ECON TEST #2

a single-price monopoly has a marginal revenue curve that is

downward sloping and lies below the demand curve

a market with only two firms is called a

duopoly

if a monopoly is able to perfectly price discriminate, then consumer surplus is

equal to zero

the prisoners' dilemma is an example of

game theory

the above figure shows a perfectly competitive firm. if the market price is $10, the firm

is making zero economic profit

with perfect price discrimination, the level of output

is the same as the amount produced in a perfectly competitive market

to maintain their economic profits, firms in monopolistic competition must continually engage in

product development and marketing

a perfectly competitive firm can

sell all of its output at the prevailing market price

the long-run average cost curve

shows economies and diseconomies of scale

the above figure illustrates a perfectly competitive firm. if the market price is $10 a unit, to maximize its profit (or minimize its loss) the firm should

shut down

a single- price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units, the monopoly must cut the price to $44. what is the marginal revenue of the extra unit sold?

$34

A single- price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38. at what price will this firm sell the output?

$38

juan's software service company is in a perfectly competitive market, juan has total fixed cost of $25,000, average variable cost for 1,000 service calls is $45, and marginal revenue is $75. juan makes 1,000 service calls a month. what is his economic profit?

$5,000

the women's dress industry is monopolistically competitive because each firm has

a very small market share

if a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct? i. price equals marginal revenue ii. marginal revenue equals marginal cost iii. price is greater than average total cost

i, ii, iii only

paulette owns a pizza parlor. her total cost schedule is in the above table. her marginal cost of producing the fifth pizza is

$8

suppose the grocery store market in kansas city is perfectly competitive. then one store buys all the others and becomes a single- price monopoly. the figure above shows the relevant demand and cost curves. when the market is perfectly competitive, the price of a pound of steak is

$8

the above table has the total revenue and total cost schedule for omar, a perfectly competitive grower of rutabagas. when omar produces 2 bushels of rutabagas, his total profit equals

-$8

the figure above shows a natural monopoly- if the firm is regulated using an average cost pricing rule, the deadweight loss created is equal to the area of

BCE

a group of firms that has entered into an agreement to restrict output and increase prices and profits is called

a cartel

compared to a perfectly competitive market, a single-price monopoly sets

a higher price

if a single firm can meet the entire market demand at a lower average total cost than a larger number of smaller firms, the single firm is

a natural monopoly

a perfectly competitive firm's short- run supply curve is

its marginal cost curve above the AVC curve

if the four- firm concentration ratio of an industry is

less than 40, the industry is considered monopolistic competition

in the long run in monopolistic competition, firms

make zero economic profit

the above figure shows three possible average total cost curves. if all firms in a perfectly competitive industry each have an average total cost curve identical to ATC1, each produce 30 units, and the market price of the good is $16 per unit, then the firms

make zero economic profit and no firms enter or exit the market

if another worker is hired with a marginal product greater than the previously hired worker, which of the following will be true?

marginal cost will decrease

for a perfectly competitive firm, profit maximization occurs when output is sich that

marginal revenue (MR) = marginal cost (MC)

the maximum profit for a single-price monopoly is found when the firm produces the level of output so that

marginal revenue equal marginal cost

suppose a perfectly competitive market is in long- run equilibrium and then there is a permanent increase in the demand for that product. the new long- run equilibrium will have

more firms in the market

which of the following would create a natural monopoly?

technology enabling a single firm to produce at a lower average cost than two or more firms

which of the following would create a natural monopoly?

technology enabling a single firm to produce at a lower average cost than two or more times

which of the following four- firm concentration ratios would be the best indication of a perfectly competitive industry?

2 percent

the above table gives the demand schedule for a single- price monopoly. if the marginal cost is $3, the profit maximizing output for the monopoly will be between

2 to 3 units

the three largest firms in an industry have market shares of 40 percent, 30 percent, and 2 percent. the remaining 47 firms in the industry each have a market share of 1 percent. the Herfindahl-Hirschman Index (HHI) for this industry is ...

2,551

the figure above shows the demand, marginal revenue, and marginal cost curves for paul's parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. when paul maximizes his profit, he produces ... pillows per hour

3,000

the figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, Paul produces .... pillows per hour and if the market was perfectly competitive, .... pillows per hour would be produced

3,000; 4,000

to maximize its profit, a perfectly competitive firm produces so that .... and a single- price monopoly produces so that....

