Chapter 10

Which of the following is true for a competitive buyer

AE=ME

Suppose a firm can produce its output at either of two plants. If profits are maximized which of the following is true

All of the above. The marginal cost at the first plant must equal marginal revenue, the marginal cost at the second plant must equal marginal revenue, the marginal cost at the two plants must be equal

Which of the following is Not true for a monopoly

At the profit maximizing output price equals marginal cost

Deadweight loss from monopoly power is expressed on a graph as the area between the

Average revenue curve and the marginal cost curve bounded by the quantities produced by competitive and monopoly markets

A manufacturer of digital music players uses a proprietary file format that is not used by the other firms in the market. This action by the firm may be an example of using a blank to reduce the number of firms in the market and to maintain a relatively inelastic demand for its products

Barrier to entry

For a monopolist, changes in demand will lead to changes in

Both price and quantity

A multi plant firm has equated marginal costs at each plant. By doing this

Costs are minimized given the level of output

Which factors determine the firms elasticity for demand

Elasticity of market demand, number of firms, and the nature of interaction among firms

For a competitive buyer the marginal expenditure per unit of an input

Equals the average expenditure per unit

For a monopsony buyer the marginal expenditure per unit of an input

Exceeds the average expenditure per unit

A monopsonist will buy blank units of an input than a competitor and will pay blank per unit

Fewer; less

Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the

Firms output is smaller than the profit maximizing quantity

Which of the following statements about natural monopolies is true

For natural monopolies marginal cost is always below average cost

If the regulatory agency sets price where AR=AC for a natural monopoly, output will be

Greater than the monopoly profit maximizing level and less than the competitive level

Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a blank price and sell a blank quantity

Higher; smaller

The monopolist that maximized profit

Imposes a cost on society because the selling price is above marginal cost

If a monopolists profits were taxed away and redistributed to its consumers

Inefficiency would remain because output would be lower than under competitive conditions

The regulatory lag

Is likely to occur with rate of return regulation

When the demand curve is downward sloping marginal revenue is

Less than price

The blank elastic firms demand curve the greater its blank

Less; monopoly power

Which of the following is true when the government imposes a price ceiling on a monopolist

Marginal revenue is kinked- horizontals and then downward sloping

A monopolist has equated marginal revenue to zero. The firm has

Maximized revenue

Which of the following is not true regarding monopoly

Monopolists can charge as high prices as it likes

The situation in which buyers are able to affect the price of a good is referred to as blank power

Monopsony

In the personal computer market some large manufacturers are able to buy computer components and software at lower prices than smaller firms in the market. This outcome indicates the that large firms enjoy some degree of blank in this market

Monopsony power

To find the profit maximizing level of output a firm finds the output level where

None of the above

When a per unit tax is imposed on the sale of a product of a monopolist the resulting price increase will

Not always be less than the tax

In a bilateral monopoly equilibrium price will

Not be determined by a simple rule

A form of implicit collusion in which one firm consistently follows the actions of another firm is

Parallel conduct

When a drug company develops a new drug it is granted a blank making it illegal for other firms to enter the market until the blank expires

Patent patent

If a monopolist sets her output such that marginal revenue marginal cost and average total cost are equal economic profit must be

Positive

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200 you should

Reduce output until marginal revenue equals marginal cost

The monopoly supply curve is not

Same as the competitive market supply curve, portion of marginal costs curve where marginal costs exceed the minimum value of average variable costs, the result of market power and production costs

Monopoly power results from the ability to

Set price above average variable cost

Which of the following is not associated with higher degree of monopoly power

Significant price competition among firms in the market

The Lerner index measure

The amount of monopoly power a firm chooses to exercise when maximizing profits

Which of the following is not an important antitrust law

The consumer protection act of 1914

A monopolist has determined that at the current level of output the price elasticity of demand is -.15 which of the following statements is true

The firm should cut output

The more elastic the demand facing a firm

The lower the value of the Lerner index

Which of the following is true at the output level where P=MC

The monopolist is not maximizing profit and should decrease output

Unlike a competitive buyer

The price that a monopsonist pays depends on the number of units purchased

The monopolist has no supply curve because

The quantity supplied at any particular price depends on the monopolists demand cruve

In an oligopsony market

There are few buyers and many sellers

In a market with a bilateral monopoly

There is a single buyer and a single seller

The firms in a market have decided not to compete with one another and have agreed to limit output and raise price

This practice is known as collusion and is illegal in the US

Suppose that the competitive market for rice in japan was suddenly monopolized. The effect of such change would be

To decrease the consumer surplus of Japanese rice consumers

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms

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

Predatory pricing is defined to be

behavior designed to drive out current competition

With respect to monopolies, deadweight loss refers to the

net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy.

A monopolist has set her level of output to maximize profit. The firms marginal revenue is $20 and the price elasticity of demand is -2.0 the firms profit maximizing price is approx

$40

DVDs can be produced at a constant marginal cost of $10 per disk, and roaring lion studios is releasing the DVD's for its last two major films. The DVD rambeau 17 is priced at $20 per disk and the DVD for schreck 10 is priced at $30 per disk. What are the Lerner indices for these two movies

.5 AND .67 respectively

What is the value of Lerner index under perfect competition

0