Term
If a perfectly competitive firm is producing the short-run profit-maximizing quantity and is earning positive economic profits, the firm should anticipate ________.
A. earning economic profits indefinitely
B. the market supply to decrease
C. the market equilibrium price to increase
D. the market equilibrium price to decrease |
|
Definition
| The correct answer is: the market equilibrium price to decrease |
|
|
Term
If a perfectly competitive firm is producing the short-run profit-maximizing quantity and is earning negative economic profits, the firm should anticipate ________.
Select one:
A. the market supply to decrease
B. the market equilibrium price to decrease
C. the market supply to increase
D. new firms to enter the market |
|
Definition
| The correct answer is: the market supply to decrease |
|
|
Term
If a perfectly competitive firm is producing 2,500 units and, at the 2,500th unit, the difference between marginal revenue and marginal cost (MR - MC) is positive, which of the following is true?
Select one:
A. The firm should decrease production to maximize profit.
B. The 2,500th unit costs more to produce than the firm earns in revenue.
C. The firm is maximizing profit.
D. The firm should increase production to maximize profit. |
|
Definition
| The correct answer is: The firm should increase production to maximize profit. |
|
|
Term
Which of the following are NOT characteristics of a competitive market?
Select one:
A. There are only one or two sellers.
B. Buyers and sellers have complete information.
C. There is freedom of entry and exit.
D. There are zero transaction costs. |
|
Definition
| The correct answer is: There are only one or two sellers. |
|
|
Term
If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as
Select one:
A. there are many buyers.
B. there is free entry and exit.
C. the transaction costs of doing business with this firm are low.
D. buyers have full information about the firm's price. |
|
Definition
| The correct answer is: there is free entry and exit. |
|
|
Term
The perfectly competitive model makes a lot of fairly unrealistic assumptions. Why do economics text books still talk a lot about this model?
Select one:
A. Perfectly competitive markets maximize societal welfare.
B. It is an important model to use as a benchmark to compare other markets structures to.
C. Many markets are close to being perfectly competitive.
D. All of the above. |
|
Definition
| The correct answer is: All of the above. |
|
|
Term
If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm
Select one:
A. will be vertical.
B. will be identical to the market demand curve.
C. will be horizontal.
D. cannot be determined from the information given. |
|
Definition
| The correct answer is: will be horizontal. |
|
|
Term
If a competitive firm finds that it maximizes short-run profits by shutting down, which of the following must be TRUE?
Select one:
A. p < AVC only if the firm has no fixed costs.
B. p < AVC for all levels of output.
C. p < AVC only for the level of output at which p = MC.
D. The firm will earn zero profit. |
|
Definition
| The correct answer is: p < AVC for all levels of output. |
|
|
Term
If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?
Select one:
A. It will exit the industry in the long run.
B. It will shut down in the short run and wait until the price increases sufficiently.
C. It will minimize its loss by decreasing output so that price exceeds marginal cost.
D. It will operate at a loss in the short run. |
|
Definition
| The correct answer is: It will minimize its loss by decreasing output so that price exceeds marginal cost. |
|
|
Term
Which of the following statements about profit maximizing firms in a competitive market is FALSE?
Select one:
A. Price equals marginal revenue.
B. Firms earn no economic profit in the long run.
C. Marginal revenue does not have to equal marginal cost.
D. p - MC = 0. |
|
Definition
| The correct answer is: Marginal revenue does not have to equal marginal cost. |
|
|
Term
If a specific tax is implemented
Select one:
A. there is less profit per unit sold.
B. the firm's average cost curve shifts up, resulting in lower profits.
C. the after-tax marginal cost curve shifts, resulting in lower quantity produced.
D. All of the above. |
|
Definition
| The correct answer is: All of the above. |
|
|
Term
In the long run, firms in a competitive market
Select one:
A. earn zero economic profit.
B. lose money.
C. are not profit maximizing.
D. shut down because profit goes to zero. |
|
Definition
| The correct answer is: earn zero economic profit. |
|
|
Term
What is one reason activists might lobby the government to force firms to produce more output than they normally would in a perfectly competitive market?
Select one:
A. They seek to minimize total surplus.
B. They seek to avoid future regulation.
C. They value consumer surplus more than producer surplus.
D. They value producer surplus more than consumer surplus. |
|
Definition
| The correct answer is: They value consumer surplus more than producer surplus |
|
|
Term
All of the following are characteristics of a monopoly market except which one?
