Chapter 8 – Microeconomics

question

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

answer

Diamonds

question

Suppose a monopolist is charging $12 for output. One can infer that

answer

marginal revenues are less than $12

question

When a consumer must take some sort of additional action to receive a lower price, the consumer is being subjected to

answer

the hurdle method of price discrimination

question

When a firm with constant returns to scale uses 30% more of all inputs and input pricesremain unchanged, then

answer

average costs remain unchanged.

question

If the monopolist's demand curve is P=70-14*Q, then the slope of her marginal revenue curve is

answer

-28

question

The monopolist will maximize profits if she produces where

answer

marginal revenue equals marginal cost.

question

Suppose a monopolist is considering two different pricing schemes: offering the good $100per unit with a $10 rebate coupon or just charging a flat $90. His economic consultant would advise him to

answer

charge the $100 price because less than 100% of the buyers will mail in the rebate

question

The price elasticity of demand for an imperfectly competitive firm is

answer

greater than zero and less than infinity

question

Because of the monopoly structure in this market, __________ units are produced and theprice is __________ when compared with perfect competition

answer

2 fewer; $2 higher

question

The deadweight loss due to monopoly in the market stems from the fact that

answer

the value of units 4 and 5 exceed or equal the cost of producing them

question

The profit maximizing monopolist will produce where __________, which in this examplemeans the price, quantity combination __________

answer

MR=MC; $8 & 3 units

question

The monopoly price, quantity combination in this market is __________ while theperfectly competitive price, quantity combination would have been _________

answer

$8 & 3; $6 & 5

question

The marginal revenue of the third unit of output is

answer

question

Assume a monopolist is charging two different groups two different prices for its output. For this to be considered price discrimination,

answer

production costs must be the same

question

A price setter finds that it has

answer

some control over the price it charges

question

When a monopolist sells additional units

answer

total revenues may rise, fall, or remain unchanged.

question

If a monopolist knows that at his current output level, marginal revenues are $8 and marginal cost are $8, then he

answer

is profit maximizing

question

Given the total cost function TC=1,000+2*Q, when output is 1,000 units average totalcosts are__________ and when output is 10,000, average total costs are __________

answer

$3; $2.10

question

As described in the textbook, price discrimination means charging

answer

different prices to different consumers when production costs are the same.

question

Suppose a firm increases its labor usage and office space (the only inputs used) by 10% and observes a 13% increase in output. The firm has

answer

increasing returns to scale

question

The common feature in pure monopoly, oligopoly, and monopolistic competition is

answer

downward sloping demand

question

Given the total cost function, TC = a + b*Q with (a,b) > 0, average costs will

answer

fall over the entire range of output.

question

Suppose monopolist M charges a uniform price of $10 based on profit maximization and has constant marginal costs of $3. Beth is willing to pay $6 for the monopolist's output. Therefore,

answer

if resale of the output is impossible, the monopolist should lower his price to $6 just for Beth

question

If the monopolist's demand curve is P=30-5*Q, then her marginal revenues are

answer

30 - 10*Q

question

If a firm collects $100 in revenues when it sells 5 units and $120 when it sells 6 units, one can infer the firm is

answer

a perfect competitor.

question

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

answer

marginal revenue

question

If a monopolist finds that her marginal revenue exceeds her marginal costs at the current level of output, she should

answer

expand output until marginal revenue equals marginal costs.

question

The justification for having a list price and offering a mail-in rebate coupon is to

answer

separate the market into the less price sensitive and the more price sensitive

question

Suppose monopolist Z has constant marginal costs of $7 and 25 consumers have reservation prices of at least $7. Under perfect price discrimination, one can infer that there will be

answer

at most 25 different prices

question

An oligopolist is a firm which finds it is

answer

one of a few firms that produce close substitutes.

