question
If the monopolist chooses to maximize total revenue rather than total profit, where will it produce?
answer
where MR=0
question
Economic profit is located
answer
where profit is (same thing)
question
Equilibrium in perfect competition
answer
where MC=D
question
Which of the following is true if a monopolist's marginal revenue is negative at the current level of output?
answer
Demand for its product is price inelastic.
question
The profit-maximizing output level produced by an unregulated monopoly is
answer
less than the socially optimal level, since the price paid by consumers exceeds the firm's marginal cost
question
In order for a firm to engage in price discrimi- nation, it must be
answer
able to separate consumers into different groups based on demand elasticities
question
A well-known fast-food franchise substantially increases the price of its hamburgers, and loses only some of its customers. Which of the following best explains why the franchise has not lost all of its customers
answer
Its hamburgers are differentiated.
question
monopolistically competitive firm in LR equilibrium
answer
P=ATC
question
What is true for both a monopolistically competitive firm and a perfectly competitive firm in long-run profit-maximizing equilibrium?
answer
Economic profits equal zero, and marginal revenue equals marginal cost.
question
What is true about a monopolistically competitive firm in long-run equilibrium?
answer
It has excess capacity and its output price exceeds its marginal cost, even though its long-run profit is zero.
question
profit or loss and what type- monopolistically competitive firm in long run equilibrium
answer
normal profit
question
Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition? (products)
answer
In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product.
question
what do perfectly competitive and monopolistically competitive markets have in common?
answer
P=AR, firms produce at MC=MR, large number of firms, no barriers to entry
question
Efficiency of Monopolistic Competitive firms
answer
are inefficient because they produce a lower level of output at a higher average cost than do perfectly competitive firms
question
LR equilibrium of monopolistic competition
answer
P=ATC and is greater than marginal cost
question
Which of the following is true of a monopolistically competitive firm in long-run equilibrium?
answer
The firm is allocatively inefficient, because it produces an output level at which price is greater than marginal cost.
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
Assume that Alpha and Beta are the only sellers of a product and they do not cooperate. Each firm has to decide whether to raise the product price. The payoff matrix below gives the profits, in dollars, associated with each pair of pricing strategies. The first entry in each cell shows the profits to Alpha, and the second, the profits to Beta.
Assuming both firms know the information in the matrix, which of the following correctly describes the dominant strategy of each firm?
Assuming both firms know the information in the matrix, which of the following correctly describes the dominant strategy of each firm?
answer
Alpha- Do not raise price
Beta- Do not raise price
Beta- Do not raise price
question
A collusive agreement to fix prices among firms in an oligopolistic industry is most likely to be broken under which of the following conditions?
answer
It is easy for new firms to enter into the industry (low barriers to entry)
question
Game theory is a useful model to explain the behavior of firms in a market when the firms are
answer
interdependent
question
Describe an oligopolistic market
answer
A few competing sellers with similar products and high barriers to entry
question
Assume that a monopolist is producing in the inelastic portion of its demand curve. Which of the following will occur if the monopolist decreases its price?
answer
Both total revenue and profits will decrease.
question
In the long run, a monopolistically competitive firm is allocatively inefficient because the firm will
answer
charge a price greater than the marginal cost
question
Generally, monopolies are considered inefficient because they
answer
lead to an underallocation of resources in the affected market
question
Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?
answer
Price is greater than marginal cost.
question
Price discrimination occurs when
answer
differences in a product's price do not reflect differences in costs of production
question
The condition for allocative efficiency is violated when
answer
firms are price makers( price searchers)
question
In which of the following market structures is it sometimes assumed that rival firms will match price decreases but not match price increases?
answer
Oligopoly
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