ECON 102 Midterm #3 - Custom Scholars
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# ECON 102 Midterm #3

question
The break-even price for a perfectly competitive firm is equal to:
the minimum value of average total cost
question
If the long-run market supply curve for a perfectly competitive market is horizontal, then this industry is one that exhibits:
constant costs
question
Marginal revenue is a firm's:
increase in total revenue when it sells an additional unit of output
question
Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is \$100 and someone offers him \$125 to complete this additional report, Tony should:
complete the additional report
question
In the short run, a perfectly competitive firm produces output and earns zero economic profit if:
P=ATC
question
In the short run, a perfectly competitive firm produces output and incurs an economic loss if:
AVC<P<ATC
question
In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in:
positive economic profits for firms, which will attract new firms, which in turn will result in a reduction in the price.
question
Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is \$9, Mikail's output is 3,000 cards a month, and his monthly average total cost is \$7, what are his monthly profits?
\$6,000
question
A firm's total output times the price at which it sells that output is:
total revenue
question
A perfectly competitive firm is a:
price-taker
question
The land you own has the only known source of aloe needed to make anti-itch lotion. In this case, your monopoly results from which of the following?
ownership of scarce inputs
question
In contrast to perfect competition, a:
monopoly produces less at a higher price
question
De Beers became a monopoly by:
establishing control over diamond mines
question
A monopolistically competitive industry is made up of:
many firms producing a differentiated product
question
In 1999, a judge declared that Microsoft was a monopolist. Assuming that it is maximizing its profits at its current level of output, we may conclude that if Microsoft were to increase its price, its total revenue would:
fall
question
After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price at which that unit is sold because of:
a downward sloping demand curve
question
Which of the following statements about the differences between monopoly and perfect competition is incorrect?
Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
question
Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets. There's decreasing average cost for all levels of demand. In this case, your monopoly would result from which of the following?
economies of scale
question
Which of the following is a barrier to entry?
control of scarce resources, economies of scale, and government-created barriers (i.e., patents and copyrights)
question
Firms in which of the following market structures have the most market power?
monopoly
question
In the game in Scenario 13.3, the equilibrium outcome:
is for Moto to offer a CD changer and Zport to offer low profile tires
question
A major application of the Sherman Antitrust Act was in ________ against ________.
1911; Standard Oil
question
A ________ occurs if all players in a game play their best strategies given what their competitors do.
Nash equilibrium
question
An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
cartel
question
Airlines are prone to price wars because:
most fliers choose airlines on the basis of schedule and price
question
An industry with two firms producing is generally called:
duopoly
question
Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome of the dominant strategy without cooperation?
both confess
question
Maximization of joint profits is most likely when firms are:
duopolists who collude
question
Which of the following is true for the game in Scenario 13.3?
Zport's dominant strategy is the low profile tires
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary believes he faces a kinked demand curve. This means Gary thinks if he lowers his price, then Frank will ________, and if he raises his price, Frank will ________.
lower his price; not raise his price
question
Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:
is earning a small economic profit.
question
During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. In the short run, Alex will shut down his lawn-mowing service rather than continue mowing grass if:
the total revenues can't cover the total variable costs.
question
If a perfectly competitive firm can sell a bushel of soybeans for \$40 and it has an average variable cost of \$50 per bushel and the marginal cost is \$52 per bushel, the firm should:
cut output to zero
question
The shut-down price is:
the minimum of the AVC curve
question
Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is \$100 and someone offers him \$125 to complete this additional report, Tony should:
complete the additional report
question
The addition to the total revenue from selling one more unit of the good is:
marginal revenue
question
Under which condition would the firm be incurring a loss?
price is below average total cost
question
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is \$0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by \$0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
firms leaving the industry
question
In the short run, a perfectly competitive firm produces output and breaks even if:
the firm produces the quantity at which P = ATC
question
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin:
earning an economic profit
question
Control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers are forms of:
barriers to entry
question
Kellogg, General Mills, Post and Quaker Oats dominate the ready-to-eat cereal market. This industry has consistently showed profits in the long run, and is difficult to enter due to brand proliferation. The ready-to-eat cereal industry is an example of what type of market structure?
