econ exam

There is only one gas station within hundreds of miles. The owner finds that if she charges $3 a gallon, she sells 199 gallons a day, and if she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is: solve the problem

$2.99*200-$3*199=$1.

A monopolist will earn economic profits as long as his price exceeds:answer, equation and then explain

ATC. Profit = TR-TC = Q*(P-ATC) the profit is positive as long as P>ATC.

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC), and the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would:

continue to produce a quantity such that marginal revenue equals marginal cost.

Which of the following is always a characteristic of the oligopoly market structure?

few sellers

Which of the following is not a characteristic of the monopolistic competition market structure?

fewer sellers

A price-taker faces a demand curve that is:

horizontal at the market price or Perfectly elastic.

In the long run, what is triple equality of the price in a perfectly competitive market?

identical to the market demand curve.

Continue with the previous question. What is (are) the nash equilibrium (equilibria)?

(Wash the fishes, study for the final exams) and (study for the finals, wash the dishes)

Which of the following characteristic of the structure of perfectly competitive markets?

- Each individual firm is small in size relative to the overall market. - Homogeneous product. Easy, low cost entry and exit.

Oligopoly Characteristics

1. few, mutually interdependent firms 2. high barriers to entry 3. imperfect information

Oligopoly

A market structure in which a few large firms dominate a market

Which of the following is true about a monopoly?

A monopoly charges a higher price and produces a lower output level than if the market were competitive.

A characteristic of an oligopoly is:

A) Mutual interdependence in pricing decisions

The industry that most closely approximates the conditions of the oligopoly model is:

Airlines in the U.S.

In a constant-cost industry where firms have identical cost, what will happen to the profit of the firms in the long run?

All firms will be making zero economic profit.

Products can be homogeneous or differentiated.

As a monopolist, a group of cooperating oligopolists that jointly reduce output and raise the price.

Without government regulation, the market outcome of monopoly:

Is inefficient and results in deadweight loss.

The drawback(s) of a monopoly is (are)

Deadweight loss. Loss of consumer welfare. The lack of competition.

A local cable company becomes a monopoly most likely because of

Economies of scale.

examples of perfect competition

Farmer's Market Flea Market Airlines

In the perfectly competitive market, all firms in the market are assumed to be producing:

Identical products.

Which of the following BEST explains why a firm in a perfectly competitive market must take the price determined in the market?

If a price-taker increases its price, consumers will buy from other suppliers.

What causes entry barrier?

If a pure monopoly exists in such an industry, economies of scale will serve as an entry barrier and will protect the monopolist from competition.

Which of the following statements best describes firms under monopolistic competition?

In the long run, positive economic profit will be eliminated.

Productively Efficient

MC=ATC

Comparing perfect competition and monopolistic competition, which of the following is FALSE?

Many sellers, each small in size relative to the overall market.

Profit is maximized when which of the following condition occurs?

Marginal revenue (MR) = marginal cost (MC).

A firm in a price-taker market:

Must take the price that is determined in the market.

Which of the following is an example of entry barrier that prevents other firms from entering the market?

Network externality. Economies of scale. Patents and licenses.

Which of the following products/services serves as the best example of network externality?

Network externality. Economies of scale. Patents and licenses.

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Oligopoly.

Allocatively Efficient

P=MC

Which of the following is FALSE about monopolistic competition?

P=MC.

Mylan became the monopoly of EpiPen, a life saving drug of individuals suffer from severe allergy reaction, because of

Patent.

For a monopolist:

Price is above marginal revenue

A monopolist will maximize its profit by:

Producing a quantity where MR = MC.

Which of the following is always associated with monopolistic competition?

Product differentiation

A common characteristic of oligopolies is:

Products can be homogeneous or differentiated.

Which of the following BEST illustrates a perfectly competitive market?

Soybean farmers.

patent

The guaranteed ownership and control of an invention, innovation, or production technique

If the idustry has constant cost, when what is the slope of the long-run industry supply curve?

The long-run supply curve will be a horizontal line.

Where is the "short-run shut down point" for a perfectly competitive firm?

The lowest point of AVC curve.

Which of the following is a necessary condition for price discrimination?

The seller must be able to divide the markets according to the different price elasticities of demand. It must be difficult for one buyer to resell the product to another buyer.

Which of the following is characteristic of a perfectly competitive market?

There is free entry into and exit from the market.

A natural monopoly is a market where:

a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.

Nash Equilibrium

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

network externality

a situation in which the usefulness of a product increases with the number of consumers who use it

dominant strategy

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

dominant strategy

a strategy that is the best for a firm, no matter what strategies other firms use

At the long-run equilibrium level of output, the monopolist's marginal cost will:

be less than price.(P > MR = MC, so the outcome is inefficient.)

Assume that a firm's marginal revenue barely exceeds marginal cost. To maximize profit, teh firm should:

expand output.

The marginal revenue for a price taker is

equal to price.

In the long run, monopolistically competitive firms have:

excess capacity.

A perfectly competitive firm sells its output for $100 per unit and margibnal cost is $100 per unit. To miaximize its short-run profit, the firm should:

maintain its output.

A perfectly competitive firm's short-run supply curve is the:

marginal cost curve above the average variable cost curve.

A perfetcly competitive firm in the short-run maximizes its profit by producing the output where:

marginal cost equals price. marginal cost equals marginal revenue. total revenue minus total cost is at the maximum

Both a perfectly competitive firm and a monopolist:

maximize profit by setting MR = MC.

A monopolistically competitive firm will:

maximize profits by producing where MR = MC. not likely earn an economic profit in the long run. shut down in the short run if price is less than average variable cost.

In the short-run, if a perfectly competitive firm is producing at a price below average total cost, its economic profit is

negative.

In the short run, a perfectly competitive firm will stay in business as long as:

price exceeds average variable cost.

Which of the following is the best example of a monopolistic competitor?

resturants

What is price discrimination?

selling the same good at different prices to different buyers

Monopoly

the only firm that sells a unique product without close substitutes.

An example of price discrimination is the price charged for:

theater tickets that offer lower prices for seniors.

In the long run, both monopolistic competition and perfect competition result in:

zero economic profit for firms.

A monopolistic competitive firm is inefficient because the firm:

zero pure economic profits.