Micro-Test

Q: A producer of widgets is most likely to be a monopolist when:

a.there are no close substitutes for widgets and there are barriers to entry into the widget industry.* b.a single firm owns the patent for producing widgets, but other firms can sell gadgets that are a close substitute for widgets. c.there are no close substitutes for widgets and there are no barriers to entry into the widget industry. d.there are close substitutes for widgets

Q: From society's perspective:

a.monopoly markets are more efficient than competitive markets. b.there is no difference between the outcome in monopoly markets and competitive markets. c.it is never good to have only one firm service an entire market. d.competition leads to lower prices, higher output, and greater efficiency than monopoly*

Q: A firm that is able to use price discrimination will seek to:

creates a deadweight loss for society because marginal benefit exceeds marginal cost.

Q: A natural monopoly can:

a.supply the entire market at a higher cost than many competing firms. b.supply the entire market at a lower cost than many competing firms.* c.always charge any price it wants since it faces no competition. d.use natural resources without being subjected to government regulation.

question

The defining characteristics of a monopoly market are:

answer

single supplier, unique product, and barriers to entry

question

All of the following are examples of barriers to entry except:

answer

a.patents and copyrights.
b.government franchises and licenses.*
c.constant returns to scale.
d.sole ownership of key resources

question

The demand curve for a monopoly firm is

answer

the same as the industry, or market, demand curve for its product

question

If electrical service can be more efficiently provided to a market by a single supplier than by many competing suppliers, the market is considered to be a(n):

answer

natural monopoly

question

A profit-maximizing monopolist will produce where:

answer

MR=MC

question

A monopoly produces a __________ level of output and charges a ___________ price than a perfectly competitive industry, provided economies of scale are not significant

answer

lower; higher

question

Which of the following is always true for a monopolist?

answer

a.Profit is maximized where marginal revenue equals marginal cost.*
b.Economic profit is positive in both the short run and long run.
c.Consumer surplus is zero because the monopoly price is greater than the competitive price.
d.All of the above are always true

question

A monopolist that earns positive economic profit in short-run equilibrium will:

answer

earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in cost or market demand

question

Which of the following is true for a profit-maximizing monopolist that charges all consumers the same price?

answer

a.P > MR = MC*
b.P > MR > MC
c.P < MR = MC
d.P = MR = MC

question

A producer of widgets is most likely to be a monopolist when:

answer

a.there are no close substitutes for widgets and there are barriers to entry into the widget industry.*
b.a single firm owns the patent for producing widgets, but other firms can sell gadgets that are a close substitute for widgets.
c.there are no close substitutes for widgets and there are no barriers to entry into the widget industry.
d.there are close substitutes for widgets

question

From society's perspective:

answer

a.monopoly markets are more efficient than competitive markets.
b.there is no difference between the outcome in monopoly markets and competitive markets.
c.it is never good to have only one firm service an entire market.
d.competition leads to lower prices, higher output, and greater efficiency than monopoly*

question

A firm that is able to use price discrimination will seek to:

answer

creates a deadweight loss for society because marginal benefit exceeds marginal cost.

question

A natural monopoly can:

answer

a.supply the entire market at a higher cost than many competing firms.
b.supply the entire market at a lower cost than many competing firms.*
c.always charge any price it wants since it faces no competition.
d.use natural resources without being subjected to government regulation.

question

Government deals with imperfect competition by:

answer

restricting market power through antitrust laws and regulation.

question

An industry dominated by a few large firms whose pricing and output decisions are dependent on one another is:

answer

oligopolistic.

question

To be successful in increasing prices for their product, members of a cartel must

answer

agree to limit their output

question

Behavior in which a dominant firm's pricing strategy is followed by other firms in the industry is called:

answer

Price Leadership

question

Assume all firms in an oligopolistic industry are colluding to set price and output to maximize total industry profit. If the firms are forced to stop colluding, the price of their product will most likely

answer

decrease but output will increase.

question

The game theory model assumes that:

answer

firms anticipate rival firms' decisions when they make their own decisions.

question

The characteristic that distinguishes oligopoly from other market structures is:

answer

interdependence among firms in pricing and output decisions.

question

All of the following are characteristics of a monopolistically competitive market except:

answer

a.there are many firms in a monopolistically competitive industry.
b.the firms in the industry produce goods that are close, but not perfect substitutes.
c.there are no significant barriers to entry.
d.the firms in the industry engage in interdependent decision making*

question

Which of following holds for both monopoly firms and monopolistically competitive firms in long-run equilibrium?

