G Test Study Questions
What price should a competitive price-searcher firm charge with the cost and demand conditions depicted in Figure 10-9 if it wants to maximize its profit?
$24
At the profit-maximizing level of production, the monopoly in Figure 11-20 will have total revenue of
$272
Refer to Table 11-1. The maximum profit this monopolist can earn is
$28
The demand and total cost schedules of a monopolist are presented in Table 11-3. What price should a profit-maximizing monopolist charge?
$8
The demand and cost schedules of a monopolist are presented in Table 11-5. What price should a profit-maximizing monopolist charge?
$8 ((look in gANSWERS website for table))
If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?
A decrease in demand for each firm and lower prices.
If firms in a competitive price-searcher market are incurring economic losses, which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to long-run equilibrium?
An increase in demand for each firm and higher prices.
What should a profit maximizing monopolist do if she is currently producing where MC < MR?
Increase output until MC = MR.
Monopolists are criticized because they are inefficient. What is meant by this statement?
Monopolists usually don't produce at the minimum of the ATC.
file:///C:/Users/Rocky/Pictures/g10.html
P3
If the monopolist is regulated by the "marginal cost pricing" technique, what price in Figure 11-10 will be charged?
P^3 ((look in gANSWERS website for pic))
What output would a monopolist with the demand and cost conditions depicted in Figure 11-4 produce if ordered by regulators to serve the entire market at average cost?
S
Which of the following is the best example of a firm operating in a competitive price-searcher market?
TGI Fridays, a family restaurant
Which of the following is true for firms that produce in markets where there are no barriers to entry?
The firms will always make zero economic profits in the long run.
Which of the following must be true if a price-searcher firm is operating at the profit-maximizing output rate?
The marginal cost of producing the last unit is no greater than the marginal revenue derived from its sale.
Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
The output of the monopolist will be too small and the price too high.
Which of the following statements is correct?
To maximize profit, a price discriminator distinguishes groups with different demands and charges higher prices to those with the more inelastic demand.
Refer to Figure 11-15. Which of the following areas represents the deadweight loss due to monopoly pricing?
Triangle bge
Suppose a market is initially competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect
a decrease in market output and an increase in the price of the product.
Which of the following firms best fits the definition of a monopoly?
a local cable company that has been granted the only license to sell cable in a city by the town council
In essence, patents grant their owners
a property right to new products and production processes that they have developed.
Which of the following increases the likelihood that a group of sellers can increase profits as the result of collusion?
a stable demand for the product
Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in
a wider variety of products and higher prices.
If a new entrant (or an established firm) wants to leave a contestable market,
all, or nearly all of, the invested capital values can be recovered.
In long-run equilibrium in a competitive price-searcher market, a firm will not produce the output level that minimizes average total cost because
at that output level, MC is greater than MR
Because barriers to entry are low in competitive price-searcher markets, in the long run, a firm's price will be equal to
average total cost.
A competitive price-searcher market is characterized by firms
being able to choose their price and no barriers preventing firms from entering or leaving the market.
In general, an organization of sellers designed to coordinate supply decisions so that the joint profits of the members is maximized is called a(n) ____. If they are successful, the total market output and price will most closely approximate the output and price in a(n) ____ market. (Fill in the blanks.)
cartel; monopoly
When the firm is a price searcher, the marginal revenue of selling the tenth unit is the
change in total revenue that results from selling the tenth unit.
Which of the following is true of a competitive price-searcher firm when the market is in a long-run equilibrium?
competition among suppliers will force prices down to the level of production costs.
In the long run the prices charged by a firm in a competitive price-searcher market will be
equal to average cost, including the opportunity cost of capital.
The characteristic that distinguishes a competitive price-searcher market from a price-taker market is the
firms in price-searcher markets produce differentiated products.
Refer to Figure 10-14. In the long run, we would expect
firms to exit this industry until zero economic profits are restored.
Which of the following is an obstacle that would reduce the likelihood of effective collusion among oligopolists?
highly unstable demand for the product
The marginal revenue curve lies below the demand curve for a competitive price searcher because
in order for a competitive price searcher to sell an extra unit, it must cut the price on all units. The lowered price offsets the additional revenue from the extra unit sold, so the marginal revenue is lower than the price.
The demand curve facing a monopolist
lies above its marginal revenue curve.
Which of the following best fits the definition of a monopoly?
local cable company
At the profit-maximizing level of production, the monopoly in Figure 11-20 will have a
loss per unit of output of $2.
If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?
low costs of entry into and exit from the market
If marginal revenue exceeds marginal cost, a profit-maximizing monopolist will
lower price and increase output.
When a single firm has control over the market supply of a resource that is essential to the production of a good,
monopoly is frequently the result.
An important difference between the situation faced by a profit-maximizing competitive price-searcher firm in the short run and the situation faced by that same firm in the long run is that in the short run,
price may exceed average total cost, but in the long run, price will equal average total cost.
The demand and cost conditions in an industry are as depicted in Figure 11-7. In the viewpoint of economic efficiency, what would the ideal price and output be?
price, $10; quantity produced, 170
If the output in the industry is produced by a monopolist, at what price will the good sell and what quantity will be produced in Figure 11-8?
price, $20; quantity produced, 50
A monopolist has less to gain from cost-saving measures in the production process when
regulators use average cost pricing to set the monopolist's price.
If a restaurant in Seattle raises its price, its
revenue will probably fall, as customers are drawn to other restaurants.
A market will tend to be more competitive when
similar products are available from alternative sellers.
One of the effects of patents is to
temporarily provide the patent owner with monopoly power.
Entrepreneurial judgment requires
the ability to discover new approaches or solutions to complex problems.
In the area of business, rent-seeking often involves
the use of resources to secure and maintain a grant of monopoly power from the government.
Some economists have argued that competitive price-searcher industries are allocatively inefficient relative to price-taker industries because
unlike price takers, price searchers do not produce at the minimum of their average total cost curves.