Econ Final exam

In a perfectly competitive industry, the market demand curve is usually: A) perfectly inelastic. B) perfectly elastic. C) downward-sloping. D) relatively elastic.

C) downward-sloping

Monopolistic competition is an industry characterized by a: A) small number of firms producing identical products, with barriers to entry for firms. B) small number of firms producing similar products, with relatively easy entry for firms. C) large number of firms producing similar products, with relatively easy entry for firms. D) large number of firms producing identical products, with relatively easy entry for firms.

C) large numbers of firms producing similar products, with relatively easy entry for firms

The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as: A) product differentiation. B) barrier to entry. C) market power. D) patents and copyrights.

C) market power

The market structure characterized by a few interdependent firms and in which there are barriers to entry is called: A) monopolistic competition. B) perfect competition. C) oligopoly. D) monopoly.

C) oligopoly

Oligopoly is a market structure that is characterized by a: A) small number of interdependent firms producing identical or differentiated products. B) small number of independent firms producing identical or differentiated products. C) large number of relatively small independent firms producing differentiated products. D) large number of relatively small independent firms producing identical products.

A) small number of interdependent firms producing identical or differentiated products

(Table: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow-clearing is a perfectly competitive industry. Her only fixed cost is $1,000 for a tractor. Her variable costs per cleared lot, shown in the table, include fuel and hot coffee. What is Alexa's shut-down price in the short run?

B) $15

(Table: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The marginal revenue of the fourth unit of production is: A) $200. B) $250. C) $450. D) $500.

B) $250

A(n) ________ is a single firm with ________, whereas ________ implies an industry with ________ firm(s) that has(have) ________. A) oligopoly; no barriers to entry; monopoly; many; easy entry and exit B) monopoly; barriers to entry; monopolistic competition; many; easy entry and exit C) monopoly; barriers to entry; oligopoly; few; no barriers to entry D) monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

B) monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

(Table: Prices and Demand) Prof. Dumbledorr has a monopoly on magic hats. He sells at most one hat to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a hat is $18. How many hats should Prof. Dumbledorr produce, and what price should he charge to maximize his profits?

C) 3; $24

(Figure: Payoff Matrix for Jake and Zoe) Jake and Zoe are the only producers of slushies in Vacatown. Each week, each firm decides whether to price high or price low for the following week. The figure shows the profit per week earned by the two firms. What is the Nash equilibrium for Jake and Zoe? A) Jake prices high; Zoe prices high B) Jake prices high; Zoe prices low C) Jake prices low; Zoe prices high D) Jake prices low; Zoe prices low

D) Jake prices low; Zoe prices low

(Table: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The price effect of increasing production from 3 megawatts to 4 megawatts is: A) -$150. B) $500. C) $450. D) -$50.

A) -$150

(Table: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow-clearing is a perfectly competitive industry. Her only fixed cost is $1,000 for a tractor. Her variable costs per cleared lot, shown in the table, include fuel and hot coffee. If the current price per cleared lot is $14, how many lots should Alexa clear?

A) 0

A monopoly is a market characterized by: A) a single seller. B) a product with many close substitutes. C) a large number of small firms. D) a small number of large firms

A) a single seller

An oligopoly knows that its ________ affect its ________ and that the ________ of its rivals will affect it. A) actions; rivals; reactions B) price changes; total revenue in a positive way; reactions C) actions rarely; rivals; actions D) price increases; total revenue in the long run only; large but not small price changes

A) actions; rivals; reactions

Conditions that prevent the entry of new firms in a monopoly market are: A) barriers to entry. B) terms of sale. C) labor market stipulations. D) production controls.

A) barriers to entry

If your farm has the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from: A) control of a scarce resource or input. B) technological superiority. C) increasing returns to scale. D) government-created barriers.

A) control of a scarce resource or input

The most important source of oligopoly is: A) economies of scale. B) government-created barriers. C) technological superiority. D) ownership of resources.

A) economies of scale

. The market for dentists in most communities can be considered ________ because there are a large number of similar, but not identical, substitutes in the market. A) monopolistic competition B) a monopoly C) perfect competition D) an oligopoly

A) monopolistic competition

For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have ________ on prices and beef is a ________ product. A) no noticeable effect; standardized B) a huge effect; standardized C) a huge effect; differentiated D) no noticeable effect; differentiated

A) no noticeable effect; standardized

The downward-sloping demand curve for a monopolistically competitive firm: A) reflects product differentiation. B) eventually will become perfectly elastic as more firms enter. C) indicates collusion among firms in the industry. D) ensures that the firm will produce at minimum average cost in the long run

A) reflects product differentiation

(Figure: Prices, Cost Curves, and Profits) In the figure, if the price is P1, then the firm earns: A) a loss equal to (ba) Q1. B) a loss equal to (ca) Q1. C) a loss equal to (bc) Q1. D) zero.

B) a loss equal to (ca) Q1

(Figure: Payoff Matrix for Gehrig and Gabriel) The figure shows the payoff matrix for two producers, Gehrig and Gabriel, who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. If both follow a tit-for-tat strategy, equilibrium will be reached when: A) they each produce 5,000 figurines. B) they each produce 7,000 figurines. C) Gehrig produces 7,000 figurines and Gabriel produces 5,000 figurines. D) Gehrig produces 5,000 figurines and Gabriel produces 7,000 figurines.

