ECON 1500 Final Study Guide

CH 11/12 A firm in an oligopoly is similar to a monopoly in that:

Both firms could have significant market power and control over price

CH 11/12 Mutual interdependence means that each firm in an oligopoly:

Considers the reactions of its rivals when it determines its pricing policy

CH 9 In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be:

A break-even point

CH 11/12 Which cannot be a characteristic of an oligopolistic industry?

A perfectly elastic firm demand curve

CH 11/12 A major distinction between a monopolistically competitive firm and an oligopolistic firm is that:

A recognized interdependence exists between firms in one industry but not in the other

CH 10 X-inefficiency is said to occur when a firm's:

Average costs of producing any output are greater than the minimum possible average costs

CH 9 Resource costs increase in a purely competitive industry. This change will result in a(n):

Decrease in the short-run supply curve for a firm in the industry

CH 10 If a monopolist produces 100 units of output at a market price of $5 per unit with marginal revenue per unit equaling $4, we would expect that if the monopolist's good was provided under pure competition, quantity would be:

Higher than 100 units, price lower than $5, and MR = price

CH 10 Discussion Do you agree with her opinion that the "rules of monopoly" should be clearly defined, if so, what are the ways this modification can benefit the society?

I totally agree with Vestager. Their must be some regulations set on big companies because often these comanies missuse the power that they have and the "competition rules" that Vestager proposes will prevent that from happening. The missuse of power by these big companies then remove the fairness in a competition; the faire chance to make it in the market is no longer there. I believe a good example of this is in the TV show "Shark Tank". In this show small companies or entrepreneurs pitch their products or ideas to investors (sharks) because these investors have the resources, necessities, partners, and, most importantly, the money to expand and grow these companies or ideas and these small companies/ entrepreneurs almost in a way have to partner with these investors bevause if not, it is very likely that their ideas or companies will fail.

CH 9 The wage rate increases in a purely competitive industry. This change will result in a(n):

Increase in the marginal cost curve for a firm in the industry

Ch 11/12 In monopolistic competition, which of the following would make an individual firm's demand curve less elastic?

Increased brand loyalty toward the firm's product

CH 10 Suppose that a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:

Increasing price and decreasing output

CH 10 In moving down the elastic segment of the monopolist's demand curve, total revenue is:

Increasing, and marginal revenue is positive

CH 9 For a purely competitive firm, total revenue:

Is price times quantity sold. increases by a constant absolute amount as output expands. graphs as a straight upsloping line from the origin.

CH 10 Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:

Marginal cost = marginal revenue

Ch 11/12 Monopolistically competitive firms are similar to monopolies in that they have:

Marginal revenues that are less than price

CH 11 Discussion- Monopolistic competition What is one monopolistically competitive company you are best familiar with? What do you think, do they earn economic profit or suffer losses in the current market period?

McDonald's and Burger King sells the burger in the market are the most common type of example of monopolistic competition. The two companies mentioned above sell an almost similar type of products but are not the substitute of each other. Regardless of the similarity of the product available on the menu, each customer has a unique preference, and decides where to spend their money. For example: the fact that McDonald's offers Coca-cola and Burger King offers Pepsi, could be a factor to where people go eat. Those two drink companies are also a clear example of monopolistic competitive companies as well. Both companies are suffering in losses because less people are buying food outside their homes right now. However, they are still making economic profit in the short run and, but they will not be able to earn an economic profit in the long-run.

Ch 11/12 A monopolistically competitive industry is like a purely competitive industry in that:

Neither industry has significant barriers to entry

CH 11/12 In the kinked demand model of oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to:

Not change their prices

CH 10 Allocative inefficiency due to unregulated monopoly is characterized by the condition:

P > MC

Ch 11/12 In which industry is monopolistic competition most likely to be found?

Retail Trade (Utilities, Agriculture, Mining are the other options)

CH 9 Discussion Suppose a bridge for automobiles was constructed across a river and all the costs associated with its construction have been paid. The amount of traffic is such that there are no foreseeable problems of overcrowding in the use of the bridge. Assume, also, that the extra cost associated with traffic crossing the bridge is for all practical purposes equal to zero. What toll should be charged to achieve the most efficient use of the bridge?

Since there are no extra costs in maintaining the bridge, the total cost would simply be the fixed cost of construction. The marginal cost for each car would be the total cost of construction divided by the amount of cars passing through the bridge. The toll, representing marginal revenue for one car, should be equal to the marginal cost. If the toll were higher than the marginal cost, some of the car drivers might use alternate routes and avoid the bridge toll. If the toll were lower than the marginal cost, especially if there was no toll at all, the firm that operates the bridge could take a loss even if overcrowding is assumed to not be a problem.

CH 9 In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if:

Total revenue is less than total variable costs

CH 10 Which of the following is not a barrier to entry for monopolies?

X-ineffiency

CH 9 For a purely competitive seller, price equals:

average revenue, marginal revenue, total revenue divided by output

CH 10 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.

CH 9 In the short run the individual competitive firm's supply curve is that segment of the:

marginal cost curve lying above the average variable cost curve.

CH 10 Other things equal, a price discriminating monopolist will:

produce a larger output than a nondiscriminating monopolist

CH 11/12 Which of the following is a characteristic of monopolistic competition?

relatively easy entry

CH 10 Price discrimination refers to:

the selling of a given product at different prices that do not reflect cost differences.

CH 9 A firm reaches a break-even point (normal profit position) where:

total revenue and total cost are equal.

CH 9 A purely competitive firm's short-run supply curve is:

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

CH 9 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.