ec 110 monopolies

In a game, a dominant strategy is

the best strategy for a player to follow, regardless of the strategies followed by other players.

In order to sell more of its product, a monopolist must

lower its price.

A monopolistically competitive industry is characterized by

many firms selling products that are similar but not identical.

26. A firm produces the welfare-maximizing level of output

*a. only when the market is perfectly competitive.

24. When monopolistically competitive firms advertise, in the long run

*a. they will still earn zero economic profit.

5. The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

*b. A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

17. Which of the following statements is correct? a. Monopolistic competition is similar to monopoly because both market structures are characterized by patents. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared to the market. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by free entry. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by excess capacity.

*b. Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared to the market.

18. For a monopolistically competitive firm,

*b. average revenue and price are the same.

19. To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

*b. marginal revenue equals marginal cost.

11. Which of the following statements is correct? Monopolies are socially inefficient because they (i) charge a price above marginal cost. (ii) produce too little output. (iii) earn profits at the expense of consumers. (iv) maximize the market's total surplus.

*c. (i) and (ii) only

14. Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.

*c. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.

20. For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

*c. both the short run and the long run.

21. When existing firms lose customers and profits due to entry of a new competitor, a

*c. business-stealing externality occurs.

13. With perfect price discrimination the monopoly

*c. eliminates deadweight loss.

23. The debate over the efficiency of markets in which products with brand names are sold

*c. hinges on whether consumers are rational in their choices.

12. Price discrimination

*c. is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices.

7. For a monopolist, marginal revenue is

*c. negative when the price effect is greater than the output effect.

15. In a market that is characterized by imperfect competition,

*c. there are at least a few firms that compete with one another.

16. Monopolistic competition is characterized by which of the following attributes? (i) free entry (ii) product differentiation (iii) many sellers

*d. (i), (ii), and (iii)

27. Which of the following statements about oligopolies is not correct? a. An oligopolistic market has only a few sellers. b. The actions of any one seller can have a large impact on the profits of all other sellers. c. Oligopolistic firms are interdependent in a way that competitive firms are not. d. Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.

*d. Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.

6. When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

*d. output effect and the price effect.

25. A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

*d. when the market is perfectly competitive, monopolistically competitive, or monopolistic.

Which of the following is an example of a barrier to entry? a. Dick obtains a copyright for the new computer game that he invented. b. Larry charges a lower price than his competitors for his lawn - mowing services. c. Harry offers free concerts on Sunday afternoons as a form of advertising. d. Tom charges a higher price than his competitors for his house - painting services.

Dick obtains a copyright for the new computer game that he invented.

What is the shape of the monopolist's marginal revenue curve?

a downward -sloping line that lies below the demand curve

Advertising

a. provides information about products, including prices and seller locations. b. signals quality to consumers, because advertising is expensive. c. has been proven to increase competition and reduce prices compared to markets without advertising.

22. Advertising

a. provides information about products, including prices and seller locations. b. has been proven to increase competition and reduce prices compared to markets without advertising. c. signals quality to consumers, because advertising is expensive.

33. As the number of sellers in an oligopoly becomes very large,

a. the quantity of output approaches the socially efficient quantity. b. the price approaches marginal cost. c. the price effect is diminished.

28. Which of the following statements is correct? a. If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly. b. Although the logic of self-interest decreases a duopoly's price below the monopoly price, it does not push the duopolists to reach the competitive price. c. Although the logic of self-interest increases a duopoly's level of output above the monopoly level, it does not push the duopolists to reach the competitive level.

all

The fundamental source of monopoly power is

barriers to entry.

The likely outcome of the standard prisoners' dilemma game is that

both prisoners confess.

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

earn negative profits, causing the firm to exit the industry.

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it

is always in their best interest to leave their quantities supplied unchanged.

A monopolistically competitive firm chooses the quantity to produce where

marginal revenue equals marginal cost.

The higher the concentration ratio, the

more control an individual firm has to set prices and less competitive the industry

Because monopoly firms do not have to compete

not in the best interest of society. one that fails to maximize total economic well-being. ineficcient

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of

price discrimination.

A monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost.

Which of the following is an example of a monopolistically competitive industry? a. tennis balls b. computer operating systems c. cable television d. restaurants in New York City

restaurants in New York City

Price discrimination is the business practice of

selling the same good at different prices to different customers.

Each firm in a monopolistically competitive firm faces a downward-sloping demand curve because

the firm's product is different from those offered by other firms in the market.