chapter 15, 16 & 17

example of a barrier to entry

Roseanne obtains a copyright for a short story that she wrote and published.

Which of the following is necessarily a problem with antitrust laws?

They may target a business whose practices appear to be anti-competitive but in fact have legitimate purposes.

A monopolistically competitive market has characteristics that are similar to

both a monopoly and a competitive firm.

Free entry and exit means that the number of firms in the market adjusts until

economic profits are driven to zero.

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

highly-differentiated consumer goods.

Cartels in the United States are

illegal.

The relationship between advertising and product differentiation is

positive; the more differentiated the product, the more a firm is likely to spend on advertising.

As the number of firms in an oligopoly increases, the magnitude of the

price effect decreases.

The laws governing patents and copyrights

promote monopolies.

Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly back. What is the reason for this price discrepancy?

- Airlines are practicing imperfect price discrimination to raise their profits - Airlines charge a different rate based on the different nature of peoples' travel needs. - Airlines are attempting to charge people based on their willingness to pay. - All of the above are correct.

Because oligopoly markets have only a few sellers, the actions of any one seller

- can have a large impact on the profits of other sellers in the market. - will affect how other firms behave in the market.

The higher the concentration ratio, the

- more control an individual firm has to set prices. - less competitive the industry

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market

Price decreases, and total surplus increases.

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have

a Nash equilibrium.

A special kind of imperfectly competitive market that has only two firms is called

a duopoly.

When an oligopoly market reaches a Nash equilibrium,

a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.

A firm that is the sole seller of a product without close substitutes is

a monopolist.

Excess capacity is

an example of the inefficiencies of monopolistically competitive markets.

When firms have agreements among themselves on the quantity to produce and the price at which to sell output, we refer to their form of organization as a

cartel.

the profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways

competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

Predatory pricing occurs when a firm

cuts its prices temporarily in order to drive out any competition.

The economic inefficiency of a monopolist can be measured by the

deadweight loss.

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

is often not in the best interest of society.

Monopolistic competition is an inefficient market structure because

it has a deadweight loss, just as monopoly does.

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

oligopoly or monopolistically competitive market.

The breakfast cereal industry, with its concentration ratio of 80%, would best be described as a(n)

oligopoly.

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

output effect and the price effect.

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

sole ownership of the right to sell the drug for a limited number of years.

A natural monopoly occurs when

there are economies of scale over the relevant range of output.

Cartels are difficult to maintain because

there is always tension between cooperation and self-interest in a cartel.