Test 2 Econ

The theory of oligopoly provides another reason that free trade can benefit all countries because

-As the number of firms within a given market increases, the price of the good falls -Increased competition leads to smaller dead weight loss

To increase their individual profits, members of a cartel have an incentive to

-Decrease price -Increase production -Cheat

The concept of a Nash equilibrium, when applied to an oligopoly situation,

-Illustrates the tension between self interest and cooperation -Relies on the logic of firms pursuing their own self-interests -relies on the notion that each firm chooses its best strategy, given the strategies that other firms have chosen

Which of the following explains why oligopolies often fail to maintain cooperation

-The story of the prisoners' dilemma -game theory -the fact that self-interest is not always consistent with collective group interest

a monopolist's marginal revenue is less than the price because

-To sell additional units of the good, the price charged on all units must be decreased -With the sale of an additional unit, the monopolist receives less revenue for each of the previous units it planned to sell.

A market force that can prevent firms from price discriminating is

Arbritage

Which of the following would definitely cause equilibrium price to rise?

Demand increases and supply decreases

A primary function of prices in a market economy is to provide participants with

Economic information

Firms that shut down in the short run still have to pay their

Fixed costs

suppose Jane is starting up a lemonade stand business. Variable costs for Jane's lemonade stand would include the cost of

Lemonade mix

Equilibrium prices in markets characterized by oligopoly are generally

Lower than in monopoly markets and higher than in perfectly competitive markets

A competitive market is one in which

There are so many buyers and sellers that each has a negligible impact on price

which of the following statements is true about patents and copyrights?

They both have benefits and costs, they lead to higher prices, they enhance the abilities of monopolists to earn above-average profits

When two firms advertise to attract the same customers,

They face a problem a similar to the prisoners' dilemma

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

a deadweight loss to society

In order to be successful, a cartel must

agree on the total level of production and on the amount produced by each member

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

are interdependent while competitive firms are not

As a group, oligopolists would always be better off if they would act collectively

as a single monopolist

When a good is taxed

both buyers and sellers are worse off

A monopoly

can set the price it charges for its output but faces a downward sloping demand curve so it can earn unlimited profits

Price ceilings and price floors

cause surpluses and shortages to persist since price cannot adjust to the market equilibrium price

Monopoly firms have

downward-sloping demand curves and they can sell only a limited quantity of output at each price.

In a duopoly situation, the logic of self-interest results in a total output level that

exceeds the monopoly level, but falls short of the competitive level

competitive firms have

horizontal demand curves, and they can sell as much output as they desire at the market price

The entry of new firms into a competitive market will

increase market supply and decrease market prices

Economies of scale occur when

long-run average total costs fall as output increases

For a construction company that builds houses, which of the following costs would be fixed costs?

the long term lease for office space it occupies, the per year salary paid to the company's book keeper, the per year premium paid to an insurance company