question

Suppose a monopolist adopts a pricing scheme where every Monday all prices are 10% lower. This would be

answer

an ineffective hurdle because all consumers could wait until Monday to buy

question

A firm that emerges as the only seller in an industry with economies of scale is termed a(n)

answer

natural monopoly

question

An imperfectly competitive firm is one

answer

that possesses some degree of control over its price

question

The firm illustrated in the graph is a(n)

answer

natural monopolist

question

At the socially efficient level of output, the monopolist would earn

answer

a loss of $100.10

question

The socially efficient price and output combination is

answer

$5 and 7

question

The __________ at the socially efficient level of output will be __________ at the profit maximizing level of output

answer

loss; larger than

question

A monopolist calculates her marginal revenues to be $15 and her marginal costs to be $16. One can infer that she

answer

should contract output

question

If both the perfectly competitive firm and the monopolist expand production form Q1 toQ2, their respective total revenues are __________ and __________

answer

A+B+C+D+E; B+E

question

Assume that the current price is P1 and current production is Q1. Total revenue to theperfect competitor is equal to __________ and __________for the monopolist.

answer

A+B; A+B

question

The loss in revenues to the monopolist as he moves from Q1 output to Q2 is represented bythe area

answer

question

According to the data, firm __________ has the lowest average total costs while firm__________ has the highest.

answer

N; L

question

Assume that firm L loses sales of 75,000 units, with 40,000 units going to firm N and35,000 units going to firm M. Firm N now has average total costs of

answer

$143

question

Assume that firm M acquires firm L. After the merger, firm M has average total costs of__________ while firm N has average total costs of __________

answer

$125; $150

question

Suppose a firm is collecting $100 in total revenues when it sells 10 units and it receives$110 in total revenues when it sells 11 units. The firm is a(n)

answer

perfect competitor

question

If a firm triples all its inputs and output triples as a result, then the firm

answer

has constant returns to scale.

question

If a firm collects $100 in revenues when it sells 5 units and $114 when it sells 6 units, one can infer the firm is

answer

a monopolist

question

The demand curve to a perfectly competitive firm is __________ while the demand curve to a monopolist is __________

answer

Perfectly elastic; downward sloping

question

To sell an extra unit of output, a perfect competitor __________ while an imperfect competitor __________.

answer

does not alter price; must lower price

question

According to the textbook, the most common source of market power is

answer

economies of scale

question

Economies of scale exist when

answer

average costs fall as the scale of production grows

question

Marginal revenue is

answer

the extra revenue that results from selling one extra unit

question

The nature of the social loss from monopoly is that

answer

the marginal benefit of the last unit the monopolist produces is greater than the marginal cost

question

If the monopolist's marginal revenue curve is MR=30-6*Q, the marginal revenue of the third unit of output is

answer

$12

question

At the point of profit maximization, a perfectly price discriminating monopolist would collect total revenues of

answer

$57

question

Assuming the monopolist does not price discriminate, he will produce __________ units and charge a price of __________

answer

3; $11

question

At the point of profit maximization, the nonprice discriminating monopolist will earn aprofit of

answer

$26

question

If the monopolist were able to perfectly price discriminate, he would charge __________for the first unit and __________ for the fifth unit.

answer

$17; $5

question

A perfectly price discriminating monopolist would produce __________ units.

answer

question

Comparing the nonprice discriminating monopoly outcome to the perfectly pricediscriminating monopoly outcome, profits are

answer

greater when price discriminating

question

When the nonprice discriminating monopolist profit maximizes, consumer surplus is

answer

$13.50

question

Pure monopoly exists when

answer

a single firm produces a good with no close substitutes.

question

A consumer goes to purchase a TV advertised for $300. As he is checking out, the clerk informs him of a $20 rebate offer for the TV, which he fills out and receives in 3 months.One can infer that the consumer had

answer

a reservation price of at least $300 but jumped the hurdle anyway

question

If the monopolist's demand curve is P=90-3*Q, then the price at which marginal revenuesare zero is

answer

$45

question

Both the perfectly competitive firm and the monopolist find that

answer

it is best to expand production until the benefits and costs of the last unit produced are equal.