A) they each produce 5,000 figurines

(Figure: Payoff Matrix for Gehrig and Gabriel) The figure shows the payoff matrix for two producers, Gehrig and Gabriel, who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. If each wishes to maximize profits, the combined profits of the two are maximized if: A) they each produce 5,000 figurines. B) they each produce 7,000 figurines. C) Gehrig produces 7,000 figurines and Gabriel produces 5,000 figurines. D) Gehrig produces 5,000 figurines and Gabriel produces 7,000 figurines.

A) they each produce 5,000 figurines

(Figure: Payoff Matrix for Jake and Zoe) Jake and Zoe are the only producers of slushies in Vacatown. Every week, each firm decides whether to price high or price low for the following week. The figure shows the profit per week earned by the two firms. Suppose the firms each decide to price high initially, and adopt a tit-for-tat strategy for the following weeks. After a few weeks, how much profit would each firm make per week? A) Jake's profit = $800; Zoe's profit = $800 B) Jake's profit = $1,000; Zoe's profit = $1,000 C) Jake's profit = $1,500; Zoe's profit = $200 D) Jake's profit = $200; Zoe's profit = $1,500

B) Jake's profit = $1,000; Zoe's profit = $1,000

Which of the following industries is most likely to be monopolistically competitive? A) automobiles B) fresh bagel shops C) corn D) an electric utility

B) fresh bagel shops

In monopolistic competition, each firm: A) is a price-taker. B) has some ability to set the price of its differentiated good. C) will set price equal to marginal cost. D) has marginal revenue that is greater than price

B) has some ability to set the price

(Figure: Payoff Matrix for Gehrig and Gabriel) The figure shows the payoff matrix for two producers, Gehrig and Gabriel, who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. For Gehrig and Gabriel, the dominant strategy is to: A) produce 5,000 figurines. B) produce 7,000 figurines. C) produce between 5,000 and 7,000 figurines. D) collude and increase production to more than 14,000 figurines.

B) produce 7,000 figurines

A monopoly is likely to ________ and ________ than a perfectly competitive firm. A) produce more; charge more B) produce less; charge more C) produce more; charge less D) produce less; charge less

B) produce less; change more

Which of the following is not an assumption economists make when using the model of perfect competition? A) Firms seek to maximize profits. B) The products of each firm in a particular market are identical. C) Each firm sets its price equal to its average total cost. D) There is easy entry and exit.

C) Each firm sets its price equal to its average total cost

All except one of the following are characteristics of perfect competition. Which is the exception? A) All firms produce the same standardized product. B) There are many producers and each has only a small market share. C) There are many producers; one firm has a 25% market share, and all the remaining firms have a market share of less than 2% each. D) There are no obstacles to entry into or exit from the industry

C) There are many producers; one firm has a 25% market share, and all the remaining firms have a market share of less than 2% each

Individuals in a market who must take the market price as given are: A) quantity-minimizers. B) quantity-takers. C) price-takers. D) price-searchers

C) price-takers

Market structures are categorized by the following two criteria: A) the number of firms and the size of the firms B) whether or not products are differentiated and the extent of advertising C) the number of firms and whether or not products are differentiated D) the size of the firms and the extent of advertising

C) the number of firms and whether or not products are differentiated

Which of the following is(are) true concerning monopoly? A) Monopoly is at the opposite end of the spectrum from a perfectly competitive firm. B) A monopoly has no rivals. C) Barriers to entry prevent other firms from entering the industry. D) All of the statements are true.

D) all of the statements are true

An industry with a large number of relatively small firms producing ________ in a market with easy entry and exit is a(n) ________. A) similar products; monopoly B) identical products; monopolistic competition C) differentiated products; oligopoly D) differentiated products; monopolistic competition

D) differentiated products; monopolistic competition

Monopolistic competition is similar to perfect competition in that firms in both market structures: A) are price-takers. B) produce goods that are perfect substitutes. C) find it beneficial to advertise. D) do not face any barriers to entry into the industry in the long run.

D) do not face any barriers to entry into the industry in the long run

One characteristic of a perfectly competitive market is that there are ________ sellers of the good or service. A) one or two B) a few C) usually less than 10 D) hundreds or thousands of

D) hundreds or thousands of

Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for financial planners is best considered: A) a monopoly. B) an oligopoly. C) perfect competition. D) monopolistic competition.

D) monopolistic competition

Oligopoly is a market structure that is characterized by a ________ number of ________ firms that produce ________ products. A) large; relatively small, independent; identical B) small; independent; identical or differentiated C) large; relatively small, independent; differentiated D) small; interdependent; identical or differentiated

D) small; independent; identical or differentiated

Which of the following is not a characteristic of monopolistic competition? A) product differentiation B) lack of barriers to entry and exit in the long run C) many competing producers D) tacit collusion

D) tacit collusion

The perfectly competitive model assumes all of the following except: A) a great number of buyers. B) easy entry into and easy exit from the market. C) complete information on the part of buyers and sellers. D) that firms attempt to maximize their total revenue.

D) that firms attempt to maximize their total revenue