micro exam 3

Tom has his own business of selling hotdogs at tailgating parties for the Auburn football games. Alternatively, he could also work as a chef in a fancy French restaurant in Atlanta making $60,000 a year. If he makes revenues of $10,000 selling hot dogs, and incurs expenses of $500, what is his economic profit?

-$50,500

what conditions distinguish an oligopoly from monopolistic competition

-each firm has a large share if the market, making the firms independent -firms face the temptation to collude -there are natural or legal barriers that prevent the entry of new firms

a Nash equilibrium is an equilibrium in which

-each player is playing his or her best strategy given the strategy choices of all other players -no player has incentive to change his or her action unilaterally

1. In the short run, a monopolistically competitive firm a) May make economic profits, but it fails to make economic profits in the long run because of the entry of new firms. b) May make profits just as it does in the long run, because there are no barriers to entry c) Makes profits just as it does in the long run because there are barriers to entry. d) None of the above

A

8. A duopoly occurs when ________. a) there are only two producers of a particular good competing in the same market b) there are two producers of two goods competing in an oligopoly market c) there are numerous producers of two goods competing in a competitive market d) the one producer of two goods sells the goods in a monopoly market

A

9. How is a monopolistically competitive firm similar to a perfectly competitive firm? A) both will observe entry into the industry if economic profit is positive B) both produce where average total cost equals marginal cost C) both make a positive economic profit in the long run D) both produce a homogeneous good

A

If the marginal product curve is __________ the average product curve, then the average product curve is _______

above; rising

which short run curve is not U-shaped

average fixed cost

When the marginal and average products of labor are equal to each other, the: -average product must be at its maximum value. -marginal product must be at its maximum value. -total product must be at its maximum value. -None of the above answers is correct

average product must be at its maximum value.

In the long run, some firms will exit the market if the price of the good is less than A. marginal cost B. average total cost C. marginal revenue D. average revenue

average total cost

in the long run, some firms will exit the market if the price of the good is less than

average total cost

what characteristic is associated with monopolistic competition: a. collusion b. product differentiation c. small number of firms d. awareness of rival firms in the market

b. product differentiation

the primary reason why a monopoly can make a long-run economic profit is the existence of

barriers to entry

prisoners delima

both players have a dominant strategy

7.Which of the following is a characteristic of monopoly? a. The firm faces competition from a few other firms. b. The firm produces a product that has many close substitutes. c. There are barriers to enter the market. d. The firm's demand curve is perfectly elastic.

c. there are no barriers to enter the market

in a perfectly competitive market, if a firm is producing at a level of output such that its marginal cost exceeds its price, it will ....

decrease its output to increase profits

perfectly competitive market, if a firm finds it is producing at a level of output such that its marginal cost exceeds its price, it will

decrease its output to increase profits

in the long run, monopolistically competitive firms make zero economic profit because of

easy entry and exit

If a company triples its plant size and its average cost decreases, then the firm is experiencing

economies of scale

a natural monopoly emerges in a market where there are

economies of scale

in perfect competition, the marginal revenue of an individual firm

equals the price of the product

how do you find profit maximizing output

find where marginal cost=marginal benefit

marginal revenue ____ in a competitive market

remains the same

If price falls below the Avc of production, a competitive firm will

shut down

if the price falls below the AVC of production, a competitive firm will ____

shut down

dominant strategy

strategy that is played all the time

Total cost is equal to the: -sum of the total fixed cost and the total variable cost. -sum of the average fixed cost and the average variable cost. -difference between the average variable cost and the average fixed cost. -product of the marginal cost multiplied by the average total cost.

sum of the total fixed cost and the total variable cost.

The short run is a period of time in which: -the quantity of at least one factor of production is fixed. -the amount of output is fixed. -prices and wages are fixed. -nothing the firm does can be altered.

the quantity of at least one factor of production is fixed.

a single price monopoly charges the same price

to all customers for each unit of output they buy

when quantity =0, fixed cost=

total cost

variable cost= (average variable cost)

total cost - fixed cost (divide by quantity to get average)

4. In the long run for a perfectly competitive market, profit is A. Positive B. Negative C. Zero D. Either a or b

zero

in the long run for a perfectly competitive market, profit is ____

zero

in which industry are there no barriers to entry

perfect competition and monopolistic competition

in a perfectly competitive industry, the demand curve faced by a single firm is

perfectly elastic

3. A monopoly that does not practice price discrimination produces ___________ output than a competitive market would and charges a ___________ price than a competitive market would. a. less; higher b. less; lower c. more; higher d. more; lower

A. less;higher

10. One important difference between monopoly and monopolistic competition is the A) slope of the demand curve that the firms faces. B) point there are no barriers to entry in monopolistic competition. C) greater restriction of output in monopolistic competition. D) result that the marginal revenue and demand curves are the same for a monopoly.

