Econ final exam

If a monopolist is producing a quantity that generates MC > MR, then profit:

C) can be increased by increasing price.

If a monopolist is producing a quantity that generates MC < MR, then profit:

C) can be increased by increasing production.

. A Japanese steel firm sells steel in the United States and in Japan. Since the United States buys steel from a number of different sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits it should:

C) charge a lower price in the United States and a higher price in Japan.

41. One of the earliest actions of antitrust policy was the breakup of:

A) the Standard Oil Company.

21. (Table: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The marginal revenue of the fourth unit of production is:

B) $250.

A(n) ________ is a single firm with ________, whereas ________ implies an industry with ________ firm(s) that has(have) ________.

B) monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a:

B) price-taker.

A major application of the Sherman Antitrust Act was in ________ against ________.

C) 1911; Standard Oil

A ________ price in the market with a ________ demand is likely due to price discrimination.

C) lower; more elastic

To practice effective price discrimination, a monopolist must be able to:

C) prevent the resale of goods among groups of buyers

38. (Table: Two Rival Gas Stations) There are only two gas stations in a small town, Swifty Gas and Speedy Gas. Each firm can set either a high price or a low price, and customers view these two firms as nearly perfect substitutes. The table shows the payoff matrix of daily profits that each firm would receive from their pricing decision, given the pricing decision of their rival. Profits in each cell of the payoff matrix are given as (Swifty, Speedy). If each firm sets the price independently, the Nash equilibrium outcome will be:

D) $50, $50

Which of the following is(are) true concerning monopoly?

D) All of the statements are true.

. In the short run, a perfectly competitive firm produces output and earns an economic profit if:

A) P > ATC.

23. (Figure: Monopoly Model) The profit-maximizing price is the one indicated by:

B) P

60. The failure to produce enough to minimize average total cost is termed:

60. The failure to produce enough to minimize average total cost is termed:

27. (Figure: Short-Run Monopoly) The profit-maximizing price is price:

A) N.

6. (Table: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow-clearing is a perfectly competitive industry. Her only fixed cost is $1,000 for a tractor. Her variable costs per cleared lot, shown in the table, include fuel and hot coffee. If the current price per cleared lot is $14, how many lots should Alexa clear?

A) 0

57. A monopolistically competitive firm is operating in the short run, is operating at the optimal level of output, and is earning positive economic profits. Which of the following describes how this firm will adjust in the long run?

A) Entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output, and decreasing the price the firm can charge until price equals average total cost.

39. (Table: Two Rival Gas Stations) There are only two gas stations in a small town, Swifty Gas and Speedy Gas. Each firm can set either a high price or a low price, and customers view these two firms as nearly perfect substitutes. The table shows the payoff matrix of daily profits that each firm would receive from their pricing decision, given the pricing decision of their rival. Profits in each cell of the payoff matrix are given as (Swifty, Speedy). Which of the following choices describes a dominant strategy?

A) Swifty will always set a low price, no matter Speedy's choice.

52. Monopolistic competition is an industry characterized by which of the following?

A) a product with many close substitutes

A monopoly is a market characterized by:

A) a single seller

. An oligopoly knows that its ________ affect its ________ and that the ________ of its rivals will affect it.

A) actions; rivals; reactions

59. Firm X is a typical firm in a market characterized by the model of monopolistic competition. If the market is in long-run equilibrium, then the price Firm X charges for its services would:

A) equal average total cost.

If a monopolist is producing a quantity that generates MC = MR, then profit:

A) is maximized.

55. Suppose a monopolistically competitive firm is making a profit, but it can increase its profits by increasing output. Then it must be the case that at the current level of output:

A) marginal revenue is greater than marginal cost.

A market structure characterized by many competitors, each producing differentiated products, with free entry and exit into the industry, is described as:

A) monopolistic competition.

. Situations in which the more users of a product there are, the more useful the product becomes are called:

A) network effects.

For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have ________ on prices and beef is a ________ product.

A) no noticeable effect; standardized

. The cable TV market has only two firms, CableNorth and CableSouth. Through tacit collusion, they each arrive at an equilibrium price and quantity and see their demand curve as kinked. CableNorth will be reluctant to raise its price because it sees that portion of the demand curve as ________ and if it raised its price, total revenue would ________.