answer

a.P > ATC
b.P = ATC
c.P > MC*
d.P = MC

question

Like a perfectly competitive firm, a monopolistically firm:

answer

maximizes profit by producing the quantity where marginal revenue equals marginal costs.

question

For monopolistically competitive firms in long-run equilibrium, economic profit is

answer

zero because there are no barriers to entry

question

Which of the following is true for monopolistically competitive firms in the long-run equilibrium?

answer

a.P > MC and P > minimum LRAC*
b.P > MC and P = minimum LRAC
c.P < MC and P < minimum LRAC
d.P = MC and P = minimum LRAC

question

A monopolistically competitive firm's demand curve is ___________ elastic than a perfectly competitive firm's and _________ elastic than a monopoly firm's.

answer

less; more

question

Firms in monopolistically competitive markets

answer

produce differentiated products and tend to earn zero economic profit in the long run.

question

Which of the following best represents a derived demand?

answer

a.The demand for tickets to the World Series by baseball fans
b.The demand for secretarial services by a publishing firm
c.The demand for new novels by readers.
d.The demand for the services of pediatricians by new parents*

question

The marginal physical product of labor (MPPl) is the:

answer

change in output that results from employing one more unit of labor

1 of 29

question

The defining characteristics of a monopoly market are:

answer

single supplier, unique product, and barriers to entry

question

All of the following are examples of barriers to entry except:

answer

a.patents and copyrights.
b.government franchises and licenses.*
c.constant returns to scale.
d.sole ownership of key resources

question

The demand curve for a monopoly firm is

answer

the same as the industry, or market, demand curve for its product

question

If electrical service can be more efficiently provided to a market by a single supplier than by many competing suppliers, the market is considered to be a(n):

answer

natural monopoly

question

A profit-maximizing monopolist will produce where:

answer

MR=MC

question

A monopoly produces a __________ level of output and charges a ___________ price than a perfectly competitive industry, provided economies of scale are not significant

answer

lower; higher

question

Which of the following is always true for a monopolist?

answer

question

A monopolist that earns positive economic profit in short-run equilibrium will:

answer

earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in cost or market demand

question

Which of the following is true for a profit-maximizing monopolist that charges all consumers the same price?

answer

a.P > MR = MC*
b.P > MR > MC
c.P < MR = MC
d.P = MR = MC

question

A producer of widgets is most likely to be a monopolist when:

answer

question

From society's perspective:

answer

question

A firm that is able to use price discrimination will seek to:

answer

creates a deadweight loss for society because marginal benefit exceeds marginal cost.

question

A natural monopoly can:

answer

question

Government deals with imperfect competition by:

answer

restricting market power through antitrust laws and regulation.

question

An industry dominated by a few large firms whose pricing and output decisions are dependent on one another is:

answer

oligopolistic.

question

To be successful in increasing prices for their product, members of a cartel must

answer

agree to limit their output

question

Behavior in which a dominant firm's pricing strategy is followed by other firms in the industry is called:

answer

Price Leadership

question

answer

decrease but output will increase.

question

The game theory model assumes that:

answer

firms anticipate rival firms' decisions when they make their own decisions.

question

The characteristic that distinguishes oligopoly from other market structures is:

answer

interdependence among firms in pricing and output decisions.

question

All of the following are characteristics of a monopolistically competitive market except:

answer

question

Which of following holds for both monopoly firms and monopolistically competitive firms in long-run equilibrium?

answer

a.P > ATC
b.P = ATC
c.P > MC*
d.P = MC

question

Like a perfectly competitive firm, a monopolistically firm:

answer

maximizes profit by producing the quantity where marginal revenue equals marginal costs.

question

For monopolistically competitive firms in long-run equilibrium, economic profit is

answer

zero because there are no barriers to entry

question

Which of the following is true for monopolistically competitive firms in the long-run equilibrium?

answer

a.P > MC and P > minimum LRAC*
b.P > MC and P = minimum LRAC
c.P < MC and P < minimum LRAC
d.P = MC and P = minimum LRAC

question

A monopolistically competitive firm's demand curve is ___________ elastic than a perfectly competitive firm's and _________ elastic than a monopoly firm's.

answer

less; more

question

Firms in monopolistically competitive markets

answer

produce differentiated products and tend to earn zero economic profit in the long run.

question

Which of the following best represents a derived demand?

answer

question

The marginal physical product of labor (MPPl) is the:

answer

change in output that results from employing one more unit of labor

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