Microeconomic final part 2

Which of the following best describes a Nash equilibrium?

An outcome that both competitors see as optimal, given the strategy of their rival.

Marginal revenue is the:

Marginal revenue is the:

Assume the figure applies to a pure monopolist and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, it should charge prices of:

P1 to children and P2 to adults

Refer to the diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at:

P1.

Refer to the diagram. The firm will shut down at any price less than:

P1.

Refer to the diagram. This firm will earn only a normal profit if product price is:

P3

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):

the maximum price each would be willing to pay.

If there are significant economies of scale in an industry, then:

a firm that is large may be able to produce at a lower unit cost than can a small firm.

Confronted with the same unit cost data, a monopolistic producer will charge:

a higher price and produce a smaller output than a competitive firm.

Refer to the diagram, which pertains to a purely competitive firm. Curve Crepresents:

average revenue and marginal revenue.

Refer to the profits-payoff table for a duopoly. If initially firms X and Y are charging $5 and $4 respectively:

both firms would find it advantageous to collude to raise their prices by $1 each

Curve (1) in the diagram is a purely competitive firm's:

total economic profit curve.

In which market model would there be a unique product for which there are no close substitutes?

Pure monopoly

In which of the following market models do demand and marginal revenue diverge?

Pure monopoly, oligopoly, and monopolistic competition.

Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output.

True

Oligopoly firms may produce either standardized or differentiated products.

True

The economic profits earned by monopolistically competitive sellers are zero in the long run.

True

The short-run supply curve slopes upward because producers must be compensated for rising marginal costs.

True

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the:

former sells similar, although not identical, products.

The Herfindahl index:

gives much greater weight to larger firms than to smaller firms in an industry

In the long run, economic theory predicts that a monopolistically competitive firm will:

have excess production capacity.

The pure monopolist's demand curve is relatively elastic:

in the price range where marginal revenue is positive.

Advertising can impede economic efficiency when it:

increases entry barriers.

Refer to the diagram for a monopolistically competitive producer. If this firm were to realize productive efficiency, it would:

incur a loss.

A monopolistically competitive firm's marginal revenue curve:

is downsloping and lies below the demand curve.

Game theory is best suited to analyze the pricing behavior of:

oligopolists.

The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because:

over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive.

Concentration ratios measure the:

percentage of total industry sales accounted for by the largest firms in the industry.

Economic profit in the long run is:

possible for a pure monopoly but not for a pure competitor.

Refer to the diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging:

price P3 and producing output Q3

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:

price and average total cost would be higher, but output would be lower.

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:

price and minimum average variable cost.

A pure monopolist is selling six units at a price of $12. If the marginal revenue of the seventh unit is $5, then the:

price of the seventh unit is $11.

Oligopolists use limit pricing to maximize short-run profits.

False

Refer to the data. At its profit-maximizing output, this firm's total revenue will be:

$280.

Refer to the diagrams. With the industry structures represented by diagram:

(B) output will be less than in diagram (A).

Refer to the diagram. At the profit-maximizing level of output, total cost will be:

0BHE

Refer to the data for a nondiscriminating monopolist. This firm will maximize its profit by producing:

4

The Herfindahl index for a pure monopolist is:

10,000.

The following table applies to a purely competitive industry composed of 100 identical firms. Refer to the table. At the equilibrium price, each of the 100 firms in this industry will produce:

6,000 units of output

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game and Bob's moves first, which cell represents the final outcome?

B

Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.

False

In a zero-sum game, the gains by one player will be exactly offset by the losses of the other.

True

Refer to the diagram. At any price below R the firm will shut down in the short run.

True

Nonprice competition refers to:

advertising, product promotion, and changes in the real or perceived characteristics of a product.

Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a repeated game, it is in the long-term best interests of both players to:

agree to cooperate and then follow through on the agreement.

For a purely competitive seller, price equals:

all of these

The MR = MC rule:

applies both to pure monopoly and pure competition.

The mutual interdependence that characterizes oligopoly arises because:

each firm in an oligopoly depends on its own pricing strategy and that of its rivals.

efer to the diagram where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If both firms follow a high-price policy:

each will realize a $20 million profit.

