question
Monopolistically competitive firms use advertising as a means to shift their demand curve
A)to the right and decrease its elasticity.
B)to the left and increase its elasticity.
C)to the left and decrease its elasticity.
D) to the right and increase its elasticity
A)to the right and decrease its elasticity.
B)to the left and increase its elasticity.
C)to the left and decrease its elasticity.
D) to the right and increase its elasticity
answer
A) to the right and decrease its elasticity.
question
Unlike the purely competitive firm, the monopolistically competitive firm
A)has some degree of control over their prices.
B)can manipulate the demand for their product by advertising.
C)does not have a perfectly elastic demand curve.
D)all of the above
A)has some degree of control over their prices.
B)can manipulate the demand for their product by advertising.
C)does not have a perfectly elastic demand curve.
D)all of the above
answer
D) All of the above
question
The demand curve facing a monopolistically competitive firm is
A) vertical.
B) highly income inelastic.
C) horizontal.
D) steeper when the firm is more successful at product differentiation.
E) none of the above
A) vertical.
B) highly income inelastic.
C) horizontal.
D) steeper when the firm is more successful at product differentiation.
E) none of the above
answer
D) Steeper when the firm is more successful at product differentiation
question
If an industry is found to be monopolistically competitive and it is determined that some firms within the
industry are earning economic profits, then which of the following will most likely occur, ceteris paribus?
A) Profits will persist due to barriers to entry.
B) Demand and marginal revenue of the firms within the industry will ten
d to shift to the left.
C) Profits will diminish as other firms enter the industry.
D) both (A) and (C)
E) both (B) and (C)
industry are earning economic profits, then which of the following will most likely occur, ceteris paribus?
A) Profits will persist due to barriers to entry.
B) Demand and marginal revenue of the firms within the industry will ten
d to shift to the left.
C) Profits will diminish as other firms enter the industry.
D) both (A) and (C)
E) both (B) and (C)
answer
E) Both B and C
question
An advantage of monopolistic competition over pure competition in the production of bread is that
A) the bread will be of higher quality if produced in a monopolistically competitive market.
B) cost structure is lower than in a purely competitive market.
C) consumers are likely to have a wider choice of types of bread, size of loaves, and types of packaging.
D) price will be lower than in a purely competitive market
A) the bread will be of higher quality if produced in a monopolistically competitive market.
B) cost structure is lower than in a purely competitive market.
C) consumers are likely to have a wider choice of types of bread, size of loaves, and types of packaging.
D) price will be lower than in a purely competitive market
answer
C) consumers are likely to have a wider choice of types of bread, size of loaves, and types of packaging.
question
From the diagram above, what is the optimal quantity of output?
A) Q2
B) Q4
C) zero
D) Q1
E) Q3
A) Q2
B) Q4
C) zero
D) Q1
E) Q3
answer
A) Q2
question
Based on the diagram above, what is the price that will be charged?
A) P2
B) P1
C) P3
D) P4
E) one of the above since output equals zero
A) P2
B) P1
C) P3
D) P4
E) one of the above since output equals zero
answer
A) P2
question
What is the long-run result for the monopolistic competitor indicated by the above diagram?
A) economic loss and subsidization
B) economic profit
C) breaking even
D) going out of business because opportunity costs are not being covered
A) economic loss and subsidization
B) economic profit
C) breaking even
D) going out of business because opportunity costs are not being covered
answer
C) breaking even
question
Oligopoly refers to a market structure that is
A) dominated by a single seller.
B) characterized by many sellers and by identical products.
C) characterized by many sellers and by differentiated products.
D) dominated by a few sellers.
A) dominated by a single seller.
B) characterized by many sellers and by identical products.
C) characterized by many sellers and by differentiated products.
D) dominated by a few sellers.
answer
D) dominated by a few sellers.
question
Oligopolistic industries are characterized by mutual interdependence. This means that
A) oligopoly firms often engage in price-fixing agreements.
B) new oligopoly firms try to imitate the products of firms already established in the industry.
C) the same individuals often serve on the board of directors of several different firms in the industry.
D) the actions of a particular firm will directly affect other firms in the industry.
A) oligopoly firms often engage in price-fixing agreements.
B) new oligopoly firms try to imitate the products of firms already established in the industry.
C) the same individuals often serve on the board of directors of several different firms in the industry.
