Microeconomics Chapters 7-10
Who among the following is most likely a price taker?
A Kansas wheat farmer
A monopolist never incurs a loss.
False
A monopoly firm can sell as much output as it wants at whatever price it sets.
False
In the long run, a perfectly competitive firm is expected to generate high economic profits.
False
The concept of derived demand indicates that the demand for a final good or service is determined by the price of the inputs used to produce that final good or service.
False
The prisoners' dilemma is an example of a cooperative game.
False
Middle-aged people have lower incomes than older people because older people are more experienced.
False
Other things equal, if the quantity of labor supplied is less than the quantity of labor demanded, wages will tend to fall.
False
A cartel is a group of firms that attempt to collude by coordinating price and output decisions.
True
A price-discriminating monopoly firm will tend to charge a higher price to customers who have an inelastic demand than it does to customers with an elastic demand.
True
If price is less than the average variable cost, firms that seek to maximize profit should shut down.
True
If the demand for opera singers increases faster than the supply increases, wages will rise.
True
In a perfectly competitive market, marginal revenue is the same as the market price.
True
Perfect competition is characterized by a large number of buyers and sellers with identical products and no significant barriers to entry.
True
The key difference between oligopoly and other market structures is the interdependence among producers.
True
Poverty rates tend to be substantially higher for families headed by females than for those headed by married couples.
True
When economies of scale exist, an increase in the level of output will lead to:
a decrease in cost per unit
Under perfect competition, in long-run equilibrium, _____.
all firms suffer zero economic losses
Improvements in the productivity of labor will tend to:
increase the demand for labor.
When there are diseconomies of scale in production, _____.
long-run average total cost declines as output expands
The demand curve for a monopolistically competitive firm is _____.
more elastic than the demand curve for a monopolist
A perfectly competitive firm faces a demand curve that is:
parallel to the horizontal axis.
U.S. public utilities are often:
regulated natural monopolies.
Collective bargaining refers to negotiations between:
representatives of employers and unions.
The entry of new firms into an industry will:
shift the industry supply curve to the right.
If the market demand curve in a perfectly competitive industry shifts right, the demand curve for each existing firm will:
shift up.
When labor is a firm's only variable input in its production process, a profit-maximizing firm will continue to employ additional workers as long as:
the marginal revenue product of labor exceeds the marginal resource cost.
If the average total cost curve is always above the demand curve for a monopolist, _____.
the monopolist will be suffering from economic losses
The figure below shows the change in the quantity of output produced along with the change in cost per unit. Based on the figure, D represents _____. (perfect U)
the total fixed cost curve
On average, middle-aged people tend to have higher incomes than younger or older people do because:
they are at an age where their productivity is at its peak.
A firm receives $10 per unit at an equilibrium level of output of 80 units. The average total cost at 80 units of output is $8. The firm makes a total economic profit of:
$160.
Which of the following is a major difference between monopolists and firms in perfectly competitive markets?
Monopolists may earn long-run economic profit, while firms in perfectly competitive markets cannot.
Which of the following is a reason why a perfectly competitive firm cannot charge a price above the market-clearing price?
Numerous competitors produce the same product and charge the market price.
Identify the correct statement about game theory.
The Nash equilibrium is a dominant strategy
Which of the following is not a potential barrier to entry into a product market?
The absence of economies of scale in the product market
Monopolistic competition is characterized by:
a large number of firms selling differentiated products.
Perfect competition describes:
an industry in which numerous price-taking firms produce identical products.
Labor unions:
can influence wages by restricting labor supply.
In an oligopoly market, such as the U.S. domestic airline industry, United Airlines would:
carefully anticipate Delta, American, and Southwest's likely responses before it raised or lowered fares.
In the short run, if a firm's price is greater than its AVC but less than its ATC, the firm should:
continue operating even though it is generating an economic loss.
If an unregulated monopolist operates in a market, then:
customers will pay higher prices than if the market was competitive.
Other things being equal, an increase in the labor force resulting from increased immigration tends to:
decrease wages.
When a firm's demand curve is tangent to its average total cost curve, _____.
economic profits are zero
Under oligopoly, a few large firms control most of the production and sale of a product because:
economies of scale make it difficult for small firms to compete.
Oligopolies are characterized by:
high barriers to entry.
Under a progressive tax system, _____.
higher marginal taxes are imposed on higher incomes
If a profit-maximizing firm finds that price exceeds average variable cost and that marginal revenue exceeds marginal cost, it should:
increase its output.
If the demand for a good is _____, a decrease in the price of the good will decrease the total revenue of the firm producing the good.
inelastic
Figure 7-2 shows the relationship among the various costs of a perfectly competitive firm. Suppose the market price equals $88 and the firm is currently producing 600 units of output. In this situation, the firm:
is maximizing profit.
A profit-maximizing, perfectly competitive firm would never operate at an output level where:
it would not cover all of its variable costs.
A price-taking firm will tend to expand its output as long as price exceeds average variable cost and:
its marginal cost is less than the market price.
If a price-taking firm selling in a competitive market raises the price of its product above the market-clearing price, it will:
not be able to sell any of its output.
The aim of antitrust policy is to:
prevent firms from acquiring or exercising undue market power.
Figure 7-4 shows the relationship among the various costs of a perfectly competitive firm. In the figure, when the market price equals $54, the firm:
should shut down.
Pure monopoly is a market structure:
that consists of a single supplier.
Marginal revenue is:
the addition to total revenue from selling one more unit of output.
The equilibrium wage and quantity in competitive markets for labor are determined by:
the intersection of the labor demand and labor supply curves.
The figure below shows the long-run average cost curve for a firm. Based on the figure, the region x shows _____.
the level of output at which the firm attains economies of scale
The poverty rate is:
the percentage of the population that falls below the poverty line.
When an economy is in a recession, _____ and _____ increase.
unemployment; poverty