question
Which of the following is true for a monopoly but NOT for a perfectly competitive firm?
answer
The firm faces a downward sloping demand curve
question
Which of the following is true of a monopoly
answer
It has a downward sloping demand curve
question
The two firms in an industry are deciding whether to advertise. The profit to each firm depends on the other firm's decision. The first entries in the matrix below indicate the profit earned, in millions of dollars, by firm A; and the second entries indicate the profits earned, in millions of dollars, by firm B
answer
It is best for each firm given what the other firm has chosen
question
If the government wants to regulate the natural monopoly illustrated above to produce the socially optimal level of output, it should set a price equal to
answer
P2
question
If Steve incorporated is a monopolistic producer of diamonds, the firm's demand curve is downward sloping because
answer
The number of diamonds Steve incorporated offers for sale affects the price of diamonds
question
The cartel model of oligopoly predicts that
answer
All the firms in the industry act in unison to set a monopoly price
question
The payoff matrix above gives the profits associated with the strategic choices of two firms in an oligopolistic industry. The first entry in each cell is the profit to Firm A and the second to Firm B.
answer
(E)
question
Game theory is most commonly used for analyzing the pricing behavior of firms in which market structure?
answer
Oligopoly
question
Which of the following statements is true for a monopolist at profit maximizing output level?
answer
Price exceeds marginal revenue
question
Which of the following ca give a firm market power?
answer
Having economies of scale in production over the range of market output
question
Which of the following market structures result in allocative efficiency
answer
Perfect competition
question
If a firm engages in perfect price discrimination, in changes
answer
each customer the highest price the customer is willing to pay
question
Antitrust laws are designed to maintain a competitive market environment by
answer
limiting practices that increase a firm's market power
question
Assume that a profit maximizing monopoly is changing a single price. If the monopoly can price discriminate and charge each consumer what he or she is willing to pay, which of the following will occur?
answer
The quantity of output produced will increase
question
A natural monopoly exists when a single firm is able to
answer
produce the entire market output at a lower cost than two or more firms do
question
For the firm shown in the graph above, which combination of output and price will maximize its profit?
answer
Output Q1 and price P4
question
A monopolist is inefficient from society's point of view because
answer
it underproduces output and charges a price above marginal cost
question
If the monopolist shown above is unregulated, its profit-maximizing price and output level would lead to a deadweight loss equal to area
answer
RTV
question
The payoff matrix above gives the profits associated with the strategic choices of two firms in an oligopolistic industry. The first entry in each cell is profit to Firm A and the second to Firm B
answer
Firm A:$100; Firm B:$100
question
A monopolistically competitive firm's demand curve will be highly elastic if which of the following exists?
answer
A high degree of product substitutability
question
The graph above shows the total revenue and total cost curves for a firm in which type of market structure and what is the profit maximizing quantity?
answer
Perfect competition, quantity Q3
question
Which of the following must be true if a profit maximizing monopolistically competitive firm continues to operate in the short run while incurring a loss?
answer
Marginal revenue equals marginal cost and price is greater than average variable cost
question
Which of the following best describes an oligopolistic market
answer
A few competing sellers with similar products and high barriers to entry
question
All of the following characterize both perfectly competitive and monopolistically competitive markets EXCEPT
answer
firms can affect the selling price of their product
question
Which of the following statements is true for both a monopolistically competitive firm and a perfectly competitive firm in long run equilibrium
answer
Economic profits equal zero, and marginal revenue equals marginal cost
question
Which of the following is true of a monopolistically competitive firm in long run equilibrium
answer
It produces where marginal cost equals marginal revenue, and the price is equal to average total cost.
question
Profit maximizing monopolist selects its level in the
answer
elastic region of its demand curve
question
Which of the following is a source of monopoly power?
answer
Barriers to entry
question
One difference between a firm in a perfectly competitive market and an unregulated monopoly is that the
answer
perfectly competitive firm can increase the quantity it sells at the market price, whereas the monopoly must lower its price to sell more
question
Which of the following will most likely lead to zero economic profits?
answer
Free entry and exit of firms
question
In which of the following market structures do firms recognize their mutual interdependence?
answer
oligopoly
question
Which of the following is necessary for a firm to practice price discrimination?
answer
The firm can prevent the resale of its goods
question
If the government regulators set price such that a natural monopolist earns only natural profits, price will be set equal to
answer
average total cost
question
The characteristic of oligopolistic firms that makes them different from all other types of firms is that oligopolistic firms
answer
consider each other's decisions
question
Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition?
answer
In perfect competition the firm's all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product.
question
Which of the following about the relationship between marginal revenue(MR) and price(P) under monopolistic competition and perfect competition is correct?
answer
with monopolistic competition, MR<P, and with perfect competition, MR=P
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