Oligopoly
question
To practice effective price discrimination, a monopolist must be able to:
prevent the resale of goods among groups of buyers
question
In contrast to perfect competition, a:
monopoly produces less at a higher price
question
Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with:
the higher price elasticity of demand
question
Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from \$30 per unit to \$29 per unit, marginal revenue for the eleventh unit is:
\$19
question
If a monopolist is producing a quantity that generates MC < MR, then profit:
can be increased by increasing production
question
Which of the following is not a barrier to entry?
a ban on certain kinds of advertising
question
Refer to Table 12.2. Jeri and Tom are arrested for having committed a crime. They are being interrogated individually and need to decide if they should confess or not confess. The police have enough information to put them in jail for 5 years. They also know the pair have committed a more egregious crime but without the help of one of the suspects they will not be able to convict them on this charge. The first number in each cell refers to the number of years of prison time Jeri will receive if she confesses or does not confess and the second number in each cell refers to the number of years of prison time Tom will receive if he confesses or does not confess. The dominant strategy for Jeri is to ________ and the dominant strategy for Tom is to ________.
confess; confess
question
Which of the following is most likely to be observed when firms engage mainly in non-price competition?
advertising and product differentiation
question
Which of the following factors increases the likelihood that oligopolists collude?
a firm and its rivals are currently operating at maximum productive capacity
question
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
both firms would charge a low price
question
In the game in Scenario 13.3, the equilibrium outcome:
is for Moto to offer a CD changer and Zport to offer low-profile tires
question
The short-run supply curve for a perfectly competitive firm is:
the marginal cost curve about the shut-down price
question
Which of the following is true?
price and marginal revenue are the same in perfect competition
question
If a competitive firm can sell a bushel of soybeans for \$25 and it has an average variable cost of \$24 per bushel and the marginal cost is \$26 per bushel, the firm should:
reduce output
question
If a perfectly competitive firm sells 300 units of output at a market price of \$1 per unit, its marginal revenue is:
\$1
question
Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:
is earning a small economic profit
question
Under which condition would the firm be incurring a loss?
price is below average total cost
question
In the long run, each firm in a perfectly competitive industry will:
earn only enough to cover the opportunity costs of the resources used in production
question
Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run, the:
industry supply curve will shift to the left
question
Ashley, who makes knitted caps, determines that her marginal cost of producing one more knitted cap is equal to \$10. A consumer offers her \$12 if she sells one more knitted cap to her. Ashley will:
sell the additional knitted cap, since the marginal revenue is greater than the marginal cost for the unit
question
The shut-down price is:
the minimum of the AVC curve
question
Marginal revenue for a monopolist is:
less than price
question
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
market power
question
Compared to a perfectly competitive industry, a monopolist:
charges a higher price
question
Which of the following statements about the differences between monopoly and perfect competition is incorrect?
Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
question
Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is incorrect?
In the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market.
question
An oligopoly is characterized as an industry in which:
there are few firms, each producing a differentiated or similar product
question
An industry with a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is:
monopoly
question
Which of the following is true?
a monopoly firm is a price-maker
question
A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared to the condition before the increase in marginal costs, the monopolist will ________ its price and ________ its level of production.
raise; decrease
question
One government policy for dealing with a natural monopoly is to:
impose a price ceiling to reduce economic profit
question
Maximization of joint profits is most likely when firms are:
duopolists who collude
question
Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs:
both firms produce low levels of output
question
Refer to Figure 12.7. The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy. If both firms follow their individual dominant strategy:
both will earn \$150 daily profit
question
A tit-for-tat strategy is one in which oligopolies
cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. The large barriers to entry in the Smalltown gas industry explain why Gary and Frank:
can earn an economic profit in the long run
question
In an oligopoly:
firms recognize their interdependence
question
Refer to Table 14.2. Firm Aʹs dominant strategy is
question
Refer to the above payoff matrix for the profits (in \$ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?
both firm A and firm B choose the low price
question
Refer to Figure d. What is the Nash equilibrium in table above?
Travis south, Darren west
question
Table 14-2 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3. At the start of the game each firm charges a low price and each earns a profit of \$7,000.
yes the firms can simplicity collude and agree to charge a higher price
question
A perfectly competitive industry is said to be efficient because the:
average total cost of production of industry's output in minimized
question
In a long-run equilibrium, economic profits in a perfectly competitive industry are:
zero
question
If firms are experiencing economic losses in the short run, firms will leave the industry, industry output will ________, and economic losses will ________ in the long run.
fall; fall
question
A perfectly competitive firm's short-run supply curve is its:
marginal cost curve above the average variable cost curve
question
In perfect competition:
each individual firm will have a small market share
question
A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:
greater than average total cost
question
Han and Micah have just started their own business-a food truck that sits on city streets and sells specialty Vietnamese food. The start-up costs were low, and there are lots of other Vietnamese food trucks in the city, but Han's cooking is very special. People come from all over the city to buy their food, so they can charge a slightly higher price than their competitors. What type of market structure do they face?
