Econ test 3 review

Which of the following is NOT true for monopoly?

at the profit maximizing output, price equals marginal cost

Deadweight loss from monopoly power is expressed on a graph as the area between the

demand curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets

When tariffs are imposed, the losers include

domestic consumers and foreign producers

What should happen to the equilibrium price and quantity in a market as a result of a tariff on imports?

equilibrium price should go up, and equilibrium quantity should go down

Compared to the equilibrium price & quantity sold in a competitive market, a monopolist will charge a ___ price & sell a ___ quantity.

higher; smaller

The monopolist that maximizes profit

imposes a cost on society because the selling price is above marginal cost

Suppose that a monopolist calculates that at present its output level, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:

increasing price and decreasing output

a non-discriminating monopolist will find that marginal revenue:

is less than average revenue or price

If the incumbent firms in a purely competitive industry are in short-run equilibrium and at their current output level, each firm's marginal cost exceeds its average total cost, then we can conclude that:

other firms will enter the industry in the long run

If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profit must be:

positive

At the profit-maximizing level of output for a monopolist:

price is greater than marginal cost

Monopoly power results from the ability to

set price above marginal cost

Suppose a hurricane hits Florida, causing widespread damage to houses and businesses. The governor of Florida places price ceilings on all building materials to keep the prices reasonable. Which of the following is the most likely result?

shortages of building materials and a slower recovery from the storm

Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is earning negative economic profits. In the long run, we can expect the market:

supply to decrease and firms' profits to increase

If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable cost, but it believes that the market demand for its product will increase soon, then

the firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon

Which of the following is true at the output level where P=MC?

the monopolist is maximizing profit