ECO 2023 Quiz 5 chapter 12 and 13

Refer to the above graph of the representative firm in monopolistic competition. Marginal revenue and marginal cost intersect at point a. b. c. d.

a.

When compared with the purely competitive industry with identical costs of production, a monopolist will produce more output and charge a higher price. more output and charge the same price. less output and charge the same price. less output and charge a higher price.

less output and charge a higher price.

The less elastic a monopolistic competitor's long-run demand curve, the lower its price relative to that of a pure competitor having the same cost curves. greater its excess capacity. higher its long-run economic profit. lower its average total cost at its equilibrium level of output.

lower its price relative to that of a pure competitor having the same cost curves.

A monopolistically competitive firm is operating at a short-run level of output where price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is $13. In the short run this firm should reduce product price. increase the level of output. make no change in the level of output. decrease the level of output.

make no change in the level of output.

Many people believe that monopolies charge any price they want to without affecting sales. In fact, the output and sales level for a profit-maximizing monopoly is codetermined with price where marginal revenue = average cost. marginal cost = average revenue. marginal cost = marginal revenue. average total cost = average revenue.

marginal cost = marginal revenue.

The supply curve for a monopolist is perfectly elastic. that portion of the marginal cost curve lying above minimum average variable cost. nonexistent. upsloping.

nonexistent.

Pure monopolists may obtain economic profits in the long run because of barriers to entry. of advertising. marginal revenue is constant as sales increase. of rising average fixed costs.

of barriers to entry.

Refer to the diagram for a non discriminating monopolist. Demand is elastic in the q1q3 output range. for all levels of output less than q2. only for outputs greater than q4. for all levels of output greater than q2.

or all levels of output less than q2.

At equilibrium, the profit-maximizing monopolist facing the situation shown in the graph will face a negative marginal revenue. average revenue. profit. total revenue.

profit.

In which industry is monopolistic competition most likely to be found? agriculture utilities mining retail trade

retail trade

Refer to the data. Firm Market Share % A 40 B 30 C 20 D 5 E 5 Refer to the data. If Firm B merged with Firm C, the industry's four-firm concentration ratio would ________ and its Herfindahl index would ________. fall; rise remain the same; fall remain the same; rise rise; rise

rise; rise

Price discrimination refers to any price above that which is equal to a minimum average total cost. selling a given product for different prices at two different points in time. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge. the selling of a given product to different customers at different prices that do not reflect cost differences.

the selling of a given product to different customers at different prices that do not reflect cost differences.

Even though many ballparks practice price discrimination between adults and children in selling tickets, such discrimination is not applied at the concession stands because children's demand for food is elastic and adults' demand for food is inelastic. adults' demand for food is elastic and children's demand for food is inelastic. there can be exchange of the product from children, who'd buy it at a lower price, to adults. there can be exchange of the product from adults, who'd buy it at a higher price, to children.

there can be exchange of the product from children, who'd buy it at a lower price, to adults.

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price will always equal ATC. equals marginal revenue. always exceeds ATC. will vertically intersect demand where MR = MC.

will vertically intersect demand where MR = MC.

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating with a loss. at a nonoptimal level of output. with positive profits. at the break-even point.

with a loss.

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is $.75 or less. $1 or less. $2 or less. $1.75 or less.

$.75 or less.

For a monopolist to sell an output level of 10 units, the price must be $8. MR at this output level will be < $8. > $16. > $8 and < $16. = $8.

< $8.

Which of the following conditions is not required for price discrimination? The seller must possess some degree of monopoly power. The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand. The good or service cannot be profitably resold by original buyers. Buyers with different elasticities must be physically separate from each other.

Buyers with different elasticities must be physically separate from each other.

Which statement concerning monopolistic competition is false? Firms differentiate their products, but the products are relatively substitutable. Firms may experience positive economic profits in the long run. Firms may experience losses in the short run. In the long run P = ATC > MC.

Firms may experience positive economic profits in the long run.

An unregulated pure monopolist will maximize profits by producing that output at which P = MC. P = ATC. MC = AC. MR = MC.

MR = MC.

(Consider This) Which of the following statements is most accurate about the difference between goods produced under the old central planning model of the Soviet Union versus those produced by American capitalism? Product differentiation in the Soviet Union was carefully integrated into the central plan, while differentiation in American capitalism occurs haphazardly and with little forethought.term-32 Soviet production employed mass production techniques, while American capitalism did not. Soviet markets were purely competitive, while U.S. markets were more monopolistically competitive. Soviet production put greater emphasis on efficiency, while American capitalism allowed for much more product differentiation.

Soviet production put greater emphasis on efficiency, while American capitalism allowed for much more product differentiation.

In the short run, a profit-maximizing monopolistically competitive firm sets it price equal to marginal cost. above marginal cost. equal to marginal revenue. below marginal cost.

above marginal cost

The economic inefficiencies of monopolistic competition may be offset by the fact that advertising expenditures shift the average cost curve upward. resources are optimally allocated to the production of the product. consumers have increased product variety. available capacity is fully utilized.

consumers have increased product variety.

An important similarity between a monopolistically competitive firm and a purely competitive firm is that both realize productive efficiency. economic profit tends toward zero for both. both face perfectly elastic demand schedules. both realize allocative efficiency.

economic profit tends toward zero for both

In long-run equilibrium, both purely competitive and monopolistically competitive firms will achieve allocative efficiency. equate marginal cost and marginal revenue. earn economic profits. produce at minimum average total cost.

equate marginal cost and marginal revenue.

An important similarity between a monopolistically competitive firm and a pure monopolist is that both achieve allocative efficiency. achieve productive efficiency. face demand curves that are less than perfectly elastic. realize an economic profit in the long run.

face demand curves that are less than perfectly elastic.

The monopolistic competition model assumes that firms will realize economic profits in the long run. firms will engage in nonprice competition. allocative efficiency will be achieved. productive efficiency will be achieved.

firms will engage in nonprice competition.

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output)? if it discovered that it was producing where MC < MR if it discovered that it was producing where its MC curve intersects its demand curve if it discovered that it was producing where MC = MR under none of these circumstances because a monopolist would never lower price

if it discovered that it was producing where MC < MR

Which of the following forces does not play a major part in the adjustments of a monopolistically competitive industry toward its long-run equilibrium? introduction of new products and patents shifts in the demand curves of individual firms as the industry expands or contracts firms expanding or shrinking their productive capacity profits/losses making firms enter or exit the industry

introduction of new products and patents

A firm will earn economic profits whenever marginal revenue exceeds variable costs. marginal revenue exceeds marginal costs. average revenue exceeds average variable costs. average revenue exceeds average total costs.

marginal revenue exceeds marginal costs.