Econ 102 LT notes for final

Q: A company at one point owned 90% of the words supply of oil which is used to make fuel. Which type of barrier to entry did they use to try to establish a monopoly?

Ownership of resources that do not have close substitutes.

Q: Which of the following is true about a monopolist using price discrimination?

Price discrimination will give the monopolist higher profits than a single price for all costumers.

Q: Is it more common to see price discrimination used with goods or services?

Services because it is easier to resell goods than services.

question

Which of the following describes the short-run supply curve for a perfectly competitive firm?

answer

It is the MC curve at and above the intersection with the average variable cost curve.

question

Which of the following curves becomes less important as output expands?

answer

AFC.

question

Select the answer choice that is a potential barrier to entry.

answer

Government license requirements, sole ownership of a key resource, excellent economies of scale relative to demand.

question

A monopolist will produce at an output level where the marginal revenue is $15 per unit and marginal cost is $30 per unit. What will happen if the monopolist decreases output?

answer

Price will increase, marginal cost will decrease, and total profit will increase.

question

When will a monopolist earn a positive profit economic profit?

answer

When its price exceeds the average total cost.

question

Which term is related to the upward-sloping portion of the long-run average cost curve?

answer

Diseconomies of scale.

question

Select the answer choice that is not a characteristic of a perfectly competitive market.

answer

It is difficult to enter and leave the market.

question

Which of the following best describes the marginal revenue curve for a single-price monopolist?

answer

It is below the average revenue curve for a monopolist.

question

Which of the following statements is correct?

answer

The average revenue curve for a monopolist is the same thing as its demand curve.

question

A single price monopolist is currently producing an output where marginal revenue is less than marginal cost. What can this firm do to increase profits? (MR<MC)

answer

Reduce output and raise price.

question

A company at one point owned 90% of the words supply of oil which is used to make fuel. Which type of barrier to entry did they use to try to establish a monopoly?

answer

Ownership of resources that do not have close substitutes.

question

Which of the following is true about a monopolist using price discrimination?

answer

Price discrimination will give the monopolist higher profits than a single price for all costumers.

question

Is it more common to see price discrimination used with goods or services?

answer

Services because it is easier to resell goods than services.

question

Which of the following does not have to be true about monopolies?

answer

Monopolies always make a profit.

question

Which of the following describes a firm that price discriminates?

answer

The firm identifies two or more groups and charges them different prices based on their willingness to pay.

question

Short-run cost curves are U-shaped because of ___, and long-run cost curves are U-shaped because of ___.

answer

Diminishing marginal product, economies of scale.

question

When will a monopolist price discriminate?

answer

When the monopolist can separate markets by different price elasticities of demand and prevent the resale of the product.

question

Which of the following describes demand for a monopolistic competitor?

answer

Relatively elastic.

question

A profit maximizing pizza shop wants to increase its revenue by charging students with a valid student ID lower prices than other customers. Which of the following needs to be true for this plan to increase the shop's revenue?

answer

The demand of students for their pizza must be elastic.

question

Which of the following explains why 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?

answer

Cereal (because it has many different brands).

question

The industry supply curve is derived by horizontal summation of all the firms'...

answer

Marginal cost curves above their intersection with average variable cost.

question

Which of the following is true?

answer

A monopolist will charge a higher price than a perfect competitor.

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 he ability to minimize cost per unit.

question

Why does the long-run average total cost curve increase in most industries?

answer

Diseconomies of scale.

question

Delta's MC of flying a passenger from NY to to LA is $30. Delta charges passengers $200 to fly from NY to LA and it's claiming that its losing money on the route. How is this possible?

answer

They're losing money because its fixed costs are not being taken into account.

question

How do monopolistically competitive firms maximize profit in the short run?

answer

Setting MR=MC.

question

Which of the following best describes the demand curve for a perfectly competitive firm?

answer

Perfectly elastic.

question

Which of the following best describes the demand curve for a perfectly competitive industry?

answer

Downward sloping.

question

Which of the following would most likely indicate that a company has the ideal plant size?

answer

Constant return to scale.

question

Why is the average variable cost curve U-shaped?

answer

Each worker adds the same amount of cost but different amounts of output.

question

Select the answer choice that is true for a perfectly competitive firm.

answer

Price and MR are always equal.

question

Which answer is a situation where economic profits are necessarily negative?

answer

Price is below minimum average total cost.

