302 final

Suppose a firm has market power and faces a downward sloping demand curve for its product and its marginal cost curve is upward sloping. If the firm reduces its price, then... A. Producer surplus increases due to new buyers, but the producer surplus from existing customers declines due to the lower price B. The firm will see an increase in producer surplus in all cases C. The increase in consumer surplus is only due to the increase in quantity demanded D. The sun of producer and consumer surplus remains the same but surplus value is transferred from the producer to customers

A. Producer surplus increases due to new buyers, but the producer surplus from existing customers declines due to the lower price

If good X and good Y are perfect substitutes, which of the following is true? A. The marginal utility of good X will not diminish B. The indifference curves will be non-linear C. The indifference curves will be vertical lines D. Each combination of X and Y on an indifference curve will have different levels of utility E. None of the above

A. The marginal utility of good X will not diminish

The practice of bundling two items together would be most successful when... A. The two goods have negatively correlated reservation prices B. The two goods have positively correlated reservation prices C. Zero correlation between the reservation prices D. The reservation price of one good is zero E. The reservation price of the two goods is identical

A. The two goods have negatively correlated reservation prices

Suppose a Toal product function is given by Q = 2L Which of the following would be true? A. Total product will be linear and rising with respect to labor B. Average product of labor will be falling C. Average product of labor will be rising D. Both (a) and (b) E. Both (a) and (c)

A. Total product will be linear and rising with respect to labor

Rational ignorance occurs when... A. Voters know there is a low value being informed on polices and a high cost to be informed B. Firms use imperfect information to get consumers to pay higher prices C. A seller has more information about the quality of the product than the buyer D. A firm spends zero dollars on advertising price

A. Voters know there is a low value being informed on polices and a high cost to be informed

Under which of the following scenarios is it most likely that a monopoly power will be exhibited by firms. A. When there are few firms in the market and the demand curve faced by each firm is relatively inelastic B. When there are many firms in the market and the demand curve faced by each firm is relatively inelastic C. When there are few firms in the market and the demand curve faced by each firm is relatively elastic D. When there are many firms in the market and the demand curve faced by each firm is relatively elastic

A. When there are few firms in the market and the demand curve faced by each firm is relatively inelastic

What is the value of the Lerner index under perfect competition? A. 1 B. 0 C. infinity D. Two times the price E. None of the above

B. 0

Under perfect 1st degree price discrimination, A. Consumer surplus is less than zero and deadweight loss is less than zero B. Consumer surplus is zero and deadweight loss is zero C. Consumer surplus is zero and deadweight loss is greater than zero D. Consumer surplus is greater than zero and deadweight loss is greater than zero

B. Consumer surplus is zero and deadweight loss is zero

Which of the following statements about natural monopolies is true? A. Natural monopolies are only found in the markets for natural resources B. For natural monopolies, marginal cost is always below average cost for the quantity demanded C. For natural monopolies, average cost is always increasing at the quantity demanded D. Natural monopolies cannot be regulated

B. For natural monopolies, marginal cost is always below average cost for the quantity demanded

Which of the following would be true for a single price monopolist? A. Markup will be higher for monopolists with higher elasticity of demand for their product B. Markup will be higher for monopolists with lower elasticity of demand for their product C. Price will be equal to marginal cost D. Both (a) and (c) E Both (b) and (c)

B. Markup will be higher for monopolists with lower elasticity of demand for their product

With respect to single price monopolies, deadweight loss refers to the A. Socially unproductive amounts of money spent to obtain or acquire a monopoly B. Net loss in consumer and producer surplus due to a monopolists pricing strategy/ policy C. Lost consumer surplus from monopolistic pricing D. none of the above

B. Net loss in consumer and producer surplus due to a monopolists pricing strategy/ policy

The deadweight loss of a single price monopolist... A. Occurs because the monopolist produces more than the efficient quantity B. Occurs because the monopolist produces less than the efficient quantity C. Occurs because the monopolist has a different total cost function than other firms D. Both (a) and (b) E. Both (a) and (c)

B. Occurs because the monopolist produces less than the efficient quantity

If a monopolist sets her output such that marginal revenue, marginal cost and average total cost are equal, economic profits must be: A. Negative B. Positive C. Zero D. Indeterminate from the given information

