ECON 201 Final Review
Refer to the following diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:
160
approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?
35%
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:
4 yards of textiles
Refer to the demand and cost data for a monopolistic firm. The profit-maximizing level of output will be:
5 units
Assume a pure monopolist is charging price P and selling output Q as shown on the following diagram. On the basis of this information we can say that:
If marginal costs were somehow zero, the firm would be maximizing its profits
in microeconomics, the term ______________________ is synonymous with decreasing returns of scale
diseconomies of scale
Which of the following is incorrect? imperfectly competitive producers:
do not compete with one another.
In the long-run, economic theory predicts that a monopolistically competitive firm will:
have excess production capacity
refer to the diagrams. the price will be ____________ and the quantity will be _______________ with the industry structure represented by diagram (B) compared to the one represented in (A).
higher; lower
A monopolistically competitive firm has a:
highly elastic demand curve
According to international trade theory, a country should:
import goods in which it has a comparative disadvantage.
refer to the following diagram. demand is relatively elastic:
in the P2 P4 price range.
Advertising can impede economic efficiency when it:
increases entry barriers
refer to the long-run cost diagram for a firm. if the firm produces output Q1 at an average total cost of ATC1, then the firm is:
incurring X-inefficiency and is failing to realize all existing economies of scale
Cartels are difficult to maintain in the long run beccause:
individual members may find it profitable to chat on agreements
An industry having a four-firm concentration ratio of 85 percent
is an oligopoly
An industry having a four-firm concentration ratio of 85 percent:
is an oligopoly
the long-run average total cost curve:
is based on the assumption that all resources are variable
refer to the diagram. at output level ! average fixed cost:
is measured by both QF and ED
a county has an absolute advantage over another in producing a good if
it can produce that good using less resources than can the other country
According to the theory of comparative advantage,
it is beneficial for society to specialize in certain production and trade with others
which of the following is characteristic of a monopolist's demand curve?
it is the same as the market demand curve
In the theory of comparative advantage, a good should be produced in that nation where:
its cost is least in terms of alternative goods that might otherwise be produced.
In long-run equilibrium, production for the firm shown in the diagram below is:
less efficient than in a perfectly competitive market.
Refer to the diagrams. for firm B, the elasticity at any price less than $4 is
less than 1 in absolute value
A monopolist's demand curve:
lies above its marginal revenue curve
The more elastic a monopolistic competitor's long-run demand curve, the:
lower its average total cost at its profit maximizing level of output
if average total cost is declining, then
marginal cost must be less than average total cost
The above diagram implies that whenever a firm's demand curve is downward sloping:
marginal revenue is less than price
When total revenue is increasing:
marginal revenue is positive
If a monopolist were to produce in the inelastic segment of its demand curve:
marginal revenue would be negative.
Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P3, the monopolist would:
maximize profits
Refer to the diagram below. if labor is the only variable input, the average product of labor is at a
maximum at point b
The idea behind comparative advantage reflects the possibility that one party:
may be able to produce something at a lower opportunity cost than another party
Assuming a pure monopolist's demand curve is downward sloping, its total revenue:
may be either rising or falling
In the short run a monopolist
may realize a positive economic profit, a zero economic profit, or a loss
the restaurant, legal assistance, and clothing industries are each illustrations of:
monopolistic competition
product variety is likely to be greater in:
monopolistic competition than in perfect competition
The gain from international trade is:
more goods than would be attainable through domestic production alone.
If a nation has a comparative advantage in the production of X, this means the nation:
must give up less of other goods than other nations in producing a unit of X
The reasons that nations trade includes the fact that:
no one country produces all of what citizens within the country want.
game theory is best suited to analyze the pricing behavior of:
oligopolists
refer to the diagram. for output level Q, per unit costs of A are
unattainable, given resource prices and the current state of technology.
