Eco 2020 exam 3
To price discriminate, firms must identify a customer's or a group of customers' willingness to pay.
True
In a competitive industry:
all firms produce at the same marginal cost.
Cartel member strategy can be like a prisoner's ______ game.
dilemma
Overfishing in oceans is a prisoner's ______ outcome.
dilemma
In many places around the world, monopolies result from:
government policies.
The most spoken language in the world is English with 1.8 billion speakers, but only 18% are native (by comparison, the next-most spoken language—standard Chinese—has 1.345 billion speakers and 63% are native). This relatively recent change has followed globalization. How does increased globalization explain why so many people choose to learn the same language as a second language?
Globalization expands the network of English speakers.
Which BEST explains why monopolies or oligopolies tend to dominate the market for network goods?I. Their products are the most likely to be compatible with other products.II. They produce the "best" products in terms of quality and compatibility.III. The power of coordination is so strong that monopolists and oligopolists can dominate the market even when they charge prices higher than their competitors.
I and III only
Friedrich Hayek described the invisible hand properties as:
"products of human action but not of human design."
(Figure: Paint Market)What is the profit or loss for this monopoly?
$100,000
If a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its accounting profit is:
$100.
Refer to the figure. Two firms in an industry act as a cartel, with each firm agreeing to charge a price of $16 and sell 2 units of output. If one of them cheats and produces 2 more units of output, the cheating firm's total revenue increases by ______ and the other firm's total revenue decreases by ______
$24; $4
(Table: Myrtle Beach Golf) Refer to the table. Assume that marginal costs of production are zero. If the resort bundles a one-night stay with a round of golf, how much profit will it make on David and John?
$260
(Figure: Monopolist) Refer to the figure. Based on the demand curves for a monopolist's product in two different markets—market A and market B—through the process of price discrimination, how much profit is the monopolist making in market A?
$450
(Table: Willingness to Pay) Refer to the table. Assume the firm has zero costs. If the firm were to set individual prices for each of the two goods, how much total profit does it earn from good A?
$90
A monopolist can sell 300 units of output for $29.00 per unit. Alternatively, it can sell 301 units of output for $28.25 per unit. The marginal revenue of the 301st unit of output is:
-$196.75.
Which of the following effects would generally make demand curves more inelastic?
Both effects
Which of the following best explains why cartel agreements are hard to maintain?
Each firm in the cartel has the incentive to increase production and earn larger profits.
India has weak patent protection for pharmaceuticals, and Canada has price controls. The United States could adopt similar policies without any bad consequences to the future market for drugs.
False
It is easier to prosecute collusion when the colluding firms never meet.
False
Network goods are for theoretically the whole market because such goods are sold by monopolies.
False
To maximize profits, firms should always charge a higher price in the market with the more elastic demand.
False
Which of the following statements is correct?
The more inelastic the demand curve is, the greater is the monopolist's price markup.
(Figure: Maximum Willingness to Pay) Refer to the figure. What is the profit that the monopolist is earning?
There is not enough information to answer the question.
Firms sometimes give away products for free in the hopes of:
becoming the dominant standard.
Microsoft Word and Microsoft Excel are typically:
bundled.
The National Basketball Association is a:
buyer's cartel.
Which of the following is the best example of a natural monopoly?
cable television providers
A competitive firm maximizes profit when marginal cost:
equals the price.
Antitrust laws:
give the government the power to prohibit or regulate anticompetitive business practices.
Customer loyalty plans are often designed to:
limit contestability.
QWERTY is used today because it is:
locked in.
Which of the following would be an effective method for firms to ensure profit from price discrimination when the possibility of arbitrage exists?
make products sold to each market have an exclusive feature
Pfizer sells Atgam in New Zealand for $14 per pill and in Brazil for $8 per pill. This implies that the demand curve in New Zealand must be ________ than in Brazil.
more inelastic
In a competitive indust
resources move across firms in such a way that the total value of production is maximized.
If your economics class were graded on a curve and everyone agrees to study only half as much, everyone would get the same grade that they otherwise would earn. You, however, will earn an A if you study more than the others, a C if you study the same amount as others, and an F if everyone else studies more than you. You don't like studying, but you'd rather study and get an A than get a C without studying, or study and get a C than get an F without studying. If everyone else cuts back their studying, what is it in your best interest to do?
study and get an A
A free market can naturally allocate production across firms in an industry to minimize total costs due to:
the invisible hand.
When resources move from a low-profit industry into a high-profit industry:
the profits of the low-profit industry rise and the profits of the high-profit industry fall.
Under perfect competition, the rate of profit tends to be ______ in all industries, so the marginal value of resources is ______ in all industries.
the same; the same
Printers and color printer ink are typically:
tied
To maximize profit using the practice of price discrimination, firms set different prices according to the characteristics that are correlated with buyers':
willingness to pay.