D) the actions of a particular firm will directly affect other firms in the industry.
answer
D) the actions of a particular firm will directly affect other firms in the industry.
question
Like pure monopolists, oligopoly firms can often earn economic profit. This is so primarily because
A) there is mutual interdependence among firms.
B) marginal revenue is greater than price in both types of industries.
C) oligopolies are run by managers who are more talented than those in purely competitive firms.
D) there are high barriers to entry.
A) there is mutual interdependence among firms.
B) marginal revenue is greater than price in both types of industries.
C) oligopolies are run by managers who are more talented than those in purely competitive firms.
D) there are high barriers to entry.
answer
D) there are high barriers to entry.
question
Oligopolistic industries are characterized by high barriers to entry that can be either natural or legal. An
example of a natural barrier to entry is
A) licensing power.
B) a patent.
C) economies of scale.
D) exclusive ownership rights to a strategic raw material.
example of a natural barrier to entry is
A) licensing power.
B) a patent.
C) economies of scale.
D) exclusive ownership rights to a strategic raw material.
answer
C) economies of scale.
question
13) What is the dominant solution to this game?
A) GM advertises and Ford does not.
B) Ford advertises and GM does not.
C) Neither firm advertises.
D) Both firms advertise.
A) GM advertises and Ford does not.
B) Ford advertises and GM does not.
C) Neither firm advertises.
D) Both firms advertise.
answer
D) Both firms advertise.
question
In this game, joint profits are maximized when
A) GM advertises and Ford does not.
B) both firms advertise.
C) Ford advertises and GM does not.
D) neither firm advertises.
A) GM advertises and Ford does not.
B) both firms advertise.
C) Ford advertises and GM does not.
D) neither firm advertises.
answer
D) neither firm advertises.
question
In the classic prisoner's dilemma game, which solution minimizes the total jail sentence for both prisoners?
A) One confesses and the other doesn't.
B) Neither confesses.
C) Both confess.
D) The total jail sentence is equal regardless of who confesses.
A) One confesses and the other doesn't.
B) Neither confesses.
C) Both confess.
D) The total jail sentence is equal regardless of who confesses.
answer
B) Neither confesses.
question
A characteristic of a monopolistically competitive market is that
A) each firm faces a downward-sloping demand curve.
B) the firms sell an identical product.
C) the firms in the industry engage in strategic, non-price competition.
D) each firm's marginal revenue curve lies above its demand curve.
E) entry into the industry is difficult.
A) each firm faces a downward-sloping demand curve.
B) the firms sell an identical product.
C) the firms in the industry engage in strategic, non-price competition.
D) each firm's marginal revenue curve lies above its demand curve.
E) entry into the industry is difficult.
answer
A) each firm faces a downward-sloping demand curve
question
17) Which of the following are characteristic of a monopolistically competitive market?
A) There are many small firms in the industry.
B) All firms are price takers.
C) Economic profits are often positive in the long run.
D) Each firm faces a horizontal demand curve.
E) Firms engage in strategic behavior.
A) There are many small firms in the industry.
B) All firms are price takers.
C) Economic profits are often positive in the long run.
D) Each firm faces a horizontal demand curve.
E) Firms engage in strategic behavior.
answer
A) There are many small firms in the industry.
question
If there are economic profits in a monopolistically competitive industry, they will generally be competed
away through the
A) entry of new firms.
B) increasing advertising budgets of existing firms.
C) introduction of brand-name products by existing firms.
D) exit of existing firms.
E) manipulation of the demand curve.
away through the
A) entry of new firms.
B) increasing advertising budgets of existing firms.
C) introduction of brand-name products by existing firms.
D) exit of existing firms.
E) manipulation of the demand curve.
answer
A) entry of new firms.
question
Monopolistic competition is similar to perfect competition in that
A) strategic behavior is common to both market structures.
B) firms in both types of market structure engage in non-price competition.
C) neither has significant barriers to entry.
D) firms in both types of market structures produce a standardized product.
E) each firm faces a horizontal demand curve.
A) strategic behavior is common to both market structures.
B) firms in both types of market structure engage in non-price competition.
C) neither has significant barriers to entry.
D) firms in both types of market structures produce a standardized product.
E) each firm faces a horizontal demand curve.
answer
C) neither has significant barriers to entry.
question
Compared with perfect competition, monopolistic competition results in
A) a wider variety of the good produced at higher unit cost.
