question
Which of the following statements best describes perfect competition?
answer
It is important to understand perfect competition in theory, but there are few real life examples of PC
question
Which of the following is the best example of a homogenous product?
a) candy bars
b) laundry detergent
c) cucumbers
d) cold medicine
a) candy bars
b) laundry detergent
c) cucumbers
d) cold medicine
answer
c) Cucumbers
question
Which of the following statements would NOT apply to perfectly competitive markets?
answer
consumers tend to prefer one brand over another ( since it is PC they are all the same)
question
Which of the following is true about economic profit in the long run in a perfectly competitive industry?
answer
Firms will breakeven ( aka earn zero profit)
question
Which of the following points would be considered a profit maximizing point for a business?
answer
MR = MC
question
Which of the following does MR equal in perfect competition?
answer
The market price --> since price is constant in perfect competition MR and price equal the same thing
question
a farmer in a perfectly competitive industry has decided not to produce anything this year despite the fact that he rents the land he farms and he will still have to pay the rent even if he doesn't produce anything. What option would have to be true to make the farmer's decision a good one?
answer
AVC > P
when this is true, one should shut down their operations, because they are losing money
when this is true, one should shut down their operations, because they are losing money
question
Assuming the farmer made a rational, which of the following statements explains the farmer's losses for the period?
answer
His losses will be equal to his fixed costs --> if the farmer shuts down the the only costs he will have, are his fixed costs
question
At what point would we want to shut down our business?
answer
AVC > P ( here we would be losing money if we chose to continue with production)
question
Which of the following is true about the PROFITS of perfectly competitive firms in the long run?
answer
they are 0
question
If firms in a perfectly competitive industry are earning positive economic profits, which of the following will occur?
answer
More firms will enter the market --> If firms see that firms in this industry are doing well, they will want to enter the market as well
question
If we are in the long run in a perfectly competitive industry, which of the following best describes the price that the firms are charging?
answer
It will be equal to the cost of production ( aka zero )
question
Which of the following best describes production efficiency?
answer
When a firm produces at the minimum point of the ATC curve
question
Which of the following would best be associated with a "price taker"
answer
In the long run they will have an economic profit of 0. --> Firms in a perfectly competitive firm are considered to be "price takers" In the long run in perfect competition, firms will earn zero economic profit
question
Which of the following is is MR equal to in perfect competition?
answer
MR = PRICE in perfect competition
question
Which of the following best describes the MR curve for a single price monopolist?
answer
It is below the average revenue curve for a monopolist --> Remember that average revenue curve = demand curve for a monopolist
question
The Average revenue curve for a monopolist is the same thing as its what?
answer
demand curve
question
A single price monopolist is currently producing an output where MR is less than MC. What can this firm do to increase profits?
answer
Reduce output and raise price ( the monopolist should reduce output/raise price until MR=MC)
question
The economic profit of a firm is negative when the?
answer
ATC is greater than price, at the point where MR=MC
question
When will a monopolist earn a positive economic profit?
answer
When its price exceeds its ATC
question
At what point does a single price monopolist maximize its REVENUE?
answer
when MR = 0
question
An aluminum company ay one point owned 90% of the world's supply of bauxite which is the key ingredient to make aluminum. What type of barrier to entry did this company use to try to establish a monopoly?
answer
Ownership of resources, that do not have close substitutes
question
What is a positive effect of price discrimination for a monopolist?
answer
Price discrimination will give the monopolist higher profits , than a single price for all customers. ( this is due to more variation in price)
question
Is it more common to see price discrimination used with services or goods?
answer
Services because it is easier to arbitrage goods than services ( arbitrage = buy something at a cheap price, and then sell it for a higher price)
question
Which of the following is true about the economic profit when it is positive?
answer
this is when price is greater than ATC at the point where MR=MC
question
Which of the following does NOT have to be true about monopolies?
a) there is a single seller
b) monopolies always make a profit
c) there are no substitutes
d) there are high barriers to entry
a) there is a single seller
b) monopolies always make a profit
c) there are no substitutes
d) there are high barriers to entry
answer
b) monopolies always make a profit
question
What is a characteristic of a firm that price discriminates?
answer
The firm identifies 2 or more groups and charges them different prices ( ex: PSU football tickets -- students tickets vs. regular season tickets)
question
Which of the following methods of regulation would make it so that producers are LEAST concerned with minimizing costs?
answer
Rate of return regulation -- this is because firms using the "ROR" regulation method, have virtually no incentive to minimize costs
question
Profit maximizing quantity can be found how?
answer
where MR=MC
question
Profit maximizing price can be found how?
answer
to find price we must find where MR=MC, and then we go up to the demand curve
question
The profit of a firm is positive when the price is greater than what?
answer
the ATC
question
Name 3 ways in which a government regulation can create a monopoly?
answer
patents, tariffs, and regulations
question
Which of the following best describes perfect price discrimination?
