Microeconomics test chap 8-10

The marginal revenue of the 5th output is

$2

Suppose a monopolist faces the market demand curve... 3-4 units per week

$3

Suppose a monopolist faces the market demand curve... Horizontal intercept

$5

Suppose a monopolist faces the market demand curve... 4 units per week

$6

The marginal revenue of the 3rd unit of output is

$6

A strategy that limits defection in a repeated prisoners dilemma game is

A tit for tat strategy

Why might an appliance retailer hammer dents into the sides of the stoves and refrigerators

Because doing so is an effective way of offering discounts to only the most highly price- sensitive customers

Patents, which confer market power, are intended to:

Encourage innovation

Suppose the market for milk is perfectly competitive

Equal to $6

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

Faces a downward sloping demand curve

Which of the following industry does not fit the natural monopoly model?

Fast food restaurant

____ is the property of an entity whose individual units are interchangeable

Fungibility

OPEC is an example of a

cartel

Which of the following is not an example of a good with network economies?

computer printer

In many cities In the united states, a single firm provides electricity. Those firms are:

monopolists

(A monopoly) that results from economies of scale is called

Natural monopoly

A payoff matrix shows

The payoffs for each possible combination of strategies

The relationship according to which the perceived change in any stimulus varies according to the size of the change...

The weber-fechner law

In the Nash equilibrium of a prisoners dilemma

There is unrealized opportunity for both to gain

When people use anchoring and adjustment to estimate something, the adjustment they make when they receive new information is typically

Too small

When a perfectly competitive firm sells additional units of output____ and when a monopolist sells additional units of output___

Total revenue always rises, total revenue could rise, fall or remain unchanged

When marginal revenue is zero

Total revenue is maximized

The ___ is a game in which the first player had the opportunity....

Ultimatum bargaining game

The weber- fechner law is the relationship according to which the perceived change in any stimulus

Varies according to the size

loss aversion is the tendency to:

Weigh losses more heavily than gains

Game theory provides tools that are used to model:

interdependence

Both the perfectly competitive firm and the monopolist find that:

it is best to expand production until the benefits and costs of the last unit produced are equal.

Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit of output, it must:

lower its price

For all firms, the additional revenue collected from the sale of one additional unit of output is

marginal revenue

The three elements of a game are:

players, strategies, payoffs

The reason economists consider monopoly to be socially undesirable is that monopolists:

produce less than the socially optimal level of output.

market power refers to a firm's ability to

raise price without losing all sales of its product

Which of the following firms is most likely to be a pure monopolist?

The only gas station in a small town

Suppose a monopolist faces the market demand curve... Vertical intercept

$10

A dominant strategy exists if

A player has a strategy that yields

Traditional economic models assume that people care about

Absolute consumption

In traditional economic models, homo economicus is assumed to be all of the following except

Altruistic

A single-priced, profit-maximizing monopolist:

Always charges a price above the marginal cost of production.

An estimation technique that begins with an initial approximation, which is then modified in accordance with additional information, is known as:

Anchoring and adjustments

start-up costs

Are the one time costs incurred when beginning the production

The rule of thumb that estimates the frequency of an event by the ease with which it is possible to summon examples from memory is the:

Availability heuristic

The present aim standard of rationality accommodates a much _____

Broader, flexible

Psychological incentives

Can serve as commitment devices

Emotions like guilt and sympathy

Can solve commitment problems

Suppose paul just saw a car accident while driving home from work. according to the availability heuristic, this is likely to mske paul think that:

Car accidents are kore common than they really are

A coalition of firms who agree to restrict output for the purpose of earning an economic profit is called an

Cartel

Homo economicus is all of the following except

Cognitively naive

When players cannot achieve their goals because they are unable to make credible threats or promises the situation is called

Commitment problems

A ____ describes the possible moves in a game in sequence and lists the playoffs to each possible combination of moves

Decision tree

In tit for tat if your partner ___ in your first interaction then you will___ in your next interaction

Defects, defect

What pricing practice is explained by the same logic as the appliance seller's scratch n dent sale

Discount for product buyers who mail In rebate coupons

In traditional economic models peopme

Do not care about how their consumption compares to the consumption of others

Which of the following is not a commitment device

High fines for illegal parking on campus

Natural monopolies are most likely to arise when firms have

High start up costs and low marginal cost

In traditional economic models, which of the following does NOT describe homo economicus

Impulsive

A credible threat is

In the threateners interest to carry out

According to the representative heuristic people belief about the likelihood that something belongs to a given category ____ the extent to which it shares characteristics with the stereotypical members of that category

Increases with

If an entity is fungible, then its individual units are:

Interchangeable

In traditional economic models, homo economicus refers to a decision maker who

Is narrowly self- interested

Rules of thumb that reduce computation costs are known as:

Judgmental and decision heuristics

According to the weber- fechner law...

Large

Suppose big dairy inc has a monopoly in the market

Less than $6

The tendency to experience losses are more painful than the pleasures that result from gains of the same magnitude is known as:

Loss aversion

A firm is most likely to experience economies of scale if its start up costs are high and marginal cost is ...

Low

The primary objective of an imperfectly competitive firm is to

Max profit

Most cartels end or cease to be effective because:

Of the incentive to cheat

A purely self-interested diner is more likely to tip

Only when dining in a restaurant at which he often eats

The phenomenon that unusual events are likely to be followed by more nearly normal is known as:

Regression to the mean

The rule of thumb according to which people are more likely to assume something belongs to a given category if it shares many characteristics with the stereotypical members of that category is the:

Representative heuristic

According to the availability heuristic, the more easily we can recall examples of an event

The more likely we judge the event to be

Suppose evan and robert are each filling out a separate survey about parking on campus...

Robert's estimate of the current fine to be higher than Evan's

The decision making strategy that aims for adequate results because optimal results may necessitate excessive expenditure of resources is known as

Satisficing

Why do prices discrimination and the existence ...

Separate buyers based on willingness to pay

According to the textbook the owners of restaurants encourage tipping in order to

Solve a commitment problem with their wait staff

A Monopolistically competitive firms

Sometimes distinguishes its output from that of its competitors by locating in a more convenient place

In sequential games, the player who moves first

Sometimes has an advantage and sometimes has a disadvantage

When a pharmaceutical company introduces a new drug, its research and development costs are ____ and the cost of the chemicals used in manufacturing the drug are ____

Start up costs, variable costs

The general resistance to change, often stemming from loss aversion is known as

Status quo bio

Typically when people use anchoring and adjustment to estimate something the importance of _____ in influencing their assessment is too large

The anchor

The ultimatum bargaining game is a game in which

The first player confronts the second player with a take it or leave it offer

If a monopolist could perfectly price discriminate

The marginal revenue curve and the demand curve would coincide

A price setter is a firm that

has some degree of control over its price.

According to the textbook, the most important and enduring source of market power is

economies of scale

If a firm functions in an oligopoly, it is:

one of a small number of firms that produce goods that are either close or perfect substitutes.

Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:

the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less than $5 for the monopolist.

In situations where people make decisions with perfectly predictable consequences, traditional economic models cannot explain

why people experience regret