Quizzes 12 - 14
The graph on the right represents the demand, marginal revenue, and marginal cost curves for a monopoly. What price should this monopolist charge to maximize profits?
$5.00
Which of the following statements are true regarding the profit-maximizing price charged by a monopolist?
- It occurs along the elastic part of the demand curve. - It occurs at the quantity where MR = MC. - It is greater than MR. - It is greater than MC.
If the number of firms increases to 10, each with an equal market share, then the HHI is
1,000
Suppose there are four firms in an industry, each with an equal market share. The Herfindahl-Hirschman Index (HHI) for this industry is ______
2,500
Which of the following is not likely covered by a copyright?
A photocopier
A.) The graph on the right shows the market demand curve for a good. Use the graph to find total revenue and marginal revenue at the given output levels. If the price is $8, then total revenue is ___ thousand B.) If the price is $7, then total revenue is __ thousand. C.) If the price is lowered from $8 to $7, then the change in total revenue is _____ thousand.
A.) $32 B.) $42 C.) $10
The Nash equilibrium is ___________.
Box 4
Which of the following is not a characteristic of monopoly?
Produces identical goods.
Two firms are planning to sell 10 or 20 units of their goods. Suppose Firm 1 decides how much to produce first. The game tree is illustrated in the figure on the right. What is the Nash equilibrium?
The Nash equilibrium is for Firm 1 to produce 20 units and for Firm 2 to produce 10 units.
Suppose Good A belongs to a market where the firms earn zero economic profits in the long-run and entry of new firms will result in price changes that operate through shifts in the market supply curve for Good A. Which market structure does Good A belong to?
The perfectly competitive market.
Which of the following is not a common characteristic between a monopoly and monopolistic competition?
The products sold have close substitutes.
Why might game theory not always be an accurate predictor of real-world situations?
We do not always know the exact payoffs, since payoffs involve attitudes and feelings as well as monetary gains.
A pure strategy involves ____________.
choosing one particular action for a situation.
Snoop's dominant strategy is to _______ and Charlie's dominant strategy is to ________
confess
When a firm exercises its monopoly power, the cost to society is the ____________
deadweight loss
Now assume that your coworkers will know if either you or Freddie lie to get the other fired, and your coworkers will shun the liar and make life miserable for that person. Given these circumstances, it would be logical for you to
do nothing
The person who lies first in this situation has a
first-mover advantage
Consider the market for college textbooks. Assume this market is monopolistically competitive. A representative firm's demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves are illustrated in the figure on the right. This industry ____________.
is not in long-run equilibrium, because firms are earning profits, which will result in firms entering.
One of your coworkers, Freddie, really gets on your nerves and it would dramatically increase your happiness if he was fired. Freddie also dislikes you and wishes you would be fired. You have the option of going to your boss and lying about Freddie harassing you, which you are sure will get him fired. Freddie has the same option to make up a lie about you to get you fired. Whoever gets fired will not have any credibility to have his lies believed afterward. Given these circumstances, it would be logical for you to
lie first to get Freddie fired
When a firm exercises its monopoly power, social surplus is _____ when compared to a perfectly competitive market.
lower
Suppose you and your friends decide to go to the beach during spring break. You need to fly from Kansas City to Miami and over 12 separate airlines provide the service. This market is best characterized as ___________.
monopolistic competition
The Department of Justice filed a lawsuit against Microsoft claiming it was engaging in unfair practices by ____________.
monopolizing the market by bundling its operating system with its Internet Explorer browser.
Suppose the government grants an individual or company the sole right to produce and sell a good or service. In this case, the government is granting a ____
patent
Suppose that a goalie is playing a mixed strategy between diving to the left and the right. A player decides which strategy to employ when playing a game with mixed strategies by choosing ____________.
randomly
The person who lies first in this situation
suffers reputational damage
In a game with mixed strategies, does either of the players have a dominant strategy? Why or why not?
no, because the best choice in a mixed strategy game is to pick a random strategy.
In recent years, some online firms have offered different consumers different prices for the same good. These firms use the consumer's IP address to find what city they are in and then charge a higher price to people in wealthier cities. This type of pricing behavior is ____________.
third-degree price discrimination
Compared to a perfectly competitive market, consumer surplus is _____ producer surplus is ______ and deadweight loss is ________
Lower, higher, higher
Seller A increases the price of its good by 20% and still enjoys a high market demand. Due to the high demand, there is an increase in the number of similar sellers in the long-run. This is an example of
monopolistic competition
Compared to a monopoly that does not price discriminate, a monopolist who engages in perfect price discrimination will produce ______ output and have ____ deadweight loss.
more, no
Some economists believe the threat of unfair monopolies is greater today than when the Sherman Act was first enacted. They argue that modern software can gain monopoly status and establish a barrier to entry through ____________.
network externalities.
