ECON FINAL

Scenario: Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. Refer to the scenario above. As a result of the new restaurant, consumers in Boston are likely to experience a

product-variety externality, which is a positive externality.

Defenders of advertising argue that in some markets advertising may

provide information to customers about products, including prices and seller locations.

When a monopolistically competitive firm raises its price,

quantity demanded declines but not to zero.

Refer to the figure. The firm in this figure is monopolistically competitive and maximizing profit. This firm

is earning a short-run economic profit.

Which of the following statements about oligopolies is not correct?

Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs.

Refer to the figure. In response to the situation represented by the figure, we would expect

some of the firms that are currently in the market to exit.

Refer to the table. Suppose the market for this product is served by two firms that have formed a cartel. What price will the cartel charge in this market if the marginal cost of production is $4?

$10

Celia and Venya are the only producers of safe drinking water in a small town. Each week they bring the water to town and sell it at whatever price the market will bear. The town's weekly demand schedule and total revenue schedule for water is shown in the following table:Refer to the table. If Celia and Venya operate as a profit-maximizing monopoly in the market for water, what price will they charge?

$18

Refer to the table. If Celia and Venya operate as a profit-maximizing monopoly in the market for water, how much profit will each of them earn, assuming that the two producers split the market equally?

$2,160.

Refer to the figure. When the firm is maximizing its profit, the markup over marginal cost amounts to

$50.00

This figure depicts a situation in a monopolistically competitive market.Refer to the figure. What price will the monopolistically competitive firm charge in this market?

$70

Refer to the table. What is the socially efficient quantity of water?

480 gallons

Only two firms sell a particular product. Each firm has the same marginal cost of $4 and zero fixed cost. Price (Dollars per unit) Quantity Demanded (Units) Total Revenue (Dollars) 140013565121012011151651020200925225830240735245640240545225450200355165260120165650700 Refer to the table. If this market were perfectly competitive instead of oligopolistic, what quantity would be produced?

50

The table shows the demand schedule for a particular product. ​ Quantity Demanded (Units) Price (Dollars per unit) 0161142123104856647280 ​ Refer to the table. If the marginal cost of production in this market is $4, what is the socially efficient quantity of output?

6 units

Refer to the figure. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

BCIJ

Refer to the figure. Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms out of thismonopolistically competitive industry?

Graph (b)

Which of the following is true about a monopolistically competitive firm?

It can earn an economic profit in the short run, but not the long run.

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Monopolistic competition features many sellers.

In which of the following market structures can firms earn economic profits in the long run?

Monopoly only

Which of the following conditions is characteristic of a monopolistically competitive firm in the short run but not in the long run?

P > ATC

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

P > MC

Pablo and Zak are competitors in a local market. Each is trying to decide if it is better to advertise or not advertise. The table below gives the profits to each of them based on their strategy.What will the profits be if both follow their dominant strategy?

Pablo earns $8,000 and Zak earns $8,000

Two CEOs from different firms in the same market collude to fix the price in the market. This action violates the

Sherman Antitrust Act of 1890.

In which of the following markets are strategic interactions among firms most likely to occur?

The market for tennis balls

In which of the following games is it clearly the case that the cooperative outcome of the game is good for the two players and bad for society?

Two airlines dominate air travel between City A and City B, and each airline decides whether to charge a "high" airfare or a "low" airfare on flights between those two cities

Matthew and Tyler are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The following table shows the payoffs for this situation, where the higher a player's payoff number, the better off that player is.​Refer to the table. What is Tyler's dominant strategy?

Tyler should always choose Don't Clean.

When an oligopoly market reaches a Nash equilibrium,

a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.

In monopolistically competitive markets, free entry and exit suggests that

all firms earn zero economic profits in the long run.

Refer to the figure. Efficient scale is reached

beyond 133.33 units.

Haidy consumes Pepsi exclusively. She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth. In a blind taste test, Haidy is found to prefer Pepsi to store-brand cola nine out of ten times. The results of Haidy's taste test would refute claims by critics of brand names that

brand names cause consumers to perceive differences that do not really exist

In the prisoners' dilemma game, self-interest leads

each prisoner to confess

An oligopolist will increase production if the output effect is

greater than the price effect.

In both perfect competition and monopolistic competition, each firm

has many competitors.

The equilibrium quantity in markets characterized by oligopoly is

higher than in monopoly markets and lower than in perfectly competitive markets.

Matthew and Tyler are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The following table shows the payoffs for this situation, where the higher a player's payoff number, the better off that player is.​ Refer to the table. If Tyler chooses not to clean, then Matthew will

not clean, and Matthew's payoff will be 10.

A market structure with only a few sellers, each offering similar or identical products, is known as

oligopoly

Consider a market served by a monopolist, Firm A. A new firm, Firm B, enters the market and, as a result, Firm A lowers its price to try to drive Firm B out of the market. This practice is known as

predatory pricing.

A monopolistically competitive firm is currently producing 21 units of output. At this level of output the firm is charging the highest price it can at $33, has marginal revenue equal to $23, has marginal cost equal to $23, and has average total cost equal to $27. From this information we can infer that

the firm is currently maximizing its profit.

A cooperative agreement among oligopolists is more likely to be maintained,

the more likely it is that the game among the oligopolists will be played over and over again.

​Cartels are difficult to maintain because

​each firm has an incentive to deviate from its agreed output level.