EXAM 3 Dan Yang 211

(Figure 23.5) A perfectly competitive firm will maximize profits by producing the level of output that corresponds to point a.D. b.B. c.C. d.A.

B

(Figure 24.1) The profit-maximizing rate of output is a.F. b.I. c.H. d.C.

a. F

A monopolist has market power because it a. Faces a downward-sloping demand curve for its own output. b. Can raise price as much as it wishes and not lose any customers. c. Is regulated by the government. d. Is a price taker.

a. Faces a downward-sloping demand curve for its own output.

A firm should shut down production when a.P <minimum AVC. b.P = MC. c.P>minimum AVC. d.P = minimum ATC.

a.P <minimum AVC.

Which of the following is a common barrier to entry in a monopoly market? a.a patent on a new product b.a vertical supply curve c.a rising long-run average total cost curve d.economic profits greater than zero for the monopolist

a.a patent on a new product

(Figure 23.6) For a perfectly competitive firm, given the current market price, we expect to see a.exit from this industry. b.costs rise to absorb the profits earned by the firms in the industry. c.no change in the number of firms in this industry. d.entry into this industry.

a.exit from this industry.

If a firm in an oligopoly expands its market share at prevailing prices, its competitors a.lose market share. b.increase their market share. c.ignore the expansion. d.increase their profits.

a.lose market share.

The demand curve will be kinked if rival oligopolists a.match price reductions but not price increases. b.do not match price changes at all. c.match both price increase and price reductions. d.match price increases but not price reductions.

a.match price reductions but not price increases.

The concentration ratio for an oligopoly is considered a.over 60 percent. b.under 40 percent. c.100 percent. d.90 percent.

a.over 60 percent.

The pricing strategy in which there is an explicit agreement among producers regarding price is called a.price-fixing. b.marginal cost pricing. c.price leadership. d.price discrimination.

a.price-fixing.

If the price of ricotta cheese, an ingredient in lasagna, increases, then a.the market supply curve for lasagna will shift to the left. b.there will be a movement up along the market supply curve for lasagna. c.there will be a movement down along the market supply curve for lasagna. d.the market supply curve for lasagna will shift to the right.

a.the market supply curve for lasagna will shift to the left.

In monopoly and perfect competition, a firm should expand production when a. Price is below marginal cost. b. Marginal revenue is above marginal cost. c. Marginal revenue is below marginal cost. d. Price is above marginal cost.

b. Marginal revenue is above marginal cost.

Which of the following is true about a competitive market supply curve? a.It is horizontal. b.It is the sum of the marginal cost curves of all the firms. c.It is downward-sloping to the right. d.It is vertical.

b.It is the sum of the marginal cost curves of all the firms.

Which of the following rules is satisfied when a monopoly maximizes profits? a.Price = AVC. b.MR = MC. c.Price >MC. d.MR <MC.

b.MR = MC.

If all of your friends use the same instant messaging service provider, you are likely to use it too. This behavior may create a.nonprice competition. b.a network economy. c.cartels. d.distribution control.

b.a network economy.

If a firm can change market prices by altering its output, then it a.engages in marginal cost pricing. b.has market power. c.is a price taker. d.faces a flat demand curve.

b.has market power.

In monopoly and perfect competition, a firm should expand production when a.marginal revenue is below marginal cost. b.marginal revenue is above marginal cost. c.price is below marginal cost. d.price is above marginal cost.

b.marginal revenue is above marginal cost.

Which of the following may not characterize an oligopoly? a.substantial control over price b.no market power c.high barriers to entry d.a few firms

b.no market power

Which of the following may characterize a monopoly? a.low barriers to entry b.substantial market power c.many firms d.differentiated product

b.substantial market power

(Figure 24.1) The shaded area represents a.total revenue. b.total profit. c.total cost. d.total loss.

b.total profit.

Which of the following is characteristic of a perfectly competitive market? a.a small number of firms b.zero economic profit in the long run c.marginal revenue lower than price for each firm d.exit of small firms when profits are high for large firms

b.zero economic profit in the long run

(Figure 23.5) If a perfectly competitive firm produces the level of output corresponding to point B, it will earn a.the maximum profit possible. b.zero economic profit. c.a loss. d.a profit, although not the maximum profit possible.

b.zero economic profit.

Which of the following is true for a monopolist? a. Its marginal revenue curve is equal to its demand curve. b. It faces a perfectly elastic demand curve. c. It must lower its price on all of its units in order to sell any additional units. d. It faces many competitors.

c. It must lower its price on all of its units in order to sell any additional units.

(Figure 24.1) The profit-maximizing monopolist will charge a price of a.C. b.J. c.A. d.L.

c.A.

For a perfectly competitive market, long-run equilibrium is characterized by all of the following but which one? a.P = minimum ATC. b.P = MC. c.P = maximum ATC. d.P = MR.

c.P = maximum ATC.

Which of the following is not a determinant of market power? a.barriers to entry b.availability of substitutes c.age of the industry d.number of producers

c.age of the industry

If a new sushi restaurant opens, then a.the market supply curve for sushi will shift to the left. b.there will be a movement down along the market supply curve for sushi. c.the market supply curve for sushi will shift to the right. d.there will be a movement up along the market supply curve for sushi.

c.the market supply curve for sushi will shift to the right.

A monopolist will find that its marginal revenue curve a. Lies above its demand curve and is flatter than its demand curve. b. Is the same as its demand curve. c. Lies below its demand curve and has the same slope as its demand curve. d. Lies below its demand curve and is steeper than its demand curve.

d. Lies below its demand curve and is steeper than its demand curve.

Market power is a. Enjoyed by all firms at high levels of output. b. Most common for competitive firms. c. A characteristic of all market structures. d. The ability to alter the market price of a good or service.

d. The ability to alter the market price of a good or service.

Which of the following is characteristic of a perfectly competitive market? a.Differentiated products b.Significant barriers to entry c.Price below marginal revenue d.A large number of firms

d.A large number of firms

Which of the following is likely to be a monopolist a.the Boeing Company, which is one of the largest producers of airplanes b.an Indonesian restaurant in a large city c.a large firm like GM, which has a substantial portion of the car market d.a drug firm that has a patent granting it the exclusive right to produce a drug

d.a drug firm that has a patent granting it the exclusive right to produce a drug

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus? a.a lower price and fewer firms b.a higher price and fewer firms c.higher price and more firms d.a lower price and more firms

d.a lower price and more firms

If economic profits are earned in a competitive market, then over time a.the market supply curve will shift to the left. b.equilibrium price will rise as more firms enter. c.economic profit will increase as more firms enter. d.additional firms will enter the market.

d.additional firms will enter the market.

The price charged by a profit-maximizing monopolist occurs a.at the minimum of the long-run average total cost curve. b.at a price on the long-run average total cost curve below the point where MR = MC. c.where P = MR = MC. d.at a price on the demand curve above the intersection where MR = MC.

d.at a price on the demand curve above the intersection where MR = MC.

Monopolists are price a.takers as are competitive firms. b.makers as are competitive firms. c.takers, but competitive firms are price makers. d.makers, but competitive firms are price takers.

d.makers, but competitive firms are price takers.

For a monopolist, marginal revenue equals a.the change in quantity divided by the change in total revenue. b.price. c.price times quantity. d.the change in total revenue divided by the change in quantity.

d.the change in total revenue divided by the change in quantity.