B

3. Which characteristic is associated with monopolistic competition? A) collusion B) product differentiation C) small number of firms D) awareness of rival firms in the market

B

7. Which of the following is NOT a characteristic of monopolistic competition? A) many firms B) price taking firms C) advertising D) product differentiation

B

9.To maximize profit, the monopolist produces on the ________ portion of its demand where ________. a. elastic; P = MC b. elastic; MR = MC c. inelastic; P = MC d. inelastic; MR = MC

B

4. To maximize profit, a monopolist who does not practice price discrimination produces on the portion of its demand curve, where ______. a. elastic; P = MC b. elastic; MR = MC c. inelastic; P = MC d. inelastic; MR = MC

B. elastic; MR=MC

10. Game theory is most useful for analyzing a) perfect competition. b) monopolistic competition. c) oligopoly. d) monopoly.

C

4. In the long-run, a firm in monopolistic competition produces at an output level where A) P > ATC and MR = MC. B) P > ATC and MR > MC. C) P = ATC and MR = MC. D) P = ATC and MR > MC.

C

5. In the long run, monopolistically competitive firms make zero economic profit because of A) excess capacity. B) product variety. C) easy entry and exit. D) government regulation.

C

9. When producers agree to restrict output, raise the price, and increase profits, the agreement is called ________. a) a pricing agreement b) an oligopoly agreement c) a collusive agreement d) a monopoly agreement

C

Which of the following is a defining characteristic of a perfectly competitive market? A) advertisements by well known celebrities B) persistent economic profits in the long run C) no restrictions on entry into the industry D) higher prices being charged for certain name brands

C) no restrictions on entry into the industry

1. A Nash equilibrium is equilibrium in which a) Each player is playing his or her best strategy given the strategy choices of all other players b) No player has incentive to change his or her action unilaterally c) Each player is playing a dominant strategy d) both a) and b)

D

2. In which of the following industries there are no barriers to entry? a) Monopoly b) perfect competition c) monopolistic competition d) both(b)and(c)

D

2. Which of the following condition(s) distinguishes an oligopoly from monopolistic competition? a) Each firm has a large share of the market, making the firms independent b) Firms face the temptation to collude c) There are natural or legal barriers prevent the entry of new firms d) All of the above

D

8. One difference between perfect competition and monopolistic competition is that A) a perfectly competitive industry has fewer firms. B) in perfect competition, firms produce slightly differentiated products. C) monopolistic competition has barriers to entry. D) firms in monopolistic competition face a downward-sloping demand curve.

D

3) Individual firms in perfectly competitive industries are price takers because A) the government sets all prices. B) buyers set prices. C) firms decide together on the best price to charge. D) each individual firm is too small to affect the market price.

D) each individual firm is too small to affect the market price.

In perfect competition, ________. A) there are restrictions on entry into the market B) firms in the market have advantages over firms that plan to enter the market C) only firms know their competitors' prices D) there are many firms that sell identical products

D) there are many firms that sell identical products

in the short run, a perfectly competitive trim will shut down if

P<AVC

in the long run, a firm in monopolistic competition produces at an output level where

P=ATC and MR=MC

in the short run, a firm in monopolistic competition produces at an output level where

P>ATC and MR=MC

When the marginal product of labor is a maximum, the average product of labor is ________. -increasing -equal to marginal product -decreasing -a maximum

increasing

Diminishing marginal returns to labor occur because: -the capital resources used by the firm are fixed in the short run. -workers become more efficient over time. -larger companies are less efficient. -after awhile it is hard to find a good worker.

larger companies are less efficient.

In an indifference curve/budget line diagram, generally when the price of a good increases, the consumer purchases ____ of the good and moves to a ____ indifference curve.

less; lower

what determines market price in a perfectly competitive market

market demand and market supply

in the short run, a monopolistic firm .....

may make economic profits, but it fails to make economic profits in the long run because of entry of new firms