Refer to the data table below for a monopolist. At its profit-maximizing output, this firm's total costs will be:
$198
refer to the data table below for a monopolist. at its profit-maximizing output, this firm's total costs will be:
$198
Suppose that a monopolist can sell 10 units of output at $5 per unit and 11 units at $4.90 per unit. The marginal revenue of the eleventh unit is:
$3.90
suppose that a monopolist can sell 10 units of output at $5 per unit and 11 units at $4.90 per unit. the marginal revenue of the eleventh unit is:
$3.90
Refer to the demand and cost data for a monopolistic firm. The profit-maximizing price for the monopolist will be:
$4.50
suppose that a monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. the marginal revenue of the twenty-first unit of output is
$4.75
refer to the diagrams, with the industry structure represented by diagram:
(B) output will be less than in diagram (A)
The Herfindahl index for a monopolistis:
10,000
Netflix is an incumbent in the movie streaming business. Which of the following statements is correct about this game?
All of the above statements are correct.
Netflix and Amazon are rivals. Which of the followings is the equilibrium outcome of this game?
Amazon's revenue is $100 million and Netflix's revenue is $75 million.
In the long run a monopolist must produce at that output where average total cost is at a minimum.
False
Which of the followings is the equilibrium outcome of this game?
In equilibrium, you make $2 million and Google makes $12 million.
Which of the following statements is correct?
In the long run perfectly competitive firms and monopolistically competitive firms earn zero economic profits, while monopolies may or may not earn economic profits
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?
India has a comparative advantage in the production of rice.
a monopoly is economically inefficient
because it produces short of minimum average cost and price is greater than marginal cost
the total output of a firm will be at a maximum where
MP is zero
The short-run profit maximizing position of an unregulated pure monopolist is characterized by:
MR=MC
Netflix and Amazon are rivals. Which of the followings is incorrect about this game?
Netflix has no dominant strategy against Amazon.
Refer to the following diagram. At the profit-maximizing level of output, total cost will be:
OBHE
Which of the following is correct?
The greater the degree of product variation, the greater is the excess capacity problem
the production possibilities frontiers below suggest that:
West Mudville should specialize in, and export, basebal bats.
which of the following holds true?
When AP is rising AVC is falling, and when AP is falling AVC is rising.
Diseconomies of scale means that
a firms long-run average total cost curve is rising
confronted with the same unit cost data, a monopolistic producer will charge:
a higher price and produce a smaller output than a competitive firm
the mutual interdependence that characterizes oligopoly arises because:
a small number of firms produce a large proportion of industry output.
when a firm does more of something, it gets better at it. this learning-by-doing is:
a source of economies of scale
Refer to the following diagram. In short-run equilibrium, the monopolistically competitive firm shown will set its price:
above ATC
which of the following industries is an illustration of homogeneous oligopoly?
aluminum
A monopolist is producing an output such that ATC=$4, P=$5, MC=$2, and MR=$3. This firm is realizing:
an economic profit that could be increased by producing more output.
The MR=MC rule
applies both to monopoly and perfect competition
barriers to entering the industry
are the basis for monopoly
which of the following best expresses the law of diminishing marginal returns?
as successive amounts of one resource (labor) are added to the fixed amounts of other resources (capital), beyond some point the resulting extra output will decline
Refer to the following diagram. Demand is relatively inelastic:
at any price below P2.
which of the following is the best example of oligopoly?
automobile manufacturing
Refer in the following diagram. The demand curve facing the monopolistic firm is also the firm's
average revenue curve
if a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to
average total cost
Target and amazon are engaged in a price war. What are the strategies of he firms in equilibrium?
both firms will charge low prices simultaneously, or they will charge high prices simultaneously
The monopolistically competitive firm shown in the following figure:
cannot operate profitably in the short run
What matters most in determining the efficient distribution of production over the world is:
comparative advantage
the ____________ of all firms can be broken down ino some common underlying patterns
cost structure
average fixed cost
declines continually as output increases
refer to the following two diagrams for individual firms. in figure 1 line B represents the firm's:
demand and marginal revenue curves
Refer to the following graphs. These production possibilities curves.
