eco ch 8-10

Which of the following is not a characteristic of an oligopoly? a) There are a few large firms that make up the industry. b) There are barriers to entry into this market. c) Firms earn zero economic profits in the long run. d) The firms in the industry are interdependent.

c) Firms earn zero economic profits in the long run.

Assume that the market for wheat is perfectly competitive. An individual seller would face a demand curve that is a(n): a) downward-sloping line. b) upward-sloping line. c) vertical line. d) horizontal line.

d) horizontal line.

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. If its marginal revenue equals $2 when its output is 100,000 kilowatt hours, what is its marginal cost if it is maximizing profits? a) $1 b) $2 c) $3 d) $4

2

n the market for many construction products (e.g., wallboard, lumber) production by all firms is based on government standards. This would be an example of: a) homogeneous products. b) barriers to entry. c) monopoly. d) price taker

a) homogeneous products.

Game theory explores the behavioral aspects of the _____ that is typical of oligopolies. a) interdependence b) variety of firm size c) barriers to entry d) price stability

a) interdependence

The key to monopoly power is significant __________ in the industry. a) political power b) investment c) barriers to entry d) unemployment Submit

c) barriers to entry

Ocean Magic is a surfboard company that sells surfboards in a perfectly competitive market. The market price in the long run for surfboards is $375. If Ocean Magic sells 37 surfboards at $375 and is earning normal profits in the short run, what is its average total cost? a) $300 b) $325 c) $350 d) $375

d) $375 when a firm is selling at the long-run market equilibrium price, the price then equals short-run average total cost.

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. If it charges $1 per kilowatt hour, its marginal revenue could be: a) $0.75. b) $1.25. c) $1.75. d) $2.25.

a) $0.75. for a monopolist, marginal revenue is less than price.

For perfectly competitive firms, normal (price equals average total costs) profits equal what level of economic profits? a) 0 b) 5% c) 10% d) 15%

a) 0

Assume a perfectly competitive market becomes monopolized. What would you expect to happen to output? a) It would fall. b) It would not change. c) It would fall to zero. d) It would rise. Submit

a) It would fall.

The profit maximizing level of output for a monopoly occurs where: a) MR = MC < P b) MR < MC < P c) MR = MC = P d) MR < MC = P

a) MR = MC < P

In agriculture markets many products are standardized because all firms sell the same thing. This would be an example of which type of market structure? a) Perfect competition b) Monopolistic competition c) Oligopoly d) Monopoly

a) Perfect competition

Which market structure has no barriers to entry and no control over price? a) Perfect competition b) Monopolistic competition c) Oligopoly d) Monopoly

a) Perfect competition

Which of the following is a characteristic of a monopoly market? a) Substantial barriers to entry b) Numerous close substitutes for the product or service c) Many sellers d) Competition in the short run

a) Substantial barriers to entry

Look around your home town or neighborhood. Which of the following is MOST likely to be associated with monopolistic competition? a) The dry cleaner b) The local cable c) A Shell gasoline station d) Walmart

a) The dry cleaner

How are monopolistically competitive firms SIMILAR to pure monopolies? a) They both charge higher prices than a competitive firm. b) They both have easy entry and exit. c) They are both small relative to the market. d) They both face horizontal demand curves.

a) They both charge higher prices than a competitive firm.

How are monopolistically competitive firms SIMILAR to pure monopolies? a) They both produce less quantity than a competitive firm. b) They both have easy entry and exit. c) They are both small relative to the market. d) They both face horizontal demand curves.

a) They both produce less quantity than a competitive firm.

Which of the following is NOT true of an oligopoly? a) They set prices independently of other firms. b) The firms are interdependent. c) A few large firms make up the industry. d) There are barriers to entry in the market. Submit

a) They set prices independently of other firms.

The gaming console market is dominated by Microsoft, Sony, and Nintendo. If each company is willing to match price decreases but not price increases, this would result in: a) a kinked demand curve. b) a homogeneous demand curve. c) an upward sloping demand curve. d) a horizontal demand curve. Submit

a) a kinked demand curve.

