question
Game theory is most useful in describing outcomes in markets where
answer
There are independent firms
question
Which of the following is true for a firm in long-run equilibrium in monopolistic competition?
answer
There is neither allocative nor productive efficiency
question
If a firm is producing below the ATC and above the AVC, what should it do in the long run?
answer
Exit if conditions do not improve
question
What is true of monopolistic competition?
answer
With the firm making economic profits, it can be expected that new firms will enter the market
question
A monopolistically competitive firm is currently producing the profit-maximizing level of output. If the price of a variable input increases, which of the following will occur?
answer
The firm's average total cost and marginal cost curves will shift upward.
question
What is true of a monopolistic competition in the long run?
answer
It has excess capacity and its output price exceeds its marginal cost, even though its long-run profit is zero.
question
What does not characterize both perfectly competitive and monopolistically competitive markets?
answer
Firms can affect the selling price of their product.
question
Game theory is a useful model to explain the behavior of firms in a market when the firms are
answer
interdependent
question
Why is a cartel difficult to maintain?
answer
Individual cartel members are tempted to cheat on the agreement.
question
Monopolistically competitive firms are inefficient because they
answer
produce a lower level of output at a higher average cost than do perfectly competitive firms
question
Let P = price, MR = marginal revenue, MC = marginal cost, and ATC = average total cost. In monopolistic competition, which of the following most accurately describes the long-run equilibrium conditions for a firm?
answer
P = ATC, MR = MC, and P > MC
question
A monopolistically competitive firm advertises in order to
answer
make the demand for its product less price elastic
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
It's hamburgers are differentiated
question
Compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because they
answer
restrict their output level to maximize profits
question
In monopolistic competition, a goal of advertising is to
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make a firm's demand curve less elastic
question
A single-price monopolist's marginal revenue is
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less than it's price
question
For an unregulated monopolist, the profit- maximizing quantity will always be
answer
in the elastic region of the demand curve
question
Monopolies are inefficient compared to perfectly competitive firms because monopolies
answer
charge a price greater than marginal cost
question
If Zeta, a single producer, had exclusive control of a key resource needed to produce good Z , a likely result would be which of the following?
answer
There would be a barrier to entry, and Zeta would have a monopoly on good Z.
question
A monopoly is different from a perfectly competitive firm in that a monopoly
answer
has a marginal revenue curve that lies below its demand curve
question
Which of the following is most likely to occur if a single-price monopolist is replaced by a perfectly competitive market?
answer
The deadweight loss will decrease.
question
What 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
A monopolist introduces a technological innovation that lowers the marginal cost and average cost of production. The price of the good and the level of output are most likely to change in which of the following ways?
answer
Price decreases and level of output increases
question
Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly's price and output will be which of the following?
answer
Price will be higher and output will be lower
question
If the marginal cost curve of a monopolist shifts up, what will occur to the monopolist's price and output?
answer
Price increases and output decreases
question
At the current quantity that a firm is selling, the firm has marginal revenue of $750 and marginal cost of $800. Which of the following is true?
answer
The firm's profits would increase if the firm decreased the quantity sold.
question
Generally, monopolies are considered inefficient because they
answer
lead to an underallocation of resources in the affected market
question
What is necessarily true at a monopolist's profit-maximizing level of output?
answer
Marginal revenue is equal to marginal cost, but less than price.
question
A monopolist is inefficient from society's point of view because
answer
it underproduces output and charges a price above marginal cost
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