Econ #2

In the figure above, this monopoly firm's profit per unit is:

$13

X-inefficiency is defined as the inefficiency that occurs:

anytime the firm is operating at greater than the lowest possible cost for a particular level of output

One of the similarities between monopolistic competition and oligopoly is that they both:

are examples of imperfect competition

Monopolies provide a social benefit when they:

are natural monopolies

Which of the following curves is NOT bowl-shaped?

average fixed cost curve

Because the market demand curve slopes down and to the right, for a monopolist marginal revenue will always:

be less than the market demand price

If the marginal cost curve is above the ATC curve:

both average total cost and average variable cost must be rising

If the industry is a competitive market, then the market is:

both productively and allocatively efficient

A price maker is a firm that:

can influence market price by adjusting its level of output

Marginal product is defined as the:

change in output from hiring an extra worker

The market structure associated with many firms selling a standardized product is:

competition

The market structure that maximizes consumer and producer surplus is:

competition

The only market structure that does NOT have control over its price is:

competition

In the kinked demand curve model:

competitors ignore any price increase and match any price decrease by a rival firm

The basic assumption of the kinked demand curve model is that:

competitors will match a price cut but not a price increase

If a firm faces a kinked demand curve and attempts to increase its price:

competitors will not increase their prices

The short-run average fixed cost curve:

continually declines in value

In the figure below, what is the appropriate course of action for the firm's owner?

continue operations in the short run and leave the industry in the long run

Which of the following is NOT one of the factors used in defining the intensity of competition in an industry?

degree to which buyers know each other

Which of the following is not considered an explicit cost?

depreciation on equipment

A characteristic that distinguishes monopolistic competition from competition is:

differentiated products

Perfect price discrimination is a situation in which:

each customer is charged a different price for the product

Both monopolistic competitive and purely competitive firms

earn only normal profits in the long run

The reason monopolistic competitive firms have difficulty maintaining a profit in the long run is that:

ease of entry into the market encourages new firms to enter and force down prices

The main characteristic of the competitive market that causes economic profits and losses to go to zero in the long run is:

easy entry and exit into the market

Fixed costs do NOT include:

electricity

If a monopolistically competitive firm is in long-run equilibrium, we can assume that price ________

equals average total cost

Costs that do not vary with the level of output are known as:

fixed costs

The Prisoner's Dilemma is an example of the application of:

game theory

A price taker is a firm that:

has no control over the market price

Monopolistic competition is like perfect competition in that they both:

have numerous competitors

At movie theaters, lower prices are charged for matinees than for evening showings of the same film. The customers attending the matinees have:

higher elasticities of demand than customers attending the evening showings

Compared with competitive markets, monopolies charge _____ prices and produce a _____ output

higher; lower

Price tends to be ______ and output levels ______ in a monopolistic competitive market compared with a purely competitive market

higher; lower

Oligopoly and monopolistic competition are examples of:

imperfect competition

A monopolist will practice price discrimination primarily to:

increase profits

Which of the following does NOT lead to economies of scale?

increased bureaucratization

The only monopoly that economists show support for are:

natural monopolies

A constantly declining long-run average cost (LRATC) curve is a characteristic of what type of industrial structure?

natural monopoly

A monopoly differs from a competitive market in that:

no close substitutes exist for the monopolist's product

In the long run, a firm in a competitive market earns a(n):

normal profit

In perfect price discrimination, a monopolist:

obtains all the consumer surplus from its customers

Game theory is one of the models used to analyze:

oligopolies

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The market model that best fits this industry is:

oligopoly

In the short run, which of the following cost curves always declines as output rises?

only average fixed costs

Competitive markets are productively efficient because products are produced at their lowest:

opportunity cost

Which of the following items is not a significant barrier to entry?

opportunity cost

Which of the following market structures exhibit easy entry and exit from the market?

perfect competition and monopolistic competition

A perfectly competitive firm faces a demand curve that is:

perfectly elastic

The perfectly competitive firm will:

produce in the short run if the price is above the minimum of the AVC

A key characteristic of monopolistic competition that separates it from pure competition is:

product differentiation

When firms collude, they are looking to operate as a monopoly by:

raising price and reducing output in the market

An industry that has large economies of scale operates most efficiently as a(n):

regulated natural monopoly

Constant returns to scale are defined as long-run average total costs (LRATC) that:

remain the same as output increases

Which of the following is the best example of a monopolistic competitive market?

restaurants

The profit-maximizing rule states that a firm:

should produce that level of output at which MR = MC

If an oligopolistic firm attempts to decrease its price:

total revenue will decrease

Which industry best illustrates a competitive market?

wheat market

A basic conclusion of the Prisoner's Dilemma game is that:

when unable to communicate and faced with irrevocable decisions, rational players will individually choose the strategy that their minimizes losses

Allocative efficiency means that products are produced:

where the price equals marginal cost

Which of the following statements about competitive firms in the long run is true?