Select one:
A. no close substitutes to the good produced in the market
B. the firm is a price-taker
C. an insurmountable barrier to entry exists
D. a single seller in the market |
|
Definition
| The correct answer is: the firm is a price-taker |
|
|
Term
Price Quantity
100 95
99 96
98 97
97 98
96 99
95 100
94 101
The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's total revenue if they charge a price of $95?
Select one:
A. $10
B. $95
C. $9,500
D. $9,450 |
|
Definition
| Feedback $95(100) = $9500 |
|
|
Term
Price Quantity
100 95
99 96
98 97
97 98
96 99
95 100
94 101
The above table shows a sample of prices and the quantity sold by a monopolist.
Refer to the table above. What is the monopolist's marginal revenue of the 98th unit?
Select one:
A. -$2
B. $0
C. -$4
D. $2 |
|
Definition
| The correct answer is: $0 $97(98) = $9506 - $98(97) = $9506 $9506 - $9506 = $0 |
|
|
Term
If a monopolist's demand curve is linear, its marginal revenue curve is ________ and has a slope that is ________ as the demand curve.
Select one:
A. upward sloping; twice as steep
B. linear; twice as steep
C. linear; the same
D. upward sloping; the same |
|
Definition
| The correct answer is: linear; twice as steep |
|
|
Term
For any demand curve, the marginal revenue is ________ when the demand is ________.
Select one:
A. negative; inelastic
B. negative; unit elastic
C. positive; inelastic
D. negative; elastic |
|
Definition
| The correct answer is: negative; inelastic |
|
|
Term
A monopoly is charging $25 for its product and at this price, the price elasticity of demand is 2. What is its marginal revenue?
Select one:
A. $15.50
B. $25.00
C. $12.50
D. $2.00 |
|
Definition
| The correct answer is: $12.50 P/PED = MR |
|
|
Term
To maximize profits, a perfectly competitive firm and a monopoly will set ________ equal to ________.
Select one:
A. marginal cost; average total cost
B. marginal revenue; marginal cost
C. marginal cost; average variable cost
D. marginal revenue; average total cost |
|
Definition
| The correct answer is: marginal revenue; marginal cost |
|
|
Term
You are the manager of Happy Avocados, the dominant firm in the ready-made guacamole market. At your current production level, your marginal cost is $0.60 and you have estimated that your price elasticity of demand is between 1.1 and 1.2. What range of prices should you charge to maximize your profit?
Select one:
A. The range between $3.60 and $6.60.
B. The range between $5.60 and $6.60.
C. The range between $4.60 and $5.60.
D. The range between $3.11 and $6.12 |
|
Definition
The correct answer is: The range between $3.60 and $6.60.
MC= $0.60 P – MC / P = 1 / | e | P- $0.60 / P = 1 / 1.1 1.1P - $0.66 = P P= $6.60
1.1 < e < 1.2 P- $0.60 / P = 1 / 1.2 1.2P - $0.72 = P P= $3.60 |
|
|
Term
Which of the following statements concerning monopoly is NOT true?
Select one:
A. A market may be monopolistic because there are some legal barriers.
B. A monopoly is always undesirable.
C. There is some deadweight loss in a monopolistic market.
D. A monopoly has market power. |
|
Definition
| The correct answer is: A monopoly is always undesirable. |
|
|
Term
The source(s) of monopoly power for a monopoly may be:
Select one:
A. patents.
B. economies of scale.
C. economies of scope.
D. All of the statements associated with this question are correct. |
|
Definition
| The correct answer is: All of the statements associated with this question are correct. |
|
|
Term
Economies of scale exist whenever:
Select one:
A. average total costs increase as output increases.
B. average total costs increase as output increases and average total costs are stationary as output increases.
C. average total costs are stationary as output increases.
D. average total costs decline as output increases. |
|
Definition
| The correct answer is: average total costs decline as output increases. |
|
|
Term
A monopoly has produced a product with a patent for the last few years. The patent is going to expire. What will happen after the patent expires?
Select one:
A. The incumbent will retain its status as a monopoly but produce at a lower price.
B. The incumbent will leave the market.
C. Some firms will enter the industry.
D. None of the answers is correct. |
|
Definition
| The correct answer is: Some firms will enter the industry. |
|
|
Term
Because an oligopoly includes a small number of firms, there is the possibility of ________ rather than ________, which can ________ profits for each of the firms.
Select one:
A. cooperation; competition; increase
B. cooperation; competition; decrease
C. competition; cooperation; decrease
D. competition; cooperation; increase |
|
Definition
| The correct answer is: cooperation; competition; increase |
|
|
Term
If a cartel firm is producing the agreed upon quantity, they are producing at a level where ________.
