Unit 3

Suppose the demand for a monopolist's output is represented by the data below: A monopolist that must charge each customer the same price will earn total revenue equal to _____ and marginal revenue equal to _____ if the price charged is $9.50. $47.50; $9.50 $38.40; $9.60 $47.50; $9.10 $38.40; $9.30

$47.50; $9.10

Suppose the demand for a monopolist's output is represented by the data below: A monopolist that is able to engage in first degree or perfect price discrimination will earn total revenue equal to _____ and marginal revenue equal to _____ if the quantity sold is 5 units. $48.50; $9.50 $48.50; $9.10 $39; $9.60 $39; $9.10

$48.50; $9.50

Based on the graph below and assuming no externalities, the deadweight loss in this market is approximately equal to: $1,440. $160. $720. $360.

$720.

A perfectly competitive firm in long-run equilibrium is shown by panel ____ and a monopolistically competitive firm in long-run equilibrium is shown by panel ____. (b); (c) (d); (a) (d); (c) (b); (a)

(b); (c)

Based on the chart below, the marginal product of the second worker is _____ and the average product of the second worker is _____. 44 units of output; 22 units of output 22 units of output; 20 units of output 20 units of output; 44 units of ouptut 20 units of output; 22 units of output

20 units of output; 22 units of output

The graph below shows market conditions for an unregulated, profit-maximizing monopolist that cannot price discriminate. The firm depicted by the above graph will maximize profit by producing 320 units of output and charging a price of $9 . This firm earns total revenue equal to $ [ Select ] ["1440", "2400", "2880"] and the firm's profit is equal to $ [ Select ] ["240", "480", "1440"] . The efficient level of output in this market is [ Select ] ["320", "400", "450"] units, so there is a deadweight loss approximately equal to [ Select ] ["$90", "$180", "$360"] .

Answer 1- 320 Answer 2- $9 Answer 3- 2880 Answer 4- 480 Answer 5- 400 Answer 6- $180

Competitive markets are characterized by [ Select ] ["few", "many"] firms and [ Select ] ["significant", "no"] barriers to entry. If the market is perfectly competitive, the products sold by firms in the market are identical; if the market is monopolistically competitive, the products sold by firms in the market are [ Select ] ["identical", "differentiated"] . In the long run, competitive firms earn [ Select ] ["positive", "zero", "negative"] economic profit. An oligopoly is a market with [ Select ] ["many", "few"] firms. The firms in the market may sell an identical product or differentiated products. In the long run, firms operating in an oligopolistic market are most likely to earn [ Select ] ["negative", "zero", "positive"] economic profit because there [ Select ] ["are", "are not"] barriers to entry. A monopoly is an industry characterized by a single firm selling a unique product. Because there [ Select ] ["are", "are not"] barriers to entry, firms are likely to earn [ Select ] ["zero", "negative", "positive"] profit in long-run equilibrium. The [ Select ] ["perfectly competitive", "monopolistic", "monopolistically competitive", "oligopolistic"] market structure is the only one that guarantees an efficient outcome in long-run equilibrium, according to economic theory.

Answer 1: many Answer 2:no Answer 3: differentiated Answer 4:zero Answer 5: few Answer 6:positive Answer 7:are Answer 8:are Answer 9:positive Answer 10: perfectly competitive

Complete the chart assuming perfectly competitive markets, product price = $2, wage rate = $12, and total fixed costs = $14, and labor is the only variable input (MP = marginal product of labor, VMP = value of marginal product). LaborOutputMPVMP00125$245$355$460$562$ A profit-maximizing firm will choose to hire workers, resulting in total revenue = $ , total variable cost = $ , total cost = $, and profit = $ .

Answer 1:25 Answer 2:!50 Answer 3:!20 Answer 4:!40 Answer 5:!10 Answer 6:!20 Answer 7:!5 Answer 8:!10 Answer 9:!2 Answer 10:!4 Answer 11: 3 Answer 12:!110 Answer 13:36 Answer 14: 50 Answer 15:60

Which of the following statements is true for a pure, unregulated monopolist that cannot price discriminate in short-run equilibrium? P = MR, but MR > MC P > MR, but MR = MC P = ATC P = MR = MC

P > MR, but MR = MC

Which of the following best represents a derived demand for labor? The demand for dog food by neighborhood dog owners The demand for vegetables by a restaurant specializing in salads The demand for the services of cashiers by grocery stores. The demand for the services of a private tutor by a student

The demand for the services of cashiers by grocery stores.

Oligopolistic industries are characterized by: a few dominant firms and independent decision making. a large number of firms and independent decision making. a few dominant firms and interdependent decision making. a large number of firms and interdependent decision making.

a few dominant firms and interdependent decision making.

Barriers to entry: characterize both perfectly competitive and monopoly markets. are obstacles that make it impossible or unprofitable for new firms to enter a market in the long run. guarantee that a firm will always earn positive economic profit. cannot be maintained in the long run because other firms will always find a way to enter a profitable industry.

are obstacles that make it impossible or unprofitable for new firms to enter a market in the long run.