question

In order to sell another unit, an imperfectly competitive firm must

answer

lower its price

question

The monopolist's profit maximizing price is $25 and his marginal costs are $13.Consumers exist with reservation prices between $24 and $13. The monopolist is

answer

willing to sell to these consumers at less than $25 if his original customers continue to pay $25

question

The reason a nondiscriminating monopolist chooses to produce where P > MC rather thanP=MC and therefore causes a deadweight loss, is he

answer

will not profit maximize at P=MC

question

The distance representing the profit maximizing price to the monopolist is

answer

question

At the point of monopoly profit maximization, consumer surplus is represented by the area

answer

CJE

question

The deadweight loss resulting from monopoly is represented by the area

answer

KEI

question

The distance representing the profit maximizing level of output to the monopolist is

answer

question

At the profit-maximizing level of output, the monopolist collects total revenues equal to the area

answer

0CEA

question

A perfectly competitive equilibrium would have resulted in a price equal to the distance__________ and a quantity equal to the distance __________

answer

0G; 0H

question

When marginal revenues are zero,

answer

total revenues are maximized.

question

Patents and copyrights, which confer market power, exist to

answer

protect research and development and creative expression

question

A single firm producing an item with no close substitutes is termed a(n)

answer

pure monopolist.

question

The term natural monopoly refers to

answer

industries with economies of scale.

question

Perfect competition is efficient and monopoly in not because in perfect competition__________ while in monopoly __________

answer

P=MC; P>MC

question

Based on the marginal revenue data in the table, one can predict the firm will

answer

never produce the seventh unit.

question

The marginal revenue of selling the sixth unit is

answer

question

When the firm lowers the price from $8 to $7, marginal revenue is less than $7 because

answer

the firm is charging $1 less for each of the first three units of output.

question

The perfectly competitive firm finds that price __________ marginal revenue while a monopolist finds that price __________ marginal revenue.

answer

equals; is greater than

question

Electricity is typically sold to residential consumers at a higher price than the price charged to commercial or industrial consumers. Which of the following does not help to explain this widespread example of imperfect price discrimination?

answer

Electricity is a necessity for residential consumers but not commercial or industrial consumers.

question

If the market price is $7 and a perfect competitor increases output from 150 units to 200units, he will collect __________ additional dollars in revenue

answer

$350

question

An industry that features a few firms which produce close substitutes is termed

answer

oligopoly

question

A price taker __________ and a price setter __________.

answer

equates price to marginal revenues; finds that price is greater than marginal revenue

question

If a monopolist's demand curve is P=55-5*Q, the marginal revenue of the fourth unit of output is

answer

$15

question

If the monopolist's demand curve is P=50-10*Q, then marginal revenues are zero when Q equals

answer

2.5 Units

question

industries where economies of scale exist will tend to be

answer

dominated by either a single firms or a few firms

question

Discounts extended to children and senior citizens by movie theaters are examples of

answer

imperfect price discrimination

question

The economic justification for disdaining monopoly from a social point of view is the monopolist

answer

produces less than the socially efficient amount

question

A firm has a production function of Q=L*K, where L is labor and K is capital. If L and can take whole values (i.e., 1., 2, 3), then the firm has

answer

increasing returns to scale

question

The correct sequence of market structures from most to least competitive is

answer

perfect competition, monopolistic competition, oligopoly, pure monopoly.

question

The extra revenue collected by selling an extra unit of output is

answer

equal to price for a perfect competitor but less than price for a monopolist

question

Perfect price discrimination is when

answer

all buyers pay their reservation price

question

Which of the following statements is false?

answer

Price setters can sell any quantity at any price

question

Which of the following situations will come closest to perfect price discrimination?

answer

Negotiating a price with each individual consumer

question

A consumer has a reservation price of $90 for a blender. If the local store is offering the blender for $100 with a $10 rebate and he does not make the purchase, one can surmise

answer

in this case, the hurdle failed to work

question

Suppose a competitive firm and a monopolist are both charging $5 for their respective outputs. One can infer that

answer

marginal revenue is $5 for the competitive firm and less than $5 for the monopolist