monopolistic competition
question
In perfect competition:
the industry output is a standardized product
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If the price is less than the average variable cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
shut down production
question
In the short run, if P = ATC, a perfectly competitive firm:
produces output and earns zero economic profit
question
For a monopolist, the market demand curve:
is also the demand for the monopolist's product
question
The De Beers company is described as a monopolist in the production of:
diamonds
question
Price discrimination is the practice of:
charging different prices to buyers of the same good
question
When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing:
economies of scale
question
Control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers are forms of:
barriers to entry
question
Sadia wants to practice price discrimination in her bakery. Which of the following techniques should Sadia not use?
the same price for all consumers for freshly baked goods
question
The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:
price discrimination
question
A firm that has economies of scale:
over the entire range of output demanded is called a natural monopoly
question
Natural monopolies include all of the following except:
a diamond mining company
question
Suppose that the Yankee Cap Company is a profit-maximizing firm that has a monopoly in the production of baseball caps. The firm sells its baseball caps for \$25 each. For this information, we can assume that the Yankee Cap Company is producing a level of output at which:
marginal cost equals marginal revenue
question
Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob confesses, what is the best strategy for Harry?
confess
question
A strategy that is the same regardless of the action of the other player in a game is said to be a:
dominant strategy
question
Which of the following is a form of strategic behavior defined as behavior intended to influence the future actions of other players?
tit-for-tat strategy
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. The large barriers to entry in the Smalltown gas industry explain why Gary and Frank:
can earn an economic profit in the long run
question
In a Nash equilibrium,
players may or may not have dominant strategies
question
Refer to Figure e. If Brandon watches the Red Sox, what is Allie's best response?
watch the Red Sox
question
Which of the following scenarios best describes an oligopolistic industry?
Coca-cola and pepsi sell most of the soft drinks consumed around the world
question
Engaging in price competition or Bertrand behavior will most likely mean oligopolists:
will likely end up behaving like a perfectly competitive industry
question
Refer to Figure c. What is the Nash equilibrium in table above (Figure c)?
Kate squeal, Alice squeal
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary and Frank decide to form a cartel to raise the price of gasoline. The total industry profits are highest when ________ and Gary's profits are highest when ________.
neither firm cheats on the agreement; Gary cheats on the agreement and Frank does not cheat
question
A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum. If ATC = \$8 and MR = \$9, in order to maximize profits (or minimize losses), this firm should:
increase output
question
If firms are making positive economic profits in the short run, then in the long run:
firms will enter the industry
question
In the short run, a perfectly competitive firm produces output and earns an economic profit if:
P<ATC
question
In perfect competition, a change in fixed cost:
will encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits
question
The addition to the total revenue from selling one more unit of the good is:
marginal revenue
question
The price received by a firm in a perfectly competitive market:
is equal to the market price
question
If economic profits exist in perfect competition, then firms will enter in the long run because of easy entry, the ________ curve will shift to the right, and ________ in the market will ________.
supply; output; increase
question
A firm's total output times the price at which it sells that output is:
total revenue
question
In the short run, a perfectly competitive firm produces output and incurs an economic loss if:
AVC<P<ATC
question
Price in a perfectly competitive industry:
is always equal to marginal revenue for the firm
question
The main reason a monopoly engages in price discrimination is that:
doing so increases its profits
question
If a monopoly market structure was transformed into a perfectly competitive one, one would find that price would ________ and output would ________.
fall; increase
question
When firms price-discriminate, people with ________ price elasticity of demand will pay ________ prices relative to those purchasing the same product who have a ________ price elasticity of demand.
lower; higher; higher
question
The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a ________ for swimming at the pool than residents.
less elastic demand
question
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:
increasing returns to scale
question
Suppose that a monopoly firm is required to pay a new annual license fee just for the privilege of doing business in its city and that the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will:
not change its price
question
Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for women and 0.55 for men. A successful price discrimination strategy would lead to:
higher prices for man and lower prices for women as long as the CoffeeBean could prevent women from reselling drinks to men
question
The demand curve for a monopoly is:
above the MR curve
question
An increase in the fixed costs of a monopoly firm would ________ price and ________ quantity in the short run.
not change; not change
question
A natural monopoly exists when:
economies of scale provide large cost advantages to having one firm produce the industry's output
question
OPEC is a(n) ________that includes ________.
legal cartel; includes 13 national governments
question
Which of the following would make it difficult for oligopolists to collude?
there are few buyers in the market
question
Refer to Table 14-1. Let's suppose the game starts with each firm adhering to its original budget so that Godrickporter earns a profit of \$6,000 and Star Connections earns a profit of \$12,000. Is there an incentive for any one firm to increase its advertising budget?
