ECO202

question

Refer to Figure 12.1. Assume the firms have formed a cartel. If the cartel is maximizing profits, the cartel's profits are

answer

$1,080.

question

If an insecure monopolist needs to determine what strategy will be best to prevent a second firm from entering the market, what could be the key variable to use when determining the best strategy?

answer

minimum entry quantity

question

Refer to Figure 12.8. If both firms follow their dominant strategies, Firm A will earn profits equal to

answer

$200.

question

The Nash equilibrium is an outcome of a game

answer

when each player is doing the best he or she can, given the actions of the other players.

question

Refer to Table 12.1. The four-firm concentration ratio of the cigarette industry is equal to

answer

71%.

question

A profit-maximizing firm will choose the level of advertisements such that

answer

the marginal cost of advertising is equal to the marginal benefit from advertising.

question

Under price leadership, when firm A suddenly drops its price, what could its competitors interpret by the drop in price?

answer

Firm A observed a change in demand or production.

question

Assume that firms in an oligopoly are currently colluding to set price and output to maximize total industry profit. If the oligopolies are forced to stop colluding, the price charged by the oligopolies would ________ and the total output produced will ________.

answer

decrease; increase

question

A single firm selling its output in a contestable market can raise its prices and

answer

give other firms the incentive to enter that market.

question

A single firm selling its output in a contestable market will

answer

be threatened constantly by the entry of new firms.

question

For monopolistically competitive firms in long-run equilibrium,

answer

at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve.

question

Which type of profit-maximizing firm will choose to produce where price equals marginal cost?

answer

perfect competition

question

Refer to Figure 11.1. If Trollio's T-shirts is in long-run equilibrium it is producing ________ silk-screened T-shirts and selling each T-shirt at a price of ________.

answer

50; $16

question

Recall the Application about the costs involved in opening a motel to answer the following question(s).

Recall the Application. Which of the following is NOT required to operate a Motel 6 franchise?

answer

earning an economic profit

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would charge a price of ________ per unit.

answer

question

Recall the Application about a South African consumer lender that offered different interest rates in loan offers via mass mailings to answer the following question(s).

According to the Application, the number of ________ who accepted a particular loan offer from the mass mailings increased when the offer letter included the picture of a ________.

answer

men; woman rather than the picture of a man

question

One key difference between profit-maximizing firms in monopolistic competition versus perfect competition is that

answer

monopolistically competitive firms charge a price greater than marginal revenue.

question

As a result of product differentiation, a firm in a monopolistically competitive market

answer

always has some market power.

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would generate total revenue equal to the area

answer

0AFD.

question

In a monopolistically competitive industry, there are many firms because

answer

there are relatively small economies of scale.

question

If the five-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal share of the market, the Herfindahl-Hirschman Index is

answer

2,000

question

Refer to Figure 12.3. The decision tree shows the payoffs for two firms based on the strategies they choose. If they agree to collude and hold prices at $10, and both stand by the agreement, each will earn profits of $5 million. If one firm cheats and the other does not, the firm that cheats will earn profits of $8 million and the other firm will have losses of $2 million. If they both cheat and cut prices, they will each earn profits of only $2 million. If both firms follow their dominant strategies, Firm B's profits will be

answer

$2 million.

question

Refer to Figure 12.10. The data in the boxes are the annual profits for each company whether they choose to advertise or not. If Lil Box decides not to advertise,

answer

Big Box should advertise.

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would generate total cost equal to the area

answer

0AFD.

question

Firms in monopolistic competition differentiate their products through

answer

physical characteristics.

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would generate total revenue equal to the area

answer

0AFD.

question

In monopolistic competition, firms can have some market power based on the fact that

answer

they produce differentiated goods.

question

A profit-maximizing firm will choose the level of advertisements such that

answer

the marginal cost of advertising is equal to the marginal benefit from advertising

question

Recall the Application about how Microsoft responds to the threat of potential competitors to answer the following question(s).

Recall the Application. Which of the following best represents the way Microsoft keeps other firms from entering the market?

answer

Microsoft uses limit pricing to deter entry.

question

The big advantage to consumers of product differentiation is that it

answer

provides variety.

question

Oligopoly is a market

answer

with a few firms and the actions of one firm have a large impact on the others.

question

Explicit price fixing was outlawed by the ________ Act.

answer

Sherman Antitrust

question

Which of the following industries was NOT charged with price fixing?

answer

none of the above

question

Suppose four firms in the airline industry have gotten together and formed a cartel. Which of the following is true?

answer

The firms will produce where marginal cost is equal to marginal revenue.

question

What is one way that firms can overcome the duopolists' dilemma and promote cartel pricing?

answer

One firm can guarantee it will match a lower price of a competitor.