Select one:
A. their marginal revenue equals their marginal cost
B. the difference between marginal revenue and marginal cost (MR - MC) is negative
C. their marginal cost exceeds their marginal revenue
D. their marginal revenue exceeds their marginal cost |
|
Definition
| The correct answer is: their marginal revenue exceeds their marginal cost |
|
|
Term
Cournot and Stackelberg oligopolies are similar in that they ________.
Select one:
A. both compete on marginal cost
B. both compete on price
C. both compete on quantity
D. do not compete |
|
Definition
| The correct answer is: both compete on quantity |
|
|
Term
As the number of firms in a Cournot oligopoly ________, the equilibrium quantity gets closer to the ________ equilibrium quantity.
Select one:
A. decreases; perfectly competitive
B. decreases; monopolistically competitive
C. increases; monopoly
D. increases; perfectly competitive |
|
Definition
| The correct answer is: increases; perfectly competitive |
|
|
Term
In a Bertrand oligopoly, firms select ________ and earn ________ economic profit.
Select one:
A. quantity; zero
B. quantity; positive
C. price; positive
D. price; zero |
|
Definition
| The correct answer is: price; zero |
|
|
Term
| question 6 chapter 9 quiz 13 |
|
Definition
|
|
Term
The Cournot Model of Oligopoly assumes that
Select one:
A. firms make their decisions simultaneously.
B. firms decide what quantity to produce.
C. firms do not cooperate.
D. All of the above. |
|
Definition
| The correct answer is: All of the above. |
|
|
Term
A Nash equilibrium occurs when
Select one:
A. players choose their best strategy given the strategies chosen by others.
B. a monopolist is forced to produce the efficient level of output.
C. oligopolists cooperate with each other.
D. the efficient allocation of resources is achieved by setting marginal revenue equal to marginal cost. |
|
Definition
| The correct answer is: players choose their best strategy given the strategies chosen by others. |
|
|
Term
Two identical firms that share a market and produce a homogeneous good will find the Bertrand Oligopoly LEAST attractive because
Select one:
A. a Cournot Oligopoly will generate more profit than a Bertrand Oligopoly.
B. they want to avoid a price war that leads to profit erosion and P = MC.
C. Cartels generate the highest joint profit.
D. All of the above. |
|
Definition
| The correct answer is: All of the above. |
|
|
Term
Assuming a homogeneous product, the Bertrand duopoly equilibrium price is
Select one:
A. greater than the Cournot equilibrium price.
B. equal to the monopoly price.
C. less than the Cournot equilibrium price.
D. the same as the Cournot equilibrium price. |
|
Definition
| The correct answer is: less than the Cournot equilibrium price. |
|
|
Term
One criticism of the Bertrand pricing model is that
Select one:
A. the model is implausible when there is product differentiation.
B. the model's predicted price is dependent on the number of firms.
C. the model's predicted price is solely a function of demand conditions.
D. when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. |
|
Definition
| The correct answer is: when there is an oligopoly with no product differentiation, the model's prediction is inconsistent with reality. |
|
|
Term
Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?
Select one:
A. Cournot Oligopoly
B. Bertrand Oligopoly
C. Cartel
D. All are equally preferable. |
|
Definition
| The correct answer is: Bertrand Oligopoly |
|
|
Term
A Nash equilibrium is a condition that:
Select one:
A. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action.
B. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies.
C. guarantees the highest payoff given the worst possible scenario.
D. results in the highest payoff to a player regardless of the opponent's action. |
|
Definition
| The correct answer is: describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies. |
|
|
Term
Which of the following is NOT an important determinant of collusion in pricing games?
Select one:
A. History
B. The number of firms
C. The importance and magnitude of the item in a consumers' budget
D. All the statements associated with this question are important. |
|
Definition
| The correct answer is: The importance and magnitude of the item in a consumers' budget |
|
|
Term
Cooperation is possible in a ________ game if both firms ________ know the final period of the game.
Select one:
A. finitely repeated; do not
B. one-shot; do
C. one-shot; do not
D. finitely repeated; do |
|
Definition
| The correct answer is: finitely repeated; do not |
|
|
Term
A secure strategy is a strategy that:
Select one:
A. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies.
B. results in the highest payoff to a player regardless of the opponent's action.
C. guarantees the highest payoff given the worst possible scenario.
D. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action. |
|
Definition
| The correct answer is: guarantees the highest payoff given the worst possible scenario. |
|
|
Term
Which of the following conditions are necessary for the existence of a Nash equilibrium?
