Econ Exam 3

Given the same cost data, a pure monopolist producer will charge: • a higher price and produce a smaller output than a purely competitive industry. © the same price and produce the same output as a purely competitive industry. O a higher price and produce a larger Qutput than a purely competitive industry. • a lower price and produce a smaller output than a purely competitive industry.

A

Under conditions of pure monopoly: • the firm is a price taker. • entry is blockd. • there are close substitutes. • there is no advertising.

B

Monopolistically competitive firms have a: O perfectly inelastic demand curve. • downward-sloping demand curve. O perfectly elastic demand curve. O horizontal demand curve.

B

In an oligopolistic market there are: O many buyers. O many sellers. • few sellers. O few buyers.

C

Purely competitive firms are assumed to: O confront demand curves that are perfectly inelastic. • sell where marginal cost is minimized. © be price takers. • advertise.

C

Which is a feature of a purely competitive market? O There are price differences between firms producing the same product. O The industry's demand curve is perfectly elastic. © Products are standardized or homogeneous. O There are significant barriers to entry into the industry.

C

Economic theory predicts a monopolist will discontinue production in the short run if: O marginal revenue is less than average variable cost. O marginal revenue is less than average total cost. • price is less than average total cost. • price is less than average varjable cost. Next

D

In which industry is monopolistic competition most likely to be found? A. Agriculture B. Utilities C. Automobiles D. Retail trade

D

One major barrier to entry under pure monopoly arises from: • the availability of close substitutes for a product. • the price taking ability of the firm. • diseconomies of scale. • ownership of essential resources.

D

The MR = MC profit maximization rule applies: O only to monopolies. O only when the firm is a "price taker. O only to purely competitive firms. © to firms in all types of industries.

D

Compared to the purely competitive firm, a pure monopoly: • is able to use barriers to entry and maintain positive economic profits in the long run. O is efficient from society's perspective because it has big plants and it uses the newest possible production technology. O produces an equal amount of output but charges higher prices to cover all costs in the market • will always become competitive in the long run because positive economic profits will induce competitors into the market.

A

In monopolistic competition, we usually observe: A. a large number of firms, each operating with excess capacity. B. slower rates of technological advance and product development due to higher advertising costs. C. more reliance on misleading advertising than in monopoly or oligopoly. D. significant diseconomies of scale.

A

In pure competition, price is determined where the industry: • demand and supply curves intersect. • total cost is greater than total revenue. O demand intersects the firm's marginal cost curve. O average total cost equals total variable costs.

A

In the short run, the monopolistically competitive firm will experience: • economic profits or losses, but in the long run only a normal profit. O economic profits or losses, but in the long run only an economic profit. O a normal profit, but in the long run only an economic profit. O an economic profit, and also one in the long run.

A

Monopolistic competition is characterized by firms: • producing differentiated products. O producing at optimal productive efficiency. O producing where price equals marginal cost. O making economic profits in the long run.

A

Suppose some firms exit a monopolistic competition industry. We would expect the demand curve of a firm already in the industry to: • shift to the right. • remain the same since entering firms serve other customers in the market. • shift to the left. • become more elastic.

A

The steel and automobile industries would be examples of which market model? ) Oligopoly O Pure competition O Pure monopoly • Monopolistic competition

A

What is the term that refers to increases in the value of a product to each user, including existing users, as the total number of users increases? © Network effects © Simultaneous consumption © Income transfer O Price discrimination

A

Which industry would be considered to be monopolistically competitive? • Locally owned restaurants in large cities. O Agriculture products sold at farmer market. O Groceries in a small remote town. • Fast food restaurants along rural interstate highways.

A

Which is a barrier to entry? © Patents O Profit maximization O Elastic product demand O Revenue maximization

A

Which is a likely characteristic of a differentiated oligopolistic market?A. Price and output decisions of firms are interdependent. B. The market demand curve is inelastic. C. There is minimal advertising expenditure. D. There are minimal barriers to entry.

A

Which is a major criticism of a monopoly as a source of allocative inefficiency? © A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to the monopolist's opportunity cost. O A monopolist has no incentive to produce efficiently because even the inefficient monopolist can be assured of economic profits. O A monopolist has an unfair advantage because it can purchase labor at a lower price than competitive firms in other industries. O A monopolist will always make profits and that means that prices are too high.

A

Which statement is correct? • Pure monopolists do not always realize economic profits. • Because of its ability to administer prices, the pure monopolist can increase its price and increase its volume of sales simultaneously. O In the short run, the pure monopolist will maximize total profits by producing at that level of output where the difference between price and average total cost is greatest. • In the short run, the pure monopolist will charge the highest price it can get for its product.

A

Which statement is true? • Pure competition will result in a lower price and a higher output than monopolistic competition. O Monopolistic competition will result in a lower price and a lower output than pure competition. • Monopoly will result in a higher price and a larger output than monopolistic competition. O Monopoly will result in a higher price and a larger output than pure competition.

A

profit-maximizing firm in the short run will expand output: • as long as marginal revenue is greater than marginal cost. O until total revenue equals total cost. O until marginal cost equals average variable cost. • until marginal cost begins to rise.

A

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because: • its demand curve is inelastic, so total revenue will decline. • it can sell all it wants to at the market price. O its competitors would not permit it. O this would be considered unethical price chiseling.

