3. (04.02 MC) A monopolist is forced to lower its price in order to sell another unit of its product. This describes the problem of (2 points} 0 persistent economic profits 0 market power 0 diseconomies of scale 0 economies of scale 0 market discrimination 1. (04m MC) Saturn Unlimited sells vials of asteroid dust. At its current production level, its marginal revenue is lower than the demand curve. This means that (2 points) 0 the rm is experiencing economic losses 0 the rm has market power 0 the rm is not producing at its prot-maximizing quantity 0 an increase in the rm's output will increase its prots 0 the rm is productively efcient 2. (04m MC) Verslas is a rm operating in a monopolistically competitive market. It is currently maximizing prot with an output of 1,200 units and a price of S5. Based on this information, which of the following statements must be true? (2 points) 0 Verslas could not sell more units by lowering its price. 0 Verslas is earning normal prot. 0 Verslas is earning $3,600 in prot. 0 Verslas has a marginal revenue less than $5. 0 Verslas has a marginal revenue greater than $5. 13. (04.05 MC) Patricia owns a cleaning business with Sarah. They both have other jobs and are trying to determine the number of hours to work at the cleaning business. The following payoff matrix shows their daily incomes depending on the number of hours they work at the cleaning business. Sarah Full time Part time Patricia Full time $60, $60 $50, $80 Part time $80, $50 $55, $55 If Patricia chooses to work full time and Sarah works part time, what will each earn in daily income? (2 points) Patricia will earn $60; Sarah will earn $60. Patricia will earn $50; Sarah will earn $80. O Patricia will earn $80; Sarah will earn $50. O Patricia will earn $55; Sarah will earn $55. Indeterminate14. (04.05 HC) Company A and Company B are each telecommunications manufacturers. Both companies manufacture the same products, and they make their decisions based on the other's actions. Both companies are considering opening retail outlets to increase their profits. The payoff matrix shows the profits of the companies in millions of dollars if they choose to open retail outlets. Company B Retail outlets No retail outlets Company A Retail outlets $25, $25 $30, $15 No retail outlets $35, $35 $34, $20 The government imposes a new $5 million tax to open retail outlets. What is the expected outcome of the new payoff matrix, given the tax? (2 points) O The Nash equilibrium will be that both companies will not open retail stores. The Nash equilibrium does not change as a result of the tax. O Company A's dominant strategy remains the same, and it will open retail stores. O Company B's dominant strategy remains the same, and it will not open retail stores. Company A's dominant strategy changes, and both companies will open retail stores.15. (04.05 MC) Megan and Martha own competing hair salons that are in the same neighborhood. They are both considering offering their clients discounts in order to increase business. The payoff matrix shows their yearly incomes in thousands of dollars if they offer and do not offer discounts to their customers. Martha Discount No Discount Megan Discount $50, $75 $75, $60 No Discount $35, $90 $70, $85 If both Megan and Martha did not discount, what would each earn in yearly income? (2 points) Megan would earn $50,000; Martha would earn $75,000. Megan would earn $75,000; Martha would earn $60,000. Megan would earn $35,000; Martha would earn $90,000. Megan would earn $70,000; Martha would earn $85,000. Megan would earn $35,000; Martha would earn $85,000.4. (04.02 MC) Use the graph to answer the question that follows. (2 points) Price MC AC M P, N P AR P. G MR Quantity (units) What would be the area of this firm's total revenue? P3, G, Q2, and 0 O P2, N, Q2. 0 O P1, M, Q2 0 O P1, M, N, P 2 O P1, M, G. P 35. (04.02 MC) The allocationy efficient quantity of widgets for the whole market is 10 million units. At that quantity, the demand for widgets is at $10. However, the single supplier of widgets is producing 5 million units and charging $20 per widget. Based on this data, the market for widgets is (2 points) a monopoly an oligopoly productively efficient O operating at minimum efficient scale experiencing economic losses510433 MC) The graph below represents the demand graph of a monopolist. {2 points) SIS %/ ///'7//// 2: m 2: 'iii 1'0 20 30 do 50 6G 70 80 90 100 Quantity This rm uses price discrimination to increase its prots. What is the change in the consumer surplus due to the price discrimination? 7. (04.03 HC) If a monopolist begins to engage in perfect price discrimination where previously it charged a single price for all its customers, what would be true of its production figures? (2 points) Firm produces more; producer surplus increases; deadweight loss increases Firm produces less; charges higher price; economic surplus decreases Firm produces more; total economic surplus increases; consumer surplus disappears Firm loses allocationefficiency; charges lower price; deadweight loss decreases Firm reaches allocation efficiency; producer surplus decreases; consumer surplus increases8. (04.04 MC) Use the graph to answer the question that follows. (2 points) Price MC ATC MR Q1 Q2 Quantity In monopolistic competition, what area represents the deadweight loss? The entire area between Q1 and Q2 up to ATC O The area between MC and D, from the intersection of MC and D to Q2 O The area between MC and D, from Q1 to the intersection of MC and D The area beneath the ATC to the intersection of MC and D () The area above MR below MC and over to Q211. (04.05 MC) What is the key difference between monopolistic competition and an oligopoly market? (2 points) In an oligopoly, the number of firms is so small they strategize their production interdependently. In monopolistic competition, the marginal revenue is beneath the demand curve because of market power. Oligopolies generally have a lower market concentration and a lower minimum efficient scale. Monopolistically competitive markets have more significant barriers to entry into and exit from the industry. O Oligopolies see consistent economies of scale across their entire product demand. 12. (04.05 MC) Compared to an oligopoly market without cooperation, one in which the individual firms form a cartel will produce and charge (2 points) less; less less; more more; less O more; more indeterminate9. (04.04 MC) Which of the following accurately describes a monopolistically competitive market? (2 points) O Barriers to entry or exit secure firms' long-term economic profits. An individual firm's demand curve is perfectly elastic. Firms will earn normal profit in long-run equilibrium. Production is inefficient in the short run and efficient in the long run. Firms will produce more and charge less than firms in perfect competition. 10. (04.04 MC) A firm operating in monopolistic competition is maximizing its profit and earning negative economic profits. Which of the following must be true of its production? (2 points) The price is equal to average total cost at the quantity where marginal revenue equals marginal cost. The price is less than average total cost at the quantity where marginal revenue equals marginal cost. O The price is equal to average total cost, and marginal revenue is less than marginal cost. The price is greater than average total cost at the quantity where marginal revenue is equal to marginal cost. The price is greater than average total cost at the quantity where marginal revenue is less than marginal cost