A natural monopoly occurs when: a) a single firm can earn economic profits if it produces a certain output, but the addition of another firm to the industry would eliminate economic profits for both firms. b) a number of firms can earn economic profits if they produce a certain output, but the addition of another firm to the industry would eliminate economic profits for all firms. c) a single firm can earn normal profits if it produces a certain output, but the addition of another firm to the industry would eliminate normal profits for both firms. d) a number of firms can earn normal profits if they produce a certain output, but the addition of another firm to the industry would eliminate normal profits for all firms.

a) a single firm can earn economic profits if it produces a certain output, but the addition of another firm to the industry would eliminate economic profits for both firms.

Fat's Meats is in an oligopoly market. According to the kinked demand curve model, if it raises its prices to increase profit, its competitors will: a) do nothing. b) raise their prices so they can increase their profit. c) lower their output so they can raise their prices. d) raise their output so they can raise their prices. Submit

a) do nothing. the kinked demand curve model assumes that if one firm raises its prices, the other firms will do nothing and the firm that raised its price will lose market share.

The demand curve for a monopolistically competitive firm is: a) downward sloping and fairly flat. b) horizontal. c) downward sloping and fairly steep. d) vertical.

a) downward sloping and fairly flat.

Short-run _____ will cause firms to enter an industry in the long run. in perf comp a) economic profits b) normal profits c) economic losses d) zero economic profit

a) economic profits

If normal profit is being earned in a perfectly competitive market, P minus ATC is: a) equal to zero. b) less than or equal to zero. c) greater than zero. d) less than zero.

a) equal to zero.

The existence of natural monopolies can be attributed to: a) extremely large economies of scale. b) extremely large diseconomies of scale. c) constant returns to scale. d) very high marginal cost.

a) extremely large economies of scale.

When a company is able to secure all the total surplus in a market for itself, which type of price discrimination is it practicing? a) first-degree b) second-degree c) third-degree d) The company is not practicing price discrimination

a) first-degree

Price discrimination based on individual willingness to pay is: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) fourth-degree price discrimination.

a) first-degree price discrimination.

The demand curve for a monopolistically competitive firm is less elastic than the demand curve for a perfectly competitive firm because of: a) product differentiation. b) easy entry into and exit from the market. c) the large number of small firms. d) barriers to entry. Submit

a) product differentiation.

Games in which players take turns are: a) sequential-moves games. b) singular-moves games. c) simultaneous-move games. d) dominant-move games.

a) sequential-moves games.

For a monopolistically competitive firm, if marginal revenue is greater than marginal cost: a) the firm should increase production. b) the firm should decrease production. c) the firm should exit the market. d) the firm should change nothing.

a) the firm should increase production

Ocean Magic is a surfboard company that sells surfboards in a perfectly competitive market. The market price in the long run for surfboards is $325. If Ocean Magic sells 37 surfboards at $325 and is earning normal profits, what is its average total cost? a) $300 b) $325 c) $350 d) $375

b) $325 when a firm is selling at the long-run market equilibrium price, the price equals long-run average total cost.

Which of the following is a tit-for-tat strategy? a) Placing a blockade around an island until the enemy's weapons are removed from that island b) Attacking one of your enemy's ships every time the enemy attacks one of your ships c) Annihilating your enemy using weapons of mass destruction in retaliation for the enemy attacking you first d) Retreating whenever the enemy advances Submit

b) Attacking one of your enemy's ships every time the enemy attacks one of your ships a tit-for-tat strategy is a simple strategy that repeats a competitor's prior move.

Delta Technologies, Inc., has seen huge economies of scale because of advanced technologies that have allowed it to make production more efficient. Delta Technologies, Inc., is in which type of industry? a) Increasing cost industry b) Decreasing cost industry c) Constant cost industry d) Zero cost industry

b) Decreasing cost industry

Ocean Magic is a surfboard company that sells surfboards in a perfectly competitive market. What would happen if the market price for surfboards fell below Ocean Magic's average total cost but stayed above its average variable cost? a) It would continue to operate and increase production. b) It would continue to operate only in the short run. c) It would have to shut down manufacturing in order to minimize losses. d) It would have to raise prices.

b) It would continue to operate only in the short run

The perfectly competitive firm's short-run supply curve is the: a) MC curve above the ATC curve. b) MC curve above the AVC curve. c) AVC curve. d) MC curve above the TC curve

b) MC curve above the AVC curve.

ince a monopolist faces a downward-sloping demand curve, what happens to marginal revenue as output increases? a) Marginal revenue increases. b) Marginal revenue decreases. c) Marginal revenue stays the same. d) Marginal revenue can either increase or decrease depending on what the monopolist does with price. Submit

b) Marginal revenue decreases.

