quiz 8 -eco

A monopolist can sell 200 units of output for $36 per unit. Alternatively, it can sell 201 units of output for $35.80 per unit. The marginal revenue of the 201st unit of output is A. $-4.20. B. $-0.20. C. $4.20. D. $35.80.

A

A monopolist maximizes profits by A. producing an output level where marginal revenue equals marginal cost. B. charging a price equal to marginal revenue and marginal cost. C. charging a price where marginal cost equals average total cost. D. Both a and b are correct.

A

Because a monopolist must lower its price in order to sell another unit of output, A. marginal revenue is less than price. B. long-term economic profits will be zero. C. total revenue increases as price increases. D. average revenue is less than price.

A

For a monopolist, when the output effect is greater than the price effect, marginal revenue is A. positive. B. negative. C. zero. D. maximized.

A

A distinguishing feature of an oligopolistic industry is the tension between A. profit maximization and cost minimization. B. cooperation and self interest. C. producing a small amount of output and charging a price above marginal cost. D. short-run decisions and long-run decisions.

B

A monopoly market A. always maximizes total economic well-being. B. always minimizes consumer surplus. C. generally fails to maximize total economic well-being. D. generally fails to maximize producer surplus.

C

Economic welfare is generally measured by (i) profit. (ii) total surplus. (iii) the price consumers pay for the product. A. (i) and (ii) only B. (ii) and (iii) only C. (ii) only D. (i), (ii), and (iii)

C

Game theory is important for the understanding of A. competitive markets. B. monopolies. C. oligopolies. D. all market structures.

C

If duopolists individually pursue their own self-interest when deciding how much to produce, the amount they will produce collectively will A. be less than the monopoly quantity. B. be equal to the monopoly quantity. C. be greater than the monopoly quantity. D. Any of the above are possible.

C

In order to sell more of its product, a monopolist must A. sell to the government. B. sell in international markets. C. lower its price. D. use its market power to force up the price of complementary products.

C

The likely outcome of the standard prisoners' dilemma game is that A. neither prisoner confesses. B. exactly one prisoner confesses. C. both prisoners confess. D. Not enough information is given to answer this question.

C

When a monopolist increases the amount of output that it produces and sells, the price of its output A. stays the same. B. increases. C. decreases. D. may increase or decrease depending on the price elasticity of demand.

C

Which of the following is not a characteristic of a monopoly? A. barriers to entry B. one seller C. one buyer D. a product without close substitutes

C

Which of the following statements is correct? A. Both a competitive firm and a monopolist are price takers. B. Both a competitive firm and a monopolist are price makers. C. A competitive firm is a price taker, whereas a monopolist is a price maker. D. A competitive firm is a price maker, whereas a monopolist is a price taker.

C

An equilibrium occurs in a game when A. price equals marginal cost. B. quantity supplied equals quantity demanded. C. all independent strategies counterbalance all dominant strategies. D. all players follow a strategy that they have no incentive to change.

D

In the prisoners' dilemma game with Bonnie and Clyde as the players, the likely outcome is A. a very good outcome for both players. B. a very good outcome for Bonnie, but a bad outcome for Clyde. C. a very good outcome for Clyde, but a bad outcome for Bonnie. D. a bad outcome for both players.

D

Martha and Oleg are competitors in a local market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $5,000. If neither of them advertise, each will earn a profit of $10,000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $15,000 and the other will earn $7,000. To earn the highest profit, Martha A. should advertise, and she will earn $5,000. B. should advertise, and she will earn $15,000. C. should not advertise, and she will earn $10,000. D. has no dominant strategy

D

The economic inefficiency of a monopolist can be measured by the A. number of consumers who are unable to purchase the product because of its high price. B. excess profit generated by monopoly firms. C. poor quality of service offered by monopoly firms. D. deadweight loss.

D

The supply curve for the monopolist A. is horizontal. B. is vertical. C. is upward sloping. D. does not exist.

D

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the A. demand effect and the supply effect. B. competition effect and the cost effect. C. competitive effect and the monopoly effect. D. output effect and the price effect.

D

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together, A. they are unable to maintain the same degree of monopoly power enjoyed by a monopolist. B. each firm's profit always ends up being zero. C. society is worse off as a result. D. Both a and c are correct.

A

For a profit-maximizing monopolist, A. P > MR = MC. B. P = MR = MC. C. P > MR > MC. D. MR < MC < P.

A

In general, game theory is the study of A. how people behave in strategic situations. B. how people behave when the possible actions of other people are irrelevant. C. oligopolistic markets. D. all types of markets, including competitive markets, monopolistic markets, and oligopolistic markets.

A

The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly A. quantity is lower than the socially-optimal quantity. B. price equals marginal revenue. C. price is the same as average revenue. D. earns positive profits.

A

Two suspected drug dealers are stopped by the highway patrol for speeding. The officer searches the car and finds a small bag of marijuana and arrests the two. During the interrogation, each is separately offered the following: "If you confess to dealing drugs and testify against your partner, you will be given immunity and released while your partner will get 10 years in prison. If you both confess, you will each get 5 years." If neither confesses, there is no evidence of drug dealing, and the most they could get is one year each for possession of marijuana. If each suspected drug dealer follows a dominant strategy, what should he/she do? A. Confess regardless of the partner's decision B. Confess only if the partner confesses C. Don't confess regardless of the partner's decision D. Don't confess only if the partner doesn't confess

A

A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit? A. $60 B. $70 C. $100 D. $120

B

Economists assume that monopolists behave as A. cost minimizers. B. profit maximizers. C. price maximizers. D. maximizers of social welfare.

B

What is the shape of the monopolist's marginal revenue curve? A. a downward-sloping line that is identical to the demand curve B. a downward-sloping line that lies below the demand curve C. a horizontal line that is identical to the demand curve D. a horizontal line that lies below the demand curve

B

When a firm's average total cost curve continually declines, the firm is a A. government-created monopoly. B. natural monopoly. C. revenue monopoly. D. All of the above are correct.

B

When strategic interactions are important to pricing and production decisions, a typical firm will A. set the price of its product equal to marginal cost. B. consider how competing firms might respond to its actions. C. generally operate as if it is a monopolist. D. consider exiting the market.

B

An agreement between two duopolists to function as a monopolist usually breaks down because A. they cannot agree on the price that a monopolist would charge. B. they cannot agree on the output that a monopolist would produce. C. each duopolist wants a larger share of the market in order to capture more profit. D. each duopolist wants to charge a higher price than the monopoly price.

C

Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true? A. Meatball prices will be less than marginal cost. B. Meatball prices will equal marginal cost. C. Meatball prices will exceed marginal cost. D. Costs are irrelevant to Angelo because he is a monopolist.

C

As a group, oligopolists would always earn the highest profit if they would A. produce the perfectly competitive quantity of output. B. produce more than the perfectly competitive quantity of output. C. charge the same price that a monopolist would charge if the market were a monopoly. D. operate according to their own individual self-interests.

C

When an oligopoly market reaches a Nash equilibrium, A. the market price will be different for each firm. B. the firms will not have behaved as profit maximizers. C. a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. D. a firm will not take into account the strategies of competing firms.

C

A dominant strategy is one that A. makes every player better off. B. makes at least one player better off without hurting the competitiveness of any other player. C. increases the total payoff for the player. D. is best for the player, regardless of what strategies other players follow.

D