FINAL MICROECONOMICS STUDY GUIDE

Which of the following industries most closely approximates pure competition?

Agriculture

For a purely competitive seller, price equals:

Average revenue, marginal revenue , total revenue divided by output

Which country has the largest share of total world exports?

China.

The MR=MC rule can be restated for a purely competitive seller as P=MC because:

Each additional unit of output adds exactly its price to total revenue

Which of the following distinguishes the short run from the long run in pure competition?

Firms can enter and exit the market in the long run but not in the short run.

Which of the following statements is correct?

In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.

Which of the following is true concerning purely competitive industries?

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

the short run supply curve of a purely competitive producer is based primarily its on:

MC curve

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

MR = MC.

An industry compromised of a small number of firms, each of which considers the potential reactions of its rivals in making price- output decisions, is called:

Oligopoly

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

Oligopoly

Which of the following will not hold true for a competitive firm in long-run equilibrium?

P equals AFC.

Which of the following is not a characteristic of pure competition?

Price strategies by firms

According to international comparisons, which nation had the highest hourly pay in U.S. dollar terms in 2011?

Sweden

Firms seek to maximize:

Total Profit

Pure monopoly refers to:

a single firm producing a product for which there are no close substitutes.

In the short run, a profit-maximizing monopolistically competitive firm sets it price:

above marginal cost.

Minimum-wage legislation is less likely to have adverse effects on employment when the:

affected labor market is monopsonistic.

Excess capacity refers to the:

amount by which actual production falls short of the minimum ATC output.

The MR = MC rule:

applies both to pure monopoly and pure competition.

Barriers to entering an industry:

are the basis for monopoly.

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.

The marginal revenue curve for a monopolist:

becomes negative when output increases beyond some particular level.

Game theory can be used to demonstrate that oligopolists:

can increase their profits through collusion.

Marginal Revenue is the:

change in total revenue associated with the sale of one more unit of output

Countries engaged in international trade specialize in production based on:

comparative advantage.

As a percentage of GDP, U.S. exports are:

considerably lower than in several other industrially advanced nations.

The likelihood of a cartel being successful is greater when:

cost and demand curves of various participants are very similar.

The automobile, household appliance, and automobile tire industries are all illustrations of:

differentiated oligopoly

The mutual interdependence that characterizes oligopoly arises because:

each firm in an oligopoly depends on its own pricing strategy and that of its rivals.

In order for mutually beneficial trade to occur between two otherwise isolated nations:

each nation must be able to produce at least one good relatively cheaper than the other.

We would expect an industry to expand if firms in that industry are:

earning economic profits.

The primary force encouraging the entry of new firms into a purely competitive industry is:

economic profits earned by firms already in the industry.

In recent years, the United States has:

exported more services abroad than it has imported.

A purely monopolistic firm:

faces a downsloping demand curve

A purely monopolistic firm:

faces a downsloping demand curve.

The monopolistic competition model assumes that:

firms will engage in nonprice competition.

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because:

foreign competition is not considered.

The study of how people (or firms) behave in strategic situations is called:

game theory.

Real wages in the United States in the long run:

have increased at about the same rate as increases in output per worker.

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output):

if it discovered that it was producing where MC < MR.

Increases in the productivity of labor result partly from:

improvements in technology.

Cartels are difficult to maintain in the long run because:

individual members may find it profitable to cheat on agreements.

A pure monopolist should never produce in the:

inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

(Last Word) The U.S. Internet search market:

is dominated by Google, which controls about 70 percent of the market.

The marginal revenue curve of a purely competitive firm

is horizontal at the market place

The nondiscriminating pure monopolist's demand curve:

is the industry demand curve.

If a purely competitive firm shuts down in the short run:

it will realize a loss equal to its total fixed costs

if a purely competitive firm is producing at some level less than the profit-maximizing output, then:

marginal revenue exceeds marginal cost

Product variety is likely to be greater in:

monopolistic competition than in pure competition.

The larger the number of firms and the smaller the degree of product differentiation the:

more elastic is the monopolistically competitive firm's demand curve.

Mutual interdependence means that each oligopolistic firm:

must consider the reactions of its rivals when it determines its price policy.

If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B

mutually advantageous specialization and trade between A and B may still be possible.

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

new firms will enter this market.

Pure monopolists may obtain economic profits in the long run because:

of barriers to entry.

Oligopoly is more difficult to analyze than other market models because:

of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

of product differentiation and consequent product promotion activities.

Game theory is best suited to analyze the pricing behavior of:

oligopolists.

Economic profit in the long run is:

possible for a pure monopoly but not for a pure competitor.

With respect to the pure monopolist's demand curve, it can be said that:

price exceeds marginal revenue at all outputs greater than 1.

Other things equal, a price discriminating monopolist will:

produce a larger output than a nondiscriminating monopolist.

a firms finds that at its MR=MC output, its TC= 1,000, TVC=800 TFC= 200, its total revenue is 900. the firm should:

produce because the resulting loss is less than its TFC

In the long run a monopolistically competitive firm:

produces where P = ATC.

Critics of minimum-wage legislation argue that it:

reduces employment.

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.

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

relatively easy entry.

Real wages in the United States are:

relatively high, but not as high as in some other industrially advanced nations.

Long-run competitive equilibrium:

results in zero economic profits.

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

should continue producing in the short run but leave the industry in the long run if the situation persists.

if at the MC=MR output, AVC exceeds price:

some firms should shut down in the short run

Other things equal, if more firms enter a monopolistically competitive industry:

the demand curves facing existing firms would shift to the left.

A dilemma of regulation is that:

the regulated price that achieves allocative efficiency is also likely to result in losses.

Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. This pricing system occurs because:

the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults.

In monopsony:

the wage rate paid by the employer varies directly with the number of workers employed.

In a purely competitive industry:

there may be economic profits in the short run but not in the long run.

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

unsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits:

will be equal to ATC.

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:

will be less than $35.

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price:

will vertically intersect demand where MR = MC.