If firms in a monopolistically competitive industry are earning economic profits, which of the following is likely to occur in the long run? a) More firms will enter, increasing industry supply, causing price to rise b) More firms will enter, increasing industry supply, causing price to fall. c) Some firms will exit the market, causing industry supply to decrease, causing price to rise. d) Some firms will exit the market, causing industry supply to decrease, causing price to rise. Submit

b) More firms will enter, increasing industry supply, causing price to fall.

In a perfectly competitive market, price is currently $10 and average total cost is $7. What is expected to happen to price in the long run? a) Price falls to zero b) Price decreases c) Price stays constant d) Price rises

b) Price decreases

Which of the following is a characteristic of an oligopoly? a) It is similar to a competitive market in that no single firm has to take into account the actions of any other firm in the industry. b) The firms are interdependent. c) A large number of small firms make up an industry. d) There are very few barriers to entry in the market. Submit

b) The firms are interdependent

The United States Postal Service is a monopoly because it has: a) control over a significant factor of production. b) a government franchise grant. c) a patent. d) a copyright

b) a government franchise grant.

Which of the following rewards cooperation and punishes defection? a) a grim trigger strategy b) a tit-for-tat strategy c) a trembling hand trigger strategy d) a Nash equilibrium

b) a tit-for-tat strategy This strategy's efficient qualities are that it rewards cooperation and punishes defection. It also offers forgiveness for defectors, so it avoids the misreading problems of the grim trigger and trembling hand trigger strategies.

The short-run supply curve is the marginal cost curve above the minimum point on the __________ curve. a) average total cost b) average variable cost c) marginal revenue d) price

b) average variable cost

Compared to a single-price monopoly market, deadweight loss in a market with price discrimination will: a) increase. b) decrease. c) remain constant. d) fluctuate randomly

b) decrease.

Panamint Springs, California, is located on State Route 190 (SR190). The community's gas station is the last one for miles in either direction on SR190. This means that this gas station: a) will earn zero economic profit. b) has monopoly power. c) is a natural monopoly. d) owns a copyright

b) has monopoly power.

Individual firms are price takers, which means that in a perfectly competitive market they get their prices from the __________ since they are so small they cannot influence market price. a) government b) market c) customers d) suppliers

b) market

Short-run _____ will cause no change in the number of firms in an industry in the long run. perf comp a) economic profits b) normal profits c) economic losses d) higher than normal profits

b) normal profits

Game theory is an approach to analyzing _____ behavior using mathematics and simulations, assumptions about the players, time, level of information, strategies, and other aspects of the game. a) monopoly b) oligopoly c) monopolistic competition d) competitive market

b) oligopoly

Assume a perfectly competitive market becomes monopolized. Deadweight loss is expected to occur because: a) both output and price would fall. b) output would fall and price would rise. c) both output and price would rise. d) output would rise and price would fall. Submit

b) output would fall and price would rise.

Price discrimination based on different levels of consumption is: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) fourth-degree price discrimination. Submit

b) second-degree price discrimination.

For a monopolistically competitive firm, if marginal revenue is less than marginal cost: a) the firm should increase production. b) the firm should decrease production. c) the firm should exit the market. d) the firm should change nothing.

b) the firm should decrease production.

Perfectly competitive firms can only earn normal profits in: a) constant cost industries. b) the long run. c) the short run only. d) decreasing cost industries

b) the long run. firms can only earn normal profits because firms can enter and leave the industry and change the total output for the industry.

Microsoft is not a monopoly in the strictest sense because: a) it earns zero economic profit. b) there are close substitutes for the product or service it provides. c) it is a price taking firm. d) there are no barriers to entry in the operating systems market.

b) there are close substitutes for the product or service it provides.

Ocean Magic is a surfboard company that sells surfboards in a perfectly competitive market. If at its profit-maximizing level of output marginal revenue is $300 per surfboard, what is the marginal cost of each surfboard? a) $100 b) $200 c) $300 d) $400

c) $300

Which of the following does not describe a prisoner's dilemma? a) The outcome is a Nash equilibrium. b) There exists another outcome that offers a higher payoff for both players. c) Both players have an incentive to unilaterally change their strategy. d) There is a possibility for cooperation to achieve a better outcome. Submit

c) Both players have an incentive to unilaterally change their strategy.

