All of the following are assumptions of the model of perfect competition except: a) the demand curve facing the firm is perfectly elastic. b) firms in the market produce identical outputs. c) the market consists of a large number of buyers and sellers. d) entry into the market in the long run is restricted. Question 2 The demand curve for an individual seller in a perfectly competitive market is: a) horizontal (perfectly elastic) at the market-determined price. b) downward-sloping; therefore, its elasticity varies along the curve. c) vertical (perfectly inelastic) at the market-determined quantity. d) upward sloping as a result of the large number of sellers. Question 3 Use the graph below to answer the following question: $3 40 50 Quantity This profit-maximizing firm will produce units of output and have total revenue ofAssume 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: crease but output will decrease. O b) decrease but output will increase. 0 c) decrease and output will decrease as well. 0 d) increase and output will increase as well. Question 29 {1 point) The game theory model assumes that; O a) firms anticipate rival firms' decisions when they make their own decisions. 0 b) firms ignore rival firms' decisions when they make their own decisions. 0 c) a firm will always follow the price strategy of the dominant firm in the industry. 0 d) markets are contestable because there are no barriers to entry. Qinliiiho The characteristic that distinguishes oligopoly from other market structures is: @terdependence among firms in pricing and output decisions. 0 b) the ability of firms to earn long-run economic profits. 0 c) the existence of barriers to entry. 0 d) product differentiation. QilijeEliiiln Use the graph depicting an unregulated, profit-maximizing monopolist that cannot price discriminate to answer the question. MC $3.00 $2.60 $2.40 $1.50 Output The monopolist will produce. units of output and charge a price of a) 32; $2.60 O b) 32; $1.5 c) 40; $2.40 d) 32; $3.00 Use the graph depicting an unregulated, profit-maximizing monopolist that cannot price discriminate to answer the question. $3.00 $2.60 $2.40 $1.50 --- Output The monopolist is: a) earning zero economic profit. b) earning positive economic profit equal to $12.80 c) earning positive economic profit equal to $35.20. d) incurring economic losses equal to $12.80 Use the payoff matrix to answer the following question about William's and Wilbur's cereal companies, deciding whether to set high or low prices for boxes of Wheat Flakes. William sets a low priceWilliam sets a high priceWilliam's profit is $30William's profit is $25 Wilbert sets a low pricemillion and Wilbert's profitmillion and Wilbert's profit s $30 million.is $50 million. William's profit is $50William's profit is $40 Wilbert sets a high pricemillion and Wilbert's profitmillion and Wilbert's profit is $25 million. is $40 million Which strategy maximizes Wilbert's and William's combined profit? a) Wilbur: high price and William: low price b) Wilbur: high price and William: high price c) Wilber: low price and William: low price d) Wilber: low price and William: high price Question 34 Use the payoff matrix to answer the following question about William's and Wilbur's cereal companies, deciding whether to set high or low prices for boxes of Wheat Flakes. William sets a low priceWilliam sets a high price William's profit is $30William's profit is $25 Wilbert sets a low pricemillion and Wilbert's profitmillion and Wilbert's profit is $30 million.is $50 million. William's profit is $50William's profit is $40 Wilbert sets a high pricemillion and Wilbert's profitmillion and Wilbert's profit s $25 million. is $40 million. Suppose that Wilbur must decide whether to charge a low price or a high price without knowing what William will do. According to game theory, he will most likely make his decision by assuming that William will set a price, which means Wilbur will choose to set a _ price. a) high; high O b) low; high c) high; low O d) low; low Question 35 All of the following are characteristics of a monopolisitcally competitive market except:a) there are no significant barriers to entry. b) the firms in the industry engage in interdependent decision making. c) the firms in the industry produce goods that are close, but not perfect, substitutes. d) there are many firms in a monopolisitcally competitive industry. Which of the following holds for both monopoly firms and monopolistically competitive firms in long-run equilibrium? a) P > ATC O b) P = MC O c) P = ATC O d ) P > MC Question 37 Like a perfectly competitive firm, a monopolistically competitive firm: Ja) has some control over the price it charges. b) sets price above marginal cost. c) maximizes profit by producing the quantity where marginal revenue equals marginal cost. O d) all of the above. Question 38 For monopolistically competitive firms in long-run equilibrium, economic profit is: a) positive because their production are unique. b) positive because their products are differentiated. c) zero because of strong barriers to entry. d) zero because there are no barriers to entry.Question 39 A monopolistically competitive firm's demand curve is _ _ elastic than a perfectly competitive firm's and elastic than a monopolistic firm's. a) more; less b) less; less c) more; more O d) less; more Firms in monopolistically competitive markets: a) produce where price equals marginal cost. b) produce differentiated products. c) tend to earn zero economic profit in the long run. d) all of the above e) (b) and (c) only Submit Quiz 0 of 40 questions savedC) a)50;$275 C) b)40;$17o C:>c)5o;$225 (:>d)40;$220 9&mMM Use the graph below to answer the following question: 0 25 40 50 Quantity This profit-maximizing firm is: O a) earning an economic profit of $50 in the short run. 0 b) earning an economic profit 0 $40 in the short run. 0 c) in long-run equilibrium. Q d) earning a normal profit (zero economic profit) in the short run. Qwh Firms operating in perfectly competitive markets: 0 a) have substantial market power and are price setters. O b) rely on advertising to keep other firms out of the market. 0 c) tend to produce differentiated goods for which there are few good substitutes. Q d) have no market power and are price takers. Question 6 (1 point) Suppose at the profit-maximizing/loss-minimizing level of output P = $6, ATC = $7, and AVC = $5. A firm in this situation will: 0 a) minimize its losses by shutting down immediately. 