ECN test prep chapters 5, 37, and 26

In the United States, the average government subsidy for a college education at a private institution is approximately __ for every $1 spent by the student.

$1

A physical book that sells new for $200 will rent for around

$100.

If a college textbook costs $80 (for a new book) at a college bookstore, the royalty paid on the book is likely

$15.

In 2012, expenditure per student in higher education was approximately

$22,429.

A physical book that sells new for $100 will typically sell as an eBook for around

$50.

In 2009 prescription drugs account for approximately ____ of total health care spending.

10%

Economic Profit exists whenever

A firm makes more than the minimum required to maintain the incentive to remain in the industry.

Which of the following is not an assumption of perfect competition?

Branded products.

In Figure 25.1, the dead weight loss that occurs with this monopoly is Picture

EBC.

The firm's supply curve is their

Marginal cost curve above the minimum of ATC.

Which of the following legal creations is imperative to creating profits for prescription drug companies?

Patents

Which of the following is not an assumption of perfect competition?

Powerful buyers.

Perfect competition means that firms are

Price takers (firms must accept the price of the market).

Once the breakeven level of sales has been reached, each additional book sold earns _______ for the publisher.

a substantial, positive additional profit

College textbook royalties are paid based on the sales to

bookstores.

Very high four-firm concentration ratios characterize the

clothing industry.

Economists generally agree that price controls in the U.S. would

diminish prices to consumers.

Economists generally agree that price controls in the U.S. would

diminish the motivation to invent new drugs and diminish profits to drug companies

The usefulness and relative simplicity of the supply and demand model is often used

even though, strictly speaking, few industries in the U.S. are governed by perfect competition.

The college textbook adoption decision is made by

faculty or faculty committees.

When textbooks are produced, the idea for a new book typically comes from

faculty thinking they have a better idea.

The reason why a cure to a disease such as AIDS would have less elastic demand than a vaccine at every price is that

for a person with AIDS the only alternative to the cure is death.

The reason why a cure to a disease such as AIDS would have less elastic demand than a vaccine at every price is that

for a person without AIDS there is a freely available substitute-monogamy with an unaffected partner.

Patents on prescription drugs last

from the moment they have been received by the patent office until they are approved by the FDA.

Under oligopoly there are

high barriers to entry

One feature of the new textbook market is that publishers face ____ costs and ____ variable costs.

high fixed; low

Drug companies tend to attribute higher drug prices on

high invention costs and long testing processes.

The rental market for textbooks is predicted to

increase royalty payments to authors.

In the 1980s, President Reagan shifted government education policies toward

increased availability of subsidized student loans.

A patent

is often necessary to motivate inventions and makes a good that has recently been invented more expensive than it could be.

The strategy of faculty choosing to stay with an old edition of a book is

likely to reduce the costs to students.

Under monopolistic competition there are

low barriers to entry

A patent

makes a good that has recently been invented more expensive than it would otherwise be.

That U.S. drug companies can sell their drugs in Canada and Mexico for much less than they sell them for in the U.S. suggests that the

marginal cost of producing the drugs is less than the Canadian and Mexican price.

An industry in which there are many competitors with specific marketing niches is likely to be characterized by

monopolistic competition.

An industry which Herfindahl-Hershman Index of 1,000 would best be described as

monopolistic competition.

The breakfast cereals industry can be best modeled using the model of

monopolistic competition.

An industry which Herfindahl-Hershman Index of 10,000 would best be described as

monopoly

If an industry has 100 firms and its Herfindahl-Hershman Index is 100 would best be described as

monopoly

There are hundreds of local water companies but economists insist that in each community they are __________ because consumers have no other choices in the local market in which they live.

monopoly

he local residential electrical power industry can be best modeled using the model of

monopoly

Relative to a cure for AIDS, the demand for an AIDS vaccine would be

more elastic.

Once a drug has been invented, marginal production costs are typically

much less than price.

An eBook book that sells new for $125 will typically be sold back to the bookstore "used" for

nothing (it can't be re-sold).

There are thousands of broadband internet providers in the country, while in a particular city the only way you can get it is through the phone, the cable company, and through DirecTv. The best model to analyze this market is

oligopoly

When a drug ceases to require a prescription it is said to have gone

over-the-counter.

Monopoly power exists in drug inventions because of

patents for drugs.

Commercialization of the internet has helped to increase the price of new textbooks by facilitating

re-sale of used books.

The key difference(s) between monopoly and oligopoly is

that there are two in oligopoly rather than one competitor in a monopoly.

The copyright gives its owner

the exclusive right to sell a work of intellectual property.

The assumption under perfect competition of a "homogeneous product" means that

the good one firm produces is exactly the same as the good another firm produces.

Under perfect competition, the supply curve is

the marginal cost curve, but only that portion that is above the minimum of average variable cost.

In a diagram of perfect competition, the marginal revenue line moves up and down when there is exit and entry, respectively, because

the market supply for the good rises and falls when there is entry and exit, respectively.

Existence of a "dead weight loss" in the prescription drug market indicates that

the number of new drugs invented is less than the optimal number and the increased profits to firms is less than the decreased net value to consumers.

The key difference(s) between perfect competition and monopolistic competition is

the products sold are slightly different in monopolistic competition.

The main reason why monopoly governs prescription drugs is

to motivate innovation.

If faculty choose to stay with an old edition of a book this is predicted to cause

used textbook prices to rise (for the older edition).

The profit a publisher makes on the sale of a used college textbook is

zero.