ECON 1123: Daily Questions (CH. 12-14)
Refer to the scenario above. In equilibrium, Beth's payoff is ___________ to win this game.
$10
Refer to the scenario above. Jack will derive ________ units of utility if Jill tries to move the tree while he does not try at all.
2
Refer to the figure above. What is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $5?
200 units
Refer to the figure above. What is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $3?
300 units
Which of the following statements is true? #6
An increase in consumer demand can change a natural monopoly into a multi-seller market
Refer to the scenario above. What will the outcome of this game be?
Both of them will confess
Refer to the scenario above. Which of the following is likely to happen if Mike confesses while Rita does not confess?
Mike will be let free while Rita will be suspended
Which of the following statements is true? #2
Network effects act as barriers to entry in a market
Which of the following is true of monopolistic competition?
There are a large number of sellers each selling a differentiated product
Which of the following best describes the relationship between price (P), marginal revenue (MR), and total revenue (TR) for a monopolist?
When MR ispositive, TR is rising, and when MR is negative, TR is falling
An industry is deemed concentrated when ___________.
a few firms account for a large fraction of total sales in that industry
Refer to the scenario above. This game
has a dominant strategy equilibrium
When a monopolist sells positive levels of output, its demand curve:
lies above its marginal revenue curve
________ refers to the ability of sellers to affect market prices
market power
In a zero-sum game, __________.
one player's loss is another player's gain
In comparison to firms in other market structures, monopolists:
produce goods that do not have close substitutes
As a monopolist expands its output:
the difference between the demand curve and the marginal revenue curve increases
A network externality refers to a situation where:
the value of a product increases as more consumers start to use it
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. If the market for Good Y is monopolistically competitive, a firm producing Good Y will shut down production in the short run if price falls below
$120
Refer to the table above. What is the total revenue of the monopolist when it charges a price of $9?
$1350
Refer to the table above. What is the total revenue when the monopolist charges a price of $3?
$1350
Refer to the table above. What is the total revenue when the monopolist charges a price of $6?
$1800
Scenario: When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Refer to the scenario above. What is the price effect of the price change?
$250
Scenario: When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Refer to the scenario above. What is the quantity effect of the price change?
$300
Suppose you are a monopolist, and you have two customers, A and B. Each will buy either zero or one unit of the good you produce. A is willing to pay up to $45 for your product; B is willing to pay up to $10. You produce this good at a constant average and marginal cost of $5. If you could not engage in third-degree price discrimination,what price would you charge?
$45
The graph on the right represents the demand, marginal revenue, and marginal cost curves for a monopoly. What price should this monopolist charge to maximize profits?
$5.00
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. A firm producing Good Y will continue production in the short run if total revenue exceeds
$60,000
Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer?
$8,000
In a small isolated town, there are two types of people, saints and crooks. In business dealings between any two residents of this town, the payoffs are below. Note that the buyer choose the rows and seller choose the columns. Which of the following strategies are Nash equilibria?
(Crook, Crook)
Suppose AMD is considering cloning Intels latest CPU chip. If AMD enters Intels market, Intel can play Mean, expand its output, drop prices, and try to make AMDs profit as small as possible or play Nice by cutting back its output and sharing the market. AMD and Intel both know that after all moves are complete, the time-discounted profits of future chip production in billions of dollars are given below. Which of the following strategies are Nash equilibria?
(In, Nice)
Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. Which of the following strategies are Nash equilibria?
(No, No)
Refer to the scenario above. In this game, the ______________ strategy combination gives strictly lower payoffs than the ____________ strategy combination.
(confess, confess); (do not confess, do not confess)
Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but cant observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? (0.10,0.10) (1.6,0.8) (0.4,1.7) (1.2,1.2)
(ii) and (iii)
Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but cant observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? (0.4,0.3) (1.2,0.6) (0.6,1.5) (1,0.9)
(ii) and (iii)
Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. If Alec commits at Thanksgiving time not to buy a gift for Kim, Kim will find it in her best interest (3,3) (4,4) (4,2) (5,5)
(ii) not to buy a gift for Alec
Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts? If they wait until Christmas morning and move simultaneously, their payoff matrix is given below. If Alec commits at Thanksgiving time to buy a gift for Kim, Kim will find it in her best interest (3,3) (1,3) (4,2) (5,5)
(iii) indifferent
There are four firms in the cement industry in Richland. Firm A has a market share of 30%, Firm B has a market share of 20%, Firm C has a market share of 25%, and Firm D has a market share of 25%. The Herfindahl-Hirschman Index for the cement industry is
2,550
The following figure shows the demand curve, the marginal revenue (MR), marginal cost curve (MC) and the average total cost curve (ATC) of a monopolist. Refer to the figure above. What is the profit-maximizing quantity for the monopolist?
