Micro Econ Test 3 - Assignment Essays

question

This type of firm would likely operate as a monopoly

answer

the local water company.

question

Consider the monopolist depicted in the figure above. The profit maximizing level of output for a single-price monopolist is

answer

question

Consider the monopolist depicted in the figure above. When it maximizes its profit, a single-price monopolist sets a price of ________ per unit.

answer

$11

question

Which area in the above figure shows the producer surplus at the price and quantity that would be set by a single-price monopoly?

answer

C + D + F + G

question

Which area in the above figure shows the producer surplus at the price and quantity that would be attained if the industry were perfectly competitive?

answer

F + G + H

question

A monopoly

answer

is able to raise the price it can charge for its product by decreasing the quantity sold.

question

A monopoly that sells every unit of its output at the same price is a

answer

single-price monopoly.

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In the figure above, a single-price unregulated monopoly sets a price equal to

answer

question

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

answer

4 units per year and the price will be $6.

question

In the above figure, which area is the deadweight loss from a single-price monopoly?

answer

E + H

question

Given the market demand and cost data in the above figure, the existence of two firms equal sized firms producing a total of 8 million cubic feet of natural gas means that the long-run average cost of producing natural gas is

answer

20 cents per cubic foot.

question

What condition must exist for a monopolist to effectively price discriminate?

answer

The monopolist must produce a good that cannot be resold.

question

Price discrimination takes place when a firm

answer

charges different prices for different units of its product.

question

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

answer

Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years.

question

If a monopolist can perfectly price discriminate, then

answer

there will be no consumer surplus.

question

A monopoly can price discriminate between two groups of consumers if each group has

answer

a different willingness to pay.

question

A monopoly is best defined as a firm that

answer

produces a good or service for which no close substitute exists and which is protected by a barrier that prevents other firms from selling that good or service.

question

Which area in the above figure equals the producer surplus under perfect price discrimination?

answer

A + B + C + D + E + F + G + H

question

Which of the following statements about a monopoly is FALSE?

answer

Monopolies have no barriers to entry or exit.

question

If a monopolist can perfectly price discriminate, it will

answer

charge a different price for every unit sold.

question

Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). Fresh Taste's economic profit is

answer

zero, that is, it earns only a normal profit

question

The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The firm has excess capacity of

answer

8 units.

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The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).

answer

loss; $8,000

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In monopolistic competition, product improvement and development

answer

is less than its efficient amount

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In the long-run, a firm in monopolistic competition produces an amount of output that sets

answer

P = ATC and MR = MC.

question

A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day. The firm's average variable cost and marginal cost is a constant $20 per book. What is the publisher's profit-maximizing level of output?

answer

80 books per day

question

answer

$60

question

In monopolistic competition, each firm has a demand curve with a ________ and there ________ barriers to entry into the market.

answer

negative slope; are no

question

The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

answer

producing 8 units and charging a price of $15.

question

answer

8; $3.00

question

An increase in advertising costs affect a firm in a monopolistic competition by increasing the firm's

answer

total fixed cost.

question

A monopolistically competitive firm is like a perfectly competitive firm insofar as both

answer

can make zero economic profit in the long run.

question

In monopolistic competition

answer

each firm supplies a small part of the total market output.

question

Graphically we can illustrate a firm with price setting ability by drawing its demand curve as

answer

downward sloping.

question

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

answer

Monopolistically competitive firms sell a differentiated good.

question

The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

answer

$0.

question

In the long run, monopolistically competitive firms produce where

answer

excess capacity exists.

question

One important difference between monopoly and monopolistic competition is the

answer

point there are no barriers to entry in monopolistic competition.

question

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

answer

The firm's price equals the price at which the MR curve intersects the MC curve.

question

In monopolistic competition, profit is maximized when the amount produced is such that

answer

marginal revenue equals marginal cost.

question

A strategy called "limit pricing" sets the price

answer

at the highest level that inflicts a loss on the entrant.

question

Libertyville has two optometrists, Dr. Smith and Dr. Jones. Each optometrist can choose to advertise his service or not. The incomes of each optometrist, in thousands of dollars, are given in the payoff matrix above. Which of the following statements CORRECTLY describes Dr. Smith's strategy given what Dr. Jones may do?

answer

Dr. Smith should advertise no matter what Dr. Jones does.

question

Oscar and Felix are the only firms that clean offices in a large city. They agree to operate as a cartel. The payoff matrix above shows the economic profit that each firm can make. If the game is played only once, then

answer

Felix and Oscar will each make $1 million economic profit.