question

Which of the following best describes a major difference between difference between monopoly and perfect competition? assume that perfectly competitive firms all have the same costs.

answer

Only monopolists can earn a positive profit in the long run.

question

Which of the following factors would be most likely to lead to a monopoly?

answer

A large minimum efficient scale.

question

Which of the following is true about a monopolistically competitive firm in the long run?

answer

It will produce at a point where price exceeds the minimum of average total cost.

question

Which of the following is a result of the freedom of entry and exit in monopolistically competitive markets?

answer

There will be zero economic profits in the long run equilibrium.

question

Which of the following statements would not apply to perfectly competitive markets?

answer

Consumers tend to prefer one brand over another.

question

Which of the following is true about economic profit in the long run in a perfectly competitive industry?

answer

Firm will breakeven. Breakeven is another way of saying they will earn zero economic profit.

question

Which of the following does marginal revenue equal in perfect competition?

answer

The market price.

question

Which of the following best describes a major difference between monopolistic competition and perfect competition?

answer

Monopolistic competition produces a wider variety of goods but at a higher price.

question

If additional firms enter a monopolistically competitive industry because its current firms are earning a positive profit, how would this affect the industry?

answer

The demand for each existing firm will shift to the left.

question

At which of the following points would we want to shut down out business?

answer

AVC > P

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.

question

If we are in the long run in a perfectly competitive industry, which of the following best describes the price firms are charging?

answer

It will equal to the cost of production.

question

Which of the following best describes production efficiency?

answer

When a firm produces at the minimum point of the average total cost curve.

question

Which of the following would be associated with price takers?

answer

In the long run, they will have an economic profit of zero.

question

Which of the following statements is false?

answer

Both accounting and economic profits can take the opportunity cost of doing business into account.

question

If a firm is a monopoly and then another firm overcomes the entry barriers and enters the market, what will happen to the original firm's demand curve?

answer

It will shift to the left and become more inelastic.

question

Which of the following explains why monopolistically competitive industries are often electively inefficient when compared to competitive industries?

answer

Monopolistically competitive industries set price above marginal cost.

question

Which of the following best describes a major difference between monopoly and perfect competition?

answer

Only monopolists can earn a positive profit in the long run.

question

Which of the following is the reason why 2day passes at theme parks are only a little more expensive than one day passes?

answer

The law of diminishing marginal utility.

question

Which of the following assumptions are related to how the demand curve is derived?

answer

Income tastes and preferences are held constant, the price of the good is held constant.

1 of 53

question

Which of the following describes the short-run supply curve for a perfectly competitive firm?

answer

It is the MC curve at and above the intersection with the average variable cost curve.

question

Which of the following curves becomes less important as output expands?

answer

AFC.

question

Select the answer choice that is a potential barrier to entry.

answer

Government license requirements, sole ownership of a key resource, excellent economies of scale relative to demand.

question

A monopolist will produce at an output level where the marginal revenue is $15 per unit and marginal cost is $30 per unit. What will happen if the monopolist decreases output?

answer

Price will increase, marginal cost will decrease, and total profit will increase.

question

When will a monopolist earn a positive profit economic profit?

answer

When its price exceeds the average total cost.

question

Which term is related to the upward-sloping portion of the long-run average cost curve?

answer

Diseconomies of scale.

question

Select the answer choice that is not a characteristic of a perfectly competitive market.

answer

It is difficult to enter and leave the market.

question

Which of the following best describes the marginal revenue curve for a single-price monopolist?

answer

It is below the average revenue curve for a monopolist.

question

Which of the following statements is correct?

answer

The average revenue curve for a monopolist is the same thing as its demand curve.

question

A single price monopolist is currently producing an output where marginal revenue is less than marginal cost. What can this firm do to increase profits? (MR<MC)

answer

Reduce output and raise price.

question

A company at one point owned 90% of the words supply of oil which is used to make fuel. Which type of barrier to entry did they use to try to establish a monopoly?

answer

Ownership of resources that do not have close substitutes.

question

Which of the following is true about a monopolist using price discrimination?

answer

Price discrimination will give the monopolist higher profits than a single price for all costumers.

question

Is it more common to see price discrimination used with goods or services?

answer

Services because it is easier to resell goods than services.

question

Which of the following does not have to be true about monopolies?

answer

Monopolies always make a profit.

question

Which of the following describes a firm that price discriminates?