300 units
Refer to the scenario above. Jack will derive ________ units of utility if both of them try to move the tree.
5
Refer to the scenario above. Jack will derive ________ units of utility if he tries to move the tree while Jill does not try at all.
5
Which of the following is true of a duopoly with differentiated products?
A firm does not lose all its customers when its rival lowers the price of its product
Which of the following firms is most likely to have a constant marginal cost?
A firm that has extremely high fixed costs
Which of the following statements is true? #3
A monopoly is a price maker because it faces a downward sloping demand curve
Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm?
A perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost
Suppose the government grants an individual or company the exclusive right to intellectual property. In this case, the government is granting a copyright. Which of the following is not likely covered by a copyright?
A photocopier
Refer to the scenario above. Which of the following is a winning strategy for this game? [rock scissors]
A random mix of all the three symbols
There are two firms in an industry and their products are perfect substitutes for each other. Each firm had a market share of 50% and charged equal prices. However, when the demand for the good declined due to a recession, Firm A lowered its price to increase sales. Firm B responded by lowering its price further. This is an example of the −−−−−−−−− of oligopoly
Bertrand model
Refer to the scenario above. What is the equilibrium outcome in this case? [two factories]
Both firms will dump their waste into the river
Imagine a game in which two drivers drive toward each other on a collision course: one must swerve, or both may die in the crash, but if one driver swerves and the other does not, the one who swerved will be called a "chicken," meaning he is a coward. If they both go straight, then they both die, earning -10 happiness points each. If one goes straight and the other swerves,then the brave driver gets 5 points of happiness and the "chicken" loses 2 points of happiness. If both drivers swerve, then it is a tie and nobody earns any happiness points. Construct the payoff matrix for Driver 1 and Driver 2. Identify the Nash equilibrium(s):
Boxes 2 and 3
Which of the following is an example of a good produced under perfect competition?
Corn
Consider the following: David's dominant strategy is Low Price, and Jordan's dominant strategy is Low Price. The Nash equilibrium is ___________.
D
Which of the following is a feature of an oligopoly market?
Each firm's action affects the decisions of its rival
Refer to the figure above. What does the region ABDC indicate?
Economic profit
Refer to the scenario above. Which of the following is true in this case? [two firms]
Firm 1's dominant strategy is to charge $5
Refer to the scenario above. Which of the following is true? [multi line]
Firm 2 should offer a discount if Firm 1 offers a discount
Which of the following statements is true? #1
Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers
Which of the following is likely to use the concepts of game theory?
International trade negotiation
Which of the following statements are true regarding the profit-maximizing price charged by a monopolist?
It occurs at the quantity where MR= MC; It occurs along the elastic part of the demand curve; It is greater than MC [ALL OF THE ABOVE]
Which of the following is true of a payoff matrix?
It takes into account all relevant costs and benefits associated with each action of the players
La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly?
La Dila will face the entire market demand
Suppose there are cable TV companies in your city, Astounding Cable and Broadcast Cable. They both must decide on a high advertising budget, a moderate advertising budget, or a low advertising budget. They will make their decisions simultaneously. Their payoffs are as follows: Astounding's dominant strategy is Medium, and Broadcast's dominant strategy is No dominant strategy. The equilibrium is __________.
Medium/Medium
Refer to the scenario above. Which of the following is true? [mike, rita]
Mike's best response is to confess irrespective of what Rita does
_________ is the market structure in which there are many rival firms producing differentiated products.
Monopolistic competition
Sellers in which of the following market structures are likely to have the highest market power?
Monopoly
It is possible for two-player games to be quite asymmetric: each player might have a different set of options, and the payoffs may be quite different. Consider the following example between a large firm and a small firm. The first number in each box denotes the large firm's payoff, and the second number shows the small firm's payoff. Given this information, which of the following is true of this game?
Neither of the firms has a dominant strategy
Which of the following is true of a Nash equilibrium?
No player can improve his payoff by changing his strategy once in Nash equilibrium
Suppose that a player has a dominant strategy. Would she choose to play a mixed strategy (such as playing two strategies each with probability 50-50)? Why or why not?
No, because it would involve choosing actions other than the dominant strategy
Suppose you were playing rock-paper-scissors as an extensive from game; first you choose rock, or paper,or scissors, and then your opponent makes a choice. Is there a first-mover advantage in this game?
No, if you show your move first you will lose every time
_____________ is the market structure in which there are a few rival firms.
Oligopoly
Which of the following is not one of the sources of natural market power?