Yes, Godrickporter has an incentive to increase its advertising budget, but Star Connections does not.
question
Which of the following is TRUE for the game in Scenario 13.4?
neither company has a dominant strategy
question
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
both firms would charge a low price
question
Oligopoly is a market structure that is characterized by a ________ number of ________ firms that produce ________ products.
small; interdependent; identical or differentiated
question
Refer to Table 14-3. Is there a dominant strategy for Nigeria and, if so, what is it?
yes, the dominant strategy is to produce a high output
question
What is a prisoner's dilemma?
a game in which players act in rational, self-interested ways that leave everyone worse off
question
Suppose two firms are in a game situation, and they each must decide on a strategy regarding whether to select a high price or a low price. Profits for a firm are highest when it selects a low price, while the other selects a high price; profits are lowest if one selects a high price, while the other selects a low price; profits are in between when both select low prices; and profits are slightly higher when both select high prices. In the absence of collusion we expect
both to select low prices
question
In the short run, if P > ATC, a perfectly competitive firm:
produces output and earns an economic profit
question
In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in:
positive economic profits for firms, which ill attract new firms, which in turn will result in a reduction in the price
question
Under which condition would the firm be incurring a loss?
price is below average total cost
question
Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect:
lower apple prices due to the entry of new firms
question
Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect:
variable cost
question
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is \$0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by \$0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
firms leaving the industry
question
Which of the following is not a characteristic of a perfectly competitive industry?
there are differentiated products
question
In the short run, a firm will produce as long as the price is greater than its:
AVC
question
If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of \$10 per bush, its marginal revenue is:
\$10
question
Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all of the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will ________ its price and ________ its level of production.
do nothing to; decrease
question
A monopolist is likely to ________ and ________ than a comparable perfectly competitive firm.
produce less; charge more
question
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at \$21,000 each. If she wants to sell six, she can only charge \$20,000 each. The price effect of selling the sixth motor home is:
-\$5,000
question
Price discrimination leads to a ________ price for consumers with a ________ demand.
higher; less elastic
question
Which of the following statements is correct for a firm that can price-discriminate?
It should adjust prices so that customers with price-elastic demand pay lower prices than those with inelastic demand.
question
You own a lemonade stand in a competitive lemonade market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power?
you own exclusive rights to harvest lemons from all domestic citrus orchards
question
The demand curve facing a monopolist is:
downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm
question
If a monopolist is producing a quantity that generates MC > MR, then profit:
can be increased by increasing price
question
Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect:
price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to rise.
question
If your local government gave you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
government-created barriers
question
In a monopoly in the long run:
entry by other firms will not occur
question
Refer to Figure e. If Allie watches the Mets, what is Brandon's best response?
watch the Mets
question
Refer to Figure d. In the game described in the figure above, Travis's dominant strategy is
south
question
Which of the following is true about the game in Scenario 13.2?
Both ABC and XYZ offer a rebate as a dominant strategy.
question
A situation in which one firm sets the price and other firms in the industry match it is known as:
question
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
both firms would charge a low price
question
An industry that consists of two firms is:
a duopoly
question
A cartel is
a group of firms that enter into a formal agreement to fix prices to maximize joint profits.
question
Your economics professor has decided that your class will not be graded on a curve but on an absolute scale. Therefore, it is possible for every student in the class to get an "A." Your grade will not depend in any way on your classmates' performance. Based on this information, you decide that you should study economics three hours each day, regardless of what your classmates do. In the language of game theory, your decision to study three hours each day is:
a dominant strategy
question
A strategy is dominant if
It is a player's only best response, regardless of other players' choices
question
Which of the following scenarios best describes an oligopolistic industry?
Coca-Cola and Pepsi sell most of the soft drinks consumed around the world.