B. Positive

If reservation prices between good X and good Y are positively correlated... A. Pricing goods separately will get more revenue for the firm than bundling B. Pricing goods separately will get approximately the same amount of revenue as bundling them together C. pricing goods separately will get less revenue than bundling

B. Pricing goods separately will get approximately the same amount of revenue as bundling them together

Consider the airline industry. An example of acquired regulation for the airline industry would include. A. A tax on airline travel B. Rigorous guidlines for safety regulations which precent some firms from entering the market C. A tax on jet fuel D. All of the above E. Only (a) and (b)

B. Rigorous guidlines for safety regulations which precent some firms from entering the market

In a situation where all consumers are identical and the monopolist knows the individual consumers demand function, a monopolist that sells its product using a two part-tarrif will. A. Set a price equal to marginal cost and a fixed fee equal to a consumers expenditures B. Set a price per unit equal to marginal cost and a fixed fee equal to a consumers consumer surplus at that price C. Set a price per unit equal to average total cost and a fixed fee equal to a consumers expenditures D. Set a price per unit equal to average total cost and a fixed fee equal to a consumers consumer surplus at that price

B. Set a price per unit equal to marginal cost and a fixed fee equal to a consumers consumer surplus at that price

Rank the following price policies from most deadweight loss to least deadweight loss. A. 1st degree price discrimination, 2nd degree price discrimination, single price monopoly B. single price monopoly, 2nd degree price discrimination, 1st degree price discrimination C. 2nd degree price discrimination, single price monopoly, 1st degree price discrimination, D. Single price monopoly, 1st degree price discrimination, 2nd degree price discrimination E. All are equal

B. Single price monopoly, 2nd degree price discrimination, 1st degree price discrimination

The firms in a market hace decided not to compete with one another and have agreed to limit output and raise price A. This is known as concentrating and is illegal in the US B. This is known as collusion and is illegal in the US C. I this way firms take advantage of economies of scale D. This is an effective barrier to entry but illegal in the US

B. This is known as collusion and is illegal in the US

The firms in a market have decided not to compete with one another and have agreed to limit output and raise price. A. This is known as concentrating and is illegal in the US B. This is known as collusion and is illegal in the US C. In this way new firms take advantage of economies of scale D. This is an effective barrier to entry but is illegal in the US E. This is a merger and myst be approved to be legal

B. This is known as collusion and is illegal in the US

Suppose a firm charged $10 for 20 pounds of steak and $15 for 30 pounds of steak, which of the following describes this pricing policy? A. Collusion B. Limit pricing C. Block pricing D. Average cost pricing

C. Block pricing

Suppose the firm, Conjectural Technologies is a monopoly. What will happen to deadweight loss when the government levies a per unit tax on this firms output? A. Deadweight loss will fall to zero B. Deadweight loss will fall but still exist C. Deadweight loss will rise D. Cannot be determined

C. Deadweight loss will rise

Which of the following creates an indifference curve that is convex to the origin. A. More is better B. Transitivity of preferences C. Diminishing marginal rate of substitution D. Completeness of preferences

C. Diminishing marginal rate of substitution

Which of the following statements are true about price taking firms? A. Can lower the market price of a good by producing more B. Can raise the market price of a good by producing less C. Do not have market power D. All of the above E. Only (a) and (b)

C. Do not have market power

Which of the following instances is more likely to be associated with market power? A. The market demand for the good is very elastic B. Firms lose all their customers when they raise price by even a tiny amount above their competitors C. Firm communicate and agree on prices D. All of the above E. Only (a) and (b)

C. Firm communicate and agree on prices

If the four main assumptions about preferences are true, which of the following statements will be true? A. Indifference curves will cross for perfect compliments B. Indifference curves that are further from the origin represent lower utility C. Indifference curves will slope downward and the slope will get flatter at higher levels of the good on the x-axis D. Both (a) and (b) E. Both (b) and (c)

C. Indifference curves will slope downward and the slope will get flatter at higher levels of the good on the x-axis

When demand curve is downward sloping, marginal revenue is A. Equal to price B. Equal to average revenue C. Less than Price D. More than price

