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Which of the following is not a characteristic of a monopoly?
answer
free entry and exit
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Which of the following would be most likely to have monopoly power?
answer
a municipal water company
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The demand curve a monopolist faces
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is the market demand curve
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For a monopolist,
answer
P = AR > MR
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When a monopolist increases the amount of output that it produces and sells, the price of its output
answer
decreases
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For a monopolist,
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both marginal revenue and price fall as quantity increases, but marginal revenue falls faster
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What is the relationship between price elasticity of demand and the monopolist's revenue?
answer
marginal revenue is negative where demand is inelastic
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Negative marginal revenue means that
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total revenue is decreasing as output increases
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For a monopolist, the level of output at which marginal revenue equals zero is also the level of output at which
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total revenue is maximized
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If a monopolist is operating at an output level where price equals average total cost, we can conclude that
answer
economic profit is $0
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Suppose that the demand for my new book, Spatulas From Around the World, is such that the demand curve lies everywhere below the average variable cost of producing it. To maximize profits or minimize losses, I should
answer
shut down the presses printing my book
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If the government breaks up a monopoly into a perfectly competitive industry, what would we expect with regard to output and price?
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output will increase and price will decrease
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A monopolistically competitive market has characteristics that are similar to
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both a monopoly and a perfect competitive firm
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Monopolistic competition is best described as
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many firms with some control over price, and some product differentiation
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The demand curve facing Imelda's Shoe Boutique, a monopolistically competitive firm,
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slopes downward because Imelda's sells a differentiated product
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Which of the following is true about a monopolistically competitive firm?
answer
It can earn an economic profit in the short run, but not the long run
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In monopolistically competitive markets as well as in monopoly,
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price exceeds marginal revenue for each firm
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Assume a monopolistically competitive firm is earning an economic profit. The marginal revenue from selling an additional unit is $50 and the marginal cost of producing that additional unit is $46. The firm should
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reduce its price and increase its output level
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For a monopolistically competitive firm,
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average revenue and price are the same
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In the short run, a firm in a monopolistically competitive market operates much like a
answer
monopolist
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In the long run, the economic profit of Hoot's Pump Chicken 'n' Ribs, a monopolistically competitor,
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is eliminated because of new firms entering the industry
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In the long run, a monopolistically competitive firm will
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produce where price equals average total cost
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Which of the following characteristics does perfect competition share with monopolistic competition?
answer
zero long-run economic profit
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Compared to a firm in perfect competition, the monopolistically competitive firm tends to
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produce less and charge a higher price
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Which of the following examples illustrates an oligopoly market?
answer
a city with four firms who are licensed to sell school uniforms for the local schools
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Which of the following is unique to oligopoly among all the market structures?
answer
mutual interdependence
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A cartel's profit maximizing quantity occurs when the
cartel's
cartel's
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marginal cost equals marginal revenue
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Which of the following is likely to occur when a two-person game can be played repeatedly?
answer
Collusion and cooperation among the players
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The prisoners' dilemma game
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has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other
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When a firm is operating at its minimum efficient scale, its
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long-run average total cost of production is minimized
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A good that is rival and nonexclusive is called
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an open access good
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The market demand curve for public good
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is the vertical sum of all individual demand curves
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The efficient level of public good provision is determined
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where the market demand curve intersects the marginal cost curve
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All of the following are examples of negative externalities except one. Which is the exception?
answer
your roommate going on a diet
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To solve the common pool problem in fishing, government can ________, or __________.
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impose a tax; restrict output
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At the free market output and price for a good whose production causes pollination,
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the marginal social cost of production exceeds the marginal social benefit of production
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The socially optimal level of output of a good with an externality occurs when
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the marginal social cost of production equals the marginal social benefit of the good
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Society's total cost of producing a good
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includes all private and external costs
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In a free market, a firm's rate of output is determined
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where marginal private cost equals marginal private benefit
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