micro final
If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is:
2,500
the following are the respective numbers for the four-firm concentration ratio and herfindahl index in an industry. which set of numbers would suggest that the industry was monopolistically competitive?
25 and 207
one feature of pure monopoly is that the firm is
a price maker
pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
nonprime competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product
collusion refers to a situation where rival firms decide to
agree with each other to set prices and output
If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there:
are constant returns to scale
barriers to entering an industry
are the basis for monopoly.
a profit-maximizing firm in the short run will expand output
as long as marginal revenue is greater than marginal cost
If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:
at which the marginal cost curve intersects the demand curve
For a purely competitive seller, price equals:
average revenue, marginal revenue, total revenue divided by output
If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that:
both relatively small and relatively large firms can be viable in the industry
barriers to entry
can result from government regulation
the kinked-demand model of oligopoly assumes that
Rivals will ignore price increases but will match price cuts
which of the following is not a barrier to entry?
X-inefficiency
Three major means of collusion by oligopolists are:
cartels, informal understandings, and price leaderships
marginal revenue is the
change in total revenue associated with the sale of one more unit of output.
suppose you find that the price of your product is less than than minimum AVC, you should
close down because, by producing, your losses will exceed your total fixed costs
the kinked-demand curve of an oligopolist is based on the assumption that
competitors will follow a price cut but ignore a price increase
a firm sells a product in a purely competitive market. the marginal cost of the product at the current output of 1,000 units is $2.50. the minimum possible average variable cost is $2.00. the market price of the product is $2.50. to maximize profits or minimize losses, the firm should
continue producing 1,000 units
if all resources used in the production of a product are increased by 10 percent and output increases by less than 5 percent, then the firm is experiencing
diseconomies of scale
price is constant to the individual firm selling in a purely competitive market because
each seller supplies a negligible fraction of total supply
oligopolistic firms engage in collusion to
earn greater profits
Which set of characteristics below best describes the basic features of monopolistic competition?
easy entry, many firms, and differentiated products
the incentive to cheat with a cartel increases with an increase in the following factors, except
economic performance and industry sales
When a firm doubles its inputs and finds that its output has more than doubled, this is known as:
economies of scale
the larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. this is an example of one reason for
economies of scale
a monopoly is most likely to emerge and be sustained when
economies of scale are large relative to market demand
the four-firm sales concentration ratio for an industry measures the
extent to which the four largest firms dominate the production of a good
the four-firm concentration ratio for an industry measures the
extent to which the four largest firms dominate the sales of a good
a defining characteristic of an oligopolistic market is that there are
few seller
the monopolistic competition model assumes that
firms will engage in nonprime competition
a significant difference between a monopolistically competitive firm and a purely competitive firm is that the
former sells similar, although not identical, products
If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:
herfindahl index
which of the following is a measure of the degree of the industry concentration?
herfindahl index
which of the following is not a source of economies of scales?
inelastic resource supply curves
as a general rule, oligopoly exists when the four-firm concentration ratio
is 40 percent or more
An industry having a four-firm concentration ratio of 85 percent
is an oligopoly
in the short run, a purely competitive seller will shut down if product price
is less than AVC
An industry having a four-firm concentration ratio of 30 percent
is monopolistically competitive
If a purely competitive firm shuts down in the short run:
it will realize a loss equal to its total fixed costs
If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that:
its demand curve is kinked
advertising can impede economic efficiency when it
leads to greater monopoly power
In many large U.S. cities, taxicab companies operate as near monopolies because of:
licenses
a natural monopoly occurs when
long-run average costs decline continuously through the range of demand.
an argument for making regulated monopolies adopt marginal-cost pricing is that this would
make the marginal cost equal to society's valuation of the marginal benefit
monopolistic competition means
many firms producing differentiated products
a competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating
marginal revenue and marginal cost
in the long run, a firm will choose a plant size that has the
minimum average total cost of producing the target level of output
The restaurant, legal assistance, and clothing industries are each illustrations of:
monopolistic competition
if you want to enjoy a major league baseball game at the stadium in St. Louis, you must patronize the cardinals. this makes the cardinals organization a
monopoly firm in st. louis
Under monopolistic competition entry to the industry is:
more difficult than under pure competition but not nearly as difficult as under pure monopoly
a market where there are many firms, but one firm dominates and has the bulk (85 percent) of sales in the marker, is called a
near-monopoly
a monopolistically competitive industry is like a purely competitive industry in that
neither industry has significant barriers to entry
Pure monopolists may obtain economic profits in the long run because:
of barriers to entry
as industry comprising a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called
oligopoly
which of the following is a barrier to entry
patents and licenses
the demand schedule or curve confronted by the individual, purely competitive firm is
perfectly elastic
which of the following is characteristic of a purely competitive seller's demand curve?
price and marginal revenue are equal at all levels of output
the goal of product differentiation and advertising in monopolistic competition is to make
price less of a factor and product differences more of a factor in consumer purchases
differentiated oligopoly exists where a small number of firms are
producing goods that differ in terms of quality and design
a monopolistically competitive industry combines elements of both competition and monopoly. the monopoly element results from
product differentiation
in an oligopolistic market,
products may be standardized or differentiated.
an industry comprising a very large number of sellers producing a standardized product is known as
pure competition
If the several oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of:
pure monopoly
in which of the following market models do demand and marginal revenue diverge?
pure monopoly, oligopoly, and monopolistic competition
in which industry is monopolistic competition most likely to be found
retail trade
Which phrase would be most characteristic of pure monopoly?
sole seller
which of the following would contribute most to a firm experiencing "economies of scale?"
specialization of labor and management within the firm
in answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. for a purely competitive firm, total revenue graphs as a
straight, upsloping line
Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?
subway
the short-run supply curve for a purely competitive industry can be found by
summing horizontally the segments of the MC curves lying above the AVC curve for all firms
economies of scale are indicated by
the declining segment of the long-run average total cost curve.
If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:
the industry would more closely approximate our competition
a firm doubles the quantity of all resources it employs and, as a result, output doubles. which of the following is correct?
the long run average total cost curve is flat
one defining characteristic of pure monopoly is that
the monopolist produces a product with no close substitutes
what is the meaning of the phrase "dilemma of regulation"?
the socially optimal price achieves allocative efficiency but may produce economic losses
monopolistically competitive and purely competitive industries are similar in that
there are few, if any, barriers to entry
which of the following assumptions is part of the model of monopolistic competition?
there is no mutual interdependence among firms
one difference between monopolistic competition and pure competition is that
there is some control over price in monopolistic competition
one argument for having the government regulate natural monopolies is that without regulation,
these monopolies produce at a level where marginal benefit is greater than marginal cost\
What do economies of scale, the ownership of essential raw materials, and patents have in common?
they are all barriers to entry
suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 mil, $30 mil, and $30 mil, respectively. we can conclude that
this industry is monopolistically competitive
the MR=MC rule applies
to firms in all types of industries
firms seek to maximize
total profit
A FIRM REACHES A BREAK-EVEN POINT (NORMAL PROFIT POSITION) where
total revenue and total cost are equal
a natural monopoly exists when
unit costs are minimized by having one firm produce an industry's entire output.
In the short run a purely competitive firm that seeks to maximize profit will produce:
where total revenue exceeds total cost by the maximum amount
the kinked-demand curve model of oligopoly is useful in explaining
why oligopolistic prices might change infrequently
If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
will also be $5
the herfindahl index for a pure monopolist is
10,000