Microeconomics Test 2 (Ch.8-10)

Suppose the accompanying table describes the relationship between price and quantity demanded for a monopolist.

The marginal revenue for the 3rd unit of output is:

Quantity Price
1 $10
2 9
3 8
4 7
5 6
6 5
7 4
8 3

Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit of output, it must:

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

"Market Power" refers to a firm's ability to:

Which of the following firms is most likely to be a pure monopolist?

When a perfectly competitive firms additional units of output, ___________, and when a monopolist sells additional units of output, _________.

Start-up costs

Which of the following industries does not fit the natural monopoly model?

When a pharmaceutical company introduces a new drug, its research & development costs are ________, and the cost of the chemicals used in manufacturing the drug are ______.

When a marginal revenue is zero:

If a firm functions in an oligopoly, it is:

A monopoly that results from economies of a scale is called a(n):

A price setter is a firm that:

Which of the following is NOT an example of a good with network economies?

According to the textbook, the most important and enduring source of market power is:

The reason economists consider monopoly to be socially undesirable is that monopolists:

Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:

Both the perfectly competitive firm and the monopolist find that:

Natural monopolies are most likely to arise when firms have:

Q P. TR
1. 10. -
2. 9. 18
3. 8. 24
4. 7. 28
5. 6. 30
6. 5. 30
7. 4 28
8. 3. 24

The marginal revenue of the 5th unit of output is:

A firm is most likely to experience economies of scale if its start-up costs are high and its marginal cost is ____________

In many cities in the U.S., a single firm provides electricity. Those firms are:

For all firms, the additional revenue collected from the sale of one additional unit of output is:

The primary objective of an imperfectly competitive firm is to:

Patents, which confer market power, are intended to

Why do price discrimination and the existence of slightly different variants of the same product tend to go hand in hand? By introduction slightly different variants of the product, firms that price discrimination are able to:

If a monopolist could perfectly price discriminate:

Suppose the market for milk is perfectly competitive, and the equilibrium price of milk $6/gallon. If a firm that produces milk increases its output by 1 gallon, then its marginal revenue will be:

Q. P. TR
1. 6. 6
2 6. 12

Suppose Big Dairy Inc. has a monopoly in the market for milk and currently sells 1,000 gallons of milk a day @ a price of $6/gallon. Big Dairy Inc.'s marginal revenue from producing its 1,000th gallon of milk is:

Q. P. TR
1,000 6. 6,000

Suppose a monopolist faces the market demand curve shown below. What's the highest price this monopolist can change if it wants to sell 4 units per week?

(7,3)
(6,4)

What is this monopolist's MR as it expands output from 3 to 4 units/week?

Q P TR
3 7 21
4 6 24

A single-priced, profit max. monopolist:

In a perfectly competitive industry, the industry demand curve is horizontal, whereas for a monopoly it is downward sloping.

Perfectly competitive firms have no control over the price they change for their product

For a natural monopoly, avg. cost declines as the # of units produced increases over the relevant output range

What's the horizontal intercept of this monopolist's MR curve?

Hint: Always equals half of it

up to 10 on the x and y axis

Whats the vertical intercept of this monopolist's MR curve?

Hint: Always the beginning

up to 10 on the x and y axis

Explain why price discrimination and the existence of slightly different variants of the same product tend to go hand in hand. Give an example from your own experience

Why might an appliance retailer hammer dents into the sides of its stores and refrigerators?

What pricing practice is explained by the same logic as the appliance seller's scratch n dent sale?

Game theory provides tools that are used to model:

The three elements of a game are:

A payoff matrix shows:

A dominant strategy exists if:

In the Nash equilibrium of a prisoner's dilemma

A coalition of firms who agree to restrict output for the purpose of earning an economic profit is called a(n):

Most cartels cease to be effective b/c:

OPEC is an example of a:

A strategy that limits deflection in a repeated prisoner's dilemma game is:

In tit-for-tat, if your partner _________ in your first interaction, then you will ______ in your next interaction

A _______________ describe the possible moves in a game in sequence and lists the payoffs to each possible combination of moves.