B) the same degree of variety of the good, but higher unit costs.
C) a clearly more efficient social outcome.
D) fewer varieties of the good produced at higher unit costs.
E) fewer varieties of the good produced at lower unit costs.
A) a wider variety of the good produced at higher unit cost.
B) the same degree of variety of the good, but higher unit costs.
C) a clearly more efficient social outcome.
D) fewer varieties of the good produced at higher unit costs.
E) fewer varieties of the good produced at lower unit costs.
answer
A) a wider variety of the good produced at higher unit cost.
question
A monopolistically competitive firm maximizes profits in the short run
A) when P = AVC.
B) when P = ATC.
C) by equating MC with MR.
D) by maximizing total revenue.
E) by equating MC with price
A) when P = AVC.
B) when P = ATC.
C) by equating MC with MR.
D) by maximizing total revenue.
E) by equating MC with price
answer
C) by equating MC with MR.
question
The main difference between perfect competition and monopolistic competition is
A) monopolistic competition has lower costs.
B) perfect competition has freedom of entry and exit.
C) there are more firms in perfect competition.
D) monopolistic competition has product differentiation.
E) firms earn profits in the long run in monopolistic competition.
A) monopolistic competition has lower costs.
B) perfect competition has freedom of entry and exit.
C) there are more firms in perfect competition.
D) monopolistic competition has product differentiation.
E) firms earn profits in the long run in monopolistic competition.
answer
D) monopolistic competition has product differentiation.
question
A Nash equilibrium
A) occurs where all players are maximizing their payoffs given the current behavior of the other players.
B) is an example of a cooperative equilibrium.
C) occurs where all players are better off than they would be with any other combination of strategies.
D) will in general produce the greatest payoff for the players.
E) is an unstable equilibrium.
A) occurs where all players are maximizing their payoffs given the current behavior of the other players.
B) is an example of a cooperative equilibrium.
C) occurs where all players are better off than they would be with any other combination of strategies.
D) will in general produce the greatest payoff for the players.
E) is an unstable equilibrium.
answer
A) occurs where all players are maximizing their payoffs given the current behavior of the other players.
question
24) Refer to Table 11-2. From the payoff matrix we can infer that
A) it is optimal for Firm A to produce 2,000 units of output regardless of what Firm B is doing.
B) it is optimal for Firm A to produce 1,000 units of output regardless of what Firm B is doing.
C) both firms are indifferent between an equilibrium (Produce 1,000 units, Produce 1,000 units) and
(Produce 2,000 units, Produce 2,000 units).
D) it is optimal for Firm B to produce 1,000 units of output regardless of what Firm A is doing.
E) there is no Nash equilibrium in the game.
A) it is optimal for Firm A to produce 2,000 units of output regardless of what Firm B is doing.
B) it is optimal for Firm A to produce 1,000 units of output regardless of what Firm B is doing.
C) both firms are indifferent between an equilibrium (Produce 1,000 units, Produce 1,000 units) and
(Produce 2,000 units, Produce 2,000 units).
D) it is optimal for Firm B to produce 1,000 units of output regardless of what Firm A is doing.
E) there is no Nash equilibrium in the game.
answer
A) it is optimal for Firm A to produce 2,000 units of output regardless of what Firm B is doing.
question
Refer to Table 11-2.The Nash equilibrium in this game is
A) (Produce 2,000 units, Produce 1,000 units).
B) (Produce 2,000 units, Produce 2,000 units).
C) (Produce 1,000 units, Produce 1,000 units).
D) (Produce 1,000 units, Produce 2,000 units).
E) non-existent.
A) (Produce 2,000 units, Produce 1,000 units).
B) (Produce 2,000 units, Produce 2,000 units).
C) (Produce 1,000 units, Produce 1,000 units).
D) (Produce 1,000 units, Produce 2,000 units).
E) non-existent.
answer
B) (Produce 2,000 units, Produce 2,000 units).
question
The distinguishing of products by brand name, color, and other attributes
A) is known as interdependence.
B) leads to many firms in the market.
C) leads to collusion.
D) is known as product differentiation.
A) is known as interdependence.
B) leads to many firms in the market.
C) leads to collusion.
D) is known as product differentiation.
answer
D) is known as product differentiation.
question
Because of product differentiation in a monopolistically competitive market, the demand curve for an
individual firm will be
A) vertical.