answer
It is economically efficient and desirable for producers --> price discrimination is economically efficient because there is no DWL
question
Why do monopolistically competitive firms face a downward sloping demand curve?
answer
The market price for their goods is affected by the amount they sell
question
Which of the following would be considered a differentiated product?
a) copper
b) tomatoes
c) sugar
d) cereal
a) copper
b) tomatoes
c) sugar
d) cereal
answer
d) cereal - because there are different brands and kinds
question
In the long run, monopolistic competition has higher unit costs than perfect competition. This implies that...
answer
There is a tradeoff between product variety and the ability to minimize cost per unit
question
Which of the following must firms do if they want to maximize joint profits in an oligopolistic industry with a homogeneous product?
answer
They must determine the share of output that each firm will produce
question
Which of the following best describes tacit collusion in an oligopolistic industry?
answer
It is when firms cooperate without an explicit agreement
question
Which of the following statements is most accurate when there is a temporary change in demand?
answer
there will be more price volatility in more competitive markets than in oligopoly markets
question
Which of the following is most accurate when there is a permanent change in demand?
answer
There will be the same price volatility in both market structures
question
Which of the following is true about advertising by existing firms in an oligopolistic industry?
answer
It can be an effective entry barrier
question
Which of the following best describes a major difference between a monopoly and perfect competition? Assume that perfectly competitive firms all have the the same costs.
answer
Only monopolists can earn a positive profit in the long run ( can not earn a profit in long run with perfect competition)
question
Of the two market structures is a Monopolistic competition or oligopoly more competitive?
answer
Monopolistic Competition
question
In an oligopolistic market, firms are mutually what?
answer
interdependent
question
Which of the following is a characteristic of a monopolistically competitive market?
answer
Each firm faces a downward sloping demand curve
question
How do monopolistically competitive firms maximize profit in the short run?
answer
They set MR=MC
question
The essential coordinating mechanism of a free-market economy is what?
answer
The price system
question
Which of the following best describes an oligopolistic market?
answer
There are high barriers to entry and firms interact strategically with each other
question
Which of the following would be described as the point of production where ATC is the lowest for a particular firm?
answer
Minimum efficient scale
question
Which of the following is not a factor required to achieve pure competition?
answer
A small number of firms in the market
question
At which of the following points would we want to shut down our business ?
answer
when AVC > P .... here the cost to produce the good is greater than the profit that can be made
question
Who will charge a higher price a monopolist or a perfect competitor?
answer
Monopolist -- no substitutes available so consumers are not sensitive to changes in price
question
What would be a (close) example to a perfect competitor?
answer
Local lawn care company
question
What is the combination of all the producer and consumer surplus from a sale called?
answer
Economic welfare
question
Which of the following would be caused by a binding price ceiling imposed on a market in equilibrium?
answer
Shortage
question
Which of the following would be caused by a non-binding price ceiling imposed on a market in equilibrium?
answer
No effect
question
Which of the following describes how to find producer surplus?
answer
It is the area above the supply curve and below the price for all units purchased
question
A perfectly competitive firm's short-run supply curve is the firm's MC curve above the MC curves intersect with with what?
answer
the AVC
question
Profit=
answer
(P-ATC)(Q)
question
When are economies of scale likely to be a barrier to entry?
answer
Only large scale production can lower the average cost of production-- this means that in order to get the lowest cost per unit you have to produce large outputs of it
question
If a firm is able to use perfect price discrimination it will produce all the way to the point where P=MC which is also known as where what two curves intersect?
answer
the MC and DC curve
question
Which of the following holds true for both monopolists and perfectly competitive firms ?
answer
they both produce where MR=MC
question
Which of the following must a single-price monopolist do to be able to sell additional units?
answer
lower price
question
The demand curve faced by monopolistically competitive firms is ________ than the demand curve faced by a monopolist
answer
More elastic
question
Which of the following is true in a long-run monopolistically competitive equilibrium?
answer
P=ATC
and ATC is not at its minimum
and ATC is not at its minimum
question
Why is the demand curve for a monopolistic competitor always downward sloping?
answer
Because if a monopolistically competitive firm wants to sell additional units it will need to sell it for a lower price
question
Which of the following is true about the long run equilibrium for a monopolistically competitive firm when compared to a perfectly competitive firm?
answer
The monopolistically competitive firm will charge a higher price and produce less output
question
Which of the following products is most likely to be produced in a monopolistically competitive industry?
answer
Fast Food ( because all fast food chains are doing the same thing, yet their are different brands)
question
Typically we will see that horizontal mergers will...
answer
Decrease the number of firms in an industry
question
Toyota purchased a company that produces break pads. What is this an example of?
answer
Vertical merger
question
Which of the following best describes oligopoly
answer
There are few large firms in the industry (interdependent)
question
Which market structure is unique to oligopoly?
answer
there is strong interdependence among competing firms ( this means that one firms actions directly impact firms in the industry
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
