Module 06 – A & B Graded Quiz – Microeconomics

GRAPH

If the industry depicted in this graph were purely competitive, the market price would be

Multiple Choice
1. $8.
2. lower than $8.
3. $16. - Incorrect
4. $14.

To practice long-run price discrimination, a monopolist must
Multiple Choice
1. charge one price to all buyers.
2. permit the resale of the product by the original buyers.
3. be a natural monopoly.
4. be able to separate buyers into different markets with different price elasticities.

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

TABLE
Total Output Price Marginal Revenue Average Total Cost Marginal Cost
1$100$100$100.00$302908063.00263806052.67324704049.50405602049.6050650050.0052740-2052.2966830-4055.7580920-6060.671001010-8067.60130

Refer to the data for a non discriminating monopolist. This firm will maximize its profit by producing

Multiple Choice
4 units.
3 units.
5 units. - Incorrect
6 units.

Price discrimination is illegal in the United States under all circumstances due to antitrust regulations.
True or False

Intel's monopoly in the sale of microchips for personal computers would be considered
Multiple Choice
1. legal by "behavioralists" but illegal by "structuralists."
2. illegal by "behavioralists" but legal by "structuralists."
3. legal by "behavioralists" and "structuralists."
4. illegal by "behavioralists" and "structuralists."

Government regulation concerning the conditions under which goods are produced, the impact of production on society, and the physical qualities of the goods is known as

In which of the following cases was the firm found not guilty of violating the Sherman Act?

The Consumer Product Safety Commission engages in social regulation, rather than industrial regulation.
True or False

Which of the following is mainly involved in social regulation?
Multiple Choice
the Social Security Administration
the Interstate Commerce Commission
the Food and Drug Administration
the Federal Communications Commission

GRAPH rev: 11_17_2017_QC_CS-109718

Refer to the graph for a monopolist in short-run equilibrium. The monopolist will charge a price equal to the distance:

Multiple Choice
1. 0C.
2. 0B.
3. not labeled on the graph.
4. 0A.

GRAPH
If the industry depicted in this graph were purely competitive, the market price would be
Multiple Choice
$14.
$8.
$16.
lower than $8.

TABLE
Total Output Price Marginal Revenue Average Total Cost Marginal Cost
1 $100 $100 $100.00 $30
2 90 80 63.00 26
3 80 60 52.67 32
4 70 40 49.50 40
5 60 20 49.60 50
6 50 05 0.00 52
7 40 -20 52.29 66
8 30 -40 55.75 80
9 20 -60 60.67 100
10 10 -80 67.60 130

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be

Multiple Choice
zero.
$27.
$82.
$54.

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explains why this occurs?

DIAGRAMS

In the accompanying diagram, Firm B's average revenue curve coincides with its marginal revenue curve.

True or False

An industry has five firms, each with a market share of 20 percent. There is no foreign competition, entry into the industry is difficult, and no firm is on the verge of bankruptcy. If two of the firms in the industry seek to merge, this action would most likely be opposed by the government because the Herfindahl index for the industry is

In the 1982 AT&T antitrust case, the resolution was an out-of-court settlement involving a

Multiple Choice
breakup of AT&T into several smaller firms.
cease-and-desist order.
change in the business practices of AT&T.
takeover of AT&T by another company.

Differences in the application of antitrust laws are in part rooted on the issue of how broadly antitrust authorities should define the relevant

Multiple Choice
product.
price.
firm.
market.

In which of the following cases did the final court decision result in a breakup of the firm into competing businesses?

Multiple Choice
DuPont cellophane case
U.S. Steel case
Microsoft case
Standard Oil case

The basic issue in the DuPont cellophane case was

Multiple Choice
structure versus behavior.
the rule of reason.
defining the relevant market.
whether trade crossed state lines.

If we believe that "variety is the spice of life," then we should be more concerned about the excess capacity in monopolistic competition and do our best to eliminate it.
True or False

Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run.
True or False

4X GRAPHS

Refer to the above graphs. The differences in the long-run equilibrium positions for a monopolistically competitive firm and for a purely competitive firm are illustrated by graphs

Multiple Choice
A and B.
B and C.
A and C. - Incorrect
C and D.

Excess capacity implies
Multiple Choice
allocative efficiency.
productive efficiency.
allocative inefficiency.
productive inefficiency.

For a monopolistically competitive firm in long-run equilibrium,
Multiple Choice
marginal revenue will exceed marginal cost.
price will equal average total cost.
price will equal the minimum average total cost.
price will equal marginal cost.

Backward induction in an extensive form game
Multiple Choice
is used to identify the decision nodes of a repeated game.
is used to determine the Nash equilibrium of a game.
is used primarily to establish whether players should compete or cooperate. - Incorrect
allows the players to alter their strategies as the game is being played.

Monopolistic competition and oligopoly are more common in the real world than pure competition and monopoly.
True or False

Suppose the Herfindahl indexes for industries A, B, and C are 7,200, 5,000, and 1,500, respectively. These data imply

Refer to the diagram. This firm's demand and marginal revenue curves are based on the assumption that

Multiple Choice
rivals will match both a price increase and a price decrease.
the firm has no immediate rivals.
rivals will ignore a price increase but match a price decrease.
rivals will match a price increase but ignore a price decrease.

The four-firm concentration ratio for an industry measures the

Answer the question on the basis of the following demand and cost data for a specific firm.

TABLE
Demand Data Cost Data
(1)Price (2)Price (3)Quantity Output Total Cost
$11.00 $10.00 6 6 $61
9.99 8.85 7 7 62
9.00 8.00 8 8 64
8.00 7.00 9 9 67
7.10 6.10 10 10 72
6.00 5.00 11 11 79
5.15 4.15 12 12 86

If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing price will be

Multiple Choice
$9.
$6.
$7.
$11.

An important similarity between a monopolistically competitive firm and a purely competitive firm is that

3X DIAGRAMS

Refer to the diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by

Multiple Choice
diagram b only.
diagram c only.
diagram a only.
both diagrams a and c.

DIAGRAM

Refer to the diagram. The monopolistically competitive firm shown

Multiple Choice
cannot operate at a loss.
is in long-run equilibrium.
will realize allocative efficiency at its profit-maximizing output. - Incorrect
is realizing an economic profit.

The larger the number of firms and the smaller the degree of product differentiation, the

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that

PAYOFF MATRIX
Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. Is there a Nash equilibrium solution to this game?

Multiple Choice
A Nash equilibrium can occur at either cell B or cell C.
Cell A represents a Nash equilibrium.
There is no possible Nash equilibrium solution.
Cell D represents a Nash equilibrium.

Suppose the Herfindahl indexes for industries A, B, and C are 7,200, 5,000, and 1,500, respectively. These data imply

When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are practicing the strategy of

Suppose that currently there are no airlines serving the city of South Podunk. Both Accommodating Airlines and Friendly Flyers are looking to enter that market. (They are the only two.) The figure shows in extensive form the possible outcomes of the two firms' decisions. The payoffs represent, in thousands per month, the profit (or loss) the firm will realize from its decision. What is the solution to this extensive form game?
POSSIBLE OUTCOME FORM GAME

Multiple Choice
FF will enter the market; AA will not.
Neither airline will enter the market.
AA will enter the market; FF will not.
Both airlines will enter the market.