B) horizontal.
C) downward sloping.
D) upward sloping.
individual firm will be
A) vertical.
B) horizontal.
C) downward sloping.
D) upward sloping.
answer
C) downward sloping.
question
The demand curve for a monopolistically competitive firm is
A) more inelastic than for a monopoly firm.
B) the same elasticity as a perfectly competitive firm.
C) more elastic than for a monopoly firm.
D) more elastic than for a perfectly competitive firm.
A) more inelastic than for a monopoly firm.
B) the same elasticity as a perfectly competitive firm.
C) more elastic than for a monopoly firm.
D) more elastic than for a perfectly competitive firm.
answer
C) more elastic than for a monopoly firm
question
An implication of the downward slope of the demand curve for a monopolistic competitive firm is that
A) its marginal revenue curve and its demand curve are identical (same) line.
B) its marginal revenue curve slopes upward.
C) its marginal revenue curve slopes downward but lies below the demand curve.
D) its marginal revenue curve slopes downward but lies above the demand curve.
A) its marginal revenue curve and its demand curve are identical (same) line.
B) its marginal revenue curve slopes upward.
C) its marginal revenue curve slopes downward but lies below the demand curve.
D) its marginal revenue curve slopes downward but lies above the demand curve.
answer
C) its marginal revenue curve slopes downward but lies below the demand curve.
question
Firms in a monopolistically competitive market will advertise because
A) the elasticity for their product is inelastic.
B) they want to increase the elasticity of the demand curve.
C) they want to differentiate their products.
D) of the significant differences in their product over their competitors.
A) the elasticity for their product is inelastic.
B) they want to increase the elasticity of the demand curve.
C) they want to differentiate their products.
D) of the significant differences in their product over their competitors.
answer
C) they want to differentiate their products.
question
Which of the following is NOT a characteristic of monopolistic competition?
A) homogeneous product
B) sales promotion and advertising
C) easy entry of new firms in the long run
D) large number of sellers
A) homogeneous product
B) sales promotion and advertising
C) easy entry of new firms in the long run
D) large number of sellers
answer
A) homogeneous product
question
In the above figure, the profit-maximizing output and price for this monopolistically competitive firm are
A) 10,000 units at a price of $10 per unit.
B) 12,000 units at a price of $8 per unit.
C) 13,000 units at a price of $7 per unit.
D) 10,000 units at a price of $5 per unit
A) 10,000 units at a price of $10 per unit.
B) 12,000 units at a price of $8 per unit.
C) 13,000 units at a price of $7 per unit.
D) 10,000 units at a price of $5 per unit
answer
A) 10,000 units at a price of $10 per unit.
question
In the above figure, total revenue for this profit-maximizing monopolistically competitive firm is
A) $50,000.
B) $91,000.
C) $100,000.
D) $96,000.
A) $50,000.
B) $91,000.
C) $100,000.
D) $96,000.
answer
C) $100,000.
question
In the above figure, total cost for this profit-maximizing monopolistically competitive firm is
A) $72,000.
B) $91,000.
C) $70,000.
D) $50,000.
A) $72,000.
B) $91,000.
C) $70,000.
D) $50,000.
answer
C) $70,000
question
In the above figure, the profit-maximizing monopolistically competitive firm will
A) make a profit of $24,000.
B) make a profit of $30,000.
C) incur a loss of $20,000.
D) make a profit of $0.
A) make a profit of $24,000.
B) make a profit of $30,000.
C) incur a loss of $20,000.
D) make a profit of $0.
answer
B) make a profit of $30,000.
question
Which of the following is TRUE for a monopolistically competitive firm?
A) MR < P
B) MR = P
C) MR > P
D) MR = AFC
A) MR < P
B) MR = P
C) MR > P
D) MR = AFC
answer
A) MR < P
question
For the monopolistically competitive firm, in both the short run and the long run
A) the demand curve is inelastic.
B) there will be no economic profit.
C) price will exceed marginal cost.
D) production will be at minimum average cost.
A) the demand curve is inelastic.
B) there will be no economic profit.
C) price will exceed marginal cost.
D) production will be at minimum average cost.
answer
C) price will exceed marginal cost.
question
The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?
A) In the long run, other firms will successfully offer substitutes for the profitable firm's product, and
competition will eliminate economic profits.
B) Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to
sustain profits in the long run.
C) Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping
competition at bay becomes very expensive.
D) If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders
a corporate restructuring to pull the company back to a normal rate of return.
A) In the long run, other firms will successfully offer substitutes for the profitable firm's product, and
competition will eliminate economic profits.
B) Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to
sustain profits in the long run.
C) Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping
competition at bay becomes very expensive.
D) If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders
a corporate restructuring to pull the company back to a normal rate of return.
answer
A) In the long run, other firms will successfully offer substitutes for the profitable firm's product, and
competition will eliminate economic profits.
competition will eliminate economic profits.
question
In the long run, if some monopolistically competitive firms are earning economic losses then
A) new firms will enter the industry.
B) they will increase production until marginal costs fall.
C) firms will leave the industry.
D) raise prices until they earn economic profits.
A) new firms will enter the industry.
B) they will increase production until marginal costs fall.
C) firms will leave the industry.
D) raise prices until they earn economic profits.
answer
C) firms will leave the industry.
question
If firms in a monopolistically competitive industry are operating with economic losses, over time we would
see
A) some firms exiting the industry, causing the market supply curve to shift to the left, raising price.
B) the firms working together to increase price and everyone's profitability.
C) some firms exiting the industry, causing the demand curves of the remaining firms to shift to the right.
D) firms alter their advertising rates until they made at least normal profits.
see
A) some firms exiting the industry, causing the market supply curve to shift to the left, raising price.
B) the firms working together to increase price and everyone's profitability.
C) some firms exiting the industry, causing the demand curves of the remaining firms to shift to the right.
D) firms alter their advertising rates until they made at least normal profits.
answer
C) some firms exiting the industry, causing the demand curves of the remaining firms to shift to the right.
question
The above table depicts prices, quantities, and marginal costs faced by the campus bookstore. At the
profit-maximizing level of output, what is the total revenue earned by the store?
A) $6
B) $5
C) $15
D) $12
profit-maximizing level of output, what is the total revenue earned by the store?
A) $6
B) $5
C) $15
D) $12
answer
C) $15
question
When a consumer's willingness to buy a good or service is influenced by the number of people who have
purchased that good or service, this is called
A) an advertising gimmick.
B) a switching cost.
C) a network effect.
D) an opportunity cost.
purchased that good or service, this is called
A) an advertising gimmick.
B) a switching cost.
C) a network effect.
D) an opportunity cost.
answer
C) a network effect
question
Strategic behavior and game theory are features of which market structure?
A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition
A) Perfect competition
B) Monopoly
C) Oligopoly
D) Monopolistic competition
answer
C) Oligopoly
question
Refer to the above payoff matrix (in years of sentence) for two people (A and B) charged for robbery. Which
of the following is the outcome of the dominant strategy without cooperation?
A) Both A and B confess.
B) A does not confess while B confesses.
C) Both A and B do not confess.
D) A confesses while B does not confess
of the following is the outcome of the dominant strategy without cooperation?
A) Both A and B confess.
B) A does not confess while B confesses.
C) Both A and B do not confess.
D) A confesses while B does not confess
answer
A) Both A and B confess.
question
Refer to the above payoff matrix for the profits (in $ millions) of two firms (A and B) and two pricing
strategies (high and low). Which of the following is the outcome of the dominant strategy without
cooperation?
A) Firm A chooses the high price while firm B chooses the low price.
B) Both firm A and firm B choose the low price.
C) Firm A chooses the low price while firm B chooses the high price.
D) Both firm A and firm B choose the high price.
strategies (high and low). Which of the following is the outcome of the dominant strategy without
cooperation?
A) Firm A chooses the high price while firm B chooses the low price.
B) Both firm A and firm B choose the low price.
C) Firm A chooses the low price while firm B chooses the high price.
D) Both firm A and firm B choose the high price.
answer
B) Both firm A and firm B choose the low price.
question
Refer to the above payoff matrix for the profits (in $ millions) of two firms (X and Y) making a decision to
advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?
A) Firm X chooses to advertise while firm Y chooses not to advertise.
B) Firm X chooses not to advertise while firm Y chooses to advertise.
C) Both firm X and firm Y choose not to advertise.
D) Both firm X and firm Y choose to advertise.
advertise or not. Which of the following is the outcome of the dominant strategy without cooperation?