0 b) earn a short-run economic profit where MR = MC. 0 c) minimize its losses by continuing to produce where MR = MC in the short run. 0 d) produce more than the output where MR = MC. 0&h If, in the short run, perfectly competitive firms are earning positive economic profits, the adjustment to long-run equilibrium will include firms _____ the industry, causing market supply to _____ and market price to _____ . O a) exiting; decrease; increase 0 b) entering; decrease; increase 0 c) exiting; increase; decrease Q d) entering; increase; decrease Qwh If firms in the market for yogurt are earning positive economic profit in the short run, and there are no barriers to entry into this market, economic theory predicts that: O a) firms will exit the market in the long run, causingthe price of yogurt to rise. 0 b) new entrants into the market will drive up the price of yogurt in the long run. 0 c) firms will exit the market in the long run, causing the price of yogurt to fall. Q d) new entrants into the market will drive down the price of yogurt in the long run. Qmb The defining characteristics of a monopoly market are: O a) single supplier, product with close substitutes, and barriers to entry. 0 b) single supplier, unique product, and barriers to entry. 0 c) many suppliers, unique product, and easy entry. 0 d) many suppliers, identical products, and easy entry. Qlmlm All of the following are examples of barriers to entry except: 0 a) patents and copyrights. O b) sole ownership of key resources. 0 c) government franchises and licenses. Q d) constant returns to scale. QuiiW The demand curve for a monopoly firm is: O a) less elastic than the industry, or market, demand curve for its product. 0 b) the same as the industry, or market, demand curve for its product. (3 c) more elastic than the industry, or market, demand curve for its product. 0 d) perfectly inelastic at the output where MR=MC. oilegllllhz 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): @atural monopoly. O b) rent-seeking monopoly. O c) unregulated monopoly. Q d) efficient monopoly. Question 13 (1 point) A profit-maximizing monopolist will produce where: a) P = MC O b) MR = MC C) MR = P O d) MR = 0 Question 14 A monopoly produces a _ level of output and charges a price than a perfectly competitive industry, provided economies of scale are not significant. Ja) higher; lower. b) lower; lower. c) lower; higher. O d) higher; higher. Question 15 Which of the following is always true for a monopolist? a) Profit is maximized where marginal revenue equals marginal cost. b) Economic profit is positive in both the short run and the long run c) Consumer surplus is zero because the monopoly price is greater than the competitive price. O d) All of the above are always true. Question 16 A monopolist that earns positive economic profit in short-run equilibrium will:O a) definitely continue to earn positive economic profit in the long run. 0 b) earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand. 0 c) earn higher economic profit in the long run because of economies of scale. 0 d) earn economic profit equal to zero in long-run equilibrium. QEBWl? Use the following table to answer the question: 2nd unit is ____ and the marginal revenue of the 3rd unit is _____ . a) $80; $90 0 O b) $10; $0 0 C) $30; $10 0 d) $10; -$10 Quilglmha Use the following table to answer the question: highest price the consumer is willing to pay would earn total revenue of _____ if it sold 2 units of output and total revenue of _____ if it sold 3 units of output. O a) $90; $80 b) $90; $120 c) $120; $140 d) $80; $90 Which of the following is true for a profit-maximizing monopolist that charges all consumers the same price? a) P = MR = MC O b) P > MR = MC C) P MR > MC A producer of widgets is most likely to be a monopolist when: a) a single firm owns the patent for producing widgets, but other firms can sell gadgets that are a close substitute for widgets. b) there are no close substitutes for widgets and there are barriers to entry into the widget industry. c) there are close substitutes for widgets. d) there are no close substitutes for widgets and there are no barriers to entry into the widget industry. Question 21 (1 point) From society's perspective:O a) monopoly markets are more efficient than competitive markets. 0 b) competition leads to lower prices, higher output, and greater efficiency than monopoly. O c) there is no difference between the outcome in monopoly markets and competitive markets . Q d) it is never good to have only one firm service and entire market. QEB'hz A firm that is able to use price discrimination will seekto: @harge all customers the same price. 0 b) set price equal to marginal revenue to determine the profit-maximizing level of output. O c) charge customers with more elastic demand a higher price. 0 d) charge customers with more elastic demand a lower price. Qmzs A profit-maximizing, unregulated monopolist choose a level of output that: O a) creates a deadweight loss for society because marginal cost exceeds marginal benefit. 0 b) creates a deadweight loss for society because marginal benefit exceeds marginal cost. 0 c) guarantees that price is equal to marginal cost in order to maximize profit. 0 d) is socially efficient because marginal benefit equals marginal cost. Qirestibnm, A natural monopoly can: a) always charge any price it wants since it faces no competition. b) supply the entire market at a lower cost than many competing firms. c) use natural resources without being subjected to government regulations. d) supply the entire market at a higher cost than man competing firms. Question 25 Government deals with imperfect competition by: Ja) requiring all firms to seek government approval before raising prices. b) preventing all proposed mergers. c) protecting monopolies from the forces of competition. d) restricting market power through antitrust laws and regulation. Question 26 An industry dominated by a few large firms whose pricing and output decisions are dependent on one another is: a) oligopolistic. b) Illegal in the United States. c) monopolistic. d) monopolistically competitive. Que SAH 27 To be successful in increasing prices for their product, members of a cartel must: a) find ways to lower costs of production. b) produce as much as they can. c) agree to limit their output. d) encourage new firms to enter the market. Question 28 (1 point)