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a9 , a10 , a11, global

For an imperfectly competitive firm:

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

Refer to the above two diagrams for individual firms. Figure 1 pertains to:

a purely competitive firm.

Refer to the above diagram. Demand is relatively inelastic:

at any price below P2.

The MR = MC rule:

applies both to pure monopoly and pure competition.

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

$82.

The supply curve of a pure monopolist:

does not exist because prices are not "given" to a monopolist.

In which one of the following market models is X-inefficiency least likely to be present?

pure competition

Which of the following is not a precondition for price discrimination?

The commodity involved must be a durable good.

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):

the maximum price each would be willing to pay.

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:

average total cost.

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

a relatively large number of firms and the monopolistic element from product differentiation.

Refer to the above diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then:

the demand curve would become more elastic.

Refer to the above data. If columns (1) and (3) of the demand data shown above are this firm's demand schedule, the profit-maximizing level of output will be:

8 units

A significant benefit of monopolistic competition compared with pure competition is:

greater product variety.

In monopolistically competitive markets, resources are:

underallocated because long-run equilibrium occurs where price exceeds marginal cost.

In long-run equilibrium a monopolistically competitive producer achieves:

neither productive efficiency nor allocative efficiency.

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

its demand curve is kinked.

The economic profits earned by monopolistically competitive sellers are zero in the long run.

True

Refer to the above payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a one-time simultaneous game:

neither firm has a dominant strategy.

Which of the following statements concerning a monopolistically competitive industry is correct?

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

Kodak introduced to the marketplace a digital camera which uses no film, but which takes photos that can be shown on personal computers. This is an example of:

product innovation.

As it relates to R&D, the imitation problem is that:

a firm's rivals may be able to copy its new product or process innovation, reducing the original firm's return on R&D.

All of the following increase the expected rate of return on R&D expenditures, except:

imitation by others.

Legal protections against competitors producing and selling a product identical to the one you invented are called _________; legal protections against competitors using your product's name are called __________.

patents; trademarks

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a:

patent.

Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that:

Oligopolists have little incentive to introduce costly new technology and produce new products when they currently are earning large economic profit using existing technology and selling existing products.

Technological advance improves allocative efficiency by:

giving society a more-preferred mix of goods and services.

Creative destruction is:

the process by which new firms and new products replace existing dominant firms and products.

The marginal cost to a firm of R&D expenditures is the market interest rate the firm must pay to obtain the needed financing.

True

The interest-rate cost-of-funds curve is perfectly elastic because firms can borrow as much or as little as they want at market interest rates.

True

The quantity demanded of a good is the amount that buyers

are willing and able to purchase.

The movement from point A to point B on the graph shows

an increase in quantity demanded.

The following table contains a supply schedule for a good.

If the law of supply applies to this good, then "?" could be

0

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages, and automobile insurance becomes more expensive?

Price will stay exactly the same.

The price elasticity of demand measures how much

quantity demanded responds to a change in price.

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

The theory of consumer choice provides the foundation for understanding the

demand for a firm's product. ???

In a market economy, government intervention

may improve market outcomes in the presence of externalities.

Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price of a book is $15. If she has $100 of income, she could choose to consume

4 pizzas and 3 books.

An indifference curve illustrates

a consumer's preferences.

Large minimum efficient scale of plant combined with limited market demand may lead to:

natural monopoly.

Answer the question on the basis of the following table showing the demand schedule
facing a nondiscriminating monopolist:

Refer to the above table. The profit-maximizing monopolist will sell at a price:

that cannot be determined with the information provided.

If the variable costs of a profit-maximizing pure monopolist decline, the firm should:

produce more output and charge a lower price.

An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are:

underallocated because price exceeds marginal cost.

Refer to the above diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one represented in (A).

higher; lower

Refer to the above long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC2, then the firm is:

incurring X-inefficiency, but is producing that output at which all existing economies of scale might be realized.

If a pure monopolist can price discriminate by separating buyers into two or more groups:

the firm will face multiple marginal revenue curves.

Refer to the figure above. Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly); P denotes the price of a round of golf; Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays, and the right graph the weekend demand, this profit-maximizing golf course will earn how much economic profit over the course of a full seven-day week?

$4,200

Refer to the above diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at:

P1.

Refer to the above diagram for a natural monopolist. If a regulatory commission set a maximum price of P1, the monopolist would produce output:

Q4 and realize a loss.

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?

Subway Sandwiches

In short-run equilibrium, the monopolistically competitive firm shown above will set its price:

below ATC.

Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be:

A.

The more elastic a monopolistic competitor's long-run demand curve, the:

lower its average total cost at its profit maximizing level of output.

Refer to the above data. The Herfindahl Index for the above industry is:

1,800.

Refer to the above diagram where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If both firms follow a high-price policy:

each will realize a $20 million profit.

Refer to the above game theory matrix where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. With collusion and no cheating, the outcome of the game is cell:

D.

Refer to the above diagram. Equilibrium price is:

d

Refer to the above payoff matrix. Bob's Burgers and Sam's Sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products. If this is a sequential game but we don't know who moves first, what can we say about the final outcome?