MR = MC, MR = MC

a cartel is a group of firms

acting together to limit output, raise price, and increase economic profit

a perfectly competitive firm will shutdown when the price is just below the minimum point on the

average variable cost curve

the figure above shows a natural monopoly- if the firm is regulated using an average cost pricing rule, the firm

avoids an economic loss, but produces less than the efficient quantity and creates a deadweight loss

in an oligopoly, there are

barriers to entry and only a few firms

to be able to price discriminate, a firm must

be able to identify and separate different types of buyers

in the prisoners' dilemma, each player is ... regardless of the other player's actions

better off confessing

The table above shows the payoff matrix offered to two suspected criminals, Bonnie and Clyde. The payoffs are the years they will spend in prison. The suspected criminals are not allowed to communicate. Given the information in the payoff matrix, the Nash equilibrium is

both bonnie and clyde confess to the crime

consider a perfectly competitive firm in a short-run equilibrium. figure .... shows a firm in bad times because the firm makes a ....

c; economic loss of $3 per unit if the firm decides to operate

if a firm in the long run produces less than its efficient scale, it

cannot be a perfectly competitive firm

the law of decreasing returns applies to

changes in a variable input with a given quantity of fixed inputs

if a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do?

continue at the current output, making zero economic profit

a cartel is a collusive agreement among a number of firms that is designed to

decrease output and raise prices

because economic profits are eliminated in the long run in monopolistic competition, to make an economic profit, firms continuously

develop and market new products

then, f the following answers, intel's total profit for the next two periods is the highest if intel ... R&D this period and ... R&D next period

does not conduct; conducts

In monopolistic competition, the presence of a large number of firms making a differentiated product means that

each firm can set the price of its particular product

in monopolistic competition, the presence of a large number of firms making a differentiated product means that

each firm can set the price of its particular product

advertising costs and other selling costs are

fixed costs

advertising is a .... cost that is incurred by ....

fixed; monopolistically competitive firms

the marginal revenue curve for a perfectly competitive firm is

horizontal

which of the following is true if a firm shuts down? i. the price is less than minimum average variable cost ii. the firm is able to avoid an economic loss iii. the firm incurs a loss equal to its total variable cost

i only

if a perfectly competitive firm's marginal revenue is greater than its marginal cost, as it increases its output, its profit .... and the price it can charge for its product ....

increases; does not change

the decision to innovate

is based on the marginal cost and marginal revenue of innovation

the figure above shows a perfectly competitive firm. if the market price is $15, the firm

is making an economic profit

peter's pencils is a perfectly competitive company producing pencils. suppose peter is producing 1,000 pencils an hour. if the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then peter

is maximizing his profit and is earning an economic profit

today, you might be buying from a regulated natural monopoly when you purchase

natural gas or electricity

if perfectly competitive lawn care firms are making an economic profit, then

new firms will enter the industry

is a single- price monopoly efficient?

no, because it creates a deadweight loss

daryl's inc. has formed a cartel with the two other firms in its industry. in which following market structures does daryl's operate?

oligopoly

which of the following is found ONLY in oligopoly?

one firm's actions affect another firm's profit

in the long run, existing firms exit a perfectly competitive market

only if they incur an economic loss

a market in which many firms sell identical product is

only perfectly competition

economic profit equals total revenue minus total

opportunity costs

To encourage invention and innovation, the government provides

patents

because perfectly competitive firms are price takers, each firm faces a demand that is

perfectly elastic

cynthia is an oklahoma wheat farmer. the demand for her wheat is

perfectly elastic

Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic .... equals....

profit; $480 per week

product differentiation allows a firm to compete with another firm on the basis of

quality, price, and marketing

if a perfectly competitive firm raised the price of its product

the quantity of output it sells decreases to zero

when a market has barriers to entry,

then in the long run it might be possible for the firms to make a positive economic profit

in both monopolistic competition and perfect competition,

there is easy entry and exit

if a struggling perfectly competitive furniture store in detroit shuts down, it incurs an economic loss equal to its

total fixed cost