Price equals both the minimum average total cost and marginal cost

Which equation is NOT correct?

ATC = TVC/Q

Which one of the following statements is correct?

An oligopoly exists when there are a few firms in an industry

Which statement is not true for a monopolist?

Because it takes the demand curve as given, a monopolist has no influence over price

The perfectly competitive firm's price-quantity combination below is at ___ and a monopolistically competitive price-quantity combination is would be at ___.

D;A

Which of the following equations is correct?

Economic profit = Total revenue - Explicit costs - Implicit costs

In the long run, monopolistic competitive firms will end up producing at a price equal to that of competitive markets

False

Which of the following characteristics is not commonly shared by oligopoly models?

Firms will always produce a homogeneous product

Firms in monopolistic competitive industries:

I. sell their products at a higher price than if their industry were strictly competitive. III. have a high incentive to innovate with new products and better quality.

A monopolistic competitive firm will maximize profits at the point where

MC = MR

The competitive firm's short-run supply curve is the:

MC curve above the AVC curve

Which of the following expresses the level of output at which a monopolist maximizes profit?

MR < P

Assume that economic profits are being earned by firms in a monopolistically competitive market. What happens in the long run?

New firms enter, and demand to each firm falls until economic profits are zero

Which of the following statements is true?

Normal profits are equal to zero economic profits

The figure below shows the cost and revenue curves for a monopolist.

The monopolist will have a loss at every output level

Which of the following properties is not required for successful price discrimination?

a kinked demand curve

Average total costs can be found by:

adding average fixed cost and average variable cost together

The practical result of brand loyalty is that it:

allows a firm to raise price and not lose all its sales

The demand curve that faces the monopolist is:

also the industry market demand curve

An example of X-inefficiency is:

an executive, at corporate expense, hiring a limousine to travel one block whenever it is raining

The marginal cost curve:

intersects the AC at its minimum point

A natural monopoly:

is an efficient producer if allowed to remain a monopoly

The Prisoner's Dilemma game:

is an example of how minimizing your losses can lead to a worst-case scenario

A cartel:

is an oligopolistic model that uses collusion to share monopoly profits

When a firm experiences diseconomies of scale:

it runs into bureaucratic red tape

If an oligopolistic firm faces a kinked demand curve, the profit maximization decision is to:

keep price stable

The cotton industry is experiencing less than normal profits. You can expect some firms to:

leave the industry in the long run

Which of the following is an advantage of a sole proprietorship?

less paperwork

Which of the following descriptions is an example of rent-seeking behavior?

liquor store lobbying the local government to restrict the number of liquor licenses issued in the city

Economies and diseconomies of scale explain the shape of the:

long-run average cost curve.

Price advertising typically:

lowers prices and increases consumer welfare

Diminishing marginal returns occurs when more of a resource is added and

marginal product decreases

If MC = MR, then a competitive firm is:

maximizing profit

In the long run, the competitive firm always produces at the:

minimum of the average total cost curve

If the price falls below the minimum of the AVC, the firm:

shuts down

Which of the following characteristics is typical of a monopoly?

significant barriers to entry

The reason price equals marginal revenue in a competitive market is

since price is constant, the added revenue from selling one more unit is the price

Which sequence describes the long-run adjustment to short-run economic losses in a competitive market?

some firms exit, industry supply decreases, market price rises

The kinked demand curve model was developed as an attempt to demonstrate the:

stability of prices for long periods of time for oligopolies

Costs that won't be recovered are:

sunk costs

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

tacit collusion

In a perfectly competitive market, firms:

take the price that is set by market forces

In oligopoly, all the firms:

take their competitors into account when they make pricing decisions

If MR is greater than MC, then:

the firm should increase output

In a competitive market structure, the marginal revenue is equal to:

the market price

If the short run, the competitive firm will continue to produce even if it experiences an economic loss if:

the market price exceeds the average variable cost

When firms in an industry are earning normal profits:

the number of firms in the industry is stable

If a government decides to regulate a natural monopoly, they are most likely to set the selling price at ________

the point where the monopoly earns a fair return

In the prisoner's dilemma:

the prisoners cannot collude

For both the monopolist and the competitive firm:

the profit-maximizing output occurs where MR = MC

In economic terms, the short run is:

the time over which at least one factor of production is fixed

In the case of a natural monopoly, economies of scale are so large that the minimum efficient scale of operation is roughly equal to:

the total market demand