Economics Midterm 2

Low; Low

A market is considered competitive if the Herfindahl-Hirschman Index (HHI) is ___ and its Four- Firms Concentration ratio is ___.

One supplier

A monopoly is a market with

With no close substitutes; Are

A monopoly produces a product _____ and there ____ barriers to entry into the market.

One firm can supply an entire market at a lower average total cost than can two or more firms

A natural monopoly exists when

Greater than average total cost

A perfectly competitive firm definitely earns an economic profit in the short run if price is

$1000

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20. What is the firm's total cost?

$150

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20.What is the firm's economic profit?

Average variable costs

A perfectly competitive firm should shut-down in the short-run if price falls below the minimum of

Its marginal cost curve above the AVC

A perfectly competitive firm's short-run supply curve is

Consumer surplus to producers

A single- price monopoly transfers

Less output

Compared to a perfectly competitive industry, a single-price monopoly produces _____.

A higher price

Compared to a perfectly competitive market, a single- price sets ____.

Creates a dead-weight loss and decreases consumer surplus

Compared to a similar perfectly competitive industry, a single-price monopoly

Is incurring an economic loss

If a perfectly competitive firm finds that price is less than its ATC, then the firm

Average total cost

For a firm in monopolistic competition, the efficient scale is the amount of output at which _____ is a minimum.

Equal to the change in total revenue brought about by a one-unit increase in quantity sold.

For a monopoly, marginal revenue is

Equal to the price

For a perfectly competitive firm, marginal revenue is

Will also be $5

If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue

Price equals marginal revenue, marginal revenue equals marginal cost, and price is greater than average total cost

If a perfectly competitive firm is maximizing its profit and is earning an economic profit, which of the following is correct?

The quantity of output it sells decreases to zero

If a perfectly competitive firm raised the price of its product,

The producer can spend funds lobbying to attain passage of the legal barrier to entry, the producer can purchase an existing monopoly, the producer can make rent seeking expenditures.

If a producer wants a monopoly with a legal barrier to entry, how can this be done?

Exit; Market supply curve shifts leftward

If firms in a perfectly competitive market have economic losses, then as time passes firms ____ and the _____.

New rivals enter the industry and the demand for any seller's good decreases

If firms in monopolistic competition are earning economic profits, then

New firms enter the industry

If firms in monopolistic competition, are earning economic profits, eventually ____.

Always to maximize its profit

If it does not shut down, a perfectly competitive firm produces where marginal cost is equal to the marginal revenue

Increases

If new firms enter a perfectly competitive industry, the market supply

Attracts entry by more firms,which lowers the price

If perfectly competitive firms are earning an economic profit, the economic profit,

New firms will enter the market

If perfectly competitive firms are making an economic profit, then

An oligopoly

If the four- firm concentration ratio for the market for diapers is 73%, then this industry is best characterized as ___.

A smaller quantity at a higher price

If we compare a perfectly competitive market to a single-price monopoly with the same costs, the monopoly sells ____.

Gain; lose

In a monopoly, producers ___ and consumers ____.

Shifts existing firms' demand curves leftward

In monopolistic competition, the entry of new firms

Similar but slightly different

In monopolistic competition, the products of different sellers are

Makes zero profit

In the long run in monopolistic competition, firms

Has; Does not have

In the long run, a firm in monopolistic competition ____ a markup of price over marginal cost and a firm in perfect competition ____ a markup of price over marginal cost.

Zero economic profit

In the long run, a perfectly competitive firm earns

Less than

In the long run, firms in monopolistic competition produce at a level that is ____ the efficient scale of output.

Less than average total cost

In the long run, perfectly competitive firms will exit the market if the price is

Might; might

In the short run, a perfectly competitive firm _____ earn an economic profit and _____ incur an economic loss.

The change in total revenue from a one-unit increase in the quantity

Marginal revenue is

$500

Suppose Pat's Paints is a perfectly competitive firm. If Pat's Paints marginal revenue equals $5 per can, and Pat decides to sell 100 cans of paint, Pat's total revenue equals

Zero

The deadweight loss with perfect price discrimination is

Has no close substitutes

The good produced by a monopoly

Horizontal

The marginal revenue curve for a perfectly competitive firm is

Marginal revenue equals marginal cost

The maximum profit for a single-price monopoly is found when the firm produces the level of output so that

MR=MC; MR=MC

To maximize its profit, a perfectly competitive firm produces so that _______ and a single price monopoly produces so that ______.

What quantity of output to produce

To maximize its profit, in the short run a perfectly competitive firm decides

Price multiplied by the quantity sold

Total revenue is equal to

Natural; Legal

Two types of barriers to entry are called _____ barriers to entry and _____ barriers to entry.

Rise; Customers

Under earnings sharing regulation, if a firm's profits ___ above a certain level, they must be shared with the firm's __.

Only perfectly price-discriminating monopoly

Under which of the following is consumer surplus zero?

A large number of firms and freedom of entry and exit.

What does monopolistic competition have in common with perfect competition?

Is the same as its demand curve

When a firm is able to engage in perfect price discrimination, its marginal revenue curve

Decrease

When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will

Exit the industry and the demand will increase for the firm's that remain

When firms in monopolistic competition incur an economic loss, some firms will

Rightward; Falls

When new firms enter a perfectly competitive market , the market supply curve shift ___ and the price _____.

25 percent

Which of the following four-firm concentration ratio is consistent with monopolistic competition?

2 percent

Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?

A perfectly competitive firm producers where MR=MC but a monopoly produces where MR>MC

Which of the following statements is FALSE?

In order to price discriminate, a firm must sell a good or service that cannot be resold.

Which of the following statements is correct?

Because the firm is protected by barriers to entry

Why can a monopoly make an economic profit in the long run?

The firm's demand curve becomes its marginal revenue curve; marginal cost

With perfect price discrimination ______ and production is expanded until marginal revenue equals ___.

Equal to but not greater than

With perfect price discrimination, the quantity of output produced by a monopoly is ____ the quantity produced by a perfectly competitive industry.

Is the same as the amount produced in

With the perfect price discrimination, the level of output ____ a perfectly competitive market.

A price discriminating; different prices

A _____ market sells different units of its good or service for _____.

A single-price monopoly; the same prices

A _____ sells different units of its good or service for _____.

Close but not perfect substitutes

A differentiated product has

Many other firms produce identical products

A firm in perfect competition is a price-taker because

Marginal revenue equal marginal cost

A firm maximizes its profit by producing the amount of output such that

Decrease until they equal zero

Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms ____

Produces a good that is identical to that of the other firms

Each firm in a perfectly competitive industry

Less than the quantity that minimizes average total cost

Excess capacity exists when a firm produces

Many firms produce the good

Monopolistic competition is defined as a type of market structure in which ____.

Are economics of scale

Natural barriers to entry arise when over the relevant range of output, there

Product diffentiation

One of the major benefits to society of monopolistic competition is

There are no restrictions on entry into or exit from the market

One requirement for an industry to be perfectly competitive is that

Are a legal barrier to entry

Patents

Imposes a price ceiling on the regulated firm

Price cap regulation is defined as regulation that

The government; economic profit

Rent seeking is the act of obtaining special treatment by _____ to create ____.

The same as the market price

The price charged by a perfectly competitive firm is

Herfindahl-Hirschman Index

The square of the percentage market share of each firm summed over the 50 largest firms in a market is the ___.

Be able to identify and separate different types of buyers

To be able to price discriminate, a firm must

A decrease in market supply

To eliminate losses in a perfectly competitive market, firms exit the industry. This exit results in ___.