micro chapter 21,22,23 test 3

perfect competition and its characteristics

-many sellers of identical products 1. there are many sellers in a perfectly competitive market 2. all firms in a perfectly competitive market sell an identical product

theories of oligopoly behavior

1. kinked demand curve theory 2. unkinked demand curve theory 3. cartel theory - non cartel competition -the tendency of cartel members to cheat on the agreement

barriers to entry

1. legal barriers -public franchise -patent -copyright -license -trade restrictions 2. economies of scale 3. exclusive ownership of an essential resource

other problems with monopoly

1. less responsive to consumer demand 2. less diligent to minimize costs of production

product differentiation list

1. product differentiation increases the firms market power 2. product differentiation increase the demand for the firms product

monopoly

a firm that is the lone seller of a product with no close substitutes

3. a natural monopoly is the results of: a.extreme economies of scale b. legal barriers to entry c. a cartel agreement d. all of the above

a. extreme economies of scale

19. in comparison to perfect competition, monopoly results in: a. greater economic profit b. the same economic profit c. lesser economic profit

a. greater economic profit

2. like perfect competition, monopolistic competition: a. has many sellers b. has no market power c. both d. neither

a. has many sellers

13. if a perfect competitor produces the quantity of output where marginal revenue equals marginal cost, when price is less than AVC, it: a. incurs a loss greater than fixed costs b. incurs a loss equal to fixed costs c. incurs a loss less than fixed costs d. all of the above are possible

a. incurs a loss greater than fixed costs

14. game theory: a. is a method for analyzing strategic behavior b. was developed by Stephen hawking c. both d. neither

a. is a method for analyzing strategic behavior

17. monopoly produces: a. may attain their monopoly positions through rent seeking b. will be very responsive to consumer demand c. will be very diligent to minimize costs of production d. all of the above

a. may attain their monopoly positions through rent seeking

20. in comparison to perfect competition, a monopoly is: a. more likely to be able to sustain economic profit b. just as likely to be able to sustain economic profit c. less likely to be able to sustain economic profit

a. more likely to be able to sustain economic profit

9.the kinked demand curve theory: a. results in a gap in the marginal revenue curve b. predicts "sticky" prices for oligopoly c. has been criticized by george stiller d. all of the above

a. results in a gap in the marginal revenue curve

11. if a perfect competitor produces the quantity of output where marginal revenue equals marginal cost, when price is greater than ATC, it: a. will earn economic profit b. incurs a loss less than fixed costs c. incurs a loss greater than fixed costs d. all of the above

a. will earn economic profit

8. the kinked demand curve theory assumes that other firms: a. will match price decreases, but not price increases b. will match price increases, but not price decreases c. will not match either price increase or price decreases d. will match both price increase and price decreases

a. will match price decreases but not price increases

oligopoly

an industry dominated by a free mutually interdependent firms

5. by producing the quantity of output where marginal revenue equals marginal cost, a firm will: a. maximize total revenue b. maximize profits c. minimize costs d. all of the above

b. maximize profits

17. perfect competition: a. requires government direction of production to protect the interests if society b. maximizes individual freedom c. both d. neither

b. maximizes individual freedom

16.a cartel is more likely to be successful if: a. there are many members in the cartel b. members in the cartel who cheat are likely to be caught and punished by the cartel c. both d. neither

b. members in the cartel who cheat are likely to be caught and punished by the cartel

4. if a perfect competitor decreases its output: a. the market price will increase b. there market price will be unaffected c. the market price will decrease d. all of the above are possible

b. there market price will be unaffected

7. in the long run, a monopolistic competitor is likely to earn: a. a small economic loss b. zero economic profit c. a small economic profit d. a large economic profit

b. zero economic profit

1. product differentiation benefits a monopolistic competitor by: a. increasing the firms market power b. increasing the demand for the firms product c. both d. neither

c. both

11. which of the following factors can make a cartel difficult to maintain? a. non cartel competition b. the tendency of cartel members to cheat on the agreement c. both d. neither

c. both

12. monopoly is inefficient because it results in a quantity of output: a. where price exceeds marginal cost b. where marginal social benefit exceeds marginal social cost c. both d. neither

c. both

14. in a perfectly competitive market, in the long run: a. firms will tend to earn zero economic profit b. price will be equal to minimum ATC c. both d. neither

c. both

15.the nash equilibrium in the prisoners' dilemma game: a. is for both prisoners to confess b. does not yield the best results for the prisoners c. both d. neither

c. both

16.the goal of a perfect competitor: a. is to maximize profits b. coincides with society goal of economic efficiency c. both d. neither