1 of 100

question

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

answer

Diamonds

question

Suppose a monopolist is charging $12 for output. One can infer that

answer

marginal revenues are less than $12

question

When a consumer must take some sort of additional action to receive a lower price, the consumer is being subjected to

answer

the hurdle method of price discrimination

question

When a firm with constant returns to scale uses 30% more of all inputs and input pricesremain unchanged, then

answer

average costs remain unchanged.

question

If the monopolist's demand curve is P=70-14*Q, then the slope of her marginal revenue curve is

answer

-28

question

The monopolist will maximize profits if she produces where

answer

marginal revenue equals marginal cost.

question

Suppose a monopolist is considering two different pricing schemes: offering the good $100per unit with a $10 rebate coupon or just charging a flat $90. His economic consultant would advise him to

answer

charge the $100 price because less than 100% of the buyers will mail in the rebate

question

The price elasticity of demand for an imperfectly competitive firm is

answer

greater than zero and less than infinity

question

Because of the monopoly structure in this market, __________ units are produced and theprice is __________ when compared with perfect competition

answer

2 fewer; $2 higher

question

The deadweight loss due to monopoly in the market stems from the fact that

answer

the value of units 4 and 5 exceed or equal the cost of producing them

question

The profit maximizing monopolist will produce where __________, which in this examplemeans the price, quantity combination __________

answer

MR=MC; $8 & 3 units

question

The monopoly price, quantity combination in this market is __________ while theperfectly competitive price, quantity combination would have been _________

answer

$8 & 3; $6 & 5

question

The marginal revenue of the third unit of output is

answer

question

Assume a monopolist is charging two different groups two different prices for its output. For this to be considered price discrimination,

answer

production costs must be the same

question

A price setter finds that it has

answer

some control over the price it charges

question

When a monopolist sells additional units

answer

total revenues may rise, fall, or remain unchanged.

question

If a monopolist knows that at his current output level, marginal revenues are $8 and marginal cost are $8, then he

answer

is profit maximizing

question

Given the total cost function TC=1,000+2*Q, when output is 1,000 units average totalcosts are__________ and when output is 10,000, average total costs are __________

answer

$3; $2.10

question

As described in the textbook, price discrimination means charging

answer

different prices to different consumers when production costs are the same.

question

Suppose a firm increases its labor usage and office space (the only inputs used) by 10% and observes a 13% increase in output. The firm has

answer

increasing returns to scale

question

The common feature in pure monopoly, oligopoly, and monopolistic competition is

answer

downward sloping demand

question

Given the total cost function, TC = a + b*Q with (a,b) > 0, average costs will

answer

fall over the entire range of output.

question

Suppose monopolist M charges a uniform price of $10 based on profit maximization and has constant marginal costs of $3. Beth is willing to pay $6 for the monopolist's output. Therefore,

answer

if resale of the output is impossible, the monopolist should lower his price to $6 just for Beth

question

If the monopolist's demand curve is P=30-5*Q, then her marginal revenues are

answer

30 - 10*Q

question

If a firm collects $100 in revenues when it sells 5 units and $120 when it sells 6 units, one can infer the firm is

answer

a perfect competitor.

question

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

answer

marginal revenue

question

If a monopolist finds that her marginal revenue exceeds her marginal costs at the current level of output, she should

answer

expand output until marginal revenue equals marginal costs.

question

The justification for having a list price and offering a mail-in rebate coupon is to

answer

separate the market into the less price sensitive and the more price sensitive

question

Suppose monopolist Z has constant marginal costs of $7 and 25 consumers have reservation prices of at least $7. Under perfect price discrimination, one can infer that there will be

answer

at most 25 different prices

question

An oligopolist is a firm which finds it is

answer

one of a few firms that produce close substitutes.

question

Suppose a monopolist adopts a pricing scheme where every Monday all prices are 10% lower. This would be

answer

an ineffective hurdle because all consumers could wait until Monday to buy

question

A firm that emerges as the only seller in an industry with economies of scale is termed a(n)

answer

natural monopoly

question

An imperfectly competitive firm is one

answer

that possesses some degree of control over its price

question

The firm illustrated in the graph is a(n)

answer

natural monopolist

question

At the socially efficient level of output, the monopolist would earn

answer

a loss of $100.10

question

The socially efficient price and output combination is

answer

$5 and 7

question

The __________ at the socially efficient level of output will be __________ at the profit maximizing level of output

answer

loss; larger than

question

A monopolist calculates her marginal revenues to be $15 and her marginal costs to be $16. One can infer that she

answer

should contract output

question

If both the perfectly competitive firm and the monopolist expand production form Q1 toQ2, their respective total revenues are __________ and __________

answer

A+B+C+D+E; B+E

question

Assume that the current price is P1 and current production is Q1. Total revenue to theperfect competitor is equal to __________ and __________for the monopolist.

answer

A+B; A+B

question

The loss in revenues to the monopolist as he moves from Q1 output to Q2 is represented bythe area

answer

question

According to the data, firm __________ has the lowest average total costs while firm__________ has the highest.

answer

N; L

question

Assume that firm L loses sales of 75,000 units, with 40,000 units going to firm N and35,000 units going to firm M. Firm N now has average total costs of

answer

$143

question

Assume that firm M acquires firm L. After the merger, firm M has average total costs of__________ while firm N has average total costs of __________

answer

$125; $150

question

Suppose a firm is collecting $100 in total revenues when it sells 10 units and it receives$110 in total revenues when it sells 11 units. The firm is a(n)

answer

perfect competitor

question

If a firm triples all its inputs and output triples as a result, then the firm

answer

has constant returns to scale.

question

If a firm collects $100 in revenues when it sells 5 units and $114 when it sells 6 units, one can infer the firm is

answer

a monopolist

question

The demand curve to a perfectly competitive firm is __________ while the demand curve to a monopolist is __________

answer

Perfectly elastic; downward sloping

question

To sell an extra unit of output, a perfect competitor __________ while an imperfect competitor __________.

answer

does not alter price; must lower price

question

According to the textbook, the most common source of market power is

answer

economies of scale

question

Economies of scale exist when

answer

average costs fall as the scale of production grows

question

Marginal revenue is

answer

the extra revenue that results from selling one extra unit

question

The nature of the social loss from monopoly is that

answer

the marginal benefit of the last unit the monopolist produces is greater than the marginal cost

question

If the monopolist's marginal revenue curve is MR=30-6*Q, the marginal revenue of the third unit of output is

answer

$12

question

At the point of profit maximization, a perfectly price discriminating monopolist would collect total revenues of

answer

$57

question

Assuming the monopolist does not price discriminate, he will produce __________ units and charge a price of __________

answer

3; $11

question

At the point of profit maximization, the nonprice discriminating monopolist will earn aprofit of

answer

$26

question

If the monopolist were able to perfectly price discriminate, he would charge __________for the first unit and __________ for the fifth unit.

answer

$17; $5

question

A perfectly price discriminating monopolist would produce __________ units.

answer

question

Comparing the nonprice discriminating monopoly outcome to the perfectly pricediscriminating monopoly outcome, profits are

answer

greater when price discriminating

question

When the nonprice discriminating monopolist profit maximizes, consumer surplus is

answer

$13.50

question

Pure monopoly exists when

answer

a single firm produces a good with no close substitutes.

question

answer

a reservation price of at least $300 but jumped the hurdle anyway

question

If the monopolist's demand curve is P=90-3*Q, then the price at which marginal revenuesare zero is

answer

$45

question

Both the perfectly competitive firm and the monopolist find that

answer

it is best to expand production until the benefits and costs of the last unit produced are equal.

