MICRO, Ch 12, 13, 14

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Cost Data Demand Data Total Output/Total Cost-Quantity Demanded/Price 0 $25 0 $60 1 40 1 55 2 45 2 50 3 55 3 45 4 70 4 40 5 90 5 35 6 115 6 30 What will the maximum total profits be?

$90

Assume that the short-run cost and demand data given in the tables below confront a monopolistic competitor selling a given product and engaged in a given amount of product promotion. Cost Data Demand Data Total Output/Total Cost-Quantity Demanded/Price 0 25 0 60 1 40 1 55 2 45 2 50 3 55 3 45 4 70 4 40 5 90 5 35 6 115 6 30 What output and price levels will maximize the firm's profit in the short run?

4 units and $40

Refer to the graphs of D and MR for a monopolist. Which of the following statements is true?

A price cut from P1 to P2 would lead to an increase in the amount of dollars consumers spend on the product.

Which statement concerning the kinked demand curve model of oligopoly is false?

It assumes when one oligopolist raises the price, all others will follow.

Which one of the following is not illustrated by the so-called Prisoner's Dilemma?

It does not pay for the players to collude with each other.

Which is true of pure competition but not of monopolistic competition?

Long-run equilibrium occurs at the minimum point on the ATC curve.

Which would make it easier to maintain an effective collusive agreement in a cartel?

a decrease in the elasticity of demand for the cartel's product

Refer to the graphs of D and MR for a monopolist. We know that to maximize profits the firm will set a price

above P2.

Refer to the diagram, where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Beta commits to a high-price policy, Alpha will gain the largest profit by

adopting a low-price policy.

Refer to the diagram. Equilibrium price is

d

X-inefficiency refers to a situation in which a firm

fails to achieve the minimum average total costs attainable at each level of output.

Firm Market Share (%) A 40 B 30 C 20 D 5 E 5 If enforcement of antitrust laws caused the two largest firms in this table to be divided in half, with each half having equal market share, the industry's four-firm concentration ratio would ________ and its Herfindahl index would ________.

fall;fall

A simultaneous game is said to exist when

firms choose their strategies at the same time as their rivals.

The copper, aluminum, cement, and industrial alcohol industries are examples of

homogeneous oligopoly.

Refer to the above graph for a representative firm in monopolistic competition in a constant-cost industry. This firm is

in short-run equilibrium, but not long-run equilibrium.

When a monopolistically competitive firm is in long-run equilibrium,

marginal revenue equals marginal cost and price equals average total cost.

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry

may understate the degree of monopoly.

"Variety is the spice of life" is best applied to which market structure?

monopolistic competition

Network effects and simultaneous consumption tend to foster the development of

monopoly power.

The demand curve of a monopolistically competitive producer is

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

Refer to the diagram. If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above,

new firms will enter the industry.

The diagram portrays

noncollusive oligopoly.

The supply curve for a monopolist is

nonexistent.

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

of product differentiation and consequent product promotion activities.

Refer to the long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is

producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Demand and marginal revenue curves are downward-sloping for monopolistically competitive firms because

product differentiation allows each firm some degree of monopoly power.

In which one of the following market models is X-inefficiency least likely to be present?

pure competition

If a monopolist were to produce in the inelastic segment of its demand curve,

the firm would not be maximizing profits.

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. This pricing system occurs because

the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults.

Price discrimination refers to

the selling of a given product to different customers at different prices that do not reflect cost differences.