c. both

18. the NCAA rules that limit the financial aid to college athletes: a. redistribute income from the football and basketball players to the coaches b. redistribute income from the football and basketball platers to the athlete in non revenue sports c. both d. neither

c. both

6. for a perfect competitor: a. the demand curve and the marginal revenue curve are the same b. price equals marginal revenue c. both of the above d. neither of the above

c. both

2. a perfect competitor: a. has maximum market power b. has only a small amount of market power c. has no market power d. all of the above are possible

c. has no market power

12. if a perfect competitor produces the quantity of output where marginal revenue equals marginal cost, when price is less than ATC, but greater than AVC, it: a. incurs a loss greater than fixed costs b. incurs a loss equal to fixed costs c. incurs a loss less than fixed costs d. all of the above

c. incurs a loss less than fixed costs

5. for a monopoly, the marginal revenue curve: a. is the same as the demand curve b. is horizontal c. is twice as steeply downward sloping as the demand curve d. is upward sloping

c. is twice as steeply downward sloping as the demand curve

4. in comparions to perfection competition,monoplistic competition results in: a.more output at a lower price b. more output at a higher price c. less output at a higher price d. less output at a lower price

c. less output at a higher price

11. in comparison to perfect competition, monopoly results in: a.more output, higher price b. more output, lower price c. less output, higher price d. less output, lower price

c. less output, higher price

13. an oligopoly produces a quantity of output: a. greater than the economically efficient quantity b. equal to the economically efficient quantity c. less than the economically efficient quantity

c. less than the economically efficient quantity

3. in a perfectly competitive market: a. entry of new firms is difficult due to economies of scale b. exit of existing firms is difficult due to high fixed costs c. there is freedom of entry and exit d. both a and b above

c. there is freedom of entry and exit

4. if a monopoly can sell ten units for $15 each or eleven units for $14 each, what is the marginal revenue of the 11th unit? a. $154 b. $150 c.$14 d.$4

d. $4

1. a perfect competitor: a. is one of many sellers in a market b. sells a product identical to its competitors' products c. is unable to affect the market price d. all of the above

d. all of the above

1. monopoly: a. has the ability to affect market price b. faces a downward sloping demand curve c. has maximum market power d. all of the above

d. all of the above

10. if the firms in an oligopolistic industry form a cartel: a. industry output will be reduced b.price will be increased c. industry profits will be increased d. all of the above

d. all of the above

15. perfect competition results in: a. the most efficient quantity of output b. the quantity of output where price equals marginal cost c. the quantity of output where marginal social benefit equals marginal social cost (assuming no externalities) d. all of the above

d. all of the above

18. price discrimination: a. may be achieved by making coupons and discounts available b. may be achieved by negotiating c. may allow a firm to increase its profits by gaining some of the consumer's surplus d. all of the above

d. all of the above

2. which of the following is an example of a legal barrier to entry? a.trade restrictions b. patent c. license d. all of the above

d. all of the above

5. monopolistic competition is: a. economically efficient, like perfect competition b.economically inefficient like monopoly c. not as inefficient as monopoly d. both b and c above

d. both b and c

10. a monopoly finds that at the present quantity output, marginal revenue equals $7.00 and marginal cost equals $4.00. which of the following will increase profits? a. leave price and output unchanged b.increase price and leave output unchanged c. increase price and decrease output d. decrease price and increase output

d. decrease price and increase output

6. monopolistic competition results in a quantity of output where: a. price equals marginal cost b. marginal social benefit is less than marginal social cost c. both d. neither

d. neither

17. the NCAA: a. limits the financial aid to college athletes to "fifty percent of the revenue generated by the athletic program" b. limits the maximum ticket prices that colleges can charge for athletic events c. limits the salaries that colleges can pay their coaches d. none of the above

d. none

12. an oligopoly produces: a. the quantity of output where price equals marginal cost b. more output than perfect competition c. where marginal social benefit equals marginal social cost d. none of the above

d. none of the above

3. for a monopolistic competitor: a. the demand curve and the marginal revenue curve are the same b. price equals marginal revenue c. profit-maximization occurs at the economically efficient quantity d. none of the above

d. none of the above

barriers to entry

factors that block the entry of new firms into a market

monopolistic competition

many sellers of similar products

price discrimination

occurs when a seller charges different prices to different buyers for the same good

profit-maximization rule

produce the quantity of output where marginal revenue equals marginal cost

market power

the ability of a seller or a buyer to affect market price

marginal revenue

the change in total revenue from selling one additional unit of output

product differentiation

the process of distinguishing a firm's product from similar products

rent seeking

when people use resources to manipulate public policy in order to redistribute income to themselves from others