A) Firm X chooses to advertise while firm Y chooses not to advertise.
B) Firm X chooses not to advertise while firm Y chooses to advertise.
C) Both firm X and firm Y choose not to advertise.
D) Both firm X and firm Y choose to advertise.
answer
D) Both firm X and firm Y choose to advertise.
question
Which of the following is a characteristic of a monopoly market?
A) firm is a price taker
B) easy entry
C) one firm
D) many firms
A) firm is a price taker
B) easy entry
C) one firm
D) many firms
answer
C) one firm
question
A monopolist is defined as
A) a producer of a good or service that is expensive to produce, requiring large amounts of capital
equipment.
B) a large firm, making substantial profits, that is able to make other firms do what it wants.
C) a single supplier of a good or service for which there is no close substitute.
D) a firm with annual sales over $10 million.
A) a producer of a good or service that is expensive to produce, requiring large amounts of capital
equipment.
B) a large firm, making substantial profits, that is able to make other firms do what it wants.
C) a single supplier of a good or service for which there is no close substitute.
D) a firm with annual sales over $10 million.
answer
C) a single supplier of a good or service for which there is no close substitute.
question
In order for a firm to receive monopoly profits, there must be
A) homogeneous products.
B) free entry and exit to the market.
C) barriers to market entry.
D) mutual interdependence among firms.
A) homogeneous products.
B) free entry and exit to the market.
C) barriers to market entry.
D) mutual interdependence among firms.
answer
C) barriers to market entry.
question
Which of the following are barriers to entry?
A) Control of resources
B) Economies of scale
C) Patents and copyrights
D) All of the above
A) Control of resources
B) Economies of scale
C) Patents and copyrights
D) All of the above
answer
D) All of the above
question
If there are no barriers to entry into an industry,
A) long-run economic profits must be zero.
B) short-run economic profits must be zero.
C) short-run and long-run profits must still be positive.
D) both short-run and long-run economic profits must be zero.
A) long-run economic profits must be zero.
B) short-run economic profits must be zero.
C) short-run and long-run profits must still be positive.
D) both short-run and long-run economic profits must be zero.
answer
A) long-run economic profits must be zero.
question
Which of the following can be a barrier to entry, closing a market to new firms?
A) Control of a vital resource by one producer
B) An elastic industry demand curve
C) Ease of obtaining capital financing
D) Diseconomies of scale
A) Control of a vital resource by one producer
B) An elastic industry demand curve
C) Ease of obtaining capital financing
D) Diseconomies of scale
answer
A) Control of a vital resource by one producer
question
A natural monopoly usually arises when
A)companies band together to form a larger company.
B)there are diseconomies of scale in an industry.
C)there are large economies of scale relative to the industry's demand.
D)the government allows unrestricted access to a market.
A)companies band together to form a larger company.
B)there are diseconomies of scale in an industry.
C)there are large economies of scale relative to the industry's demand.
D)the government allows unrestricted access to a market.
answer
C)there are large economies of scale relative to the industry's demand.
question
A patent on a product gives a firm
A) the power to impose a tariff on a competing product.
B) economies of scale in producing the product.
C) excessive profits in the long run.
D) protection from having the invention copied or stolen for a period of 20 years.
A) the power to impose a tariff on a competing product.
B) economies of scale in producing the product.
C) excessive profits in the long run.
D) protection from having the invention copied or stolen for a period of 20 years.
answer
D) protection from having the invention copied or stolen for a period of 20 years.
question
If a monopolist wishes to increase its output and quantity
sold,
A) it must raise its price, so its marginal revenue is greater than its price.
B)it must reduce its price, so its marginal revenue is greater than its price.
C) it must reduce its price, so its marginal revenue is less than its price.
D) it must raise its price, so its marginal revenue is less than its price.
sold,
A) it must raise its price, so its marginal revenue is greater than its price.
B)it must reduce its price, so its marginal revenue is greater than its price.
C) it must reduce its price, so its marginal revenue is less than its price.
D) it must raise its price, so its marginal revenue is less than its price.
answer
C) it must reduce its price, so its marginal revenue is less than its price.
question
The demand curve faced by the monopolist
A) is perfectly elastic.
B) slopes upward.
C) is perfectly inelastic.
D) slopes downward
A) is perfectly elastic.
B) slopes upward.
C) is perfectly inelastic.