1 of 172
question
The break-even price for a perfectly competitive firm is equal to:
the minimum value of average total cost
question
If the long-run market supply curve for a perfectly competitive market is horizontal, then this industry is one that exhibits:
constant costs
question
Marginal revenue is a firm's:
increase in total revenue when it sells an additional unit of output
question
Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is \$100 and someone offers him \$125 to complete this additional report, Tony should:
complete the additional report
question
In the short run, a perfectly competitive firm produces output and earns zero economic profit if:
P=ATC
question
In the short run, a perfectly competitive firm produces output and incurs an economic loss if:
AVC<P<ATC
question
In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in:
positive economic profits for firms, which will attract new firms, which in turn will result in a reduction in the price.
question
Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is \$9, Mikail's output is 3,000 cards a month, and his monthly average total cost is \$7, what are his monthly profits?
\$6,000
question
A firm's total output times the price at which it sells that output is:
total revenue
question
A perfectly competitive firm is a:
price-taker
question
The land you own has the only known source of aloe needed to make anti-itch lotion. In this case, your monopoly results from which of the following?
ownership of scarce inputs
question
In contrast to perfect competition, a:
monopoly produces less at a higher price
question
De Beers became a monopoly by:
establishing control over diamond mines
question
A monopolistically competitive industry is made up of:
many firms producing a differentiated product
question
In 1999, a judge declared that Microsoft was a monopolist. Assuming that it is maximizing its profits at its current level of output, we may conclude that if Microsoft were to increase its price, its total revenue would:
fall
question
After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price at which that unit is sold because of:
a downward sloping demand curve
question
Which of the following statements about the differences between monopoly and perfect competition is incorrect?
Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
question
Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets. There's decreasing average cost for all levels of demand. In this case, your monopoly would result from which of the following?
economies of scale
question
Which of the following is a barrier to entry?
control of scarce resources, economies of scale, and government-created barriers (i.e., patents and copyrights)
question
Firms in which of the following market structures have the most market power?
monopoly
question
In the game in Scenario 13.3, the equilibrium outcome:
is for Moto to offer a CD changer and Zport to offer low profile tires
question
A major application of the Sherman Antitrust Act was in ________ against ________.
1911; Standard Oil
question
A ________ occurs if all players in a game play their best strategies given what their competitors do.
Nash equilibrium
question
An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
cartel
question
Airlines are prone to price wars because:
most fliers choose airlines on the basis of schedule and price
question
An industry with two firms producing is generally called:
duopoly
question
Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. Which of the following is the outcome of the dominant strategy without cooperation?
both confess
question
Maximization of joint profits is most likely when firms are:
duopolists who collude
question
Which of the following is true for the game in Scenario 13.3?
Zport's dominant strategy is the low profile tires
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary believes he faces a kinked demand curve. This means Gary thinks if he lowers his price, then Frank will ________, and if he raises his price, Frank will ________.
lower his price; not raise his price
question
Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:
is earning a small economic profit.
question
During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. In the short run, Alex will shut down his lawn-mowing service rather than continue mowing grass if:
the total revenues can't cover the total variable costs.
question
If a perfectly competitive firm can sell a bushel of soybeans for \$40 and it has an average variable cost of \$50 per bushel and the marginal cost is \$52 per bushel, the firm should:
cut output to zero
question
The shut-down price is:
the minimum of the AVC curve
question
Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is \$100 and someone offers him \$125 to complete this additional report, Tony should:
complete the additional report
question
The addition to the total revenue from selling one more unit of the good is:
marginal revenue
question
Under which condition would the firm be incurring a loss?
price is below average total cost
question
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is \$0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by \$0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
firms leaving the industry
question
In the short run, a perfectly competitive firm produces output and breaks even if:
the firm produces the quantity at which P = ATC
question
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin:
earning an economic profit
question
Control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers are forms of:
barriers to entry
question
Kellogg, General Mills, Post and Quaker Oats dominate the ready-to-eat cereal market. This industry has consistently showed profits in the long run, and is difficult to enter due to brand proliferation. The ready-to-eat cereal industry is an example of what type of market structure?
Oligopoly
question
To practice effective price discrimination, a monopolist must be able to:
prevent the resale of goods among groups of buyers
question
In contrast to perfect competition, a:
monopoly produces less at a higher price
question
Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with:
the higher price elasticity of demand
question
Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from \$30 per unit to \$29 per unit, marginal revenue for the eleventh unit is:
\$19
question
If a monopolist is producing a quantity that generates MC < MR, then profit:
can be increased by increasing production
question
Which of the following is not a barrier to entry?
a ban on certain kinds of advertising
question
Refer to Table 12.2. Jeri and Tom are arrested for having committed a crime. They are being interrogated individually and need to decide if they should confess or not confess. The police have enough information to put them in jail for 5 years. They also know the pair have committed a more egregious crime but without the help of one of the suspects they will not be able to convict them on this charge. The first number in each cell refers to the number of years of prison time Jeri will receive if she confesses or does not confess and the second number in each cell refers to the number of years of prison time Tom will receive if he confesses or does not confess. The dominant strategy for Jeri is to ________ and the dominant strategy for Tom is to ________.