demonstrate that there can be gains from specialization and trade between the two nations.
which of the following is most likely to be an implicit cost for Company X?
depreciation charges on company-owned equipment
Refer to the following diagrams, which pertain to monopolistically competitive firms. Long run equilibrium is shown by:
diagram a only
Refer to the following diagrams, which pertatin to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by:
diagram b only
an important similarity between a monopolistically competitive firm and a perfectly competitive firm is that:
economic profit tends toward zero for both
in order to calculate marginal cost, the change in ________ is divided by the amount of change in quantity
either total cost or variable cost
Refer to the diagrams. The demand for Firm B's product is:
elastic for prices above $4 and inelastic for prices below $4.
Refer to the following diagram for a monopolistically competitive firm in short-run equilibrium. Assume the firm is part of an increasing-cost industry, in the long run firms will:
enter this industry, causing demand to fall and the ATC curve to shift upward
Refer to the diagrams. For firm B, the elasticity at Price=$4 is
equal to 1 in absolute value
Refer to the diagrams. For firm A, the elasticity at Price - $1 is
equal to infinity
marginal cost
equals both average variable cost and average total cost at their respective minimums
Advertising can enhance economic efficiency when it:
expands sales such that firms achieve substantial economies of scale.
an important similarity between a monopolistically competitive firm and a monopolist is that both:
face demand curves which are less than perfectly elastic
refer to the following diagram for a monopolist. demand is elastic
for all levels of output less than q2.
Refer to the diagrams. For firm B, the elasticity at any price greater than $4 is
greater than 1 in absolute value
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA:
has an absolute advantage over India in the production of wheat.
an industry producing a homogeneous product whose four-firm concentration ratio is 76 percent is an example of:
oligopoly
The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of
opportunity cost
the slope of the production possibility frontier is determined by the ____________ of expanding one good measured by how much of the other good would be lost.
opportunity cost
an industry comprised of a very large number of sellers that are producing a homogenous of standardized product is called:
perfect competition
in which of these continuums of degrees of competition (highest to lowest) in oligopoly properly properly placed?
perfect competition, monopolistic competition, oligopoly, monopoly
Comparing a monopoly and a perfectly competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist:
price and average total cost would be higher, but output would be lower
Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P2, the monopolist would:
produce output Q3 and realize a normal profit.
Refer to the following diagram. if this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by:
producing Q2 units and charging a price of P2.
Refer to the following graphs. Terryville has a comparative advantage in producing:
product A
Refer to the following graphs. Stanville has a comparative advantage in producing:
product B
Refer to the following diagram for a monopolistically competitive producer. the firm is:
realizing a zero economic profit in the long run
Which of the following is not a basic characteristic of monopolistic competition?
recognized mutual interdependence
if a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:
reducing output and raising price
which of the following is not a possible source of natural monopoly?
rent-seeking behavior
_______________ is calculated by takin the quantity of everything that is sold and multiplying it by the sale price
total revenue
refer to the diagram for a monopolist. if a regulatory commission sets price to achieve the most efficient allocation of resources, it will have to:
subsidize the monopolist or the monopolist will go bankrupt in the long run.
refer to the following demand schedule facing a monopolist. the profit-maximizing monopolist will sell at a price
that cannot be determined with the information provided. P: $10,7,5,3,1 Q4: 1,2,3,4,5
If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:
the Herfindahl index
if an industry evolves from monopolistic competition to oligopoly, we would expect:
the four-firm concentration ratio to increase
for an imperfectly competitive firm:
the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
fixed costs are associated with
the short run only
If two nations have straight-line production possibilities frontiers:
there will be a basis for mutually advantageous trade provided the slopes differ.
If I'maJuiceCo. establishes a bottling plant in Delaware, it will most likely
use production technologies that conserve on the number of workers
If an imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:
will be less than $35.
a monopolist
will never produce in the output range where demand is inelastic