) Fat's Meats is part of the cartel that controls the kielbasa industry. Which of the following would cause instability in this cartel? a) The demand for kielbasa could decrease. b) The cost of producing kielbasa could increase. c) Fat's Meats could engage in nonprice competition. d) Barriers to entry into the industry could increase

c) Fat's Meats could engage in nonprice competition. nonprice competition between cartel members, such as enhanced service, creates instability in the cartel.

What happens to consumer surplus when a firm engages in perfect price discrimination? a) It increases as marginal revenue increases. b) It decreases as marginal revenue decreases. c) It is reduced to zero. d) It is reduced to a negative level.

c) It is reduced to zero.

Fat's Meats is part of the cartel that controls the kielbasa industry. Which of the following would cause instability in this cartel? a) The demand for kielbasa could decrease. b) The cost of producing kielbasa could increase. c) More firms could enter the industry. d) Nonprice competition is nonexistent.

c) More firms could enter the industry. more firms entering the industry causes instability in the cartel.

An equilibrium in which no player can improve his or her position by unilaterally deviating from the noncooperative outcome is a _____ equilibrium a) Nalebuff b) simultaneous c) Nash d) sequential

c) Nash

f Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then: a) the market demand curve will shift to the left. b) the market supply curve will shift to the right. c) Rosco's demand curve will shift to the right. d) Rosco's supply curve will shift to the right.

c) Rosco's demand curve will shift to the right.

Which of the following is NOT a requirement for successful price discrimination? a) Sellers must have some market power. b) Sellers must be able to separate the market into different consumer groups based on their elasticities of demand. c) Sellers must have higher price elasticities than buyers. d) Sellers must be able to prevent arbitrage; that is, it must be impossible or prohibitively expensive for low-price buyers to resell to higher-price buyers. Submit

c) Sellers must have higher price elasticities than buyers.

Which of the following is a characteristic of a monopoly market? a) Minimal barriers to entry and exit b) Numerous close substitutes for the product or service c) Single seller d) Competition in the short run

c) Single seller

If firms in a monopolistically competitive industry are earning economic losses, which of the following is likely to occur in the long run? a) More firms will enter, increasing industry supply, causing price to rise. b) More firms will enter, increasing industry supply, causing price to fall. c) Some firms will exit the market, causing industry supply to decrease, causing price to rise. d) Some firms will exit the market, causing industry supply to increase, causing price to fall

c) Some firms will exit the market, causing industry supply to decrease, causing price to rise.

Ocean Magic is a surfboard company that sells surfboards in a competitive market. What would happen if the market price for surfboards fell below Ocean Magic's average variable cost? a) The company would have a positive economic profit. b) The company would have a positive normal profit. c) The company would have to shut down manufacturing in order to minimize losses. d) The company would have to raise prices.

c) The company would have to shut down manufacturing in order to minimize losses.

How are monopolistically competitive and perfectly competitive firms SIMILAR? a) They both sell homogeneous goods. b) They both face downward-sloping demand curves. c) They are both small relative to the market. d) They both have substantial barriers to entry. Submit

c) They are both small relative to the market.

A monopolist participates in price discrimination when they charge: a) a higher price to consumers whose demand is more elastic. b) a higher price when their marginal cost is lower. c) a lower price to consumers whose demand is more elastic. d) the same price to all of their consumers.

c) a lower price to consumers whose demand is more elastic.

Jet Ski Inc. sold a total of 100 jet skis last year. Its total revenues was $1 million and its total cost was $800,000. Jet Ski Inc. earned: a) a normal profit of $200,000 b) a normal profit of $2,000 c) an economic profit of $200,000 d) an economic profit of $2,000

c) an economic profit of $200,000

For a monopolist, price is ____ marginal revenue. a) less than b) equal to c) greater than d) set by the government at a level equal to

c) greater than

Short-run _____ will cause firms to exit an industry in the long run. a) zero economic profit b) normal profits c) losses d) economic profits

c) losses

The profit maximization rule states that firms maximize profit by producing output at a level at which __________ equals marginal cost. a) normal profits b) marginal cost c) marginal revenue d) economic profits

c) marginal revenue

Compared to a single-price monopolist, price discrimination: a) leads to higher prices for all consumers. b) leads to lower prices for all consumers, so it improves efficiency by allowing more consumers to purchase the good which reduces deadweight loss. c) may lead to higher prices for some consumers, but it also improves efficiency by allowing more consumers to purchase the good which reduces deadweight loss. d) leads to greater deadweight loss

c) may lead to higher prices for some consumers, but it also improves efficiency by allowing more consumers to purchase the good which reduces deadweight loss.

