eco100 week 4

A firm that holds a monopoly position in the marketplace is:

+ a price maker. a price taker. monopolistically competitive. subject to infinite market forces.

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

+ decreasing returns to scale consent returns to scale economies of scale increasing returns to scale

When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale,

+ the firm is a natural monopoly. there are close substitutes for the good the firm produces. the firm is a single-price monopoly. the firm is well protected from competition by a legal barrier.

Why are some producers forced to sell their products at the prevailing market price?

Price takers find market analysis to be too costly. They are very small players in the overall market. + They have a high degree of similarity to competitors products. They can increase output without affecting quality

Which of the following is the most accurate description of a monopolist?

a sole producer of a narrowly defined product class, such as brown, Grade A eggs in Eagle County, Colorado a firm that is very large relative to all its competitors within a narrow product class + a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry a large multinational firm that produces a single product in a narrow product class

When a natural monopoly exists in a given industry, the per-unit costs of production will be:

lowest when there are a large number of producers in the industry. lower for smaller firms than for larger firms. minimized at the output that maximizes the industry's profitability. + lowest when a single firm generates the entire output of the industry.

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

Collusion A monopoly + An oligopoly A cartel

In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________.

long run; production increases short run; fixed costs can be reduced + short run; losses are smallest long run; fixed costs can be eliminated

In the _________, the perfectly competitive firm will seek out ________________________.

long run; the quantity of output where profits are highest short run; profits by ignoring the concept of total cost analysis + short run; the quantity of output where profits are highest long run; methods to reduce production and shut down

Government policy-makers often must decide how to balance the potential benefits of ______________ against the potential benefits of _____________ .

competition; nationalization + corporate size; competition corporate size; predatory pricing nationalization; privatization

Idaho farmers can sell as large a quantity of their potato crop as they wish, if which of the following is true?

They set their own price in the short run, but in the long run, the market sets the price. + Each farmer willingly accepts the prevailing market price. They set their own price in the long run, but in the short run, the market sets the price. Quality is perceptible and determines the market price.

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________, regardless of the level of production.

+ fixed costs; do not change variable costs; are constantly changing fixed costs; are consistently changing variable costs; do not change

The application of current U.S. antitrust law

extends its long reach to block mergers that reduce competition. reaches beyond the subjective judgments of antitrust regulators. + includes a wide arrange of anticompetitive practices. includes a narrow range of anticompetitive practices.

In the ________, the perfectly competitive firm will react to profits by __________________________.

short run; increasing the quality of products long run; tailoring their quality controls short run; reducing its labor inputs + long run; increasing its production

The use of sharp, temporary price cuts as a form of _________________ would enable traditional U.S. automakers to discourage new competition from smaller electric car manufacturers.

natural monopoly monopolistic competition + predatory pricing oligopolistic competition

"Constant returns to scale" describes a situation where:

+ expanding all inputs does not change the average cost of production. a larger-scale firm can produce at a lower cost than a smaller-scale firm. expanding all inputs changes the average cost of production. the quantity of output rises and the average cost of production falls.

A monopolistically competitive firm may earn abnormally high profits in the

+ short term, but the process of entry will drive those profits to zero in the long run. long term, but the process of entry will drive those profits to zero in the short run. short run, but after entry occurs, the long-term perceived demand curve shifts to the right. long run, but after entry occurs, the short-term perceived demand curve shifts to the right

Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.

a perfect monopoly + perfect competition an oligopoly a free market

The fundamental belief behind the market-oriented US economy is that firms are in the best position to know if their actions will

contravene antitrust regulations. lead to attracting more customers. let them produce more efficiently. + the right answer is both b and c.

Which term describes a situation where the quantity of output rises, but the average cost of production falls?

diminishing marginal returns marginal cost output + economies of scale diseconomies of scale