Owning a firm in a small community
The pricing rule for a monopolist is:
P > MR = MC
Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What must you, as the consultant, construct for Chevron before you can determine if there is a dominant strategy equilibrium?
Payoff matrix
The effect of the invisible hand is likely to be the strongest under which market structure?
Perfect competition
Which of the following market structures provides socially efficient outcomes?
Perfect competition
Refer to the scenario above. Which of the following is true? [two friends game]
Player 1 should draw a black ball if he expects Player 2 to draw a white ball
Use a matrix to model a two-player game of rock-paper-scissors with a payoff of 1 if you win, -1 if you lose, and 0 if you tie. Construct the payoff matrix for this game. Why should you use a mixed strategy to play this game?
Predictable behavior by one player can be taken advantage of by the other player
Which of the following is not a characteristic of monopoly?
Produces identical goods
Which of the following statements correctly identifies a similarity between monopoly and perfect competition?
Production is expanded until marginal revenue equals marginal cost in both the market structures
Which of the following equations calculates economic profits for a monopoly?
Profits = (P - ATC) x Q
Refer to the scenario above. Which of the following is likely to happen if Rita confesses while Mike does not confess?
Rita will be let free while Mike will be suspended
Which of the following is an example of differentiated goods?
Tea and energy drinks
Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−10. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $100. If they both choose R the price war ends and they each earn $50. What is the Nash equilibrium?
The Nash equilibria are for Station A to pick C and Station B to pick R and for Station A to pick R and Station B to pick C
Which of the following statements is true? #5
The basis for both first-degree price discrimination and third-degree price discrimination is differences in the buyers' willingness to pay for a good
Which of the following statements is true? #7
The best response of a player is not always her dominant strategy
Refer to the scenario above. Which of the following is true? [two firms]
The dominant strategy equilibrium is the Nash equilibrium
Refer to the scenario above. Which of the following is true in this case? [payoff matrix]
The dominant strategy equilibrium of this game is also the Nash equilibrium.
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. Which of the following will happen if the equilibrium price charged by the firm in the short run is $130?
The firm will incur a loss but continue production
Which of the following is a similarity between a monopoly and an oligopoly with differentiated products?
The long-run equilibrium price in both markets exceeds marginal cost
Which of the following markets is an example of an oligopoly?
The market for premium apparels
Which of the following is an example of a monopolistically competitive market?
The market for shampoo
At a certain level of production, the marginal revenue and marginal cost of a monopolist are $12 and $10, respectively. Which of the following statements is true in this context?
The monopolist should expand production
At a certain level of production, the marginal revenue and marginal cost of a monopolist are $8 and $6, respectively. Which of the following statements is true in this context?
The monopolist should expand production
Two gas stations, A and B, are locked in a price war. Each player has the option of raising its price (R) or continuing to charge the low price (C). They will choose strategies simultaneously. If both choose C, they will both suffer a loss of $−10. If one chooses R and the other chooses C, (i) the one that chooses R loses many of its customers and earns $0, and (ii) the one that chooses C wins many new customers and earns $100. If they both choose R the price war ends and they each earn $50. Does either player have a dominant strategy? Explain.
The stations do not have dominant strategies because what works best depends on what the other station does
Scenario: When a monopolist charges $5 for its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. Refer to the scenario above. What is the change in total revenue due to the price reduction?
The total revenue increases by $50
As this chapter explains, a monopoly is an industry structure where only one firm provides a good or service that has no close substitutes. This question explores the last part of this definition further. In 1947, the United States government charged the DuPont Company with a violation of the Sherman Act. The government argued that DuPont was monopolizing the cellophane market. At trial, the government showed that DuPont produced nearly 75 percent of all of the cellophane sold in the United States each year. Nonetheless, the U.S. Supreme Court ruled in favor of DuPont and dismissed the case. Which of the following is a likely argument used by DuPont to convince the Supreme Court that it did not violate the Sherman Act?
There are many close substitutes for cellophane such as aluminum foil and waxedpaper, so DuPont did not have significant market power
Sirius XM Satellite Radio and XM Satellite Radio were the only two satellite radio providers in the United States. The Department of Justice (DOJ) and the Federal Communications Commission (FCC) approved the merger of the two companies in 2008 even though Sirius-XM would then control 100 percent of the satellite radio market. Which of the following arguments do you think Sirius and XM used to convince the DOJ and the FCC to allow the merger to proceed?
