Microeconomics Module 3
profit equals
(average revenue minus total cost) multiplied by output
If a perfectly competitive firm raises its price, the quantity demanded of its product ____________.
falls to zero
Refer to the table below. The information pertains to the demand curve and the average cost curve for a natural monopoly firm. What will the price be in this market?
50
Which of the following would be classified as a differentiated product produced by a monopolistic competitor?
Channel No. 5
Allocative efficiency occurs when:
MB = MC.
Compared to an unregulated natural monopoly, what is true about the price charged and quantity produced when a natural monopoly is regulated?
Price is lower and Quantity is higher
A firm sustains a loss if:
TR < TC.
In perfect competition,:
firms cannot influence the market price with production decisions.
Which of the following measures the percentage of sales by the four largest firms in a particular industry?
The four-firm concentration ratio (CR4)
Which of the following is a true statement?
The government approves most proposed mergers.
situation in which decision makers coordinate their actions to achieve a desired outcome describes: Multiple choice question.
a collusion
An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________.
accounting profit; excluding opportunity cost
A business _____________ occurs when, for practical purposes, one firm purchases another.
acquisition
The marginal revenue curve for a monopolist _________ the market demand curve.
always lies beneath
The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the:
deadweight loss.
A pure monopoly has the overall market ________ to itself because it is the only seller in a market.
demand
___________ law implies ownership over an idea or concept or image
intellectual property
The output level for a monopolistically competitive firm is lower than the output level that achieves the minimum average total cost for the firm and, as such:
is not productively efficient in the long run.
Producing output at the lowest possible total cost of production per unit is
productive efficientcy
normal
profit is also known as zero economic profit.
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
they will be unable to earn higher-than-normal profits in the long run.
The main challenge for antitrust regulators is
to determine when a merger may hinder competition.
Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?
to produce the profit-maximizing quantity of output at the lowest possible average cost
Productive efficiency is:
using the fewest resources possible to produce a good or a service.
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce
A company can break even and meet operating costs without a loss when it earns
zero economic profit
total revenue
cost x quantity
What role does the US government play with respect to market competition? Group of answer choices
policing anticompetitive behavior and prohibiting contracts that restrict competition
The use of sharp, temporary price cuts as a form of ________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
matrix is a table showing the potential outcomes arising from the choices made by decision makers.
payoff
Because monopolies have market power and can influence the price of the goods they sell, they tend to produce lower output and charge a higher price than would prevail in a(n)
competive equilibrium
Intellectual property law is a body of law that includes:
copyright legislation, as well as all of the other three
Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as:
cost-plus regulation
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ________________________.
could likely result in a notable loss of sales to competitors
In a monopolistic competitive industry, firms can try to differentiate their products by
enhancing product's physical aspects and all of the other three
The term _______________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
price taker
A concentration index that measures the sum of the squared percentage of sales from all firms in a particular industry is called:
the Herfindahl-Hirschman Index (HHI).
Which of the following is not a characteristic of an oligopoly?
Producers who are price takers
efficiency is producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost.
allocative
A monopoly will charge consumers the price that they are willing and able to pay for the amount of output available which is shown along the
demand curve
In competitive settings, profits will lead firms to _______ and losses will lead firms ____________, so the incentives for producing at low cost and coming up with new ways of pleasing customers are strong. Group of answer choices
enter the market; to exit
Which of the following has the power to allow a merger, prohibit it, or allow it if certain conditions are met?
department of justice
Economic profit can be derived from calculating total revenues minus all of the firm's costs, ________
including its opportunity costs.
Which of the following is most likely to be a monopoly?
local electricity distributor
In the _____________, the perfectly competitive firm will react to profits by __________________.
long run; increasing its production
The market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit is known as
long-run equilibrium
Monopolies maximize profits by choosing levels of output ________________ than those found in purely competitive markets
lower
Under perfect competition, any profit-maximizing producer faces a market price equal to its
marginal costs
In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ____________ and ________________. Group of answer choices
marginal revenue; marginal cost
market structure characterized by a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit is known as
monopolistic competition
The largest cattle rancher in a given region will be unable to have a _____________ sufficient numbers of smaller cattle ranchers provide sources of competition.
monopoly
As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble ________________. Group of answer choices
monopoly; perfect competition
The kinked demand model occurs when:
noncollusive oligopolistic firms ignore other firms' price increases, but match their price decreases.
