Econ chap 7 and 8

OutputPriceTRMRTCMC0$18$0-$400-100171,700$171,900$15200163,200152,90010300154,500133,5006400145,600114,0005500136,50094,6006600127,20075,3507.50700117,70056,1508800108,00037,3001390098,10019,30020 Please consider the above table with cost and revenue data for a monopoly firm. The above monopolist will maximize profits at output:

500

According to our text, which of the following is accurate about a monopoly industry?

A government-granted monopoly (for example, a utility) is less-efficient and usually charges higher prices than a self-earned (free market) monopoly (for example, Microsoft).

When gasoline prices rise, oil companies are often accused of collusion in order to artificially raise the price and reap exorbitant (extremely high) profits. Which of the following is a reason why this is unlikely to persist in the long run?

A high price will leave room for competitors in the industry to undercut the price and capture a larger share of the market. It is usually very difficult for all the producers in the industry to come to an agreement about the price and production quotas. A high price will invite new entrants (competitors) into the market who will undercut the price in order to establish a place in the market.

Which of the following is true about a monopolist?

A monopolist's price can be lower than a purely competitive firm's price if the monopolist can take advantage of significant economies of scale.

OutputPriceMarginal Cost1007.500.5020071.503006.502.5040063.505005.505.5060056.50 Please consider the above data for a monopolist. At which output level does the monopolist maximize its profits (or minimize its losses)?

At an output of 400

Which of the following is a difference between a purely competitive firm and a monopolistically competitive firm?

Average total cost at the profit-maximizing output in the long run is different for a monopolistically competitive firm, as compared to a purely competitive firm. For a purely competitive firm, average total cost is at its minimum point.

Which of the following about a monopolistically competitive firm is correct?

Because the demand curve of a monopolistically competitive firm is downward sloping, the firm achieves the profit-maximizing quantity at a point where the average total cost is not at its minimum.

Which of the following situations is (are) a violation(s) of the United States anti-trust laws?

Executives of two large telephone companies meet and agree to charge their customers the same monthly price for a family plan offering.

According to oligopoly game theory, in which scenario are the combined profits of the two firms maximized (the addition of the two firms' profits are the greatest)?

Firm A sets a high price and firm B sets a high price.

Which of the following is a characteristic of an oligopoly industry?

Firms in this industry are interdependent.

Which of the following industries is a good example of an oligopoly industry?

The auto manufacturing industry, in which several large firms are responsible for a majority of the sales in the market.

The demand curve of a typical firm in monopolistic competition is:

downward-sloping and less-elastic than a perfectly competitive firm's demand curve.

Which of the following is a characteristic of a monopolistically competitive industry?

None of the above.

Which of the following is true about an oligopolist's kinked demand curve?

Rival firms usually lower their price if a competitor lowers its price. Thus, at prices below the current price, the demand curve is less elastic. Rival firms usually choose to not change their price if a competitor raises its price. Thus, above the current price, the demand curve is more elastic.

According to economic theory, in the long run, a monopolistically competitive firm's:

average total cost curve touches its demand curve. The firm has zero economic profits in the long run.

Let's say that we are looking at a free market without government intervention (no companies in this industry are regulated or controlled by the government). If a firm owns a significant market share and is considered a near-monopoly, then (according to our text):

competition is possible because the market is free. If a new firm offers a better and/or less expensive product, then over time it may be successful. Even if no competitors enter the market, the threat of competition for the near-monopoly firm will keep the firm on its toes and will encourage the firm to provide relative low-priced and high quality products.

A firm in monopolistic competition maximizes profits by identifying that price and output at which:

marginal cost equals marginal revenue, or where marginal cost comes closest to marginal revenue without being greater than marginal revenue. All this is contingent upon the conditions that the price is greater than the average variable cost and marginal cost must be rising.

A monopolist maximizes profits by choosing that output and price at which:

marginal cost is equal to or comes as close as possible to (without exceeding) the marginal revenue. This is given that the price is greater than the average variable cost, and that the marginal cost is rising at the profit-maximizing output.

There are significant barriers to enter a(n):

oligopoly industry.

Let's say that a monopolist produces at an output where its price is greater than its average variable cost, but its price is less than its average total cost. In this case, the monopolist:

operates at a loss but should not shut down.