question
. . Which type of public policy toward monopolies is much more common in Europe than in the United states?
answer
public ownership
question
For a monopolist, when the output effect is greater than the price effect, marginal revenue is
answer
positive
question
Most firms have
answer
some monopoly pricing power
question
A natural monopoly arises when
answer
there are economies of scale over the relevant range of output
question
Amanda inherited the only local cable TV/Internet company in town after her father passed away.
The company has a local monopoly on the delivery of high-speed Internet service. The company is
completely unregulated by the government and is therefore free to operate as it wishes. Assume that
Amanda understands the true power of her new monopoly. Which of the following statements is (are)
correct?
(i) She will be able to set the price of high-speed Internet service at whatever level she wishes.
(ii) The customers will be forced to purchase high-speed Internet service at whatever price she
wants to set.
(iii) She will be able to achieve any profit level that she desires.
The company has a local monopoly on the delivery of high-speed Internet service. The company is
completely unregulated by the government and is therefore free to operate as it wishes. Assume that
Amanda understands the true power of her new monopoly. Which of the following statements is (are)
correct?
(i) She will be able to set the price of high-speed Internet service at whatever level she wishes.
(ii) The customers will be forced to purchase high-speed Internet service at whatever price she
wants to set.
(iii) She will be able to achieve any profit level that she desires.
answer
. (i) only
question
The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called
answer
. resale price maintenance.
question
When a market is monopolistically competitive, the typical firm in the market can earn
answer
losses in the short run and zero profit in the long run.
question
Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium
answer
P > ATC
P = ATC
P < ATC
P = ATC
P < ATC
question
Which of the following correctly lists the products in order from most advertised to least advertised?
answer
dog food, communication satellites, corn
question
In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally
answer
overturned laws that prohibit advertising.
question
When a profit-maximizing firm in a monopolistically competitive market is producing the long-run
equilibrium quantit
equilibrium quantit
answer
its demand curve will be tangent to its average total cost curve
question
...
answer
it has a deadweight loss, just as monopoly does.
question
Which of the following conditions is characteristic of a monopolistically competitive firm in short-run
equilibrium?
equilibrium?
answer
P = AR
MR = MC
P > MC
MR = MC
P > MC
question
A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has
average revenue of $9 and average total cost of $7. It follows that the firm's
average revenue of $9 and average total cost of $7. It follows that the firm's
answer
a. average total cost curve intersects the marginal cost curve at an output level of less than 200 units.
b. average variable cost curve intersects the marginal cost curve at an output level of less than 200 units.
c. profit is $400.
d. All of the above are correct.
b. average variable cost curve intersects the marginal cost curve at an output level of less than 200 units.
c. profit is $400.
d. All of the above are correct.
question
A local playground equipment company plans to operate out of its current factory, which is
estimated to last 30 years. All cost decisions it makes during the 30-year period
estimated to last 30 years. All cost decisions it makes during the 30-year period
answer
are short-run decisions
question
Profit
answer
Total revenue minus total cost
question
explicit costs
answer
input costs that require an outlay of money by the firm
question
Implicit costs
answer
input costs that do not require an outlay of money by the firm
question
Economic Profit
answer
total revenue minus total cost, including both explicit and implicit costs
question
Accounting profit
answer
total revenue minus total explicit cost
question
True
answer
accounting profit is usually larger than economic profit.
question
Production Function
answer
the relationship between the quantity of inputs used to make a good and the quantity of output of that good
question
Diminishing marginal product
answer
the property whereby the marginal product of an input declines as the quantity of the input increases
question
Total costs
answer
FC+VC
question
Average Fixed cost
answer
FC/Q
question
Average Variable Cost
answer
VC/Q
question
Average total cost
answer
TC/Q
question
Marginal cost
answer
change in total cost/ change in quantity
question
Efficient scale
answer
the quantity of output that minimizes average total cost
question
Economies of scale
answer
the property whereby long-run average total cost falls as the quantity of output increases
question
Diseconomies of scale
answer
the property whereby long-run average total cost rises as the quantity of output increases
question
Constant returns to scale
answer
the property whereby long-run average total cost stays the same as the quantity of output changes
question
Shut down
answer
Total revenue < Variable cost
question
Sunk cost
answer
a cost that has already been committed and cannot be recovered
question
Exit in the long run
answer
Total revenue < Total cost
question
Entry rule
answer
Price > ATC
question
Firms profit
answer
(P-ATC) x Q
question
Monopolistic competition
answer
a market structure in which many firms sell products that are similar but not identical
question
collusion
answer
an agreement among firms in a market about quantities to produce or prices to charge
question
cartel
answer
a group of firms acting in unison
question
Nash equilibrium
answer
a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen
question
What might cause economies or diseconomies of scale?
answer
Economies of scale often arise because higher production levels allow specialization among workers, which permits each worker to become better at a specific task. For instance, if Ford hires a large number of workers and produces a large number of cars, it can reduce costs using modern assembly-line production. Diseconomies of scale can arise because of coordination problems that are inherent in any large organization. The more cars Ford produces, the more stretched the management team becomes, and the less effective the managers become at keeping costs down.
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