Perfect competition and monopoly stand at ___________ of the spectrum of competition.
opposite ends
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
output will be too small and its price too high.
Government _____________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for _______________.
patent; a limited time
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price.
In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means Group of answer choices
price is higher than marginal revenue.
Firms that take or accept the market price and have no ability to influence that price are known as:
price takers.
If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then
that firm could set up barriers to entry to discourage competition.
What role can advertising play with respect to differentiated products?
shapes consumers intangible preferences
In the _______________, the perfectly competitive firm will seek out _______________.
short run; profits by ignoring the concept of total cost analysis
If a firm's revenues do not cover its average variable costs, then that firm has reached its ________________.
shutdown point
Practices that reduce competition without actual documented agreements between firms to raise price are commonly referred to as
restrictive practices
All firms maximize profits by producing the quantity of output at which the marginal _________ is equal to the marginal ________
revenue, cost
If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger? Group of answer choices
the new firm will produce more efficiently and all of the above and all of the other three choices
Which of the following would a market competition regulator be most likely to assign the maximum HHI valuation to?
a monopoly
Which one of the following is the most accurate description of a monopolist?
a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry
A pure monopoly is a price maker
engaging in non-price competition.
The demand curve as perceived by a perfectly competitive firm is _______________.
flat
n order for a monopolistically competitive firm to produce at a point that is both productively and allocatively efficient, which of the following has to be true about the profit-maximizing quantity?
Demand = Marginal Cost = ATC
The four-firm concentration ratio is:
a concentration ratio that measures the percentage of sales by the four largest firms in a particular industry.
A firm that holds a monopoly position in the market place is
a price maker
_________________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
an oligpoly
Occasionally, ________________ may lead to pure monopoly; in other market conditions, they may limit competition ______________________-. Group of answer choices
barriers to entry; to a few oligopoly firms
For a monopoly, the marginal revenues per unit fall______,the price per unit because when the price___________.
below, decreases
Antitrust laws were created to give government the power to
block certain mergers and break up large firms into smaller ones.
Oligopoly firms acting individually may seek to gain profits
by expanding levels of output and cutting prices
A _______________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.
cartel
A group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition is called a(n)
cartel
The form of legal protection intended to prevent reproduction of original works is referred to as _________ law.
copyright
The slope of the demand curve for a monopoly firm is
downward sloping
The demand curve as perceived by a monopolistic competitor is ____________. Group of answer choices
downward-sloping
The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is
game theory
hich of the following concerns would groups like the Consumer Federation of America and Public Knowledge most likely raise with regulators considering a merger application?
he merger would reduce competition
The application of current US antitrust law
includes a wide arrange of anticompetitive practices.
What is the name of the model where firms operating in an oligopolistic market match only price decreases of other firms in the industry?
kinked demand model
____________ refers to the additional revenue gained from selling one more unit.
marginal revenue
A perfectly competitive firm should produce output until the point where:
marginal revenue equals marginal cost.
Because monopolistically competitive firms face a downward-sloping demand curve, their ______ revenue curve lies below the __________ curve.
marginal, demand
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to
match price cuts, but not price increases.
Which of the following typically leads to two formerly separate firms being under common ownership?
mergers and aquisitions
reduce the availability of goods and services and consumers' ability to buy those goods.
monopolies
The term _____________ is used to describe circumstances where government takes over ownership of a business.
nationalization
A ___________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.
natural monopoly
When the regulator sets a price that a firm cannot exceed over the next few years, the regulator is enforcing
price cap regulation
___________ has occurred if a government-owned firm becomes privately owned.
privatization
A monopolist is able to maximize its profits by
producing output where MR = MC and charging a price along the demand curve.
Monopolistic competitors can make a __________ in the short-run, but in the long run, ___________ will drive these firms toward ____________.
profit or loss; entry and exit; a zero-profit outcome
If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the __________ and the vertical axis will represent ________________________________.
quantity produced; both total revenue and total costs, measured in dollars.