D) slopes downward
answer
D) slopes downward
question
A monopolist's demand curve is
A) perfectly inelastic.
B) of unit elasticity throughout.
C) perfectly elastic.
D) the industry demand curve.
A) perfectly inelastic.
B) of unit elasticity throughout.
C) perfectly elastic.
D) the industry demand curve.
answer
D) the industry demand curve.
question
A monopolist's marginal revenue curve is
A)the same as a perfectly competitive firm's marginal revenue curve.
B)a horizontal line at the market price.
C)below the firm's demand curve.
D)higher than the monopolist's demand curve.
A)the same as a perfectly competitive firm's marginal revenue curve.
B)a horizontal line at the market price.
C)below the firm's demand curve.
D)higher than the monopolist's demand curve.
answer
C) below the firm's demand curve.
question
If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99, its
marginal revenue for the last unit sold is
A)$109.
B)$99.
C)$89.
D)$11
marginal revenue for the last unit sold is
A)$109.
B)$99.
C)$89.
D)$11
answer
C)$89.
question
Refer to the above figure. Which of the following statements is true about the
demand curves for an
individual firm in a perfectly competitive industry and a monopoly?
A) Panel C is the demand curve for a perfectly competitive firm and panel A is the demand curve for a
mono
poly.
B) Panel A is the demand curve for a perfectly competitive firm and panel B is the demand curve for a
monopoly.
C) Panel B is the demand curve for a perfectly competitive firm and panel A is the demand curve for a
monopoly.
D)Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a
monopoly.
demand curves for an
individual firm in a perfectly competitive industry and a monopoly?
A) Panel C is the demand curve for a perfectly competitive firm and panel A is the demand curve for a
mono
poly.
B) Panel A is the demand curve for a perfectly competitive firm and panel B is the demand curve for a
monopoly.
C) Panel B is the demand curve for a perfectly competitive firm and panel A is the demand curve for a
monopoly.
D)Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a
monopoly.
answer
Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly
question
A monopoly will maximize profits at the level of output at which
A)MC=ATC.
B)MC=P.
C)MR=MC.
D)MR=AFC.
A)MC=ATC.
B)MC=P.
C)MR=MC.
D)MR=AFC.
answer
C)MR=MC.
question
Suppose a monopolist's costs and revenues are as follows: ATC=$50.00; MC=$35.00; MR=$45.00; P=$55.00. The firm should
A)not change output or price.
B)shut down.
C)increase output and decrease price.
D)decrease output and increase price.
A)not change output or price.
B)shut down.
C)increase output and decrease price.
D)decrease output and increase price.
answer
C)increase output and decrease price.
question
The profit-maximizing price and quantity established by the unregulated monopolist in the above figure are
A)Q1units of output and a price of P5.
B)Q1units of output and a price of P1.
C)Q3units of output and a price of P3.
D)Q4units of output and a price of P4
A)Q1units of output and a price of P5.
B)Q1units of output and a price of P1.
C)Q3units of output and a price of P3.
D)Q4units of output and a price of P4
answer
B) Q1units of output and a price of P1.
question
In the above figure, at the firm's profit maximizing output, total revenue is rectangle
A)0P1AQ1.
B)0P2BQ1.
C)0P3FQ3.
D)0P5EQ5
A)0P1AQ1.
B)0P2BQ1.
C)0P3FQ3.
D)0P5EQ5
answer
A)0P1AQ1.
question
In the above figure, if the firm is producing at Q3
and charging a price of P3, it should
A)increase output and decrease price.
B)not change output or price.
C)shut down.
D)decrease output and increase price.
and charging a price of P3, it should
A)increase output and decrease price.
B)not change output or price.
C)shut down.
D)decrease output and increase price.
answer
D)decrease output and increase price.
question
According to the above figure, the profit maximizing price
-output combination for the monopolist is a price of
A) 45 cents and an output of 45,000 newspapers per day.
B) 60 cents and an output of 30,000 newspapers per day.
C) 50 cents and an output of 40,000 newspapers per day.
D) 30 cents and an output of 30,000 newspapers per day
-output combination for the monopolist is a price of
A) 45 cents and an output of 45,000 newspapers per day.
B) 60 cents and an output of 30,000 newspapers per day.
C) 50 cents and an output of 40,000 newspapers per day.
