Econ Prep

The figure shows the demand and cost curves for a single−price monopoly. The​ firm's economic profit equals

$100.

The figure shows the demand and cost curves for a single−price monopoly. What economic profit does this firm​ earn?

$200

Consider the perfectly competitive firm in the figure. At what price will long−run equilibrium​ occur?

$22

Donna owns the only dog grooming salon on Lonely Island. The figure shows the dog grooming market. Donna is a single−price monopoly that maximizes profit by charging​ ________ per grooming and producing​ ________ groomings per day.

$30; 8

The​ unregulated, single−price monopolist illustrated in the figure has a total cost of

$32 per day

The​ unregulated, single−price monopoly shown in the figure has a total economic profit of

$8

Suppose firms in a perfectly competitive industry are earning economic profits. As a​ result, I. new firms enter the industry. II. the market price falls. III. the economic profits of the existing firms eventually decreases.

1,2 and 3

The figure shows the demand and cost curves for a single−price monopoly. The firm will produce​ ________ units and set a price of​ ________ per unit.

10; $30

The figure shows the demand and cost curves for a single−price monopoly. What level of output maximizes the​ firm's economic​ profit?

20 units

The​ unregulated, single−price monopolist illustrated in the figure will produce

4 units per day.

For the​ unregulated, single−price monopoly shown in the​ figure, when its profit is​ maximized, output will be

4 units per year and the price will be​ $6.

In the long​ run, for a perfectly competitive​ market, if economic profit is A. greater than zero then some firms will enter the market and the market supply curve will shift rightward. B. less than zero then some firms will exit the market and the industry supply curve will shift leftward. C. equal to zero then there is no entry or exit of firms into or out of the market. D. All of the above answers are correct.

All above are correct

In the long−run equilibrium for a perfectly competitive​ industry,

All of the above are correct

Entry in a perfectly competitive market A. shifts the market supply curve rightward. B. decreases the market price. C. shifts the market supply curve leftward. D. Both answers A and B are correct.

Both A and B are correct

In the long−run ​equilibrium, perfectly competitive firms produce the level of output such that marginal cost is minimized. B. average total cost is minimized. C. marginal cost equals the price. D. Both answers B and C are correct.

Both answers B and C are correct.

Which of the following statements regarding the long−term equilibrium is​ true?

Entry and exit stop when firms make zero economic profit

A perfectly competitive firm initially is earning a normal profit.​ Then, a decrease in demand for the​ firm's product occurs. Of the​ following, in the long run which action listed below is the firm most likely to​ take?

Exit the market

Monopolistic competition is a market structure in​ which:

Firms are free to enter and exit the industry.

Monopolistic competition is a market structure in​ which:

Firms produce a differentiated product.

If a monopolist is maximizing​ profits, then it is producing an amount of output so that

MR​ = MC.

Suppose a new vaccine for Lyme disease is developed by​ Merck, a large drug company. Which of the following is most likely to​ occur?

Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years.

The figure shows the marginal revenue and long−run cost curves for a perfectly competitive firm. All other firms in the industry have identical curves. Which of the following statements is​ true? A. The firm is earning economic profit. B. Over​ time, firms will enter this industry. C. The​ firm's average cost exceeds the price. D. None of the above is true.

None of the above is true.

Which of the following is true for BOTH monopoly and perfect​ competition?

Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.

For a perfectly competitive​ firm, in the long−run ​equilibrium,

P​ = MC​ = ATC​ = MR

Which of the following is true for a single−price ​monopolist?

P​ > MR

The figure shows the marginal revenue and long−run cost curves for a perfectly competitive firm. Which of the following statements is​ true?

The firm is producing at minimum long−run average cost.

Which of the following is a characteristic of​ monopoly?

There are barriers to enter the market.

A product that is a close substitute but not a perfect substitute for the products of the other firms is called

a differentiated product.

The existence of economies of scale creates​ ________.

a natural monopoly

Which of the following is a barrier to entry for a​ monopoly?

a patent

Firms in monopolistic competition can achieve product differentiation by

advertising special characteristics.

Patents encourage invention by

allowing patent owners to make an economic profit.

Economic profit sends a signal to entrepreneurs by telling them where

an above normal return on investment can be earned

If the regulator had a natural monopoly set its price equal to its marginal​ cost, that would ensure

an economic loss for the firm.

For a firm in monopolistic​ competition, the marginal cost curve intersects the average total cost curve

at the minimum average total cost.

A monopoly has two key​ features, which are​ ________.

barriers to entry and no close substitutes

A monopolistically competitive firm is like a monopoly firm insofar as

both have MR curves that lie below their demand curves.

A single−price monopolist determines

both its output and its price.

A monopolistically competitive firm is like a perfectly competitive firm insofar as

both make zero economic profit in the long run.

How is a monopolistically competitive firm similar to a perfectly competitive​ firm?

both will observe entry into the industry if economic profit is positive

In the short​ run, perfectly competitive firms​ ________ but in the long​ run, perfectly competitive firms make​ ________.

can incur economic​ losses; zero economic profit

Firms in monopolistic competition charge prices that are​ ________ those of the other firms in the market.

close to

For a​ monopoly, the industry demand curve is the​ firm's

demand curve

In the​ monopoly, the​ firm's marginal revenue curve is​ ________, while in a perfectly competitive​ market, each​ firm's marginal revenue curve is​ ________ .

downward​ sloping; horizontal

Which of the following is NOT a characteristic of a​ monopoly?

easy entry and exit

If firms in a competitive industry are making​ ________ then there is​ ________ for firms to​ ________ the industry.

economic​ losses; an​ incentive; exit

A patent creates a monopoly by restricting​ ________.

entry into the market

In the long−​run, if firms in a perfectly competitive industry are incurring persistent economic​ losses, some firms will

exit and the price will rise.