An important similarity between a monopolistically competitive firm and a purely competitive firm is that:

economic profit tends toward zero for both.

Refer to the diagram for a purely competitive producer. If product price is P3:

economic profits will be zero

monopolistic competition and oligopoly are similar because in both types of market structures:

firm use advertising to increase profits

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

is realizing an economic profit of $40

Under monopolistic competition, entry to the industry is:

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

Assuming no change in product demand, a pure monopolist:

must lower price to increase sales.

The diagram portrays:

noncollusive oligopoly.

Price discrimination is:

only illegal if used to lessen or eliminate competition.

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

reducing output and raising price.

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

relatively easy entry.

Refer to the diagram. At P4, this firm will:

shut down in the short run.

Refer to the diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then:

the demand curve would become more elastic.

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are:

underallocated because price exceeds marginal cost.

A pure monopolist:

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:

$.75 or less.

The following table applies to a purely competitive industry composed of 100 identical firms. Refer to the table. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have a total cost of:

$18,000.

The following table applies to a purely competitive industry composed of 100 identical firms. Refer to the table. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have an average total cost of:

$3

The following table applies to a purely competitive industry composed of 100 identical firms. Refer to the table. If each of the 100 firms in the industry is maximizing its profit, each must have a marginal cost of:

$3.

Refer to the figure. Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly); Pdenotes the price of a round of golf; Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays and the right graph the weekend demand, this profit-maximizing golf course will earn how much economic profit over the course of a full seven-day week?

$4,200.

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:

160.

Answer the question on the basis of the following data confronting a firm: Refer to the data. At the profit-maximizing output, the firm's total revenue is:

48.

Answer the question on the basis of the following demand and cost data for a specific firm: Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be:

8 units

If Alpha and Beta engage in collusion, the outcome of the game will be at cell:

A

Which of the following is correct?

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

Which of the diagrams correctly portrays a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

B.

Refer to the payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

Cells B and C both represent possible Nash equilibrium outcomes for this game.

Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will:

Decide to increase advertising expenditures even if it means a reduction in profits

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

Ford Motor Company

Which of the following statements concerning a monopolistically competitive industry is correct?

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right

Refer to the payoff matrix. Suppose that Alpha and Beta agree that they will both pursue a high-price strategy. If Beta then cheats on the agreement in order to increase profits, which of the following is true?

If this is a repeated game, Alpha can be expected to pursue a low-price strategy in future games.

Which of the following statements is correct?

In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.

Which of the following statements is correct?

In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

The gains to monopolists from exercising market power:

are less than the losses to consumers in monopoly markets, resulting in a net loss to society.

Suppose that at 500 units of output marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit and average total cost at 500 units of output is $6. On the basis of this information, we:

cannot determine whether the firm should produce or shut down in the short run.

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should:

charge a higher price

The economic inefficiencies of monopolistic competition may be offset by the fact that:

consumers have increased product variety.

The monopolistically competitive seller's demand curve will become more elastic the:

larger the number of competitors.

If a purely competitive firm is producing at some level less than the profit-maximizing output, then:

marginal revenue exceeds marginal cost

For a pure monopolist the relationship between total revenue and marginal revenue is such that:

marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

If a pure monopolist is operating in a range of output where demand is elastic:

marginal revenue will be positive but declining.

If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry:

may understate the degree of monopoly.

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: Refer to the data. If the market price for the firm's product is $28, the competitive firm will: Correct!

produce 7 units at a loss of $14.00.

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:

produce because the resulting loss is less than its TFC.

Differentiated oligopoly exists where a small number of firms are:

producing goods that differ in terms of quality and design.

On a per unit basis, economic profit can be determined as the difference between:

product price and average total cost.

Suppose for a regulated monopoly that price equals minimum ATC but price exceeds MC. This means that:

productive efficiency is being achieved, but not allocative efficiency.

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:

profit of $480.

Refer to the diagrams. Firm A is a:

pure competitor and Firm B is a pure monopoly.

If an industry evolves from monopolistic competition to oligopoly, we would expect:

the four-firm concentration ratio to increase.

A firm reaches a break-even point (normal profit position) where:

total revenue and total cost are equal.