answer

The firm identifies two or more groups and charges them different prices based on their willingness to pay.

question

Short-run cost curves are U-shaped because of ___, and long-run cost curves are U-shaped because of ___.

answer

Diminishing marginal product, economies of scale.

question

When will a monopolist price discriminate?

answer

When the monopolist can separate markets by different price elasticities of demand and prevent the resale of the product.

question

Which of the following describes demand for a monopolistic competitor?

answer

Relatively elastic.

question

answer

The demand of students for their pizza must be elastic.

question

Which of the following explains why 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?

answer

Cereal (because it has many different brands).

question

The industry supply curve is derived by horizontal summation of all the firms'...

answer

Marginal cost curves above their intersection with average variable cost.

question

Which of the following is true?

answer

A monopolist will charge a higher price than a perfect competitor.

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 he ability to minimize cost per unit.

question

Why does the long-run average total cost curve increase in most industries?

answer

Diseconomies of scale.

question

Delta's MC of flying a passenger from NY to to LA is $30. Delta charges passengers $200 to fly from NY to LA and it's claiming that its losing money on the route. How is this possible?

answer

They're losing money because its fixed costs are not being taken into account.

question

How do monopolistically competitive firms maximize profit in the short run?

answer

Setting MR=MC.

question

Which of the following best describes the demand curve for a perfectly competitive firm?

answer

Perfectly elastic.

question

Which of the following best describes the demand curve for a perfectly competitive industry?

answer

Downward sloping.

question

Which of the following would most likely indicate that a company has the ideal plant size?

answer

Constant return to scale.

question

Why is the average variable cost curve U-shaped?

answer

Each worker adds the same amount of cost but different amounts of output.

question

Select the answer choice that is true for a perfectly competitive firm.

answer

Price and MR are always equal.

question

Which answer is a situation where economic profits are necessarily negative?

answer

Price is below minimum average total cost.

question

Which of the following best describes a major difference between difference between monopoly and perfect competition? assume that perfectly competitive firms all have the same costs.

answer

Only monopolists can earn a positive profit in the long run.

question

Which of the following factors would be most likely to lead to a monopoly?

answer

A large minimum efficient scale.

question

Which of the following is true about a monopolistically competitive firm in the long run?

answer

It will produce at a point where price exceeds the minimum of average total cost.

question

Which of the following is a result of the freedom of entry and exit in monopolistically competitive markets?

answer

There will be zero economic profits in the long run equilibrium.

question

Which of the following statements would not apply to perfectly competitive markets?

answer

Consumers tend to prefer one brand over another.

question

Which of the following is true about economic profit in the long run in a perfectly competitive industry?

answer

Firm will breakeven. Breakeven is another way of saying they will earn zero economic profit.

question

Which of the following does marginal revenue equal in perfect competition?

answer

The market price.

question

Which of the following best describes a major difference between monopolistic competition and perfect competition?

answer

Monopolistic competition produces a wider variety of goods but at a higher price.

question

If additional firms enter a monopolistically competitive industry because its current firms are earning a positive profit, how would this affect the industry?

answer

The demand for each existing firm will shift to the left.

question

At which of the following points would we want to shut down out business?

answer

AVC > P

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.

question

If we are in the long run in a perfectly competitive industry, which of the following best describes the price firms are charging?

answer

It will equal to the cost of production.

question

Which of the following best describes production efficiency?

answer

When a firm produces at the minimum point of the average total cost curve.

question

Which of the following would be associated with price takers?

answer

In the long run, they will have an economic profit of zero.

question

Which of the following statements is false?

answer

Both accounting and economic profits can take the opportunity cost of doing business into account.

question

If a firm is a monopoly and then another firm overcomes the entry barriers and enters the market, what will happen to the original firm's demand curve?

answer

It will shift to the left and become more inelastic.

question

Which of the following explains why monopolistically competitive industries are often electively inefficient when compared to competitive industries?

answer

Monopolistically competitive industries set price above marginal cost.

question

Which of the following best describes a major difference between monopoly and perfect competition?

answer

Only monopolists can earn a positive profit in the long run.

question

Which of the following is the reason why 2day passes at theme parks are only a little more expensive than one day passes?

answer

The law of diminishing marginal utility.

question

Which of the following assumptions are related to how the demand curve is derived?

answer

Income tastes and preferences are held constant, the price of the good is held constant.

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Econ 102 LT notes for final

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