B

In the long run, a representative firm in a monopolistically competitive industry will typically: A. have an elasticity of demand that will be less than it was in the short run. B. earn a normal profit, but not an economic profit. C. produce a level of output at which marginal cost and price are equal. D. have a larger number of competitors than it will in the short run.

B

Price is constant or "given" to the individual firm selling in a purely competitive market because: O product differentiation is reinforced by extensive advertising. © each seller supplies a negligible fraction of total supply. • there are no good substitutes for the firm's product. O the firm's demand curve is downward sloping.

B

The demand curve confronting a nondiscriminating pure monopolist is: O more elastic than the demand curve confronting a competitive firm. © the same as the industry's demand curve. O derived by vertically summing the individual demand curves competitors. O horizontal.

B

The following data show the relationship between output, total costs, and total revenue for a pure monopoly. Output TC TR 50 $750 $1,000 60 800 1,100 70 950 1,250 80 1,200 1,450 90 1,300 1,500 Within which of the following output ranges does the firm earn maximum economic profits? O 80 to 90 units • 60 to 70 units O 70 to 80 units O 50 to 60 units

B

The retail trade for clothing would be an example of which market model? O Oligopoly © Monopolistic competition • Pure monopoly O Pure competition

B

Under which market model are the conditions of entry into the market easiest? • Monopolistic competition © Pure competition • Pure monopoly O Oligopoly

B

What do economies of scale, the ownership of essential raw materials, and patents have in common? O They all help explain why a monopolist's demand and marginal revenue curves coincide. They are all barriers to entry. • They must all be present before price discrimination can be practiced. • They all help explain why the long-run average cost curve is U-shaped.

B

When compared with the purely competitive industry with identical costs of production, a monopolist will produce: O more output and charge a higher price. • less output and charge a higher price. O less output and charge the same price. O more output and charge the same price.

B

Which characteristic would best be associated with pure competition? O Nonprice competition © Price takgr O Few sellers O Product differentiation

B

Which is a characteristic of monopolistic competition? • Standardized product. • Relatively easy entry. • Absence of nonprice competition. • A relatively small number of firms.

B

Which is a reason why there is no advertising by individual firms under pure competition? • The quantity of the product demanded is very large. © Firms produce a homogeneous product. • Firms do not make long-run profits. • The market demand curve cannot be increased.

B

Which is most characteristic of a pure monopoly? O Exit from the industry is blocked but entry into the industry is relatively easy. • The firm produces a good or a service for which there are no close substitutes. • There is a dominant firm in a multifirm industry. • The firm has considerable control over the quantity of the output produced, but not over price.

B

Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is making a positive level of economic profits. In the long run, we can expect the market: O demand to increase. • supply to decrease. • supply to increase. © demand to decrease.

C

Efforts by corporate lobbyists to obtain a license that would give a firm a monopoly over the making of a product would be an example of: O price discrimination. O X-efficiency. • rent-seeking. • network effects.

C

If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry: • demand curve to the left, and the market price will decrease. • demand curve to the right, and the market price will increase. • supply curve to the left, and the market price will increats. O supply curve to the right, and the market price will decrease.

C

In pure competition, the marginal revenue of a firm always equals: O marginal cost. • total revenue. © product price. • average total cost.

C

One difference between monopolistic competition and pure competition is that: O firms differentiate their products in pure competition. O products can be standardized or differentiated in pure competition. • there is some control over price in monopolistic competition. O monopolistic competition has significant barriers to entry.

C

The economic inefficiency of monopolistic competition means that: O industries tend to evolve into oligopolies rather than become more competitive. O firms do not maximize profits at the MC equals MR output. • firms produce at an output short of, and charge a price greater than, minimum average total cost. • industries spend money on advertising and sales promotion.

C

When demand increases, in the short run the purely competitive firm: O will spend more on advertising. O will experience no change in costs as it steps up production. © will earn higher profits or experience smaller losses. O can alter available inputs and output as well as the size of the plant.

C

Which of the following Internet firms has a near monopoly in the search market? O Facebook O Bing • Google O Amazon

C

Which phrase would be most characteristic of pure monopoly? O Close substitutes O Price taker • Single seller O Efficient advertiser

C

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will: A. make the industry allocatively efficient as each firm seeks to maintain its profits. B. reduce the excess capacity in the industry as firms expand production. C. cause firms to standardize their product to limit the degree of competition. D. attract other firms to enter the industry since the barriers to entry are low.

D

Compared to pure competition, monopolistic competition: • offers less product differentiation and lower productive efficiency. O offers less product differentiation but attains equal productive efficiency. • provides greater product differentiation and achieves greater productive efficiency. • provides greater product differentiation at the cost of some excess capacity.

D

Which is true for a purely competitive firm in short-run equilibrium? O A decrease in output would lead to a rise in profits. O The firm is making only normal profits. O The firm's marginal cost is greater than its marginal revenue. • The firm's marginal revenue is equal to its marginal cost.

D

Which is true of normal profits? O They are zero under pure competition in the long run. • They are excluded from a firm's costs of production. O They are greater than the opportunity cost to the firm. © They are necessary to keep a firm in the industry in the long run.

D

Which is true under conditions of pure competition? • The market demand curve is perfectly elastic. O There are differentiated products. • Firms that cannot make pure or economic profits go bankrupt. © No single firm can influence the market price by changing is output.

D

Which product is made by an industry that best illustrates the concept of homogeneous oligopoly? O Home computers O Cigarettes O Cars • Copper

D