There are many close substitutes for satelliteradio; therefore, Sirius-XM would not exercise market power
The game is played between two players, Player A and Player B. Each player has a penny and must secretly turn the penny to heads or tails. The players then reveal their choices simultaneously. If the pennies match (both heads or both tails), Player A keeps both pennies. If the pennies do not match (one heads and one tails), Player B keeps both pennies. Construct the payoff matrix for Player A and Player B. Identify the Nash equilibrium(s):
There is no Nash equilibrium
Use a matrix to model a two-player game of rock-paper-scissors with a payoff of 1 if you win, -1 if you lose, and 0 if you tie. Construct the payoff matrix for this game. The Nash equilibrium is:
There is no Nash equilibrium
Refer to the scenario above. Which of the following is true in this case? [two friends game]
There is no Nash equilibrium in this game
Which of the following best describes network externalities?
They occur when a product's value increases as more consumers begin to use it
Chevron and BP are bidding against each other for new oil drilling leases in the Gulf of Mexico. The bids will be simultaneous with the high bidder as the winner. Chevron decides to hire you as a consultant to help it use game theory to make the best decision on how much to bid. What elements must be known to set up a simultaneous move game?
The players, the strategies, the payoffs
Suppose Russia is deciding to Invade or Not Invade its neighbor Ukraine. The United States has to decide to be Tough or Make Concessions. They will make their decisions simultaneously. Their payoffs are as follows: The Nash equilibrium is ____________.
Tough/Not Invade
Which of the following statements is true? #4
Under monopoly, prospective buyers may not be able to buy a good even if they have a willingness to pay above marginal costs
Two firms are thinking of entering a new market. If one enters it will be successful but if a second enters both will suffer very large losses. Is there a first-moveradvantage in this game
Yes. The firm that goes first can enter and the firm that goes second will have no incentive to enter
Suppose as creative college students you and your friends develop software that for a small fee helps students choose courses based on professors' ratings and grade distributions, and it becomes an instant hit around campus. You decide to patent your software and license its use to a large tech firm that agrees to pay you 5 percent of all revenue earned. For example, if the tech firm sells 200 subscriptions at $10 each, it will have revenue of $2,000,meaning you will earn 5 percent of that total, or $100. The tech firm's goal is to maximize profits, while your goal as a license holder is to maximize total revenue. Given this information, what do we know about the price of the good? Based on the graph, we know that ____________.
You prefer P1, but the tech firm prefers P2
A collusion breaks down if
a firm charges a price lower than the price set by the other colluding firms
Perfect price discrimination occurs when:
a firm charges each buyer exactly their willingness to pay
A market in which a firm emerges as a monopoly due to large economies of scale is referred to as:
a natural monopoly
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. If the equilibrium price charged by the firm in the short run is $170, the firm will earn
a profit of $0 per unit
Consider a game with two players, Bill and Larry. They play the game as summarized in the game tree below. Suppose Bill initially has a secure monopoly in the market for computer operating systems. When there is no threat of entry, Bill charges the maximum monopoly price. Then Bill discovers that a second software firm run by Larry is thinking about entering the market. Since his monopoly is now insecure, Bill has two options: he can continue to act as a monopolist and allow the second software firm to enter the market, or he can try to prevent the other firm from entering the market by producing a greater quantity at a lower cost. This is an example of:
an extensive game
The quantity effect of a price reduction causes:
an increase in revenue because of increased sales
Refer to the scenario above. Beth should use ________ to win this game.
backward induction
When compared to a perfectly competitive industry, in a monopoly:
both consumer surplus and social surplus are smaller
The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. A Nash equilibrium is that
both firms select a high advertising budget
Refer to the scenario above. In equilibrium,
both firms will offer a discount
Compared to a firm under perfect competition, a monopolist:
charges more and produces less
A pure strategy involves ____________.
choosing one particular action for a situation.
There are a few firms in the automobile industry in Portland. In order to prevent a price war, these firms have secretly agreed to charge a price 20% above the marginal cost of production. This is an example of
collusion
A ___________ is an exclusive right granted by the government to an author's intellectual property
copyright
A musician was guaranteed by the government that no one else could replicate or sell his music CDs. This is an example of a:
copyright
An oligopoly model in which sellers compete on quantities rather than prices is called a ___________ model.
cournot
A strategy is called a mixed strategy if it involves choosing ___________.
different actions randomly
Goods that are similar but are not perfect substitutes are called _________ goods.
differentiated
A monopolistically competitive firm always faces a(n)
downward sloping demand curve
A Nash equilibrium occurs if
each player chooses strategies that are mutual best responses
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. Refer to the scenario above. A firm producing Good Y will
earn zero economic profits if it charges a price of $170
The Herfindahl-Hirschman Index is used to
estimate the degree of competition in an industry
Refer to the scenario above. This is an example of a(n)
extensive-form game
A firm is said to have market power if it charges a price ___________of production.