Select one:
A. The existence of a dominant strategy for one player and the existence of a secure strategy for another player.
B. The existence of a secure strategy for both players.
C. The existence of dominant strategies for both players.
D. None of the answers is correct. |
|
Definition
Typically secure strategy can be used when there is no Nash equilibrium, minimizing loss by focussing on strategy the can guarantee the highest pay off given what the other player is doing in a worst-case scenario. So the example in the video or textbook, the Nash equilibrium is not the same as secure strategy equilibrium
The correct answer is: None of the answers is correct. |
|
|
Term
A dominant strategy is a strategy that:
Select one:
A. guarantees the highest payoff given the worst possible scenario.
B. randomizes over two or more available actions in order to keep rivals from being able to predict a player's action.
C. results in the highest payoff to a player regardless of the opponent's action.
D. describes a set of circumstances in which no player can improve her payoff by unilaterally changing her own strategy, given the other players' strategies |
|
Definition
| The correct answer is: results in the highest payoff to a player regardless of the opponent's action. |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
Economists use game theory to predict the behavior of oligopolists. Which of the following is crucial for the success of the analysis?
Select one:
A. Determine whether the problem considered is of a one-shot or a repeated nature.
B. Make sure the payoffs reflect the true payoffs of the oligopolists.
C. Determine whether the oligopolists move simultaneously or sequentially.
D. All of the statements associated with this question are correct. |
|
Definition
| The correct answer is: All of the statements associated with this question are correct. |
|
|
Term
|
Definition
|
|
Term
Game theory is best applied to the analysis of:
Select one:
A. oligopoly.
B. monopoly.
C. perfect competition.
D. All of the statements associated with this question are correct. |
|
Definition
| The correct answer is: oligopoly. |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| when you have two equilibria in our case, is the most efficient and yields the highest payoff. in this case, the two equilibria are 3,6 and 9,11. so the Pareto criterion will be strategies that yield the highest payoff in this case: Best Treats Introduce and Healthy Snacks Do Not Introduce. |
|
|
Term
You are the manager of a Mom and Pop store that can buy milk from a supplier at $3.00 per gallon. If you believe the elasticity of demand for milk by customers at your store is −4, then your profit-maximizing price is:
Select one:
A. $2.50.
B. $2.00.
C. $5.00.
D. $4.00. |
|
Definition
The correct answer is: $4.00. profit maximizing price = MC * ( ed/ (1+ed)) Cost is $3 which is also MC MC= $3 ed= -4
= 3* (-4/ (1-4))
= 3* (-4/-3)
= $4 |
|
|
Term
Which of the following pricing strategies is NOT used in markets with special cost and demand structures?
Select one:
A. Peak-load pricing
B. Low-price guarantees
C. Cross-subsidization
D. Transfer pricing |
|
Definition
| The correct answer is: Low-price guarantees |
|
|
Term
Cinemas sometimes give senior citizens discounts. What is the possible privately motivated purpose for them to do so?
Select one:
A. Senior citizens have a more elastic demand for movies than ordinary citizens.
B. Purely because entrepreneurs are benevolent.
C. Senior citizens lack recreational activities.
D. None of the statements is correct. |
|
Definition
| The correct answer is: Senior citizens have a more elastic demand for movies than ordinary citizens. |
|
|
Term
Which of the following statements is true?
Select one:
A. The higher the marginal cost, the lower the profit-maximizing price.
B. The more elastic the demand, the higher the profit-maximizing markup.
C. The more elastic the demand, the lower the profit-maximizing markup.
D. The higher the average cost, the lower the profit-maximizing price. |
|
Definition
| The correct answer is: The more elastic the demand, the lower the profit-maximizing markup. |
|
|
Term
Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?
Select one:
A. P = MC
B. Positive long run profits
C. MC = MR
D. P = MC and positive long run profits |
|
Definition
| The correct answer is: P = MC |
|
|
Term
Which of the following strategies will most likely NOT enhance profits in a Bertrand oligopoly?
Select one:
A. Brand loyalty
B. Two-part pricing
C. Price matching
D. Randomized pricing |
|
Definition
| The correct answer is: Two-part pricing |
|
|
Term
Price-matching strategies may fail to enhance profits when:
Select one:
A. firms cannot prevent customers from making deceptive claims.
B. firms cannot prevent customers from making deceptive claims or firms have different marginal costs.
C. firms have different marginal costs.
D. None of the statements are correct |
|
Definition
| The correct answer is: firms cannot prevent customers from making deceptive claims or firms have different marginal costs. |
|
|
Term
Which group of policies aims at extracting all consumer surplus?