Cells B and C both represent possible Nash equilibrium outcomes for this game

Refer to the above 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. If this is a repeated game with no cooperation or reciprocity, cell A:

is the expected outcome of this game, and it is both a Nash equilibrium and a prisoner's dilemma.

The quantity demanded of a good is the amount that buyers

are willing and able to purchase.

The movement from point A to point B on the graph shows

an increase in quantity demanded.

The following table contains a supply schedule for a good.

Price

Quantity Supplied
$10

100
$20

?


If the law of supply applies to this good, then "?" could be

0

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages, and automobile insurance becomes more expensive?

Price will stay exactly the same.

The price elasticity of demand measures how much

quantity demanded responds to a change in price.

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

In a market economy, government intervention

may improve market outcomes in the presence of externalities.

The theory of consumer choice provides the foundation for understanding the

demand for a firm's product.

Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price of a book is $15. If she has $100 of income, she could choose to consume

4 pizzas and 3 books.

An indifference curve illustrates

a consumer's preferences.

Given the budget constraint depicted in the graph, the consumer will choose bundle

C

Economists normally assume that the goal of a firm is to

maximize its profit.

Profit is defined as

total revenue minus total cost.

Those things that must be forgone to acquire a good are called

opportunity costs.

When a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs.

Economies of scale occur when a firm's

long-run average total costs are decreasing as output increases.

A firm has market power if it can

maximize profits.

A key characteristic of a competitive market is that

producers sell nearly identical products.

Which of the following are necessary characteristics of a monopoly?
(i)
The firm is the sole seller of its product.
(ii)
The firm's product does not have close substitutes.
(iii)
The firm generates a large economic profit.
(iv)
The firm is located in a small geographic market.

(i) and (ii) only

Deadweight loss

equals monopoly revenues minus profits.

Which of the following is not a characteristic of a perfectly competitive market?

Goods offered for sale are largely the same.

Price discrimination

can occur in both perfectly competitive and monopoly markets.

Monopolistic competition is a type of

oligopoly.

What price will the monopolistically competitive firm charge in this market?

$80

Firms in a monopolistically competitive market

produce an output level that minimizes average total cost in the long run.

A group of firms that act in unison to maximize collective profits is called a

cartel.

An equilibrium in which each firm in an oligopoly maximizes profit, given the actions of its rivals, is called

a dominant equilibrium.

Game theory is important for the understanding of

competitive markets.

The prisoners' dilemma game

provides insight into why cooperation is individually rational.

Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.
The dominant strategy for ABC is to

produce high output, and the dominant strategy for XYZ is to produce high output.

Which of the following statements concerning a monopolistically competitive industry is correct?

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

The quantity demanded of a good is the amount that buyers

are willing and able to purchase.

The movement from point A to point B on the graph shows

an increase in quantity demanded.

he following table contains a supply schedule for a good.

Price

Quantity Supplied
$10

100
$20

?


If the law of supply applies to this good, then "?" could be

0

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages, and automobile insurance becomes more expensive?

Price will fall

The price elasticity of demand measures how much

quantity demanded responds to a change in price.

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

In a market economy, government intervention

may improve market outcomes in the presence of externalities.

The theory of consumer choice provides the foundation for understanding the

demand for a firm's product.

Assume that a college student spends her income on books and pizza. The price of a pizza is $8, and the price of a book is $15. If she has $100 of income, she could choose to consume

4 pizzas and 3 books.

An indifference curve illustrates

a consumer's preferences.

Given the budget constraint depicted in the graph, the consumer will choose bundle

C

Economists normally assume that the goal of a firm is to

maximize its profit.

Profit is defined as

total revenue minus total cost.

Those things that must be forgone to acquire a good are called

opportunity costs.

When a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs.

Economies of scale occur when a firm's

long-run average total costs are decreasing as output increases.

A firm has market power if it can

influence the market price of the good it sells.

A key characteristic of a competitive market is that

producers sell nearly identical products.

Which of the following is not a characteristic of a perfectly competitive market?

Firms have difficulty entering the market.

Which of the following are necessary characteristics of a monopoly?
(i)
The firm is the sole seller of its product.
(ii)
The firm's product does not have close substitutes.
(iii)
The firm generates a large economic profit.
(iv)
The firm is located in a small geographic market.

(i) and (ii) only

Deadweight loss

measures monopoly inefficiency.

Price discrimination

can maximize profits if the seller can prevent the resale of goods between customers.

Monopolistic competition is a type of

market structure.

What price will the monopolistically competitive firm charge in this market?

$80

Firms in a monopolistically competitive market

cannot earn economic profits in the long run.

A group of firms that act in unison to maximize collective profits is called a

cartel.

An equilibrium in which each firm in an oligopoly maximizes profit, given the actions of its rivals, is called

a Nash equilibrium.

Game theory is important for the understanding of

oligopolies.

The prisoners' dilemma game

provides insight into why cooperation is difficult.

Two companies, ABC and XYZ, each decide whether to produce a high level of output or a low level of output. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.

produce high output, and the dominant strategy for XYZ is to produce high output.

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