confess; confess
question
Which of the following is most likely to be observed when firms engage mainly in non-price competition?
advertising and product differentiation
question
Which of the following factors increases the likelihood that oligopolists collude?
a firm and its rivals are currently operating at maximum productive capacity
question
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
both firms would charge a low price
question
In the game in Scenario 13.3, the equilibrium outcome:
is for Moto to offer a CD changer and Zport to offer low-profile tires
question
The short-run supply curve for a perfectly competitive firm is:
the marginal cost curve about the shut-down price
question
Which of the following is true?
price and marginal revenue are the same in perfect competition
question
If a competitive firm can sell a bushel of soybeans for \$25 and it has an average variable cost of \$24 per bushel and the marginal cost is \$26 per bushel, the firm should:
reduce output
question
If a perfectly competitive firm sells 300 units of output at a market price of \$1 per unit, its marginal revenue is:
\$1
question
Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:
is earning a small economic profit
question
Under which condition would the firm be incurring a loss?
price is below average total cost
question
In the long run, each firm in a perfectly competitive industry will:
earn only enough to cover the opportunity costs of the resources used in production
question
Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run, the:
industry supply curve will shift to the left
question
Ashley, who makes knitted caps, determines that her marginal cost of producing one more knitted cap is equal to \$10. A consumer offers her \$12 if she sells one more knitted cap to her. Ashley will:
sell the additional knitted cap, since the marginal revenue is greater than the marginal cost for the unit
question
The shut-down price is:
the minimum of the AVC curve
question
Marginal revenue for a monopolist is:
less than price
question
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
market power
question
Compared to a perfectly competitive industry, a monopolist:
charges a higher price
question
Which of the following statements about the differences between monopoly and perfect competition is incorrect?
Monopoly profits can continue to exist in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
question
Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is incorrect?
In the long run, economic profits are driven to zero in both a monopoly and a perfectly competitive market.
question
An oligopoly is characterized as an industry in which:
there are few firms, each producing a differentiated or similar product
question
An industry with a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is:
monopoly
question
Which of the following is true?
a monopoly firm is a price-maker
question
A monopolist's marginal cost curve shifts up, but the firm's demand curve remains the same and the firm does not shut down. Compared to the condition before the increase in marginal costs, the monopolist will ________ its price and ________ its level of production.
raise; decrease
question
One government policy for dealing with a natural monopoly is to:
impose a price ceiling to reduce economic profit
question
Maximization of joint profits is most likely when firms are:
duopolists who collude
question
Consider the following game in which two firms decide how much of a homogeneous good to produce. The annual profit payoffs for each firm are stated in the cell of the game matrix, and Firm A's payoffs appear first in the payoff pairs:
both firms produce low levels of output
question
Refer to Figure 12.7. The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy. If both firms follow their individual dominant strategy:
both will earn \$150 daily profit
question
A tit-for-tat strategy is one in which oligopolies
cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. The large barriers to entry in the Smalltown gas industry explain why Gary and Frank:
can earn an economic profit in the long run
question
In an oligopoly:
firms recognize their interdependence
question
Refer to Table 14.2. Firm Aʹs dominant strategy is
question
Refer to the above payoff matrix for the profits (in \$ millions) of two firms (A and B) and two pricing strategies (high and low). Which of the following is the outcome of the dominant strategy without cooperation?
both firm A and firm B choose the low price
question
Refer to Figure d. What is the Nash equilibrium in table above?
Travis south, Darren west
question
Table 14-2 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3. At the start of the game each firm charges a low price and each earns a profit of \$7,000.
yes the firms can simplicity collude and agree to charge a higher price
question
A perfectly competitive industry is said to be efficient because the:
average total cost of production of industry's output in minimized
question
In a long-run equilibrium, economic profits in a perfectly competitive industry are:
zero
question
If firms are experiencing economic losses in the short run, firms will leave the industry, industry output will ________, and economic losses will ________ in the long run.
fall; fall
question
A perfectly competitive firm's short-run supply curve is its:
marginal cost curve above the average variable cost curve
question
In perfect competition:
each individual firm will have a small market share
question
A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:
greater than average total cost
question
Han and Micah have just started their own business-a food truck that sits on city streets and sells specialty Vietnamese food. The start-up costs were low, and there are lots of other Vietnamese food trucks in the city, but Han's cooking is very special. People come from all over the city to buy their food, so they can charge a slightly higher price than their competitors. What type of market structure do they face?