C. Less than price

A single price monopsony will... A. pay a price that is higher than the competitive market price B. Force sellers to produce more than the competitive market quantity C. Lower the quantity it purchases in order to get a lower price D. Have a marginal expenditure curve equal to the supply function

C. Lower the quantity it purchases in order to get a lower price

The slope of the total product curve is the A. Average product B. Slope of the line from the origin to the point C. Marginal product D. Marginal rate of technical substitution E. None of the above

C. Marginal product

Suppose a small airport is served by one of the major airlines and a new low cost airline enters the market. If the major airlines cuts its airfares in this market to levels that are below its marginal cost in response to the other firms entry, then the major airline may be engaging in. A. Parallel conduct B. Parallel pricing C. Predatory pricing D. Unlawful collusion E. Rent seeking

C. Predatory pricing

Which of the following is not associated with a high degree of monopoly power? A. A relatively inelastic demand curve for the firm B. A small number of firms in the market C. Significant price competition among firms in the market D. significant barriers to entry

C. Significant price competition among firms in the market

Suppose that the firm Impossible industries is a price searcher. Which of the following would be true? A. The firms marginal revenue will rise as output rises B. The firms marginal revenue will be constant (horizontal line) C. The firms marginal revenue will fall as output rises D. The firms marginal revenue will rise but fall once it reaches profit maximization E. none of the above

C. The firms marginal revenue will fall as output rises

If a price taker is profit maximizing in the long run, which of the following statements will be true? A. Price will equal average total cost B. Price will equal marginal revenue C. Marginal revenue will equal average total cost D. All of the above E. Only (a) and (b)

D. All of the above

If a price taker is profit maximizing in the short run, which of the following statements will be true? A. Price will equal marginal cost B. Price will equal marginal revenue C. Marginal revenue will equal marginal cost D. All of the above E. Only (a) and (b)

D. All of the above

Which of the following actions would be investigated as part of anti-trust law? A. Two large firms merging B. One firm raising price after another firm raised price C. One firm lowering price below cost D. All of the above E. Only (a) and (b)

D. All of the above

In a long run competitive equilibrium with firms that have identical cost functions, which of the following is true? A. Firms produce at their optimal firm size B. Firms earn zero economic profit C. Price is greater than average total cost D. Both (a) and (b) E. Both (a) and (c)

D. Both (a) and (b)

Under a binding price ceiling (an effective price ceiling) what does the change in consumer surplus represent A. The gain in surplus for those buyers who can still purchase the product at a lower price B. The loss in surplus for those buyers who previously purchased some units of the good at the higher price but those units are no longer produced at that price C. The loss in surplus for those buyers who would like the purchase the excess demand created by the price ceiling policy D. Both (a) and (b) E. Both (a) and (c)

D. Both (a) and (b)

Which of the following do price-taking firms and price-searching firms engaging in a two-part tariff have in common? A. Both are efficient B. Both charge a per unit price equal to marginal cost C. Consumer surplus is the same in either case D. Both (a) and (b) E Both (b) and (c)

D. Both (a) and (b)

Collusion occurs when... A. Firms produce competitive quantities in order to maximize profits B. A price searcher produces the same quantity that a price taker would C. A firm lowers price in order to force another firm out of the market D. Firms agree to production quotas to increase price of output

D. Firms agree to production quotas to increase price of output

Rather than charging a single price to consumers, a firm charges a higher price to men and a lower price to women. By engaging in this practice the firm: A. Is trying to reduce its costs and therefore increase its profit B. Is engaging in an illegal activity that is prohibited by the Sherman Anti-trust act C. Is attempting to cover producer surplus into consumer surplus D. Is attempting to convert consumer surplus into producer surplus

D. Is attempting to convert consumer surplus into producer surplus

A firm that engages in first degree price discrimination... A. Charges lower prices to its inelastic clients B. Charges all customers a price higher than their reservation price C. Creates some deadweight loss and consumer surplus D. Is efficient E. Produces at a marginal cost lower than its rival firms