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With barriers to the entry of new firms

answer

the cartel will likely earn an economic profit greater than zero.

question

In game theory, strategies include

answer

all possible actions of each player.

question

Suppose that all pizza companies have the same costs and the minimum average total cost is $12 per pizza. The pizza companies have an efficient scale of 100 pies per night. In the small town of Coatsville, at the price of $12 per pizza the quantity demanded is approximately 300 pizzas per night. This market, therefore, can best be characterized as

answer

a natural oligopoly.

question

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

answer

high; perfectly competitive

question

Oligopoly is

answer

like monopoly because there are barriers to entry.

question

If firms in an industry make output decisions that are partially based on the price and output decisions of their competitors, then these firms are in ________ market have ________ with the other firms in the market.

answer

an oligopoly; interdependence

question

When producers agree to restrict output, raise the price, and increase profits, the agreement is called

answer

a cartel agreement.

question

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

answer

All of the above answers are correct.

question

A trigger strategy is one in which a player

answer

cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats.

question

A strategy of setting price below the monopoly profit-maximizing price but at the highest level that will still result in a loss for a potential entrant into the market is known as

answer

limit pricing.

question

The maximum total economic profit that can be made by colluding duopolists

answer

equals the economic profit made by a monopolist.

question

A cooperative equilibrium is most likely to arise in a

answer

repeated game with a small number of players.

question

When two firms collude to maximize profit the total quantity produced by both firms taken together is determined at the quantity where

answer

industry marginal cost equals industry marginal revenue.

question

Game theory is applicable to oligopoly behavior because oligopolists

answer

use strategic behavior.

question

The table above displays the possible outcomes for Bob and Joe, who have been arrested for armed robbery and car theft. Which of the following is TRUE?

answer

If Bob confesses, Joe should confess.

question

A duopoly occurs when

answer

there are only two producers of a particular good competing in the same market.

question

An equilibrium in game theory in which the players make and share the monopoly profit is called

answer

the cooperative equilibrium.

1 of 60

question

This type of firm would likely operate as a monopoly

answer

the local water company.

question

Consider the monopolist depicted in the figure above. The profit maximizing level of output for a single-price monopolist is

answer

question

Consider the monopolist depicted in the figure above. When it maximizes its profit, a single-price monopolist sets a price of ________ per unit.

answer

$11

question

Which area in the above figure shows the producer surplus at the price and quantity that would be set by a single-price monopoly?

answer

C + D + F + G

question

Which area in the above figure shows the producer surplus at the price and quantity that would be attained if the industry were perfectly competitive?

answer

F + G + H

question

A monopoly

answer

is able to raise the price it can charge for its product by decreasing the quantity sold.

question

A monopoly that sells every unit of its output at the same price is a

answer

single-price monopoly.

question

In the figure above, a single-price unregulated monopoly sets a price equal to

answer

question

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

answer

4 units per year and the price will be $6.

question

In the above figure, which area is the deadweight loss from a single-price monopoly?

answer

E + H

question

answer

20 cents per cubic foot.

question

What condition must exist for a monopolist to effectively price discriminate?

answer

The monopolist must produce a good that cannot be resold.

question

Price discrimination takes place when a firm

answer

charges different prices for different units of its product.

question

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

answer

Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years.

question

If a monopolist can perfectly price discriminate, then

answer

there will be no consumer surplus.

question

A monopoly can price discriminate between two groups of consumers if each group has

answer

a different willingness to pay.

question

A monopoly is best defined as a firm that

answer

produces a good or service for which no close substitute exists and which is protected by a barrier that prevents other firms from selling that good or service.

question

Which area in the above figure equals the producer surplus under perfect price discrimination?

answer

A + B + C + D + E + F + G + H

question

Which of the following statements about a monopoly is FALSE?