higher than the marginal cost
The price chosen by a monopolist:
is independent of the production of other firms
The total revenue curve of a monopolist:
is positively sloped when the marginal revenue curve is upward sloping
The above figure shows the payoff matrix for two firms, A and B, selecting an advertising budget. The firms must choose between a high advertising budget and a low advertising budget. Firm B's dominant strategy
is to select a high advertising budget
Everything else remaining unchanged, if a new seller enters a market to compete with an existing monopoly that is enjoying economies of scale, it will lead to:
lower profits for the existing firm
The quantity produced in a monopolistically competitive market is ___________ than the quantity produced in a perfectly competitive market, and the price charged in a monopolistically competitive market is ___________ than the price charged in a perfectly competitive market.
lower; higher
In an oligopoly with differentiated products, firms
make positive economic profits
A monopolistic competitor exits the industry in the long run if
marginal revenue equals marginal cost
A profit-maximizing monopolistic competitor continues production until
marginal revenue equals marginal cost
At the profit-maximizing level of production of a monopolist, ____________.
marginal revenue equals marginal cost
The Department of Justice filed a lawsuit against Microsoft claiming it was engaging in unfair practices by ____________.
monopolizing the market by bundling its operating system with its Internet Explorer browser
Economies of scale in production act as a source of:
natural market power
If a monopolist owns or controls a key resource necessary for production, it is a source of:
natural market power
Refer to the scenario above. Collectively, the firms will be better off if:
neither of the firms dumps its waste into the river
Some economists believe the threat of unfair monopolies is greater today than when the Sherman Act was first enacted. They argue that modern software can gain monopoly status and establish a barrier to entry through ____________.
network externalities
In a game with mixed strategies, does either of the players have a dominant strategy? Why or why not?
no, because the best choice in a mixed strategy game is to pick a random strategy
Suppose Boeing and Airbus are both considering expanding their plant capacity as a strategic move but cant observe their opponents move until their own move has been determined. The following are time-discounted values of all future profit streams in billions of dollars. Which of the following strategies are Nash equilibria? (0.3,0.2) (1,0.4) (0.8,1.8) (1.1,1.5)
none are Nash equilibria
There are a few ship manufacturers in Polonia and each firm faces a downward sloping demand curve. The ship-building industry in Polonia is an example of a(n)
oligopoly
A best response is
one player's optimal action choice taking the other player's action as given
A _________ is the privilege granted to an individual or company by the government, which gives them the sole right to produce and sell a good
patent
Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a:
patent
Which of the following is an example of a good produced under monopoly?
patented software
A game is called a simultaneous move game if
players choose their actions at the same time
When firms charge different prices to different consumers for the same good or service, it is referred to as ________.
price discrimination
A monopolistically competitive firm makes positive economic profits if
price is higher than average total cost
Suppose that a goalie is playing a mixed strategy between diving to the left and the right. A player decides which strategy to employ when playing a game with mixed strategies by choosing ____________.
randomly
Buyers who buy in bulk are often offered discounts. This is an example of:
second-degree price discrimination
The below figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm A
setting a low price is the dominant strategy
The below figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm B
setting a low price is the dominant strategy
Refer to the scenario above. This is an example of a
simultaneous-move game
If a monopoly engages in first-degree price discrimination:
social surplus is maximized
The Herfindahl-Hirschman Index is calculated by
squaring the market share of each firm competing in the market and then summing the resulting numbers
Game theory is the study of
strategic interactions
A __________ is a complete plan describing how a player will act
strategy
Average total cost decreases with an increase in output because:
the average fixed cost decreases with an increase in output
If new firms enter a monopolistically competitive market structure in the long run, ________.
the demand curves faced by the existing firms become more elastic
A first-mover advantage occurs if __________.
the first mover to act in a sequential game gets a benefit from doing so
The price effect of a price decrease by a monopolist refers to:
the loss in revenue due to the price reduction
A monopolist faces an average total cost of $6 when it produces 200 units of its product. If it sells the 200 units at $8 per unit, ________.
the monopolist makes a profit of $400
In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than its rival as long as
the rival's price is above marginal cost
In recent years, some online firms have offered different consumers different prices for the same good. These firms use the consumer's IP address to find what city they are in and then charge a higher price to people in wealthier cities. This type of pricing behavior is ____________.
third-degree price discrimination
A monopolistically competitive firm shuts down in the short run if
total revenues do not cover variable costs
Refer to the scenario above. If this game is repeated several times, Beth will ____________ and Charles will ____________.
trust; cooperate
Refer to the scenario above. This is an example of a(n) ________. [zero-sum]
zero-sum game