D. Is efficient

A firm maximizes profit by operating at the level of output where... A. Average revenue equals average cost B. Average revenue equals average variable cost C. Total costs are minimized D. Marginal revenue equals marginal cost E. Marginal revenue exceeds marginal cost by the greatest amount

D. Marginal revenue equals marginal cost

_________ questions have to do with explanation and prediction, _______ questions have to do with what ought to be. A. Positive, negative B. Negative, normative C. Affirmative, positive D. Positive, normative E. Econometric, theoretical

D. Positive, normative

In a situation where the monopolist knows all reservation prices, 1st degree price discrimination... A. There will be deadweight loss due to the firm overpricing the good B. There will be deadweight loss due to the firm producing too little output C. There will be deadweight loss because of the shortage of the good D. There will be no deadweight loss

D. There will be no deadweight loss

A price ceiling set lower than the equilibrium cost will cause...

Deadweight loss

Which of the following is NOT true for a single price monopoly? A. The profit maximizing output is one at which marginal revenue and marginal cost are equal B. Average revenue equals price C. The profit maximizing output is the one at which the difference between total revenue and total cost is largest D. The monopolist demand curve is the same as the market demand curve E. At the profit maximizing output, price equals marginal cost

E. At the profit maximizing output, price equals marginal cost

Which of the following would be a form of acquired regulation for the butter industry? A. A licensing agreement that all butter producers had to have at least 100 cows B. A tax on margarine (a butter substitute) C. A tax on butter producers D. All of the above E. Both (a) and (b)

E. Both (a) and (b)

You are analyzing the demand for good X, which of the following will result in a shift to the right of the demand curve of X? A. A decrease in the price of X B. An increase in income if X is a normal good C. A decrease in income if X is an inferior good D. Both (a) and (b) E. Both (b) and (c)

E. Both (b) and (c)

When the movie came out the price for a ticket was 7.50. After several months the ticket dropped to $4, this is an example of A. Peak-load pricing B. Second degree price discrimination C. A two part tariff D. Tying E. None of the above

E. None of the above

Which of the following would be true about 1st degree price discrimination A. It is difficult to conduct in practice due to information requirements B. Firms must precent resale of their product to properly enforce C. Consumer surplus is higher with 1st degree price discrimination than with a single price monopolist D. all of the above E. only (a) and (b)

E. only (a) and (b)

Suppose that gold can be produced by a single price monoplist or by many price taking firms A The single price monopolist would have a higher profit itself than the total profit of all the competing price takers B. The single-price monopolist would charge a lower price than the price taking firms C. The total quantity produced by a monopoly would be higher than the total quantity produced by all competitive firms D. The market will be more efficient with the single price monopolist than with price taking firms

A The single price monopolist would have a higher profit itself than the total profit of all the competing price takers

The deadweight loss from a single price monopolist will... A. Be associated from producing a less than efficient quantity B. Be associated from producing a more than efficient quantity C. Be the result of the firm capturing 100% of consumer surplus D. Be the result of changing a price equal to the choke price E. all of the above

A. Be associated from producing a less than efficient quantity

Bundling is effective at increasing profits when the demands for the bundled products are _______ and ______ correlated. A. Different, negatively B. Different, positively C. Similar, negatively D. Similar, positively E. Identical, perfectly

A. Different, negatively

Which of the following statements are true? A. Fixed costs affect the firms future decisions where sunk costs do not B. Fixed costs cannot be recovered C. Firms ignore fixed costs incurred in the future D. Firms shutdown when fixed costs and sunk costs are equal E. Sunk costs are variable as firm changes its level of output

A. Fixed costs affect the firms future decisions where sunk costs do not

A firm with a higher Lerner Index will... A. Have a higher mark-up percentage B. Have a lower markup percentage C. Sell a product with a more elastic demand curve D. Both (a) and (c) E. Both (b ) and (c)

A. Have a higher mark up percentage

Which of the following is true for price taking firms? A. Marginal revenue is equal to price B. The demand for the individual firm's product is perfectly inelastic C. The firms always earns economic profits equal to $0 in the short run D. The firm has no fixed costs E. The firm can reduce output and increase price

A. Marginal revenue is equal to price