Microeconomics Test #3
76. The demand curve faced by a monopoly firm is:
the same as the market demand for the product
55. What are the competitive equilibrium wage and employment level in Figure 31.1 above?
$5; 16 workers
79. In Figure 9.4 above, the marginal cost at the profit maximizing level of output is approximately:
$60
49. Suppose that a monopoly firm produces tables and can sell 10 tables per month at a price of $400 per table. In order to increase sales by one table per month, the monopolist must lower the price of its tables by $30 to $370 per table. The marginal revenue of the eleventh table is:
$70
72. Refer to Figure 9.3 above for a monopoly. At the profit-maximizing rate of output, total profit is:
ABFG
41. To be successful in changing wage rates and employment conditions, labor unions need to have control over only:
the supply of labor to the market
38. The quantity of labor demanded can change without shifting labor demand curve when there is a change in:
wage rate
69. What will happen to wages and the level of employment in a competitive market when the government eliminates a minimum wage, ceteris paribus?
wages will fall but employment will rise
36. If the sellers of labor in a competitive market decided to unionize, ceteris paribus, then:
wages would rise and employment would fall
59. The law of diminishing returns states that, ceteris paribus, the:
MPP of labor declines as more labor is employed
78. To maximize profits or minimize losses, a monopolist should at so that
MR= rising MC
46. Which of the following rules will always be satisfied when any firm (i.e. perfectly competitive or monopoly) has maximized profits?
MR=MC
43. Oligopolistic firms will maximize total profits for all of the firms in the market at the rate of output where:
MR=MC for the market
60. Which of the following is likely to be a monopolist?
a drug firm that has a patent granting it the exclusive right to produce a drug
37. Compared with the profit-maximizing choice of a natural monopolist, output regulation will result in:
a higher level of output and a lower price
47. A gap in the marginal revenue curve results from:
a kinked demand curve
57. The refusal to work by unionized labor is an example of:
a strike
16. The most common form of non-price competition is:
advertising
10. The doctrine of laissez faire is consistent with:
all of the above
25. Which of the following is an example of government failure?
all of the above
56. Which of the following may characterize oligopolistic behavior?
all of the above
70. Economies of scale over the entire range of market output:
all of the above
74. The danger of experimenting with pricing for an oligopoly is:
all of the above
62. Price-discriminating firms which sell in two markets will charge higher prices in the market, ceteris paribus:
with the more price-inelastic demand
27. In a contestable market:
entry occurs when prices rise above average total costs
100. The marginal physical product of a factor is equal to the additional revenue generated from employing 1 additional unit of the factor.
false
101. Monopolists can charge any price and sell any amount of output they want since no competition exists.
false
102. Government failure can never be worse than the market failure it attempts to correct.
false
104. When the minimum wage is set above the market equilibrium wage, it has no effect on wages in that market.
false
107. The intersection of the labor market supply and market demand curves establishes the minimum wage.
false
85. A multiplant monopolist produces more than if each of its plants were a separate firm in a competitive market.
false
86. If marginal revenue product is declining, the marginal physical product must decline.
false
87. Unlike most monopolies, unions do not attempt to use their market power to raise the equilibrium wage above its competitive level.
false
88. The concept of laissez faire calls for government intervention if market failure is evident.
false
91. Monopolists in the labor market equate the marginal wage with the marginal revenue product.
false
94. Unions do not need to control the labor supply in order to have market power.
false
97. Antitrust laws focus only on the structure of an industry, not on its behavior.
false
98. When there are economies of scale, a firm can simply increase production rates in the long run, and the unit costs will rise.
false
99. An attempt by one oligopolist to increase its market share by cutting prices will leave competitors unaffected.
false
51. When there is market failure:
government intervention is beneficial only when the marginal benefit of intervention exceeds the marginal cost
20. Typical goals of a labor union in the United States include:
higher wages, better working conditions, more job security
12. Jane loves to work. She does not receive any enjoyment from leisure time. The last dollar that she earns each year means just as much to her as her first dollar. Which of the following best describes the shape of Jane's labor supply curve?
horizontal
18. The responsiveness of workers to a change in wage rates, ceteris paribus, is measured by the:
labor-demand curve
63. A profit-maximizing monopsonist will hire workers at the point where the marginal factor cost curve intersects the:
marginal revenue product curve
17. Competitive firms and monopolies both face downward-sloping:
market demand curves
22. When firms have the power to restrict output, raise prices, stifle competition, and inhabit innovation the market failure involved is:
market power
5. Market failure includes:
market power resulting in reduced output and higher price
23. In which of the following market structures are entry barriers the highest?
monopoly
61. The correct ranking of barriers to entry (from highest to lowest) in the market is:
monopoly, oligopoly, monopolistic competition, perfect competition
31. According to the text, what type of market failure provides the best case for government regulation?
natural monopoly
42. When the MPP of labor is zero, ceteris paribus:
no further increases in output can be achieved by using additional units of labor