In simultaneous-move games: a) players take turns moving. b) only one player makes a move. c) the players' actions occur at the same time. d) neither player has a dominant strategy. Submit

c) the players' actions occur at the same time.

Price discrimination based on charging different groups of people different prices is: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) fourth-degree price discrimination. Submit

c) third-degree price discrimination.

When airlines provide lower fares if one books at least 21 days in advance, this is an example of: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) profit maximization. Submit

c) third-degree price discrimination.

When grocery stores offer coupons for those willing to clip and redeem them to save money, this is an example of: a) first-degree price discrimination. b) second-degree price discrimination. c) third-degree price discrimination. d) The company is not practicing price discrimination.

c) third-degree price discrimination.

In the long run, which factor of production can a firm NOT adjust? perf comp a) Labor b) Human capital c) Physical capital d) All factors of production can be adjusted in the long run

d) All factors of production can be adjusted in the long run even leaving the market

Which of the following describes a cartel? a) All of the firms compete for a limited market share. b) All of the firms agree not to advertise their product on television. c) All of the firms lower their prices so as to entice consumers to purchase their products. d) All of the firms agree upon a specific price and output for their products.

d) All of the firms agree upon a specific price and output for their products.

What is the shape of the long-run supply curve in a constant cost industry? a) Downward sloping b) Upward sloping c) Vertical d) Horizontal

d) Horizontal

Assume a perfectly competitive market becomes monopolized. What would you expect to happen to the market price? a) It would fall. b) It would not change. c) It would fall to zero. d) It would rise.

d) It would rise.

In a perfectly competitive market, price is currently $12 and average total cost is $14. What is expected to happen to price in the long run? a) Price falls to zero b) Price decreases c) Price stays constant d) Price rises

d) Price rises

Which of the following differentiates monopolistic competition from perfect competition? a) Differences in market share b) Differences in market equilibrium price control c) Differences in ease of entry and exit d) Product differentiation

d) Product differentiation

When a company charges more for higher-quality products, which type of price discrimination is it practicing? a) First-degree b) Second-degree c) Third-degree d) The company is not practicing price discrimination.

d) The company is not practicing price discrimination.

How are monopolistically competitive firms SIMILAR to pure monopolies? a) They both differentiate their products from those of competitors b) They both have easy entry and exit. c) They are both small relative to the market. d) They both face downward-sloping demand curves.

d) They both face downward-sloping demand curves.

According to the kinked demand curve model of oligopoly, demand is _____ if a firm raises its price and _____ if the firm lowers its price. a) inelastic; inelastic b) inelastic; elastic c) elastic; elastic d) elastic; inelastic

d) elastic; inelastic the kinked demand curve assumes that if one firm raises its price, the other firms will not, but if a firm lowers its prices, the other firms will lower their prices. Demand is therefore elastic if a firm raises its price and inelastic if the firm lowers its price.

Able Notepads, Inc., sells plain white printer paper in a perfectly competitive market. What does its individual demand curve look like? a) downward-sloping line b) upward-sloping line c) vertical line d) horizontal line Submit

d) horizontal line

Suppose that a sole producer can earn economic profits if it produces a certain output, but that the addition of a second producer would eliminate economic profits for both firms. This is a case of: a) x-inefficiency. b) diseconomies of scale. c) pure monopoly. d) natural monopoly. Submit

d) natural monopoly.

For a monopolistically competitive firm, if marginal revenue equals marginal cost: a) the firm should increase production. b) the firm should decrease production. c) the firm should exit the market. d) the firm should continue to produce at the current level. Submit

d) the firm should continue to produce at the current level.

Because monopolistically competitive firms have product differentiation: a) they are large firms. b) there are only a few firms. c) entry and exit are difficult. d) they have some monopoly power.

d) they have some monopoly power.