A credible threat is:

In sequential games, the player who moves first.

A monopolistically competitive firm:

When players cannot achieve their goals b/c they are unable to make credible threats or promises, the situation is called a

According to the textbook, the owners of restaurants encourage tipping in order to:

Which of the following is NOT a commitment device?

A purely self-interested diner is more likely to tip:

Psychological incentives:

Emotions like guilt and sympathy

A pure monopoly exists when:

A monopolistically competitive firm is one:

A good is characterized by network economies if it:

If a firm's total revenue is $112 when it sells 16 units, $119 when it sells 17 units and $126 when it sells 18 units,

A natural monopoly is a monopoly that arises from:

If a natural monopoly decreases the quantity of output it produces, then

A monopolist will maximize profits at the output level for which:

Industries in which firms have high fixed costs and low marginal costs are likely to have a:

A credible promis is:

A decision tree is used when modeling:

The use of psychological incentives to solve commitment problems would be least effective in games played:

In traditional economic models, homo economicus is assumed to be all of the following EXCEPT

In traditional economic models, which of the following does NOT describe homo economicus:

Government programs aimed at stimulating personal savings:

Traditional economic models assume that people care about:

The ______ is a game in which the first. player has the power to confront the second player with a take-it-or-leave-it offer

Evidence suggests that as the importance of what's at stake grows, loss aversion

One criticism of the present-aim standard of rationality is that it:

In the realm of public policy, loss aversion makes it:

Impulse control problems can arise when people:

Status quo bias is the

___________ is the phenomenon that unusual events are likely to be followed by more nearly norma ones

The phenomenon that unusual events are likely to be followed by more nearly normal is known as:

According to the representative heuristic, if Roger has many of the characteristics of a millionaire, then people will:

If an entity is fungible, then its individual units are:

Judgmental and decision heuristics are:

In traditional economic models, homo economicus refers to a decision maker who:

The decision-making strategy that aims for adequate results because optimal results may necessitate excessive expenditure of resources is known as:

________ is the property of an entity whose individual units are interchangeable

Rules of thumb that reduce computation costs are known as:

The rule of thumb that estimates the frequency of an event by the ease with which it is possible to summon examples from memory is the:

According to the availability heuristic, the more easily we can recall example of an event:

Suppose Paul just saw a care accident while driving home from work. According to the availability heuristic, this likely to make Paul think that:

The rule of thumb according to which people are more likely to assume something belongs to a given category if it shares many characteristics with the stereotypical members of that category is the:

According to the representative heuristic, people's belief about the likelihood that something belongs to a given category _______ the extent to which it shares characteristics with the stereotypical members of that category.

An estimation technique that begins with an initial approximation, which is then modified in accordance with additional information, is known as:

When people use anchoring and adjustment to estimate something, the adjustment they make when they receive new information is typically:

Typically, when people use anchoring and adjustment to estimate something, the importance of ____________ in influencing their assessment is too large

Suppose Evan and Robert are each filling out a separate survey about parking on campus. On Evan's survey, the first question asks about whether he thinks the fine for parking illegally on campus should be $50, and on Robert's survey the first question asks about whether he thinks the fine should be $100. For both Evan and Robert, the second question asks how much each thinks the fine currently is. If Evan and Robert know nothing about the parking fines on campus, but each uses anchoring and adjustment to form his assessment, then, all else equal, you would expect:

The relationship according to which the perceived change in any stimulus varies according to the size of the change measured as a proportion of the original stimulus is known as:

The Weber-Fechner law is the relationship according to which the perceived change in any stimulus

According to the Weber-Fechner law, when the change in a stimulus is large in proportion to the original stimulus, the perceived size of the change will be:

In situations where people make decisions with perfectly predictable consequences, traditional economic models cannot explain:

The tendency to experience losses as more painful than the pleasures that result from gains of the same magnitude is known as:

Loss aversion is the tendency to:

The general resistance to change, often stemming from loss aversion, is known as:

The present aim standard of rationality accommodates a much _______ range of observed behavior than traditional economic models, but has been criticized because the model is too _______.

In traditional economic models, people: