Chapter 8 - Microeconomics - Custom Scholars
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Chapter 8 – Microeconomics

question
Which of the following industries does not fit the natural monopoly model?
Diamonds
question
Suppose a monopolist is charging \$12 for output. One can infer that
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
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
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
-28
question
The monopolist will maximize profits if she produces where
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
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
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
2 fewer; \$2 higher
question
The deadweight loss due to monopoly in the market stems from the fact that
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 __________
MR=MC; \$8 & 3 units
question
The monopoly price, quantity combination in this market is __________ while theperfectly competitive price, quantity combination would have been _________
\$8 & 3; \$6 & 5
question
The marginal revenue of the third unit of output is
\$6
question
Assume a monopolist is charging two different groups two different prices for its output. For this to be considered price discrimination,
production costs must be the same
question
A price setter finds that it has
some control over the price it charges
question
When a monopolist sells additional units
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
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 __________
\$3; \$2.10
question
As described in the textbook, price discrimination means charging
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
increasing returns to scale
question
The common feature in pure monopoly, oligopoly, and monopolistic competition is
downward sloping demand
question
Given the total cost function, TC = a + b*Q with (a,b) > 0, average costs will
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,
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
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
a perfect competitor.
question
For all firms, the extra revenue collected from the sale of one extra unit of output is
marginal revenue
question
If a monopolist finds that her marginal revenue exceeds her marginal costs at the current level of output, she should
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
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
at most 25 different prices
question
An oligopolist is a firm which finds it is
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
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)
natural monopoly
question
An imperfectly competitive firm is one
that possesses some degree of control over its price
question
The firm illustrated in the graph is a(n)
natural monopolist
question
At the socially efficient level of output, the monopolist would earn
a loss of \$100.10
question
The socially efficient price and output combination is
\$5 and 7
question
The __________ at the socially efficient level of output will be __________ at the profit maximizing level of output
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
should contract output
question
If both the perfectly competitive firm and the monopolist expand production form Q1 toQ2, their respective total revenues are __________ and __________
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.
A+B; A+B
question
The loss in revenues to the monopolist as he moves from Q1 output to Q2 is represented bythe area
A
question
According to the data, firm __________ has the lowest average total costs while firm__________ has the highest.
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
\$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 __________
\$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)
perfect competitor
question
If a firm triples all its inputs and output triples as a result, then the firm
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
a monopolist
question
The demand curve to a perfectly competitive firm is __________ while the demand curve to a monopolist is __________
Perfectly elastic; downward sloping
question
To sell an extra unit of output, a perfect competitor __________ while an imperfect competitor __________.
does not alter price; must lower price
question
According to the textbook, the most common source of market power is
economies of scale
question
Economies of scale exist when
average costs fall as the scale of production grows
question
Marginal revenue is
the extra revenue that results from selling one extra unit
question
The nature of the social loss from monopoly is that
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
\$12
question
At the point of profit maximization, a perfectly price discriminating monopolist would collect total revenues of
\$57
question
Assuming the monopolist does not price discriminate, he will produce __________ units and charge a price of __________
3; \$11
question
At the point of profit maximization, the nonprice discriminating monopolist will earn aprofit of
\$26
question
If the monopolist were able to perfectly price discriminate, he would charge __________for the first unit and __________ for the fifth unit.
\$17; \$5
question
A perfectly price discriminating monopolist would produce __________ units.