answer

Monopolies have no barriers to entry or exit.

question

If a monopolist can perfectly price discriminate, it will

answer

charge a different price for every unit sold.

question

answer

zero, that is, it earns only a normal profit

question

The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The firm has excess capacity of

answer

8 units.

question

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).

answer

loss; $8,000

question

In monopolistic competition, product improvement and development

answer

is less than its efficient amount

question

In the long-run, a firm in monopolistic competition produces an amount of output that sets

answer

P = ATC and MR = MC.

question

answer

80 books per day

question

answer

$60

question

In monopolistic competition, each firm has a demand curve with a ________ and there ________ barriers to entry into the market.

answer

negative slope; are no

question

The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

answer

producing 8 units and charging a price of $15.

question

answer

8; $3.00

question

An increase in advertising costs affect a firm in a monopolistic competition by increasing the firm's

answer

total fixed cost.

question

A monopolistically competitive firm is like a perfectly competitive firm insofar as both

answer

can make zero economic profit in the long run.

question

In monopolistic competition

answer

each firm supplies a small part of the total market output.

question

Graphically we can illustrate a firm with price setting ability by drawing its demand curve as

answer

downward sloping.

question

Which of the following best explains why monopolistically competitive firms face a downward sloping demand curve while perfectly competitive firms do not?

answer

Monopolistically competitive firms sell a differentiated good.

question

The above figure shows the demand and cost curves for a monopolistically competitive firm in the long run. The maximum economic profit this firm can make equal equals

answer

$0.

question

In the long run, monopolistically competitive firms produce where

answer

excess capacity exists.

question

One important difference between monopoly and monopolistic competition is the

answer

point there are no barriers to entry in monopolistic competition.

question

Which of the following statements regarding a profit-maximizing monopolistically competitive firm is NOT true?

answer

The firm's price equals the price at which the MR curve intersects the MC curve.

question

In monopolistic competition, profit is maximized when the amount produced is such that

answer

marginal revenue equals marginal cost.

question

A strategy called "limit pricing" sets the price

answer

at the highest level that inflicts a loss on the entrant.

question

answer

Dr. Smith should advertise no matter what Dr. Jones does.

question

answer

Felix and Oscar will each make $1 million economic profit.

question

With barriers to the entry of new firms

answer

the cartel will likely earn an economic profit greater than zero.

question

In game theory, strategies include

answer

all possible actions of each player.

question

answer

a natural oligopoly.

question

In a contestable market the Herfindahl-Hirschman Index is ________ and the market behaves as if it is ________.

answer

high; perfectly competitive

question

Oligopoly is

answer

like monopoly because there are barriers to entry.

question

answer

an oligopoly; interdependence

question

When producers agree to restrict output, raise the price, and increase profits, the agreement is called

answer

a cartel agreement.

question

The ABC Nail Company has entered into a collusive agreement with the other firm in the industry, the DC Nail Company. What occurs in the nail industry if ABC decides to cheat on the agreement?

answer

All of the above answers are correct.

question

A trigger strategy is one in which a player

answer

cooperates in the current period if the other player has always cooperated, but cheats forever if the other player ever cheats.

question

A strategy of setting price below the monopoly profit-maximizing price but at the highest level that will still result in a loss for a potential entrant into the market is known as

answer

limit pricing.

question

The maximum total economic profit that can be made by colluding duopolists

answer

equals the economic profit made by a monopolist.

question

A cooperative equilibrium is most likely to arise in a

answer

repeated game with a small number of players.

question

When two firms collude to maximize profit the total quantity produced by both firms taken together is determined at the quantity where

answer

industry marginal cost equals industry marginal revenue.

question

Game theory is applicable to oligopoly behavior because oligopolists

answer

use strategic behavior.

question

The table above displays the possible outcomes for Bob and Joe, who have been arrested for armed robbery and car theft. Which of the following is TRUE?

answer

If Bob confesses, Joe should confess.

question

A duopoly occurs when

answer

there are only two producers of a particular good competing in the same market.

question

An equilibrium in game theory in which the players make and share the monopoly profit is called

answer

the cooperative equilibrium.

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