monopolistic competition
question
In perfect competition:
the industry output is a standardized product
question
If the price is less than the average variable cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
shut down production
question
In the short run, if P = ATC, a perfectly competitive firm:
produces output and earns zero economic profit
question
For a monopolist, the market demand curve:
is also the demand for the monopolist's product
question
The De Beers company is described as a monopolist in the production of:
diamonds
question
Price discrimination is the practice of:
charging different prices to buyers of the same good
question
When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing:
economies of scale
question
Control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers are forms of:
barriers to entry
question
Sadia wants to practice price discrimination in her bakery. Which of the following techniques should Sadia not use?
the same price for all consumers for freshly baked goods
question
The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:
price discrimination
question
A firm that has economies of scale:
over the entire range of output demanded is called a natural monopoly
question
Natural monopolies include all of the following except:
a diamond mining company
question
Suppose that the Yankee Cap Company is a profit-maximizing firm that has a monopoly in the production of baseball caps. The firm sells its baseball caps for \$25 each. For this information, we can assume that the Yankee Cap Company is producing a level of output at which:
marginal cost equals marginal revenue
question
Refer to the above figure. The figure gives the payoff matrix for two individuals who are being accused of robbing a bank together. If Bob confesses, what is the best strategy for Harry?
confess
question
A strategy that is the same regardless of the action of the other player in a game is said to be a:
dominant strategy
question
Which of the following is a form of strategic behavior defined as behavior intended to influence the future actions of other players?
tit-for-tat strategy
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. The large barriers to entry in the Smalltown gas industry explain why Gary and Frank:
can earn an economic profit in the long run
question
In a Nash equilibrium,
players may or may not have dominant strategies
question
Refer to Figure e. If Brandon watches the Red Sox, what is Allie's best response?
watch the Red Sox
question
Which of the following scenarios best describes an oligopolistic industry?
Coca-cola and pepsi sell most of the soft drinks consumed around the world
question
Engaging in price competition or Bertrand behavior will most likely mean oligopolists:
will likely end up behaving like a perfectly competitive industry
question
Refer to Figure c. What is the Nash equilibrium in table above (Figure c)?
Kate squeal, Alice squeal
question
Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary and Frank decide to form a cartel to raise the price of gasoline. The total industry profits are highest when ________ and Gary's profits are highest when ________.
neither firm cheats on the agreement; Gary cheats on the agreement and Frank does not cheat
question
A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum. If ATC = \$8 and MR = \$9, in order to maximize profits (or minimize losses), this firm should:
increase output
question
If firms are making positive economic profits in the short run, then in the long run:
firms will enter the industry
question
In the short run, a perfectly competitive firm produces output and earns an economic profit if:
P<ATC
question
In perfect competition, a change in fixed cost:
will encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits
question
The addition to the total revenue from selling one more unit of the good is:
marginal revenue
question
The price received by a firm in a perfectly competitive market:
is equal to the market price
question
If economic profits exist in perfect competition, then firms will enter in the long run because of easy entry, the ________ curve will shift to the right, and ________ in the market will ________.
supply; output; increase
question
A firm's total output times the price at which it sells that output is:
total revenue
question
In the short run, a perfectly competitive firm produces output and incurs an economic loss if:
AVC<P<ATC
question
Price in a perfectly competitive industry:
is always equal to marginal revenue for the firm
question
The main reason a monopoly engages in price discrimination is that:
doing so increases its profits
question
If a monopoly market structure was transformed into a perfectly competitive one, one would find that price would ________ and output would ________.
fall; increase
question
When firms price-discriminate, people with ________ price elasticity of demand will pay ________ prices relative to those purchasing the same product who have a ________ price elasticity of demand.
lower; higher; higher
question
The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a ________ for swimming at the pool than residents.
less elastic demand
question
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:
increasing returns to scale
question
Suppose that a monopoly firm is required to pay a new annual license fee just for the privilege of doing business in its city and that the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will:
not change its price
question
Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for women and 0.55 for men. A successful price discrimination strategy would lead to:
higher prices for man and lower prices for women as long as the CoffeeBean could prevent women from reselling drinks to men
question
The demand curve for a monopoly is:
above the MR curve
question
An increase in the fixed costs of a monopoly firm would ________ price and ________ quantity in the short run.
not change; not change
question
A natural monopoly exists when:
economies of scale provide large cost advantages to having one firm produce the industry's output
question
OPEC is a(n) ________that includes ________.
legal cartel; includes 13 national governments
question
Which of the following would make it difficult for oligopolists to collude?
there are few buyers in the market
question
Refer to Table 14-1. Let's suppose the game starts with each firm adhering to its original budget so that Godrickporter earns a profit of \$6,000 and Star Connections earns a profit of \$12,000. Is there an incentive for any one firm to increase its advertising budget?
