Econ Midterm 3 Quiz 3 Miyoung Oh - Custom Scholars
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Econ Midterm 3 Quiz 3 Miyoung Oh

question
Market structures are categorized by:
answer
the number of firms and whether products are differentiated.
question
Which of the following statements about the differences between monopoly and perfect competition is INCORRECT?
answer
Monopoly profits can continue in the long run because the monopoly produces
more and charges a higher price than a comparable perfectly competitive industry.
question
A monopoly:
answer
produces a product with no close substitutes.
question
Which of the following statements concerning monopoly is TRUE?
answer
A monopoly has no rivals.
question
De Beers became a monopoly by:
answer
establishing control over diamond mines.
question
A monopolist is likely to produce _____ and charge _____ than a comparable perfectly competitive firm.
answer
Less; more
question
If you had a license for the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
answer
government-set barriers.
question
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
answer
market power
question
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. 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:
answer
increasing returns to scale
question
Most electric, gas, and water companies are examples of:
answer
natural monopolies
question
In contrast with perfect competition, a monopolist:
answer
may have economic profits in the long run.
question
You own a lemonade stand in a competitive market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power?
answer
You own exclusive rights to harvest lemons from all domestic citrus orchards.
question
Conditions that keep new firms out of a monopoly market are:
answer
barriers to entry.
question
A natural monopoly exists whenever a single firm:
answer
has economies of scale over the entire range of production that is relevant to its
market.
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, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:
answer
economies of scale
question
Natural monopolies are likely to include all of the following EXCEPT:
answer
a diamond mining company.
question
Which of the following is (are) barrier(s) to entry?
answer
control of scarce resources, economies of scale, and patents and copyrights
question
The large barriers to entry are a reason a monopoly:
answer
earns an economic profit in the long run.
question
Which of the following is TRUE?
answer
MR = MC is a profit-maximizing rule for any firm.
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 charge only $20,000 each. The quantity effect of selling the sixth motor home is:
answer
$20,000
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:
answer
-$5,000
question
Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price
effects on total revenue would be, respectively, an increase of _____.
answer
$45; $50
question
One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve.
answer
downward-sloping; perfectly elastic
question
The demand curve facing a monopolist is:
answer
downward sloping
question
A monopolist responds to an increase in demand by _____ price and _____ output.
answer
increasing; increasing
question
A monopolist responds to an increase in marginal cost by _____ price and _____ output.
answer
increasing; decreasing
question
Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is INCORRECT?
answer
In the long run, economic profits are driven to zero in both a monopoly and a
perfectly competitive market.
question
Which of the following is TRUE?
answer
Monopolies produce too little and charge too much from the standpoint of
efficiency
question
A monopolist or an imperfectly competitive firm practices price discrimination primarily to:
answer
increase profits
question
One government policy for dealing with natural monopoly is to:
answer
impose a price ceiling to reduce economic profit.
question
Price discrimination leads to a _____ price for consumers with a _____ demand.
answer
higher; less elastic
question
Because business travelers' demand for airline flights is relatively _____, small increases in price will result in relatively _____ decreases in additional business travelers.
answer
price inelastic; small
question
If the government allowed only one airline to serve the entire U.S. market, there would be a _____ loss associated with _____ efficiency in the airline industry.
answer
deadweight; reduced
question
Which of the following is NOT an example of price discrimination?
answer
a Fourth of July sale
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 _____ demand for swimming at the pool
than residents.
answer
less elastic
question
A community college charges lower tuition fees to town residents than to nonresidents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that nonresidents must have a _____ demand for attending the community college than residents.
answer
less price-elastic
question
A Japanese steel firm sells steel in the United States and in Japan. Since the United States buys steel from a number of sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits, it should:
answer
charge a lower price in the United States and a higher price in Japan.
question
Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge
lower prices to _____ because their demand is _____.
answer
men; elastic
1 of 38
question
Market structures are categorized by:
answer
the number of firms and whether products are differentiated.
question
Which of the following statements about the differences between monopoly and perfect competition is INCORRECT?
answer
Monopoly profits can continue in the long run because the monopoly produces
more and charges a higher price than a comparable perfectly competitive industry.
question
A monopoly:
answer
produces a product with no close substitutes.
question
Which of the following statements concerning monopoly is TRUE?
answer
A monopoly has no rivals.
question
De Beers became a monopoly by:
answer
establishing control over diamond mines.
question
A monopolist is likely to produce _____ and charge _____ than a comparable perfectly competitive firm.
answer
Less; more
question
If you had a license for the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
answer
government-set barriers.
question
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
answer
market power
question
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. 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:
answer
increasing returns to scale
question
Most electric, gas, and water companies are examples of:
answer
natural monopolies
question
In contrast with perfect competition, a monopolist:
answer
may have economic profits in the long run.
question
You own a lemonade stand in a competitive market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power?
answer
You own exclusive rights to harvest lemons from all domestic citrus orchards.
question
Conditions that keep new firms out of a monopoly market are:
answer
barriers to entry.
question
A natural monopoly exists whenever a single firm:
answer
has economies of scale over the entire range of production that is relevant to its
market.
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, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:
answer
economies of scale
question
Natural monopolies are likely to include all of the following EXCEPT:
answer
a diamond mining company.
question
Which of the following is (are) barrier(s) to entry?
answer
control of scarce resources, economies of scale, and patents and copyrights
question
The large barriers to entry are a reason a monopoly:
answer
earns an economic profit in the long run.
question
Which of the following is TRUE?
answer
MR = MC is a profit-maximizing rule for any firm.
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 charge only $20,000 each. The quantity effect of selling the sixth motor home is:
answer
$20,000
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:
answer
-$5,000
question
Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price
effects on total revenue would be, respectively, an increase of _____.
answer
$45; $50
question
One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve.
answer
downward-sloping; perfectly elastic
question
The demand curve facing a monopolist is:
answer
downward sloping
question
A monopolist responds to an increase in demand by _____ price and _____ output.
answer
increasing; increasing
question
A monopolist responds to an increase in marginal cost by _____ price and _____ output.
answer
increasing; decreasing
question
Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is INCORRECT?
answer
In the long run, economic profits are driven to zero in both a monopoly and a
perfectly competitive market.
question
Which of the following is TRUE?
answer
Monopolies produce too little and charge too much from the standpoint of
efficiency
question
A monopolist or an imperfectly competitive firm practices price discrimination primarily to:
answer
increase profits
question
One government policy for dealing with natural monopoly is to:
answer
impose a price ceiling to reduce economic profit.
question
Price discrimination leads to a _____ price for consumers with a _____ demand.
answer
higher; less elastic
question
Because business travelers' demand for airline flights is relatively _____, small increases in price will result in relatively _____ decreases in additional business travelers.
answer
price inelastic; small
question
If the government allowed only one airline to serve the entire U.S. market, there would be a _____ loss associated with _____ efficiency in the airline industry.
answer
deadweight; reduced
question
Which of the following is NOT an example of price discrimination?
answer
a Fourth of July sale
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 _____ demand for swimming at the pool
than residents.
answer
less elastic
question
A community college charges lower tuition fees to town residents than to nonresidents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that nonresidents must have a _____ demand for attending the community college than residents.
answer
less price-elastic
question
A Japanese steel firm sells steel in the United States and in Japan. Since the United States buys steel from a number of sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits, it should:
answer
charge a lower price in the United States and a higher price in Japan.
question
Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge
lower prices to _____ because their demand is _____.
answer
men; elastic

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