Exam 3 Practice Quizes

In game theory, a "maximin strategy" is intended to a) maximize the amount of the lowest possible outcome for the decision-maker b) maximize the likelihood of exceeding the rival's payoff c) maximize the highest possible outcome for the decision maker d) maximize the likelihood of the best possible outcome for the decision maker

a

a natural monopoly

a firms long run average cost curve is downward sloping at the point where it intersects the market demand curve

public goods are a) consumed collectively b) produced by government workers c) consumed in public d) paid for by the government in additon, _________ can consume them a) citizens b) those who vote c) those who pay taxes d) everyone

a, d

rent seeking

any actions taken to protect positive profits

the profit for a firm that cannot price discriminate is_____ the profit for a firm that can perfectly price discriminate is___

area above MC area below MC

AVC and ATC get closer together as output increases because

average fixed costs decreases as output increases

Which of the following is NOT likely to be the basis for a barrier that keeps from entering a monopoly? a) ownership of a scares and necessary input b) a high ratio of variable costs to fixed costs c) economies of scale d) a patent e) a government franchise

b

empirical evidence shows that import technological advances are achieved a) mostly by large firms in concentrated industries b) both by small independent firms and by large firms in concentrated industries c) mostly by large firms in unconcentrated industries d) mostly by small independent firms

b

when marginal cost is falling, which is true. a) AVC is increasing b) AVC is falling c) ATC is increasing d) AFC is increasing

b

In an industry characterized by imperfect competition, a) MC > AC b) price is higher than MC c) price is lower than MC d) price is higher than marginal utility and a) MC is more than it would be for PC b) output is more than it would be for PC c) AC is less than it would be for PC d) output is less than it would be under PC

b, d

Rent seeking in the form of lobbying for an increase in import tariffs by domestic producers a) increases total welfare b) increases consumer surplus c) increases the DWL d) none of the above

c

If an oligopoly behaves according to the price-leadership model, then industry output will be a) more than if the industry were perfectly competitive b) less than if the industry fit the Cournot model c) less than if the industry were a monopoly d) more than if the industry were a monopoly and less than if the industry were perfectly competative

d

when a firm engages in perfect price discrimination a) consumer surplus is 0 b) there is no DWL c) they produce the same output level as a competitive firm d) all of the above

d

The commercial fishing industry is competitive. Hundreds of commercial fishing boats work along the coast of Maine Each boat owner increases output to the point wheree: a) TC = TR b) AC = Average revenue c) average revenue = price d) MC = price Decisions-makers in other industries do the same thing. Consumers adjust their consumption of fish, and all other goods, so that... a) price in each industry reflects what products are worth b) price in each industry reflect production costs c) price in all industries are minimized d) average utility in all industries is maximized e) marginal utility in all industries is maximized Therefore, if the price of a good ends up greater than MC, producing more of it will generate benefits to households more than the opportunity costs, so society gains.

d, a

in order to maximize its profit, a monopolist...

decides price and output simultaneously

as output increase, average fixed costs...

decrease

if a monopolist is at a point on its demand curve such that marginal revenue is greater than marginal cost, then it can increase profit by

decreasing price and increasing output

one of the key assumptions underlying the kinked demand theory

demand is more elastic for a price increase than for a price decrease

total fixed cost

difference between AVC and ATC

total variable cost

difference between MC and AVC

Between 1890 and 1920, antitrust legislation was passed in response to the

increase important of very large firms and trusts, which were groups of firms that acted like monopolies

A condition is Pareto Optimal when...

no change is possible that will make some members of society better off without making some members of society worse off

To identify the per-unit cost at the profit maximizing level you need to...

pick the point above the MC=MR intersection, that lies on the ATC

imperfect competition

results in less efficient market outcomes

a patent

slow that flow of benefits from research and development consumers

The Cournot model is...

there are two firms and each assumes the other will not change its price or its output

If there are no externalities or if such costs and benefits are properly internalized, firms (will / will not) weigh social benefits and costs in their production decisions. Freely functioning markets in the real world (do / do not) always produce an efficient allocation of resources.

will, do not