Yes, Godrickporter has an incentive to increase its advertising budget, but Star Connections does not.
question
Which of the following is TRUE for the game in Scenario 13.4?
neither company has a dominant strategy
question
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
both firms would charge a low price
question
Oligopoly is a market structure that is characterized by a ________ number of ________ firms that produce ________ products.
small; interdependent; identical or differentiated
question
Refer to Table 14-3. Is there a dominant strategy for Nigeria and, if so, what is it?
yes, the dominant strategy is to produce a high output
question
What is a prisoner's dilemma?
a game in which players act in rational, self-interested ways that leave everyone worse off
question
Suppose two firms are in a game situation, and they each must decide on a strategy regarding whether to select a high price or a low price. Profits for a firm are highest when it selects a low price, while the other selects a high price; profits are lowest if one selects a high price, while the other selects a low price; profits are in between when both select low prices; and profits are slightly higher when both select high prices. In the absence of collusion we expect
both to select low prices
question
In the short run, if P > ATC, a perfectly competitive firm:
produces output and earns an economic profit
question
In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in:
positive economic profits for firms, which ill attract new firms, which in turn will result in a reduction in the price
question
Under which condition would the firm be incurring a loss?
price is below average total cost
question
Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect:
lower apple prices due to the entry of new firms
question
Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect:
variable cost
question
Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is \$0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by \$0.05; there are no other changes in production costs. Based on the information given, we can conclude that in the long run we will observe:
firms leaving the industry
question
Which of the following is not a characteristic of a perfectly competitive industry?
there are differentiated products
question
In the short run, a firm will produce as long as the price is greater than its:
AVC
question
If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of \$10 per bush, its marginal revenue is:
\$10
question
Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all of the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will ________ its price and ________ its level of production.
do nothing to; decrease
question
A monopolist is likely to ________ and ________ than a comparable perfectly competitive firm.
produce less; charge more
question
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at \$21,000 each. If she wants to sell six, she can only charge \$20,000 each. The price effect of selling the sixth motor home is:
-\$5,000
question
Price discrimination leads to a ________ price for consumers with a ________ demand.
higher; less elastic
question
Which of the following statements is correct for a firm that can price-discriminate?
It should adjust prices so that customers with price-elastic demand pay lower prices than those with inelastic demand.
question
You own a lemonade stand in a competitive lemonade market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power?
you own exclusive rights to harvest lemons from all domestic citrus orchards
question
The demand curve facing a monopolist is:
downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm
question
If a monopolist is producing a quantity that generates MC > MR, then profit:
can be increased by increasing price
question
Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect:
price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to rise.
question
If your local government gave you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
government-created barriers
question
In a monopoly in the long run:
entry by other firms will not occur
question
Refer to Figure e. If Allie watches the Mets, what is Brandon's best response?
watch the Mets
question
Refer to Figure d. In the game described in the figure above, Travis's dominant strategy is
south
question
Which of the following is true about the game in Scenario 13.2?
Both ABC and XYZ offer a rebate as a dominant strategy.
question
A situation in which one firm sets the price and other firms in the industry match it is known as:
question
Refer to Figure 12.7 The numerical data show daily profits for each of the two firms when they choose a specific pricing strategy.In the Nash equilibrium:
both firms would charge a low price
question
An industry that consists of two firms is:
a duopoly
question
A cartel is
a group of firms that enter into a formal agreement to fix prices to maximize joint profits.
question
Your economics professor has decided that your class will not be graded on a curve but on an absolute scale. Therefore, it is possible for every student in the class to get an "A." Your grade will not depend in any way on your classmates' performance. Based on this information, you decide that you should study economics three hours each day, regardless of what your classmates do. In the language of game theory, your decision to study three hours each day is:
a dominant strategy
question
A strategy is dominant if
It is a player's only best response, regardless of other players' choices
question
Which of the following scenarios best describes an oligopolistic industry?
Coca-Cola and Pepsi sell most of the soft drinks consumed around the world.

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