6
question
Comparing the nonprice discriminating monopoly outcome to the perfectly pricediscriminating monopoly outcome, profits are
greater when price discriminating
question
When the nonprice discriminating monopolist profit maximizes, consumer surplus is
\$13.50
question
Pure monopoly exists when
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
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
\$45
question
Both the perfectly competitive firm and the monopolist find that
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
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
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
will not profit maximize at P=MC
question
The distance representing the profit maximizing price to the monopolist is
0C
question
At the point of monopoly profit maximization, consumer surplus is represented by the area
CJE
question
The deadweight loss resulting from monopoly is represented by the area
KEI
question
The distance representing the profit maximizing level of output to the monopolist is
0A
question
At the profit-maximizing level of output, the monopolist collects total revenues equal to the area
0CEA
question
A perfectly competitive equilibrium would have resulted in a price equal to the distance__________ and a quantity equal to the distance __________
0G; 0H
question
When marginal revenues are zero,
total revenues are maximized.
question
Patents and copyrights, which confer market power, exist to
protect research and development and creative expression
question
A single firm producing an item with no close substitutes is termed a(n)
pure monopolist.
question
The term natural monopoly refers to
industries with economies of scale.
question
Perfect competition is efficient and monopoly in not because in perfect competition__________ while in monopoly __________
P=MC; P>MC
question
Based on the marginal revenue data in the table, one can predict the firm will
never produce the seventh unit.
question
The marginal revenue of selling the sixth unit is
0
question
When the firm lowers the price from \$8 to \$7, marginal revenue is less than \$7 because
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.
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?
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
\$350
question
An industry that features a few firms which produce close substitutes is termed
oligopoly
question
A price taker __________ and a price setter __________.
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
\$15
question
If the monopolist's demand curve is P=50-10*Q, then marginal revenues are zero when Q equals
2.5 Units
question
industries where economies of scale exist will tend to be
dominated by either a single firms or a few firms
question
Discounts extended to children and senior citizens by movie theaters are examples of
imperfect price discrimination
question
The economic justification for disdaining monopoly from a social point of view is the monopolist
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
increasing returns to scale
question
The correct sequence of market structures from most to least competitive is
perfect competition, monopolistic competition, oligopoly, pure monopoly.
question
The extra revenue collected by selling an extra unit of output is
equal to price for a perfect competitor but less than price for a monopolist
question
Perfect price discrimination is when
all buyers pay their reservation price
question
Which of the following statements is false?
Price setters can sell any quantity at any price
question
Which of the following situations will come closest to perfect price discrimination?
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
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
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?
Diamonds
question
Suppose a monopolist is charging \$12 for output. One can infer that
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
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
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
-28
question
The monopolist will maximize profits if she produces where
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
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
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
2 fewer; \$2 higher
question
The deadweight loss due to monopoly in the market stems from the fact that
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 __________
MR=MC; \$8 & 3 units
question
The monopoly price, quantity combination in this market is __________ while theperfectly competitive price, quantity combination would have been _________
\$8 & 3; \$6 & 5
question
The marginal revenue of the third unit of output is
\$6
question
Assume a monopolist is charging two different groups two different prices for its output. For this to be considered price discrimination,
production costs must be the same
question
A price setter finds that it has
some control over the price it charges
question
When a monopolist sells additional units
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
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 __________
\$3; \$2.10
question
As described in the textbook, price discrimination means charging
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
increasing returns to scale
question
The common feature in pure monopoly, oligopoly, and monopolistic competition is
downward sloping demand
question
Given the total cost function, TC = a + b*Q with (a,b) > 0, average costs will
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,
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
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
a perfect competitor.
question
For all firms, the extra revenue collected from the sale of one extra unit of output is
marginal revenue
question
If a monopolist finds that her marginal revenue exceeds her marginal costs at the current level of output, she should
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
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
at most 25 different prices
question
An oligopolist is a firm which finds it is
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
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)
natural monopoly
question
An imperfectly competitive firm is one
that possesses some degree of control over its price
question
The firm illustrated in the graph is a(n)
natural monopolist
question
At the socially efficient level of output, the monopolist would earn
a loss of \$100.10
question
The socially efficient price and output combination is
\$5 and 7
question
The __________ at the socially efficient level of output will be __________ at the profit maximizing level of output
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
should contract output
question
If both the perfectly competitive firm and the monopolist expand production form Q1 toQ2, their respective total revenues are __________ and __________
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.