question

As a result of product differentiation, a firm in a monopolistically competitive market

answer

always has some market power.

question

By using celebrities to promote a product, a firm is attempting to

answer

all of the above

question

If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product,

answer

it will likely increase its price.

question

In the long run, which two curves are tangent for a firm in monopolistic competition?

answer

average total cost and demand

question

In the short run in monopolistic competition there can be

answer

economic profits, losses, or the firm can break even

1 of 40

question

Refer to Figure 12.1. Assume the firms have formed a cartel. If the cartel is maximizing profits, the cartel's profits are

answer

$1,080.

question

If an insecure monopolist needs to determine what strategy will be best to prevent a second firm from entering the market, what could be the key variable to use when determining the best strategy?

answer

minimum entry quantity

question

Refer to Figure 12.8. If both firms follow their dominant strategies, Firm A will earn profits equal to

answer

$200.

question

The Nash equilibrium is an outcome of a game

answer

when each player is doing the best he or she can, given the actions of the other players.

question

Refer to Table 12.1. The four-firm concentration ratio of the cigarette industry is equal to

answer

71%.

question

A profit-maximizing firm will choose the level of advertisements such that

answer

the marginal cost of advertising is equal to the marginal benefit from advertising.

question

Under price leadership, when firm A suddenly drops its price, what could its competitors interpret by the drop in price?

answer

Firm A observed a change in demand or production.

question

answer

decrease; increase

question

A single firm selling its output in a contestable market can raise its prices and

answer

give other firms the incentive to enter that market.

question

A single firm selling its output in a contestable market will

answer

be threatened constantly by the entry of new firms.

question

For monopolistically competitive firms in long-run equilibrium,

answer

at the profit-maximizing quantity, the demand curve must be tangent to the average total cost curve.

question

Which type of profit-maximizing firm will choose to produce where price equals marginal cost?

answer

perfect competition

question

Refer to Figure 11.1. If Trollio's T-shirts is in long-run equilibrium it is producing ________ silk-screened T-shirts and selling each T-shirt at a price of ________.

answer

50; $16

question

Recall the Application about the costs involved in opening a motel to answer the following question(s).

Recall the Application. Which of the following is NOT required to operate a Motel 6 franchise?

answer

earning an economic profit

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would charge a price of ________ per unit.

answer

question

answer

men; woman rather than the picture of a man

question

One key difference between profit-maximizing firms in monopolistic competition versus perfect competition is that

answer

monopolistically competitive firms charge a price greater than marginal revenue.

question

As a result of product differentiation, a firm in a monopolistically competitive market

answer

always has some market power.

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would generate total revenue equal to the area

answer

0AFD.

question

In a monopolistically competitive industry, there are many firms because

answer

there are relatively small economies of scale.

question

If the five-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal share of the market, the Herfindahl-Hirschman Index is

answer

2,000

question

answer

$2 million.

question

Refer to Figure 12.10. The data in the boxes are the annual profits for each company whether they choose to advertise or not. If Lil Box decides not to advertise,

answer

Big Box should advertise.

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would generate total cost equal to the area

answer

0AFD.

question

Firms in monopolistic competition differentiate their products through

answer

physical characteristics.

question

Refer to Figure 11.2. In the long run, the monopolistic competitor would generate total revenue equal to the area

answer

0AFD.

question

In monopolistic competition, firms can have some market power based on the fact that

answer

they produce differentiated goods.

question

A profit-maximizing firm will choose the level of advertisements such that

answer

the marginal cost of advertising is equal to the marginal benefit from advertising

question

answer

Microsoft uses limit pricing to deter entry.

question

The big advantage to consumers of product differentiation is that it

answer

provides variety.

question

Oligopoly is a market

answer

with a few firms and the actions of one firm have a large impact on the others.

question

Explicit price fixing was outlawed by the ________ Act.

answer

Sherman Antitrust

question

Which of the following industries was NOT charged with price fixing?

answer

none of the above

question

Suppose four firms in the airline industry have gotten together and formed a cartel. Which of the following is true?

answer

The firms will produce where marginal cost is equal to marginal revenue.

question

What is one way that firms can overcome the duopolists' dilemma and promote cartel pricing?

answer

One firm can guarantee it will match a lower price of a competitor.

question

As a result of product differentiation, a firm in a monopolistically competitive market

answer

always has some market power.

question

By using celebrities to promote a product, a firm is attempting to

answer

all of the above

question

If a firm in a monopolistically competitive market uses advertising to lower the price elasticity of demand for its product,

answer

it will likely increase its price.

question

In the long run, which two curves are tangent for a firm in monopolistic competition?

answer

average total cost and demand

question

In the short run in monopolistic competition there can be

answer

economic profits, losses, or the firm can break even

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