Economics 10-11

Which of the following is true for a monopolistically competitive firm in Long-run equilibrium?

It earns a normal profit

The use of game theory to explain strategic behavior among firms is most associated with which of the following market structures?

Oligopoly

A monopolistically competitive firm's demand curve will be highly elastic if which of the following exists?

A high degree of product substitutability

A monopolist introduces a technological innovation that lowers the marginal costs and average cost of production. The price of the good and the level of output are most likely to change in which of the following ways? Price Level of output

Decrease Increase

Which of the following government actions can correct the inefficiency caused by the existence of a monopoly?

Granting a per-unit subsidy on the monopolist's output

Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly's price and output will be which of the following? Price Output

Higher Lower

Monopolistically competitive firms are considered inefficient in allocating society's resources for which of the following reasons?

In equilibrium, the marginal benefit exceeds the marginal cost of production.

Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition?

In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product.

A cartel is difficult to maintain for which of the following reasons?

Individual cartel members are tempted to cheat on the agreement.

Which of the following is always true of a monopoly that is producing a level of output such that marginal revenue is negative?

It could decrease output to increase profits.

For the firm shown in the above graph, which combination of output and price will maximize its profit? Output Price

Q1 P4

For the firm shown in the graph above, the short-run profit-maximizing strategy would be to set output at

Q1, price at P3, and earn an economic profit

Which of the following is true of a monopolistically competitive firm in long-run equilibrium?

Price equals average total cost but is greater than marginal cost.

If a per-unit tax is imposed on a monopolist, how will the monopolist's marginal cost curve, output, and the price paid by consumer be affected? Marginal Cost Output Price

Shift up Decrease Increase

In order for a firm to engage in price discrimination, it must be

able to separate consumers into different groups based on demand elasticities

A monopolist is inefficient from society's point of view because

it underproduces output and charges a price above marginal cost

If Chris Wizzart Incorporated is a monopolistic producer of diamonds, the firm's demand curve is downward sloping because

the number of diamonds Wizzart Inc offers for sale affects the price of diamonds

Farmingdale charges high price. Farmingdale charges low price. Agronomia charges high price. $150, $150 $50, $300 Agronomia charges low price. $30, $50 $100, $100 9. The above table shows the profits associated with the pricing strategies of two oligopolistic firms, Agronomia and Farmingdale. Each firm has two possible strategies: to charge a low price or a high price. The first entry in each cell shows the profits to Agronomia and the second the profits to Farmingdale. If the two firms do not cooperate, as a result of the firms' pricing decisions that profits of each firm will be which of the following Agronomia's Profit Farmingdale's Profit

$100 $100

The characteristic of oligopolistic firms that makes them different from all other types of firms is that oligopolistic firms

consider each other's decisions

For an unregulated monopolist, the profit-maximizing quantity will always be

in the elastic region of the demand curve

Consider the above payoff matrix. If lock chooses to charge the low price, the best course of action for star would be to charge the

low price and earn a profit of $40

One difference between a firm in a perfectly competitive market and an unregulated monopoly is that the

perfectly competitive firm can increase the quantity it sells at the market price, whereas the monopoly must lower its price to sell more.

If the government imposes a per-unit tax on the output of a monopoly with a downward-sloping demand curve, the burden of the tax will be

shared by consumers and the monopolist

Which of the following is necessary for a firm to practice price discrimination?

the firm can prevent resale of its goods.

Over the past 5 years, 50 new restaurants have opened and 30 have closed in the city of Philadelphia. Currently there are 110 restaurants operating in the city. Which of the following best represents the market structure, barriers to entry, and economic profits in the long-run? Market Structure Barriers to Entry Long-Run Economic Profits

Monopolistic competition Low Zero