A+B; A+B
question
The loss in revenues to the monopolist as he moves from Q1 output to Q2 is represented bythe area
A
question
According to the data, firm __________ has the lowest average total costs while firm__________ has the highest.
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
\$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 __________
\$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)
perfect competitor
question
If a firm triples all its inputs and output triples as a result, then the firm
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
a monopolist
question
The demand curve to a perfectly competitive firm is __________ while the demand curve to a monopolist is __________
Perfectly elastic; downward sloping
question
To sell an extra unit of output, a perfect competitor __________ while an imperfect competitor __________.
does not alter price; must lower price
question
According to the textbook, the most common source of market power is
economies of scale
question
Economies of scale exist when
average costs fall as the scale of production grows
question
Marginal revenue is
the extra revenue that results from selling one extra unit
question
The nature of the social loss from monopoly is that
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
\$12
question
At the point of profit maximization, a perfectly price discriminating monopolist would collect total revenues of
\$57
question
Assuming the monopolist does not price discriminate, he will produce __________ units and charge a price of __________
3; \$11
question
At the point of profit maximization, the nonprice discriminating monopolist will earn aprofit of
\$26
question
If the monopolist were able to perfectly price discriminate, he would charge __________for the first unit and __________ for the fifth unit.
\$17; \$5
question
A perfectly price discriminating monopolist would produce __________ units.
6
question
Comparing the nonprice discriminating monopoly outcome to the perfectly pricediscriminating monopoly outcome, profits are
greater when price discriminating
question
When the nonprice discriminating monopolist profit maximizes, consumer surplus is
\$13.50
question
Pure monopoly exists when
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
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
\$45
question
Both the perfectly competitive firm and the monopolist find that
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
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
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
will not profit maximize at P=MC
question
The distance representing the profit maximizing price to the monopolist is
0C
question
At the point of monopoly profit maximization, consumer surplus is represented by the area
CJE
question
The deadweight loss resulting from monopoly is represented by the area
KEI
question
The distance representing the profit maximizing level of output to the monopolist is
0A
question
At the profit-maximizing level of output, the monopolist collects total revenues equal to the area
0CEA
question
A perfectly competitive equilibrium would have resulted in a price equal to the distance__________ and a quantity equal to the distance __________
0G; 0H
question
When marginal revenues are zero,
total revenues are maximized.
question
Patents and copyrights, which confer market power, exist to
protect research and development and creative expression
question
A single firm producing an item with no close substitutes is termed a(n)
pure monopolist.
question
The term natural monopoly refers to
industries with economies of scale.
question
Perfect competition is efficient and monopoly in not because in perfect competition__________ while in monopoly __________
P=MC; P>MC
question
Based on the marginal revenue data in the table, one can predict the firm will
never produce the seventh unit.
question
The marginal revenue of selling the sixth unit is
0
question
When the firm lowers the price from \$8 to \$7, marginal revenue is less than \$7 because
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.
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?
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
\$350
question
An industry that features a few firms which produce close substitutes is termed
oligopoly
question
A price taker __________ and a price setter __________.
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
\$15
question
If the monopolist's demand curve is P=50-10*Q, then marginal revenues are zero when Q equals
2.5 Units
question
industries where economies of scale exist will tend to be
dominated by either a single firms or a few firms
question
Discounts extended to children and senior citizens by movie theaters are examples of
imperfect price discrimination
question
The economic justification for disdaining monopoly from a social point of view is the monopolist
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
increasing returns to scale
question
The correct sequence of market structures from most to least competitive is
perfect competition, monopolistic competition, oligopoly, pure monopoly.
question
The extra revenue collected by selling an extra unit of output is
equal to price for a perfect competitor but less than price for a monopolist
question
Perfect price discrimination is when
all buyers pay their reservation price
question
Which of the following statements is false?
Price setters can sell any quantity at any price
question
Which of the following situations will come closest to perfect price discrimination?
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
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
marginal revenue is \$5 for the competitive firm and less than \$5 for the monopolist

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