econ review

The demand curve facing a monopolist is:

B. downward sloping. Correct

If a change in fixed cost raises average total cost above the demand curve:

B. the monopoly will go out of business. Correct

A monopolist responds to an increase in demand by ________ price and ________ output.

D. increasing; increasing Correct

The demand curve for a monopoly is:

D. the industry demand curve. Correct

Market power in the United States was often gained in the latter part of the nineteenth century by:

c. forming trusts. Correct

In a Nash equilibrium,

c. players may or may not have dominant strategies. CorrectCorrect

Which of the following statements about the differences between monopoly and perfect competition is incorrect?

A. Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry. Correct

A monopolist responds to a decrease in demand by ________ price and ________ output.

A. decreasing; decreasing Correct

A natural monopoly exists when:

A. economies of scale provide large cost advantages to having one firm produce the industry's output. Correct

If your local government gave you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:

A. government-created barriers. Correct

Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for women and 0.55 for men. A successful price discrimination strategy would lead to:

A. higher prices for men and lower prices for women as long as the CoffeeBarn could prevent women from reselling drinks to men. Correct

Price discrimination leads to a ________ price for consumers with a ________ demand.

A. higher; less elastic Correct

Price-discriminating firms will impose a price structure that offers customers with a ________ demand a ________ price and offers customers with a(n) ________ demand a ________ price.

A. less elastic; higher; more elastic; lower Correct

When firms price-discriminate, people with ________ price elasticity of demand will pay ________ prices relative to those purchasing the same product who have a ________ price elasticity of demand.

A. lower; higher; higher Correct

Many hotel chains offer discounts for senior citizens. This is an example of ________ that is ________ in the United States.

A. price discrimination; legal Correct

A monopolist responds to an increase in marginal cost by ________ price and ________ output.

B. increasing; decreasing Correct

The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a ________ for bus service than other passengers.

B. more elastic demand

Because business travelers' demand for airline flights is relatively ________, small increases in price will result in relatively ________ in additional business travelers.

B. price-inelastic; small decreases Correct

In the short run, a monopoly will stop producing if:

C. P < AVC. Correct

A downward-sloping demand curve will ensure that:

C. P > MR. Correct

Which of the following is a barrier to entry?

C. control of scarce resources, economies of scale, and government-created barriers (i.e., patents and copyrights) Correct

A natural monopoly is one that:

C. has increasing returns to scale over the entire relevant range of output. Correct

In contrast with perfect competition, a monopolist:

C. may have economic profits in the long run. Correct

Market structures are categorized by the following two criteria:

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

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

D. $19. Correct

Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is:

D. $20,000. Correct

In order to engage in price discrimination a firm must be:

D. a price-setter, and it must be able to identify consumers whose elasticities differ. Correct

If the government allowed only one airline to serve the entire U.S. market, there would be a ________ loss associated with ________ efficiency in the airline industry.

D. deadweight; reduced Correct

For a monopolist with a downward-sloping demand curve, the quantity effect dominates the price effect at:

D. lower levels of production. Correct

Most electric, gas, and water companies are examples of:

D. natural monopolies. Correct

An increase in the fixed costs of a monopoly firm would ________ price and ________ quantity in the short run.

D. not change; not change Correct

If a monopoly is producing at the profit-maximizing level of output, then we can assume that at that level of output, demand is:

D. price-elastic. Correct

A statement that best reflects an evaluation of monopoly firms is that:

D. they are economically inefficient. Correct

Refer to Figure a. What is the Nash equilibrium in the figure above? Charlie, joe (rock paper)

a. There is not one Correct

Refer to Figure e. If Allie watches the Mets, what is Brandon's best response?

a. Watch the Mets Correct

What is a prisoner's dilemma?

b. a game in which players act in rational, self-interested ways that leave everyone worse off CorrectCorrect

A dominant strategy equilibrium exists in a game when:

b. every player makes the same choice, regardless of the action of the other players. Correct

Cartels made up of a large number of firms are unstable because each firm in the cartel:

b. has a great incentive to cheat. Correct

In an oligopolistic market structure, collusion between firms usually leads to higher profits than noncooperative behavior. However, formal, overt collusion doesn't usually occur in the United States because:

b. it is illegal and because there is an incentive for each firm to cheat on a collusive agreement. Correct

OPEC is a(n) ________that includes ________.

b. legal cartel; includes 13 national governments

To calculate the Herfindahl-Hirschman Index (HHI), one must:

b. sum the squared market shares of all firms in the industry. Correct

In the game in Scenario 13.5, deer meat

b. there are two equilibria: either can expand in the West, and the other expands in the South. CorrectCorrect

Which of the following factors increases the likelihood that oligopolists collude?

c. A firm and its rivals are currently operating at maximum productive capacity. Correct

Which of the following does not describe OPEC?

c. OPEC is the name of the free-trade zone encompassing the Middle East and other oil-producing nations. Correct

Which of the following scenarios best describes an oligopolistic industry?

d. Coca-Cola and Pepsi sell most of the soft drinks consumed around the world. Correct

Refer to Figure c. What is the Nash equilibrium in table above (Figure c)? kate alice

d. Kate squeal, Alice squeal Correct

An action is a dominant strategy when it is a player's best action:

d. regardless of the actions by other players. Correct

Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs: What are the dominant strategies in this game?

e. Firm A's dominant strategy is to produce low levels of output, but Firm B does not have a dominant strategy. CorrectCorrect

The outcome of a strategic choice is a:

payoff