A) price-elastic; fall

In the short run, if P = ATC, a perfectly competitive firm:

A) produces output and earns zero economic profit.

43. (Scenario: Payoff Matrix for Two Firms) If both firms pursue their dominant strategies, they will find that:

A) their joint profits are maximized.

34. (Figure: Payoff Matrix for Gehrig and Gabriel) The figure shows the payoff matrix for two producers, Gehrig and Gabriel, who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figur

A) they each produce 5,000 figurines.

For a firm producing at any level of output greater than the most profitable one, a reduction in output decreases:

A) total cost more than total revenue.

42. (Scenario: Payoff Matrix for Two Firms) Which of the following is the dominant strategy for Firm A?

B) Firm A is to cooperate.

58. The profit-maximizing rule or ________ is adhered to by firms under ________.

B) MC = MR; both monopolistic competition and perfect competition

An industry dominated by a few firms, where each firm recognizes that its own choices will affect the choices of its rivals and vice versa, is:

B) an oligopoly.

44. (Scenario: Payoff Matrix for Firms X and Y) If Firm X were to choose its dominant strategy, it would:

B) choose a high price.

Lenoia runs a natural monopoly producing electricity for a small mountain village. The barrier preventing other firms from competing with her is:

B) economies of scale.

(Scenario: Payoff Matrix for Firms X and Y) If firms such as Firm X and Firm Y wish to maximize joint profits, they should:

B) have one choose a dominant strategy and the other choose a nondominant strategy

53. Monopolistic competition is an industry characterized by:

B) many firms facing individual downward-sloping demand curves.

Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary believes he faces a kinked demand curve. This means Gary thinks the demand curve above the kink is:

B) more elastic than the demand curve below the kink.

In the short run, if P > ATC, a perfectly competitive firm:

B) produces output and earns an economic profit.

8. (Figure: Marginal Decision Rule) To maximize economic profit, this firm should produce quantity ________ where ________ = ________.

B) q2; price; MC

If a Florida strawberry wholesaler is in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market.

B) small; standardized; little, if any

The shut-down price is:

B) the minimum level of AVC.

________ almost always take the market price as given, or are considered ________, but this is often not true of ________.

C) Consumers and producers; price-takers; firms that produce a differentiated product

22. (Figure: Computing Monopoly Profit) At the profit-maximizing output, total cost is:

C) P20Q1F

Oligopoly is a market structure characterized by:

C) a small number of interdependent firms.

56. A monopolistically competitive firm has a downward-sloping demand curve for its product, primarily because:

C) the firm sells a product distinct from products sold by competing firms.

Market structures are categorized by the following two criteria:

C) the number of firms and whether or not products are differentiated

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

C) variable cost.

If the toothpaste market is monopolistically competitive, product differentiation will take place in which of the following forms?

D) all of these forms

54. The sources of product differentiation do not include:

D) consumers' value in uniformity.

7. (Figure: Marginal Revenue, Costs, and Profits) In the figure, if market price decreases to $16, marginal revenue ________ and profit-maximizing output ________.

D) decreases; decreases

51. An industry with a large number of relatively small firms producing ________ in a market with easy entry and exit is a(n) ________.

D) differentiated products; monopolistic competition

Monopolistic competition is similar to perfect competition in that firms in both market structures:

D) do not face any barriers to entry into the industry in the long run.

In the short run, if P < AVC, a perfectly competitive firm:

D) does not produce output and incurs an economic loss

5. (Table: Total Cost and Output) The table describes Bart's perfectly competitive ice cream-producing firm. If the market price is $67.50, how many units of output will the firm produce?

D) four

Assume an oligopolist faces a kinked demand curve due to tacit collusion. In this case, a decrease in marginal cost within the range of the marginal revenue that corresponds to the tacit collusion output will cause the firm to:

D) maintain the same price and output.

. A monopolistically competitive industry such as baked goods and a perfectly competitive industry like wheat farming are alike in that:

D) there are many firms in each industry.