unit 4 micro

If the monopolist engages in perfect price discrimination, which of the following will happen?

Consumer surplus and deadweight loss will be zero because all the surplus will be transferred to producer surplus.

Which of the following is true in imperfectly competitive markets? A: Firms produce standardized or identical products. B: Firms enjoy economies of scale in production. C: Firms produce output at constant marginal cost. D: Firms must lower their product prices to sell additional units. E: New firms can easily enter or exit the market.

D: Firms must lower their product prices to sell additional units.

A monopolistically competitive firm's demand curve will be least elastic if A: there are a large number of rival firms producing very similar products B: there are a large number of rival firms producing more differentiated products C: there are a small number of rival firms producing very similar products D: there are a small number of rival firms producing more differentiated products E: a monopolistically competitive firm's demand curve is perfectly elastic

D: there are a small number of rival firms producing more differentiated products

Assume a monopoly has an increase in fixed costs and decides to stay in business. What will happen to that monopoly's deadweight loss and economic profit?

Deadweight loss will remain the same and economic profit will decrease

Which of the following is true of a natural monopoly? A: The average total cost is constant throughout the entire effective demand. B: Marginal cost decreases throughout the entire effective demand. C: The average total cost initially decreases and then increases throughout the entire effective demand. D: The marginal cost initially increases and then decreases throughout the entire effective demand. E: The average total cost decreases throughout the entire effective demand.

E: The average total cost decreases throughout the entire effective demand.

When two firms interact in an oligopolistic market, which of the following statements is true?

If both firms have dominant strategies, then there is a Nash equilibrium.

Which of the following statements is true for a monopolist at the profit-maximizing output level? a. price exceeds marginal revenue b. marginal cost exceeds price c. demand is price inelastic d. price equals marginal cost, which equals average total cost e. the demand curve intersects the supply curve

a

One difference between monopolistic competition and oligopoly is that firms in monopolistic competition are assumed to

act independently in setting price and output

A monopolistically competitive firm is currently producing the profit-maximizing level of output. If the price of a variable input increases, what happens to average total cost and marginal cost curves?

atc shifts up, mc shifts up

If Zeta, a single producer, had exclusive control of a key resource needed to produce good Z , a likely result would be which of the following? a. Good Z would be produced in a perfectly competitive market. b. Slight differences in output would lead to good Z being in a monopolistically competitive market. c. There would be a barrier to entry, and Zeta would have a monopoly on good Z d. Only a few firms would produce good Z , so there would be an oligopoly. e. Zeta must have decreasing returns to scale and operate as a natural monopoly in producing good Z .

c

Which of the following statements relating to a firm in an imperfectly competitive market and a firm in a perfectly competitive market is true? a. Firms in both types of markets will likely advertise the merits of their products to increase sales. b. Firms in both types of markets will increase price to increase total revenues when their demand is inelastic. c. An imperfectly competitive firm must lower its price to increase sales, while a perfectly competitive firm can increase sales by increasing output at the current price. d. Barriers to entry give both imperfectly competitive and perfectly competitive firms market power to raise price. e. As their product becomes different from their competitors' product, both an imperfectly competitive firm and a perfectly competitive firm will face less elastic consumer demand.

c

which of the following is a source of monopoly power? a. scarcity b. elastic of demand c. barriers to entry d. low profits e. free markets

c

What happens to average total cost in a natural monopoly?

decreases, moves towards demand

What can give a firm market power?

economies of scale, mass produced with a lower atc

What is the difference between imperfectly competitive and perfectly competitive firms?

imperfect: price makers, downward sloping demand perfect: price takers, demand is constant/ = to mr

In monopolistic competition, what is the goal of advertising?

increase demand and increase inelastic

A firm with market power engages in price discrimination in order to

increase profits

Monopolistically competitive markets are characterized by

large number of firms

In a market with two firms and one firm has a dominant strategy, what will that firm do?

maintain strategy

Assume that a monopolistically competitive firm is currently maximizing profit with an output of 100 units and a price of $50. What would happen to marginal cost compared to marginal revenue if output was raised to 150 units?

mc is greater

With a single-price monopoly that has the same market demand and cost curves, what will happen to output and price?

output decreases, price increases

How do you tell if a firm should shut down?

price exceeds average variable cost

What must be true if a profit-maximizing monopolistically competitive firm continues to operate in the short run while incurring a loss?

price is greater than avc

Why are imperfectly competitive markets inefficient?

price is greater than mc

Why are monopolistically competitive product markets inefficient?

price is greater than mc

Why do firms in monopolistic competition do not attain allocative efficiency at the long-run equilibrium output?

price is greater than mc

If a perfectly competitive industry were monopolized without any changes in cost conditions, the price and quantity produced would change in which of the following?

price:increase quantity:decrease

In monopolistic competition, a goal of advertising is to

shift a firm's demand curve to the left

What is a necessary condition for price discrimination?

the firm must have market power, the firm must be able to recognize differences in demand

If a firm engages in perfect price discrimination, what does it charge customers?

the highest price customers are willing to pay

There are four firms in an oligopolistic industry. The four firms agree to collude and act like a monopoly. If one of the firms violates the agreement and charges a lower price or sells a larger quantity than what was agreed to, what will happen in the short run for the profit of that firm and the industry?

the one firm will increase, industry will decrease

A monopolist's demand curve is necessarily

the same as the market demand curve

allocatively efficient quantity of output

where demand intersects with mc

When both firms have a dominant strategy will there be a Nash equilibrium?

yes