When firms in monopolistic competition incur an economic​ loss, some firms will

exit the​ industry, and demand will increase for the firms that remain.

Monopolistic competition differs from monopoly because in monopolistic competition

firms are free to enter and exit.

Which of the following is NOT true of monopolistic​ competition?

firms produce a good that is a perfect substitute for their​ competitors' goods.

Firms that can price discriminate between customers do so to​ ________.

increase their profit

Suppose the cost curves in the figure apply to all firms in the industry. If the initial price is P1​, firms are​ ________ and some firms will​ ________ the industry.

incurring an economic​ loss; leave

Monopolies earn an economic profit in the long run because there

is a barrier to entry.

Natural monopolies occur when there are

large economies of scale.

The marginal revenue curve for a single−price monopoly

lies below its demand curve.

Which of the following firms is most likely to be a​ monopoly?

local distributor of water

For a​ single-price monopolist to sell one more unit of a​ good, it must

lower the price on all units sold.

Which of the following is a characteristic of monopolistic​ competition?

many firms

In the long​ run, which of the following is present in a perfectly competitive​ market?

many firms in the industry

In monopolistic​ competition, there are

many firms making a differentiated product.

In a monopolistically competitive market there are

many firms.

Monopolistic competition is a market in which​ ________ firms produce​ ________ goods and services.

many; differentiated

The profit maximizing condition for a firm in monopolistic competition is to produce so that

marginal cost equals marginal revenue.

A single−price monopolist maximizes profits by producing the output at which

marginal revenue equals marginal cost.

In monopolistic​ competition, in the short run a firm maximizes its profit by selecting an output at which marginal cost equals

marginal revenue.

If perfectly competitive firms exit a​ market, the

market supply curve shifts leftward. Your answer is correct.

In the​ figure, the curve labeled ​"X​" can be a

monopoly's demand curve.

In the​ figure, the curve labeled ​"W​" can be a

monopoly's marginal revenue curve.

An industry in which one firm can supply the entire market at a lower price than can two or more firms is called a

natural monopoly

In monopolistic​ competition, when firms make an economic​ profit,

new firms enter the industry so that the price falls and the economic profit eventually falls to zero.

If firms in a monopolistically competitive industry are earning an economic​ profit, then

new firms will enter the industry.

Patents encourage inventions because without a patent

other firms could enter the​ inventor's market by producing the same product.

The figure shows the cost curves for a perfectly competitive firm. If all firms in the industry have the same cost curves and the price equals​ $16 per​ unit,

over​ time, the price will fall as new firms enter the industry.

Firms in which type of market earn zero economic profit in the long​ run?

perfect competition and monopolistic competition

When Dominant Pizza is willing to sell a pizza to a student who lives on−campus at a lower price than it is willing to sell the identical pizza to a student who lives a block away from the​ campus, the pizza firm is​ ________.

practicing price discrimination

When an average total cost pricing rule is​ enforced, average total cost equals​ ________.

price

Total revenue of a firm equals

price multiplied by quantity sold.

The Public Service Company of Colorado is a natural monopoly in the transmission and distribution of electric power. As​ such, it will incur an economic loss if it

prices its services at marginal cost.

The key feature of monopolistic competition that distinguishes it from perfect competition is

product differentiation

The​ Firefox, Internet​ Explorer, and Opera browsers are an example of​ ________.

product differentiation

Which characteristic is associated with monopolistic​ competition?

product differentiation

Brand name aspirin is chemically identical to store brand aspirin.​ Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

product differentiation.

Brand name drugs are chemically identical to their generic counterparts.​ Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

product differentiation.

Brand names are an example of

product differentiation.

Suppose firms in a perfectly competitive industry are incurring an economic loss. As firms​ exit, the price​ ________ and the economic loss of the surviving firms​ ________.

rises; decreases

Suppose some firms in a perfectly competitive industry are incurring an economic loss. As a​ result,

some firms will leave the industry and the price of the good will rise.

Suppose the cost curves in the figure apply to all firms in the industry.​ Then, if the initial price is P1​, in the long run the market

supply will decrease

In the long−run equilibrium in a perfectly competitive​ market,

the firms earn a normal profit.

When an average cost pricing rule is imposed on a natural​ monopoly, ________.

the monopoly makes a normal profit

The demand curve facing the monopolist is

the same as the market demand curve.

If firms in a perfectly competitive industry are presently earning zero economic​ profit, then

there is no incentive for either entry or exit.

In the long​ run, the economic profit of a firm in a perfectly competitive industry

will equal zero

The figure shows the​ cost, demand, and marginal revenue curves for a monopoly. The firm

will produce 20 units per day.

The figure shows the demand and cost curves for a single−price monopoly. What price will the firm​ charge?

​$30 per unit

The​ unregulated, single−price monopolist illustrated in the figure has a total revenue of

​$40.00 per day.

The​ unregulated, single−price monopolist illustrated in the figure earns an economic profit of

​$8.00 per day.

​Today, firms in a perfectly competitive industry are making an economic profit. In the long​ run, firms will​ ________ the industry until all firms in the industry are​ ________.

​enter; making zero economic profit

Compared to a single−price monopoly, a perfectly competitive industry with the same costs produces​ ________ output and has a​ ________ price.

​more; lower

When some firms enter a perfectly competitive industry in which firms are earning an economic​ profit, the short−run industry supply curve shifts​ ________, the market price​ ________, and each​ firm's economic profit​ ________.

​rightward; falls; decreases