32. The soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as:
oligopoly
40. The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is:
oligopoly
50. Which market structure is characterized by a few interdependent firms?
oligopoly
7. The pricing strategy in which one firm is allowed by its rivals to establish the market price for all firms in the market is called:
overt collusion
2. The kinked-demand curve explains:
price fixing along the elastic part of the demand curve and predatory pricing on the inelastic portion
28. Refer to Figure 24.3. Suppose this good could somehow be produced at no cost (that is, the total cost at any level of output was zero.) This single-priced monopoly firm would maximize profit by:
producing Q2 and charging P2
71. Oligopolists have a mutual interest in coordinating production decisions in order to maximize combined:
profits
66. A market in which a single seller is required for efficient production is a:
pure monopoly
8. The labor-supply curve depicts the:
quantities of labor supplied at alternative wage rates
3. Refer to Figure 8.2 above. If the market price equaled $10, in the short run this firm should:
raise the price
15. Price discrimination allows a producer to:
reap the highest possible average price for the quantity supplied
48. The collapse of AT&T's natural monopoly in long distance telephone service was caused by:
satellite technology which made it easier and less expensive for new companies to provide long-distance service
44. Refer to Figure 29.3, above, for a cotton market with an equilibrium price of P1 and a Commodity Credit Corporation (CCC) Ioan rate set above P1. Given this situation, cotton farmers are most likely to:
sell their cotton on the market and repay the CCC Ioan with the proceeds plus other funds to make up the difference
13. The number of firms is an oligopoly must be:
small enough so that one firm's decisions have a significant impact on the decisions of the other firms in the industry
80. Which of the following prohibits price discrimination, certain types of mergers, and interlocking boards of directors among competing companies?
the Clayton Act
9. The creation of another antitrust agency besides the Justice Department was accomplished through:
the Federal Trade Commission Act
73. Which of the following markets best illustrates the practice of price discrimination?
the airline market
35. Which of the following is the same for monopoly and competition under the same cost and demand conditions?
the goal of maximizing profits
77. When an individual's MRP is not measurable, his or her market wage is usually determined by:
the individual's MPP
34. Ceteris paribus, if immigration to the United States increases the number of workers:
the labor-supply curve will shift to the right and the equilibrium wage rate will fall
33. The best measure of the economic cost of doing your homework is:
the most valuable opportunity you give up when you do your homework
24. Which of the following firms is most likely to have more market power?
the only airline serving two cities (assume this is a contestable market)
65. A clothing store can sell two shirts for $20 each or three shirts or $18 each. At a quantity of three shirts sold, marginal revenue is:
$14
75. Suppose a monopsonist must pay $10 per hour to attract 10 workers. If the same monopsonist must raise its wage to $11 per hour to attract the 11th worker, what is its marginal factor cost for labor?
$21 per hour
81. In Table 9.2 above, according to the profit-maximization rule, at the profit maximizing level of output average total cost is:
$325
4. Refer to Figure 8.7 above for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point:
B
21. Which of the following is likely to be a monopolist?
a drug firm that has a patent granting it the exclusive right to produce a drug
30. At very high wage rates, it is likely that an individual's labor-supply curve:
bends backward
1. A market that experiences both strikes and lockouts at different times is most likely characterized by:
bilateral monopoly
39. The supply curve for a monopolist:
does not exist
52. The marginal revenue product of labor is equal to:
change in total revenue/ change in quantity of labor
14. The marginal wage is:
change in total wages paid/ change in quantity of labor employed
53. The marginal factor cost is:
change in total wages/ change in quantity of labor supplied
11. An individual's labor-supply curve reflects his or her:
choice between work and leisure
68. When officers of firms in an industry get together to discuss how they can improve their mutual well-being, the result is:
collusion
64. One could argue that advertising:
creates barriers to entry
54. Which of the following is a barrier to entry in a monopoly market?
difficulty in obtaining resources
45. The demand for labor is downward sloping because of:
diminishing returns of labor
58. A monopolist who does not practice price discrimination should never produce in the:
inelastic portion of its demand curve because it can increase total revenue and reduce total costs by increasing the price
67. Monopoly power:
is the ability of a firm to influence the price of its product
6. Price discrimination:
is the sale of an identical good at different prices to different consumers by a single seller
19. The long-run average total cost curve of a natural monopolist:
is u-shaped
29. If a firm can raise market price by reducing its output, then:
it faces a downward-sloping demand curve
103. In a monopoly labor market, the optimal union wage can be read off the marginal revenue product curve.
true
105. Duopoly is an oligopoly with only two firms.
true
106. A monopolist has market power because it faces a downward-sloping demand curve.
true
82. The opportunity cost of working is the amount of leisure time that must be given up in order to work.
true
83. If close substitutes are available which have only slight product differentiation, a firm is not a monopoly.
true
84. Individual farmers face a horizontal demand curve.
true
89. Antitrust laws can restrain the abuse of monopoly power.
true
90. A monopsonist must raise the wage rate if it desires to hire additional workers.
true
92. Unregulated natural monopolists produce sub-optimal rates of output.
true
93. Colluding oligopolists face the conflict between maximizing joint-marker profit or their own market share.
true
95. If, at the optimum level of output, a typical perfectly competitive firm's price is greater than its ATC, the firm should increase output.
true
96. In the long run, a firm will leave the market if it is not covering all of its fixed costs.
true
26. As long as additional workers are attracted into the labor force by higher wages, the market labor supply curve is:
upward-sloping