Tris is a single-price monopoly, so Tris operates on the ________ part of the ________ curve.
elastic; demand
A patent creates a monopoly by restricting ________
entry into the market
A single-price monopolist will maximize profit by producing so that marginal revenue
equals marginal cost
In 1986, PepsiCo announced its intention to buy 7-Up for $380 million and Coca-Cola said it would buy Dr Pepper for $470 million. Because the Herfindahl-Hirschman index for carbonated soft drinks is ________, the Federal Trade Commission ________ the mergers.
high; blocked
Refer to question 10, as a result of the increase in the wage rate, the total labor income will
increase because labor demand is inelastic.
If the entire output of a market is produced by a single seller, the firm:
is a monopoly
Compared to a single-price monopoly, the output of a perfectly competitive market with the same costs
is more than the monopoly's output.
The monopolist's supply curve,
is non existent
Which of the following statements regarding an average-cost pricing rule for a natural monopoly is WRONG?
it is efficient
When a monopolist increases sales by one unit,
it loses some marginal revenue it gains some marginal revenue from selling that extra unit. more low priced sales cause negative marginal revenues. every other unit must now be sold at a lower price.
A competitive firm's short run supply curve is:
its MC curve above the AVC curve
A monopolist will shut down if it cannot cover:
its variable cost
The willingness to work a certain amount of time at a given wage rate is known as
labor supply
A monopolistically competitive industry is characterized by ________ concentration ratios and ________ entry barriers.
low; low
In the long run, in monopolistic competition
make firms earn zero economic profit.
Monopolistic competition is defined as a type of market structure where
many firms produce the good.
Under perfect competition, the demand curve facing the individual firm is:
perfectly elastic
One important difference between monopoly and monopolistic competition is the
point there are no barriers to entry in monopolistic competition.
Compared to a single-price monopolist, a price-discriminating monopolist
produces more output
If, at the present output level, price exceeds marginal cost, the purely competitive firm
should increase output to maximize its profit or minimize its loss
Each producer in monopolistic competition has
some market power
To say that a firm is price taker means that:
the firm can adjust its output but doing so it will not affect price
The marginal revenue product of labor is equal to
the marginal physical product multiplied by the marginal revenue of the output
Monopolistic competition and perfect competition share all of the following EXCEPT
the type of good they sell
If a monopoly is operating along the portion of its demand curve where marginal revenue is positive, its
total revenue increases when price decreases.
