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econ unit 4 – mc questions

question
A cartel is difficult to maintain for which of the following reasons?

A
Consumers substitute away from the good when the price increases.
B
Individual cartel members are tempted to cheat on the agreement.
C
Although the total gain to cartel members is positive, all members lose when everyone sticks to the agreement.
D
Some firms will reduce output in an effort to lower costs of production.
E
Oligopolistic behavior is generally predictable.
answer
B
Individual cartel members are tempted to cheat on the agreement.
question
A firm with market power engages in price discrimination to

A
earn a higher profit
B
increase consumer surplus
C
decrease deadweight loss
D
make its demand more elastic
E
make its demand more inelastic
answer
A
earn a higher profit
question
A monopolist is inefficient from society's point of view because

A
it overproduces output and charges a price above marginal cost
B
it underproduces output and charges a price above marginal cost
C
it sometimes colludes with other firms to obtain higher prices
D
the price the monopolist charges is too low and it does not advertise
E
consumers must pay whatever price the monopolist charges
answer
B
it underproduces output and charges a price above marginal cost
question
A monopolist's demand curve is necessarily

A
the same as the market demand curve
B
the same as its marginal revenue curve
C
upward sloping
D
perfectly elastic
E
perfectly inelastic
answer
A
the same as the market demand curve
question
A monopolistically competitive firm is currently producing the profit-maximizing level of output. If the price of a variable input increases, which of the following will occur?

A
The firm will increase its output to increase its revenue.
B
The firm will increase the price of its output by the same amount.
C
The firm's average total cost and marginal cost curves will shift upward.
D
The firm's average fixed cost will decrease as it decreases production.
E
The firm's fixed cost will increase, but its output level will be unaffected.
answer
C
The firm's average total cost and marginal cost curves will shift upward.
question
A single-price monopolist is currently producing in the inelastic portion of its market demand curve. In order to maximize profits, the monopolist should change the price and output in which of the following ways?

A
Price increase
Output increase

B
Price increase
Output decrease

C
Price increase
Output not change

D
Price decrease
Output increase
E
Price not change
Output increase
answer
B
Price increase
Output decrease
question
A single-price monopolist's marginal revenue is

A
equal to its price
B
less than its price
C
greater than its price
D
negative when it maximizes revenues
E
zero when it maximizes profit
answer
B
less than its price
question
From the point of view of economic efficiency, a monopolist produces

A
too much of a good and charges too low a price
B
too much of a good and charges too high a price
C
too little of a good and charges too low a price
D
too little of a good and charges too high a price
E
the socially optimal amount of a good
answer
D
too little of a good and charges too high a price
question
If government regulators set price such that a natural monopolist earns only normal profits, price will be set equal to

A
marginal revenue
B
marginal cost
C
average total cost
D
average revenue
E
average variable cost
answer
C
average total cost
question
price differentation is a key characteristic of which market structure?
answer
monopolistically competitive markets only
question
for a non-price discriminating imperfectly competitive firm---
answer
marginal revenue will become zero at the output where TR is at a max
question
The MR = MC rule applies to---
answer
only perfectly competitive firms
question
why can monopolists obtain profits in the long-run?
answer
because of extremely high barriers to entry
question
the kinked demand curve is based on what assumption?
answer
that competitors will follow a price cut, but ignore a price increase
question
why can advertising hinder efficiency?
answer
advertising increases entry barriers so firms can't enter
question
why are monopolistic firms more complicated than perfect competition?
answer
monopolistic competitive firms have product variability and consequent advertising activities
1 of 16
question
A cartel is difficult to maintain for which of the following reasons?

A
Consumers substitute away from the good when the price increases.
B
Individual cartel members are tempted to cheat on the agreement.
C
Although the total gain to cartel members is positive, all members lose when everyone sticks to the agreement.
D
Some firms will reduce output in an effort to lower costs of production.
E
Oligopolistic behavior is generally predictable.
answer
B
Individual cartel members are tempted to cheat on the agreement.
question
A firm with market power engages in price discrimination to

A
earn a higher profit
B
increase consumer surplus
C
decrease deadweight loss
D
make its demand more elastic
E
make its demand more inelastic
answer
A
earn a higher profit
question
A monopolist is inefficient from society's point of view because

A
it overproduces output and charges a price above marginal cost
B
it underproduces output and charges a price above marginal cost
C
it sometimes colludes with other firms to obtain higher prices
D
the price the monopolist charges is too low and it does not advertise
E
consumers must pay whatever price the monopolist charges
answer
B
it underproduces output and charges a price above marginal cost
question
A monopolist's demand curve is necessarily

A
the same as the market demand curve
B
the same as its marginal revenue curve
C
upward sloping
D
perfectly elastic
E
perfectly inelastic
answer
A
the same as the market demand curve
question
A monopolistically competitive firm is currently producing the profit-maximizing level of output. If the price of a variable input increases, which of the following will occur?

A
The firm will increase its output to increase its revenue.
B
The firm will increase the price of its output by the same amount.
C
The firm's average total cost and marginal cost curves will shift upward.
D
The firm's average fixed cost will decrease as it decreases production.
E
The firm's fixed cost will increase, but its output level will be unaffected.
answer
C
The firm's average total cost and marginal cost curves will shift upward.
question
A single-price monopolist is currently producing in the inelastic portion of its market demand curve. In order to maximize profits, the monopolist should change the price and output in which of the following ways?

A
Price increase
Output increase

B
Price increase
Output decrease

C
Price increase
Output not change

D
Price decrease
Output increase
E
Price not change
Output increase
answer
B
Price increase
Output decrease
question
A single-price monopolist's marginal revenue is

A
equal to its price
B
less than its price
C
greater than its price
D
negative when it maximizes revenues
E
zero when it maximizes profit
answer
B
less than its price
question
From the point of view of economic efficiency, a monopolist produces

A
too much of a good and charges too low a price
B
too much of a good and charges too high a price
C
too little of a good and charges too low a price
D
too little of a good and charges too high a price
E
the socially optimal amount of a good
answer
D
too little of a good and charges too high a price
question
If government regulators set price such that a natural monopolist earns only normal profits, price will be set equal to

A
marginal revenue
B
marginal cost
C
average total cost
D
average revenue
E
average variable cost
answer
C
average total cost
question
price differentation is a key characteristic of which market structure?
answer
monopolistically competitive markets only
question
for a non-price discriminating imperfectly competitive firm---
answer
marginal revenue will become zero at the output where TR is at a max
question
The MR = MC rule applies to---
answer
only perfectly competitive firms
question
why can monopolists obtain profits in the long-run?
answer
because of extremely high barriers to entry
question
the kinked demand curve is based on what assumption?
answer
that competitors will follow a price cut, but ignore a price increase
question
why can advertising hinder efficiency?
answer
advertising increases entry barriers so firms can't enter
question
why are monopolistic firms more complicated than perfect competition?
answer
monopolistic competitive firms have product variability and consequent advertising activities
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