question

In order to sell another unit, an imperfectly competitive firm must

answer

lower its price

question

The monopolist's profit maximizing price is $25 and his marginal costs are $13.Consumers exist with reservation prices between $24 and $13. The monopolist is

answer

willing to sell to these consumers at less than $25 if his original customers continue to pay $25

question

The reason a nondiscriminating monopolist chooses to produce where P > MC rather thanP=MC and therefore causes a deadweight loss, is he

answer

will not profit maximize at P=MC

question

The distance representing the profit maximizing price to the monopolist is

answer

question

At the point of monopoly profit maximization, consumer surplus is represented by the area

answer

CJE

question

The deadweight loss resulting from monopoly is represented by the area

answer

KEI

question

The distance representing the profit maximizing level of output to the monopolist is

answer

question

At the profit-maximizing level of output, the monopolist collects total revenues equal to the area

answer

0CEA

question

A perfectly competitive equilibrium would have resulted in a price equal to the distance__________ and a quantity equal to the distance __________

answer

0G; 0H

question

When marginal revenues are zero,

answer

total revenues are maximized.

question

Patents and copyrights, which confer market power, exist to

answer

protect research and development and creative expression

question

A single firm producing an item with no close substitutes is termed a(n)

answer

pure monopolist.

question

The term natural monopoly refers to

answer

industries with economies of scale.

question

Perfect competition is efficient and monopoly in not because in perfect competition__________ while in monopoly __________

answer

P=MC; P>MC

question

Based on the marginal revenue data in the table, one can predict the firm will

answer

never produce the seventh unit.

question

The marginal revenue of selling the sixth unit is

answer

question

When the firm lowers the price from $8 to $7, marginal revenue is less than $7 because

answer

the firm is charging $1 less for each of the first three units of output.

question

The perfectly competitive firm finds that price __________ marginal revenue while a monopolist finds that price __________ marginal revenue.

answer

equals; is greater than

question

answer

Electricity is a necessity for residential consumers but not commercial or industrial consumers.

question

If the market price is $7 and a perfect competitor increases output from 150 units to 200units, he will collect __________ additional dollars in revenue

answer

$350

question

An industry that features a few firms which produce close substitutes is termed

answer

oligopoly

question

A price taker __________ and a price setter __________.

answer

equates price to marginal revenues; finds that price is greater than marginal revenue

question

If a monopolist's demand curve is P=55-5*Q, the marginal revenue of the fourth unit of output is

answer

$15

question

If the monopolist's demand curve is P=50-10*Q, then marginal revenues are zero when Q equals

answer

2.5 Units

question

industries where economies of scale exist will tend to be

answer

dominated by either a single firms or a few firms

question

Discounts extended to children and senior citizens by movie theaters are examples of

answer

imperfect price discrimination

question

The economic justification for disdaining monopoly from a social point of view is the monopolist

answer

produces less than the socially efficient amount

question

A firm has a production function of Q=L*K, where L is labor and K is capital. If L and can take whole values (i.e., 1., 2, 3), then the firm has

answer

increasing returns to scale

question

The correct sequence of market structures from most to least competitive is

answer

perfect competition, monopolistic competition, oligopoly, pure monopoly.

question

The extra revenue collected by selling an extra unit of output is

answer

equal to price for a perfect competitor but less than price for a monopolist

question

Perfect price discrimination is when

answer

all buyers pay their reservation price

question

Which of the following statements is false?

answer

Price setters can sell any quantity at any price

question

Which of the following situations will come closest to perfect price discrimination?

answer

Negotiating a price with each individual consumer

question

A consumer has a reservation price of $90 for a blender. If the local store is offering the blender for $100 with a $10 rebate and he does not make the purchase, one can surmise

answer

in this case, the hurdle failed to work

question

Suppose a competitive firm and a monopolist are both charging $5 for their respective outputs. One can infer that

answer

marginal revenue is $5 for the competitive firm and less than $5 for the monopolist

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Chapter 8 – Microeconomics

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