D) 30 cents and an output of 30,000 newspapers per day
answer
B) 60 cents and an output of 30,000 newspapers per day.
question
The monopolist is a
A)price taker who tries to find the profit-maximizing price.
B)price taker who tries to find the profit-maximizing rate of output.
C)price searcher who tries to find the rate of output that maximizes price.
D)price searcher who tries to find the profit-maximizing price-output combination.
output combination
A)price taker who tries to find the profit-maximizing price.
B)price taker who tries to find the profit-maximizing rate of output.
C)price searcher who tries to find the rate of output that maximizes price.
D)price searcher who tries to find the profit-maximizing price-output combination.
output combination
answer
D)price searcher who tries to find the profit-maximizing price-output combination.
question
Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for
this monopolist?
A)30
B)14
C)25
D)19
this monopolist?
A)30
B)14
C)25
D)19
answer
C)25
question
The monopolist determines the price and quantity combination that maximizes short-run profits by
A)finding the quantity at which marginal cost and marginal revenue are equal and then using the
demand curve to find price.
B)finding the point at which marginal revenue and demand intersect. This gives the price and quantity
that maximizes profits.
C)finding the quantity at which average revenue and average total cost are furthest apart.
D)determining the price by finding the highest price at which sales can be made and then using the
demand curve to find the appropriate quantity.
A)finding the quantity at which marginal cost and marginal revenue are equal and then using the
demand curve to find price.
B)finding the point at which marginal revenue and demand intersect. This gives the price and quantity
that maximizes profits.
C)finding the quantity at which average revenue and average total cost are furthest apart.
D)determining the price by finding the highest price at which sales can be made and then using the
demand curve to find the appropriate quantity.
answer
A)finding the quantity at which marginal cost and marginal revenue are equal and then using the
demand curve to find price.
demand curve to find price.
question
According to the above figure, the maximum profit the monopolist can receive is
A)0.
B)$1,500 per day.
C)$7,500 per day.
D)$9,000 per day.
A)0.
B)$1,500 per day.
C)$7,500 per day.
D)$9,000 per day.
answer
B)$1,500 per day
question
The profit-maximizing price of the monopolist compared to the perfectly competitive industry in the above
figure are, respectively
A)P2and P5.
B)P1and P2.
C)P1and P3.
D)P1and P5.
figure are, respectively
A)P2and P5.
B)P1and P2.
C)P1and P3.
D)P1and P5.
answer
C)P1and P3.
question
The profit-maximizing quantity of the monopolist compared to the perfectly competitive industry in the
above figure are, respectively
A)Q1and Q3.
B)Q1and Q2.
C)Q1and Q5.
D)Q2and Q3
above figure are, respectively
A)Q1and Q3.
B)Q1and Q2.
C)Q1and Q5.
D)Q2and Q3
answer
A) Q1and Q3.
question
Compared to an efficient perfectly competitive industry, the monopolist will
A)produce less output and charge a higher price.
B)produce less output at a higher total cost.
C)produce more output at a lower price.
D)produce more output at a higher price and higher profit.
A)produce less output and charge a higher price.
B)produce less output at a higher total cost.
C)produce more output at a lower price.
D)produce more output at a higher price and higher profit.
answer
A) produce less output and charge a higher price.
question
Refer to Figure 14-5.What is the amount of consumer surplus if, instead of monopoly, the industry was
organized as a perfectly competitive industry?
A)$21
B)$124
C)$186
D)$332
organized as a perfectly competitive industry?
A)$21
B)$124
C)$186
D)$332
answer
D)$332
question
Refer to Figure 14-5. Assume the firm maximizes its profits. What is the amount of consumer surplus?
A)$21
B)$124
C)$186
D)$332
A)$21
B)$124
C)$186
D)$332
answer
C)$186
question
Collusion is
A)common among monopoly firms.
B)legal under U.S. antitrust law
s if the intent is to increase competition.
C)an agreement among firms to charge the same price or otherwise not to compete.
D)necessary for firms to raise money by borrowing from investors or from banks in order to fund research
and development required to develop new products.
A)common among monopoly firms.
B)legal under U.S. antitrust law
s if the intent is to increase competition.
C)an agreement among firms to charge the same price or otherwise not to compete.
D)necessary for firms to raise money by borrowing from investors or from banks in order to fund research
and development required to develop new products.
answer
C)an agreement among firms to charge the same price or otherwise not to compete.
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