Select one:
A. Cross-subsidization and brand loyalty.
B. Price matching and randomized pricing.
C. Price discrimination and peak load pricing.
D. Two-part pricing and commodity bundling. |
|
Definition
| The correct answer is: Two-part pricing and commodity bundling. |
|
|
Term
A monopoly producing a chip at a marginal cost of $6 per unit faces a demand elasticity of −2.5. Which price should it charge to optimize its profits?
Select one:
A. $10 per unit
B. $8 per unit
C. $12 per unit
D. $6 per unit |
|
Definition
The correct answer is: $10 per unit
MC * ( ed/ (1+ed))
$6* (-2.5/ 1 - 2.5))
$6* (-2.5/-1.5) = $10 |
|
|
Term
Brand loyalty can be enhanced through:
Select one:
A. a price war.
B. an advertising campaign.
C. neither an advertising campaign nor a price war.
D. an advertising campaign and a price war. |
|
Definition
| The correct answer is: an advertising campaign. |
|
|
Term
Which of the following pricing policies does NOT extract the entire consumer surplus from the market?
Select one:
A. Block pricing
B. Peak load pricing
C. First-degree price discrimination
D. Two-part pricing |
|
Definition
| The correct answer is: Peak load pricing |
|
|
Term
To engage in first-degree price discrimination, a firm must:
Select one:
A. be able to set P > MC.
B. prevent low-value consumers from reselling to high-value consumers.
C. know each consumer's maximum willingness to pay.
D. All of the answers are correct. |
|
Definition
| The correct answer is: All of the answers are correct. |
|
|
Term
All of the following are characteristics of monopolistic competition except which one?
Select one:
A. many sellers
B. barriers to entry
C. firms produce differentiated products
D. no barriers to entry |
|
Definition
| The correct answer is: barriers to entry |
|
|
Term
If a monopolistically competitive firm is producing 1,200 units of output and the marginal revenue from producing the 1,200th unit of output is $5 and the marginal cost is $4.50, which of the following is true?
Select one:
A. The firm maximizing profit.
B. The difference between marginal revenue and marginal cost (MR - MC) at the 1,200th unit is negative.
C. The firm should increase production to maximize profit.
D. The firm should decrease production to maximize profit. |
|
Definition
| The correct answer is: The firm should increase production to maximize profit. |
|
|
Term
If a monopolistically competitive firm is producing 9,000 units of output and at this output level, the price is $10 and the average total cost is $10, the firm profit/loss is equal to ________ and it ________ possible for the firm to be in long-run equilibrium.
Select one:
A. $900; is not
B. $900; is
C. $0; is
D. $0; is not |
|
Definition
| The correct answer is: $0; is |
|
|
Term
Monopolistically competitive firms ________ earn profits in the long run due to ________.
Select one:
A. can; no barriers to entry
B. cannot; barriers to entry
C. can; barriers to entry
D. cannot; no barriers to entry |
|
Definition
| The correct answer is: cannot; no barriers to entry |
|
|
Term
All of the following are characteristics of monopolistic competition except which one?
Select one:
A. firms produce homogeneous products
B. firms produce differentiated products
C. no barriers to entry
D. many sellers |
|
Definition
| The correct answer is: firms produce homogeneous products |
|
|
Term
Which of the following industries is most likely to represent the monopolistic competition market structure?
Select one:
A. restaurants
B. automobiles
C. tobacco products |
|
Definition
| The correct answer is: restaurants |
|
|
Term
The main difference between perfect competition and monopolistic competition is
Select one:
A. the number of sellers in the market.
B. the difference in the firm's profits in the long run.
C. the degree of product differentiation.
D. the ease of exit from the market. |
|
Definition
| The correct answer is: the degree of product differentiation. |
|
|
Term
In the long run, the most helpful action that a monopolistically competitive firm can take to maintain its economic profit is to
Select one:
A. lower its price.
B. do nothing, because it will inevitably experience a decline in profits.
C. continue its efforts to differentiate its product.
D. raise its price. |
|
Definition
| The correct answer is: continue its efforts to differentiate its product. |
|
|
Term
Firms have market power in:
Select one:
A. monopolistically competitive markets.
B. monopolistically competitive markets and monopolistic markets.
C. monopolistic markets.
D. perfectly competitive markets. |
|
Definition
| The correct answer is: monopolistically competitive markets and monopolistic markets. |
|
|
Term
Which of the following is NOT a basic feature of a monopolistically competitive industry?
Select one:
A. There is free entry and exit into the industry.
B. Each firm in the industry produces a differentiated product.
C. Each firm owns a patent on its product.
D. There are many buyers and sellers in the industry. |
|
Definition
| The correct answer is: Each firm owns a patent on its product. |
|
|
