Micro - Unit 2
Price discrimination by a monopolist leads to the firm earning higher profits but it also delivers benefits to
consumers, because prices are lowered to potential consumers who otherwise might not have been able to buy the good
Which statement is TRUE about public and private-employee unions?
Only private-employee unions can call strikes, while public-employee unions tend to contribute less for their health insurance premiums
The National Football League (NFL) achieves market power through its ability to
control inputs
The industrial structure of cartels is an example of a(n):
cooperative game
Which characteristic does monopolistic competition NOT have in common with perfect competition?
Products of individual firms are different
If Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then:
Rosco's demand curve will shift to the right
If Tamara is given a $3-per-hour pay increase, and in response, she decides to work more hours, then
Tamara's work hours are represented on the upward-sloping portion of her labor supply curve
Which of these is NOT a condition necessary for price discrimination?
The product must be a durable good
Gary Becker's theory of economic discrimination argues that
employers who discriminate against women will lose profit opportunities
Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is
an oligopoly
A Nash equilibrium:
assumes that each player chooses his or her best strategy
If the public utility commission allows a water company to earn a normal profit, then it is enforcing a(n)
average cost pricing rule
If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand until each firm earns a normal profit.
exit; increasing
A Nash equilibrium always yields the best outcome for all participants in a game
false
Prisoner's dilemma outcomes are uncommon
false
Which action can help increase the stability of a cartel?
increase government protection
If a cartel member is considering cheating in order to earn profits, it should:
increase the quantity it sells at the quota price
Which of the following products is likely to be the MOST differentiated?
garments sold to a retail customer
Three barriers to entry that prevent firms from entering a market and competing in the market are control over inputs, economies of scale, and
government protection through patents and copyrights
According to the segmented labor market view, unions restrict the labor supply in order to increase wages. As labor migrates to non-union markets, non-union wage rates fall. Which of these actions would reduce the incentive for firms to substitute non-union workers for union members?
increasing the minimum wage in the non-union markets
If wages increase at a 5% rate and the quantity demanded of labor decreases by 10%, then the elasticity of demand for labor is
2
If an industry is made up of five firms with market shares of 25%, 20%, 20%, 20%, and 15%, respectively, its Herfindahl-Hirschman Index is
2,050
A monopolist has four distinct groups of customers: group A has an elasticity of demand of 0.2, group B has an elasticity of demand of 0.8, group C has an elasticity of demand of 1.0, and group D has an elasticity of demand of 2.0. The group paying the highest price for the product will be group
A
At movie theaters, lower prices are charged for matinees than for evening shows of the same film. The customers attending the matinees have
higher elasticities of demand than customers attending the evening shows
What types of industries have been outsourced from the United States because of international trade?
industries that require a large amount of labor
In recent years, the United States has produced a growing share of
intangible services
A deadweight loss
is the same as welfare loss
Derived demand suggests that
labor demand is derived from demand for the product it produces
One of the reasons that competition may fail to eliminate gender wage discrimination is
lack of mobility
To maximize profits, the monopolist produces at a level of output in which
marginal revenue equals marginal cost, and then the monopolist charges the highest price for that output indicated by the demand curve
Game theory is the study of how
people make decisions when each is acting in his or her own best interest, and have strategies that may yield different outcomes
A monopoly harms consumers because
prices are higher and output is lower than if the industry was perfectly competitive
Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then
profits will increase
When monopolies waste resources attempting to prevent other firms from competing with them, it is referred to as
rent seeking
Some prisoner's dilemma outcomes can be resolved when the players engage in
repeated games
Suppose a water utility company charges a residential customer $1.50 per 1,000 gallons for the first 30,000 gallons of water used and $1.00 per 1,000 gallons for any amounts used in excess of 30,000 gallons of water. The water utility is practicing
second-degree price discrimination
When a business offers its customers bulk discounts, they are practicing
second-degree price discrimination
When players in a game select a dominant strategy, they are
selecting the best strategy regardless of the strategies their opponents choose
Market power enables businesses to
set prices and reap profits
If the price of diesel fuel increases, the MRP curve for truck drivers will
shift to the left
A right-to-work law is a
state law making a union shop illegal
When the individual labor supply curve is positively sloped, the _____ effect dominates and higher wages lead to _____ hours worked
substitution; more
In an oligopoly, all the firms:
take their competitors into account when they make pricing decisions
The demand curve for a monopolist is
the industry demand curve
In a competitive labor market, if a new manufacturing plant seeks to build its labor force, it is assumed that
the quantity of workers available is greater than the quantity of workers that are required
While prisoner's dilemma outcomes may produce worse results for competing companies than other alternate outcomes, such dilemmas can benefit
third parties who do business with the competing companies
The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a(n):
tit-for-tat strategy
Game theory can be applied in business, political science, military planning, and sports
true
The Federal Trade Commission Act prohibits
unfair competitive practices and deceptive acts
Prisoner's Dilemma
when a Nash equilibrium outcome results in a payoff for all players that is worse than another outcome
The act that makes it unlawful to refuse to hire a person based on their race, color, religion, sex, or national origin is the
Civil Rights Act of 1964
_____ in an industry can be so large that demand is able to support only one firm
Economies of scale
(T/F) All monopolies earn profits
False
(T/F) A profit-maximizing monopolist can charge any price to consumers
Fasle
An unregulated natural monopolist would produce to the point at which
MR = MC
(T/F) Market power reaches its maximum potential in a monopoly
True
Which statement about the relationship between a firm's demand curve under perfect competition and a monopoly is TRUE?
Under perfect competition, the demand curve is perfectly elastic; under a monopoly, the demand curve has elastic, unit-elastic, and inelastic portions
Assume that Coca-Cola has a market share of 40% and Pepsi has a market share of 30%. If Pepsi and Coca-Cola attempt to merge, will the Federal Trade Commission challenge that attempt in court?
Yes; the industry is concentrated
Which game does NOT describe a Prisoner's Dilemma outcome?
a game of chicken in which one player backs down while the other player does not
Barriers to entry into an industry
a patent. governmental restrictions. economies of scale. NOT relatively low marginal tax rates.
In many instances, competitive companies could agree with each other on key strategic items, and produce higher profits than what competition allows. Reasons this is not done include the _____, and the illegality of collusion
absence of trust between companies
A Nash equilibrium describes an outcome in which
all players in a game maximize their expected payoffs given the information they have
An example of x-inefficiency is
an executive, at the corporation's expense, hiring a limousine to drive him one block whenever it is raining
Monopolistically competitive markets and perfectly competitive markets do NOT share which characteristic?
differentiated products
Robotic manufacturing has made labor demand for factory workers
more elastic
Factory jobs are no longer plentiful in the United States. This is due to all of these EXCEPT
more foreign direct investment into the United States
What percentage of families with small children are two-income households?
more than 50%
