eco 2180 exam 3 practice

Industries X and Y both have four-firm concentration ratios of 70 percent, but the Herfindahl index for X is 2,500, while that for Y is 2,000. These data suggest A) greater market power in X than in Y. B) greater market power in Y than in X. C) that price competition is stronger in X than in Y. D) that X is more technologically progressive than Y.

A) greater market power in X than in Y.

An industry is producing at the least-cost rate of production when A) price and the minimum average cost are equal. B) marginal revenue is greater than price. C) marginal cost is greater than average total cost. D) price and marginal revenue are equal.

A) price and the minimum average cost are equal.

The allocative inefficiency of nondiscriminating monopoly arises from the fact that: A) price exceeds marginal cost B) output falls short of the output at which average cost is minimized C) output exceeds that at which average cost is minimized D) price exceeds minimum average cost

A) price exceeds marginal cost

Price discrimination refers to A) the selling of a given product to different customers at different prices that do not reflect cost differences. B) selling a given product for different prices at two different points in time. C) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge. D) any price above that which is equal to a minimum average total cost.

A) the selling of a given product to different customers at different prices that do not reflect cost differences.

Suppose a monopolist could segment its market into two distinct submarkets and prevent resale between them. Its profits would increase if it charged a higher price to the group whose: A) demand is more elastic B) demand is more inelastic C) demand is greater D) cost is lower

B) demand is more inelastic

Keely says that he's glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market. If this is true for most things Keely buys, it suggests that he A) cares most about allocative efficiency. B) is willing to pay extra for product variety. C) is most concerned about paying the lowest price possible. D) is a creature of habit who always buys the same type of a particular good.

B) is willing to pay extra for product variety.

In many large U.S. cities, taxicab companies operate as near monopolies because of A) strategic pricing. B) licenses. C) economies of scale. D) patents.

B) licenses.

Many people believe that monopolies charge any price they want to without affecting sales. In fact, the output and sales level for a profit-maximizing monopoly is codetermined with price where A) marginal revenue = average cost. B) marginal cost = marginal revenue. C) average total cost = average revenue. D) marginal cost = average revenue.

B) marginal cost = marginal revenue.

The fast-food restaurant industry in a large city would be an example of which market model? A) pure monopoly B) monopolistic competition C) oligopoly D) pure competition

B) monopolistic competition

The downward-sloping demand curve of a monopolistic competitor A) becomes eventually horizontal in the long run. B) reflects some level of control over its own price. C) ensures that the firm will produce at minimum average cost in the long run. D) indicates collusion among the members of the product group.

B) reflects some level of control over its own price.

Which of the following is the best example of oligopoly? A) women's dress manufacturing B) cotton farming C) automobile manufacturing D) restaurants

C) automobile manufacturing

Under pure monopoly, a profit-maximizing firm will produce A) in the inelastic range of its demand curve. B) only where marginal costs are decreasing. C) in the elastic range of its demand curve. D) only where marginal revenue is increasing.

C) in the elastic range of its demand curve.

Compared to the purely competitive industry, a pure monopoly A) is often more efficient from society's perspective because it has big plants and it uses the newest technology. B) will always become competitive in the long run because positive economic profits will entice competitors into the market. C) is able to use barriers to entry and maintain positive economic profits in the long run. D) produces an equal amount of output, but charges higher prices to cover all costs in the market.

C) is able to use barriers to entry and maintain positive economic profits in the long run.

When a purely competitive firm is in long-run equilibrium, it is said to achieve allocative efficiency because A) average cost equals marginal cost. B) average cost is at a minimum. C) marginal cost equals marginal revenue. D) total revenue is at a maximum.

C) marginal cost equals marginal revenue.

The demand curve of a monopolistically competitive producer is A) more elastic than that of either a pure monopolist or a pure competitor. B) less elastic than that of a pure monopolist, but more elastic than that of a pure competitor. C) more elastic than that of a pure monopolist, but less elastic than that of a pure competitor. D) less elastic than that of either a pure monopolist or a pure competitor.

C) more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

The long-run supply curve would be upward-sloping if A) resource prices are not affected by changes in industry output-level. B) resource prices fall as industry production contracts. C) resource prices rise as industry production contracts. D) resource prices are set by the government.

C) resource prices rise as industry production contracts.

Limit pricing by a price leader in an oligopoly refers to the strategy of setting a price A) that maximizes profits for all firms in the oligopoly market. B) that maximizes profits for the price leader, but not necessarily for the other firms. C) that blocks the entry of new firms. D) that ensures profits for the least efficient existing firm in the oligopoly.

C) that blocks the entry of new firms.

A dilemma of regulation is that A) the regulated price that results in a "fair return" restricts output by more than would unregulated monopoly. B) the regulated price that achieves allocative efficiency is also likely to result in persistent economic profits. C) the regulated price that achieves allocative efficiency is also likely to result in losses. D) regulated pricing always conflicts with the "due process" provision of the Constitution.

C) the regulated price that achieves allocative efficiency is also likely to result in losses.

The four-firm sales concentration ratio for an industry measures the A) degree of X-inefficiency in the industry. B) geographic concentration of firms. C) percentage of the industry's capital facilities owned by the four largest firms. D) extent to which the four largest firms dominate the production of a good.

D) extent to which the four largest firms dominate the production of a good.

In game theory, the credibility of a threat A) determines whether or not a firm has a dominant strategy. B) is relevant only in simultaneous games. C) determines whether or not a Nash equilibrium to a game exists. D) influences the degree of cooperation between two rivals.

D) influences the degree of cooperation between two rivals.

Combined consumer and producer surplus is maximized in a competitive market: A) at the quantity corresponding to the intersection of the market supply and demand curves B) if the market price exceeds minimum average total cost C) at any output level at least as large as the market equilibrium quantity D) provided price exceeds marginal cost

D) provided price exceeds marginal cost

Creative destruction is A) the process by which large firms buy up small firms. B) applicable to planned economies but not to market economies. C) a term coined many years ago by Adam Smith. D) the process by which new firms and new products replace existing dominant firms and products.

D) the process by which new firms and new products replace existing dominant firms and products.