A firm gains monopoly power when: barriers to entry can be erected and maintained. other firms cannot produce an identical product but are able to produce a close substitute. it can sell all that it can produce at the price determined by market forces. it must raise price on all units in order to sell a higher level of output.

barriers to entry can be erected and maintained.

Government addresses the inefficiency associated with monopoly by: You Answered using antitrust laws to prevent competition. changing the monopoly firm to a government-owned business. blocking mergers that would result in too much market power. regulating business firms to promote monopoly power.

blocking mergers that would result in too much market power.

A monopolistically competitive firm: earns zero economic profits in the short run. charges a price equal to ATC in the long run. produces where Price = MR to maximize profit. faces a perfectly elastic demand.

charges a price equal to ATC in the long run.

In a competitive labor market, an increase in the supply of labor, ceteris paribus, will: increase the demand of labor. decrease the market wage rate. increase the market wage rate. decrease the demand of labor.

decrease the market wage rate.

Ceteris paribus, an increase in the marginal product of manufacturing workers causes the: supply of labor to shift to the left. supply of labor to shift to the right. demand for labor to shift to the left. demand for labor to shift to the right.

demand for labor to shift to the right.

A monopolistically competitive firm's demand curve is: more elastic than a perfectly competitive firm's demand curve. horizontal at the market-determined price. less elastic than the market demand curve for its product. downward-sloping and marginal revenue lies below demand.

downward-sloping and marginal revenue lies below demand.

A monopolist that earns positive economic profit in the short run will: earn zero economic profit in long-run equilibrium. earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand. always continue to earn positive economic profit in the long run. earn higher economic profit in the long run because of economies of scale.

earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand.

A competitive, profit-maximizing firm will choose to hire workers up to the point where the value of the marginal product: begins to decrease. is equal to the price of the good being produced. is equal to zero. is equal to the wage.

is equal to the wage.

Compared to a perfectly competitive market, a monopoly produces a ________ output and charges a ________ price, provided economies of scale are not significant. lower; lower higher; lower higher; higher lower; higher

lower; higher

A monopolistically competitive market is characterized by: several large dominant firms, identical outputs, and barriers to entry. several large dominant firms, product differentiation, and easy entry in the long run. many firms, product differentiation, and barriers to entry. many firms, product differentiation, and easy entry in the long run.

many firms, product differentiation, and easy entry in the long run.

A monopolistically competitive market is characterized by: many firms, product differentiation, and easy entry in the long run. many firms, product differentiation, and barriers to entry. several large dominant firms, product differentiation, and easy entry in the long run. several large dominant firms, identical outputs, and barriers to entry.

many firms, product differentiation, and easy entry in the long run.

Oligopoly is characterized by all of the following except: a small number of firms. no price-setting ability. large firms. mutual interdependence.

no price-setting ability.

According to the ________ model, a single firm may dominate a market, causing other firms to set their product price equal to the price set by the dominant firm to avoid retaliation from the dominant firm. game theory kinked demand cartel price leadership

price leadership

Game Theory and the Kinked Demand model suggest that competing firms in an industry dominated by only two firms may be: reluctant to change prices because they anticipate that rivals will match price cuts but ignore price increases. too quick to raise prices because they fail to anticipate that rivals may gain market shares. too quick to cut prices because they fail to anticipate that rivals may also cut their prices. reluctant to change prices because they anticipate that rivals will ignore price cuts but match price increases.

reluctant to change prices because they anticipate that rivals will match price cuts but ignore price increases.

To be successful in increasing the price of their product, members of a cartel must: restrict market output. encourage new firms to enter the market. find ways to lower costs of production. significantly increase market output.

restrict market output.

Government addresses the inefficiency associated with monopoly by: restricting market power through antitrust laws and regulation. prohibiting all forms of market power. requiring all firms to seek government approval before raising prices. preventing all proposed mergers.

restricting market power through antitrust laws and regulation.

The Herfindahl-Hirschman Index is a measure of industry concentration that is calculated by: summing the squares of the market shares of each firm in the industry. summing the market shares of the four largest firms in the industry. dividing the market share of the largest firm by the market share of the smallest firm. summing the market shares of all of the firms in the industry.

summing the squares of the market shares of each firm in the industry.

A natural monopoly can: use natural resources without being subjected to government regulations supply the entire market at a higher cost than many competing firms. always charge any price it wants since it faces no competition. supply the entire market at a lower cost than many competing firms.

supply the entire market at a lower cost than many competing firms.

If a monopolistically competitive firm is earning economic profits in the short-run, then: these profits will persist in the long-run because of the firm's limited monopoly power. price will be driven down to minimum average total cost in the long-run. these profits will be eliminated in the long-run as new firms enter the industry. its output will increase in the long-run.

these profits will be eliminated in the long-run as new firms enter the industry.

A firm is a pure monopoly when it is the only seller of a ____ product and barriers to entry ____ other sellers from entering the market in the long run. unique; encourage common; prevent unique; prevent common; encourage

unique; prevent