Econ test
Tucker Corporation sells its product for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:
$25.00 or less per hour
Because an oligopoly is characterized by
A few large sellers, each seller has some influence over the market price
Why are government welfare programs often called entitlement programs?
Because people whose income is below a certain level are entitled to government assistance
Suppose there are four buyers all considering purchasing round-trip airfare from Boston to Miami with the following price elasticities of demand for this purchase: Buyer A: 1.5, Buyer B: 0.7, Buyer C: 1.0, Buyer D: 2.3. If the airline knows of these elasticities and practices price discrimination, which buyer will pay the highest price for the airfare?
Buyer B
When a product is defined as homogenous
Buyers are indifferent as to which seller's product they buy
Suppose costs are identical for the two firms in Exhibit 9-7. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:
Camel charging the low price and Marlboro charging the low price
The process of negotiating labor contracts between the union and management concerning wages and working conditions is called
Collective bargaining
An example of price discrimination is the price charged for:
College admission
The large-number-of-sellers condition of perfect competition?
Each firm is so small relative to the total market that no single firm can influence the market price.
A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as:
Featherbedding
Which of the following is not a characteristic of the structure of perfectly competitive markets?
Few sellers
In the perfectly competitive market, all firms in the market are assumed to be producing
Identical products
SNAP (food stamps) and Medicaid are examples of:
In-kind transfers
Suppose a single egg farmer alters the number of eggs she produces the change in egg output does not have any effect on the market price. This example describes which of the following characteristics of perfect competition?
Large number of small firms
Which of the following firms best fits the definition of a monopoly
Local electric utility
The monopolistic competition market structure is characterized by:
Many firms and differentiated products
Describe the characteristics of the four markets in detail. Provide an example for each
Monopoly - oneseller/many buyers, unique product, price maker, difficult entry. Ex. local utility company Perfect Competition - many sellers/many buyers, homogenous produce, price taker, easy entry. Ex. wheat farmer Monopolistic Competition - many sellers/many buyers, differentiated product, price maker, easy entry. Ex. fast food Oligopoly - few large sellers/many buyers, homogenous/differentiated product, interdependent but price maker, difficult entry. Ex. coke and pepsi
When Pepsi is considering a price hike, it needs to consider how Coke may react. This situation is called:
Mutual interdependence
Suppose the Tidy Laundry Detergent Company, which sells 40% of all detergent, is thinking about raising its price. Before Tidy makes the change, they analyze the likely responses of the All-Clean Detergent Company, which sells 35% of all detergent, and Cheerful Detergent Company, which sells 20% of all detergent. Tidy's behavior shows:
Mutual interdependence in pricing decisions
When a perfectly competitive firm a monopolistically competitive firm is making zero economic profit:
No firms will want to enter or exit
Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?
Oligopoly
Which of the following is always associated with monopolistic competition?
Product differentiation
If the price of labor falls, we can expect:
Quantity demanded of labor will increase
Which of the following correctly describes price discrimination?
Selling the same product to different people for different prices
Which of the following describes the monopoly market structure?
Single firm that is a price maker
Which of the following statements best describes firms under monopolistic competition?
The firms compete, using quality, location, advertising, and price
A monopoly is:
The only seller of a good for which there are no good substitutes in a market with high barriers to entry
Which of the following most closely approximates the conditions of a monopolistically competitive market?
The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers
Which of the following is a characteristic of a competitive price-taker market?
There are many firms in the market, each producing a small share of total market output
Which of the following correctly explains why sellers in a perfectly competitive market are price takers?
There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process.
Which of the following scenarios demonstrates price discrimination
Tickets to a play are sold for $15 for students and $25 for adults
Bethany decides to build a chicken coop, get some chickens, and start selling fresh eggs in her neighborhood. This example describes which of the following characteristics of perfect competition?
Very easy entry and exit
Which of the following best illustrates perfect competition?
Wheat farming
In monopolistic competition if there is profit, there is:
a signal for new firms to enter
Which of the following is not associated with the monopoly structure?
many sellers
Because a monopolistically competitive market is characterized by
many small sellers selling a differentiated product, each seller has some influence over its own price
The demand for a monopolistically competitive firm's product is
more elastic than for a monopoly
