Exercise one.

Kindly answer with clear explanations.

1. Compared with a perfectively competitive market a monopoly is inefficient because

a. it raises the market price above marginal cost and produces a smaller output.

b. it produces a greater output but charges a lower price.

c. it produces the same quantity while charging a higher price.

d. all surplus goes to the producer.

e. it leads to a smaller producer surplus but greater consumer surplus.

2. The demand curve of a monopolist typically

slopes downward to the right.

slopes upward to the right.

is a horizontal line.

can be shifted by the monopolist because of his economic power.

is the same as that faced by a competitive firm.

3. The ability of a firm to influence the market price of a good by influencing the total quantity of the good sold is known as

monopoly.

market power.

legal monopoly.

patent.

copyright.

4. A monopoly is distinguished from a firm operating under any other market structure in the following way:

the monopoly charges a price higher than its average revenue.

the monopoly can choose its output level.

the monopoly can choose its level of cost.

the monopoly does not produce at a profit-maximizing level of output.

the monopoly has a demand curve which is identical to the market demand curv

5. A single-price monopolist maximizes profit by producing an output where

a. its marginal revenue equals marginal cost equals the market price.

b. its marginal revenue exceeds marginal cost.

c. its marginal revenue equals marginal cost but is less than the market price.

d. its marginal revenue equals marginal cost but is greater than the market price.

e. its marginal revenue is less than marginal cost.

6. While firms in a perfectly competitive industry make zero economic profit in the long run, a monopolist could makea.a positive economic profit.

b.an economic loss.

c.a declining economic profit.

d.an increasing economic profit.

e.also a zero economic profit.

7. You are the manager of a firm that sells its product in a competitive market at a price of $250. Your firm's cost function is C = 30 + 5Q2. The profit-maximizing output for your firm is

25.

10.

8.45.

7.07.

None of the above.

8. The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because

the market price is determined (through regulation) by the government

the firm supplies a different good than its rivals

the firm's output is a small fraction of the entire industry's output

the short run market price is determined solely by the firm's technology

the demand curve for the industry's output is downward sloping

9. Which of the following is true regarding a perfectly competitive firm?

The firm can charge a lower price than its competitors and thereby sell more output and increase its profits.

The firm always earns a normal profit.

The firm's marginal revenue continually decreases.

The firm's minimum efficient scale is small relative to the market demand.

None of the above.

10. A price-taking firm faces a

perfectly inelastic demand.

downward-sloping marginal revenue curve.

downward-sloping supply curve.

perfectly elastic demand.

downward-sloping demand curve.

11. If a competitive firm produces an output where its average total cost is $40, and marginal revenue and marginal cost are $50, in the short run this firm

maximizes profit but makes only a normal profit.

maximizes profit and makes an economic profit.

can still increase profit.

has a declining profit.

makes an economic loss.

12. If current output is less than the profit-maximizing output, then the next unit produced

will decrease profit.

will increase cost more than it increases revenue.

will increase revenue more than it increases cost.

will increase revenue without increasing cost.

may or may not increase profit.

13. Which one of the following statements describes a market that is monopolistically competitive?

The presence of significant barriers to entry.

The products produced by the firms are identical.

Many firms compete by making similar but slightly different products.

There is a small number of large firms.

The product produced by one firm has no close substitutes.

14. A market structure where a small number of firms compete occurs in

perfect competition.

monopolistic competition.

the worldwide market for wheat, corn, and rice.

oligopoly.

monopoly.

15. You are the manager of a monopoly that faces an inverse demand curve described by P = 528 - 12Q. Your costs are

C = 124 + 48Q. The profit-maximizing price is

$20.

$48.

$240.

$288.

None of the above

16. Which one of the following is a potential source of monopoly power?

Cost complementarities.

The patent system.

Economies of scope.

All are potential sources of monopoly power.

None of the above.

17. Which of the following is a correct representation of a profit-maximizing monopoly earning positive economic profits?

P = MR = MC, and P > AVC.

ATC = MR, and P > AVC.

MC = MR, and P > ATC.

P = MC, and P > ATC.

None of the above

18. Which of the following is true regarding the long-run equilibrium relationship between price and costs in a perfectly competitive and monopolistically competitive industry?

P = MC.

P

P = average costs.

P > average costs.

None of the above

19. The implication of the long-run equilibrium in the competitive industry is that

resources are allocated efficiently.

price of the product is the lowest price possible.

there is no incentive for firms to enter or leave the industry.

All of the above.

None of the above.

20. Monopoly, as compared to perfect competition (with a given cost structure), is predicted to result in

the same output and a higher price.

a greater output and a higher price.

a smaller output and a higher price.

a smaller output with the same price.

the same output and the same price.

Exercise 2.

How much did you think the world was globalized before you listened to Professor Ghemawat's lectures on globaloney in Week 1? Below is the lecture:

For Week 1, the required reading focuses on providing some basic data about the extent of globalization. Of the optional readings, chapter 2 from my book World 3.0 (The laws of globalization and business applications) provides deeper discussion of most of the topics covered in the videos: if you read this chapter, you don't need to do the "required" reading. The other two optional readings are best seen as a pair: the note on "The Globalization of Markets" provides more data on globalization than any of the other readings and the note on the "The Globalization of Firms in Historical Perspective" (with Geoffrey Jones of the Harvard Business School) adds more of a longitudinal dimension as well as shifting the primary focus from markets to firms?a focus carried forward in the sessions that follow.

Having talked about some of the reasons why being accurately calibrated about globalization levels is helpful from a social perspective. Let's also think about why being accurately calibrated might be helpful from the standpoint of a company that's thinking about how to conduct its global strategy. The argument I'll make, is that if you have inflated perceptions of how globalized the world is, you're much, much more likely to agree with exaggerated statements about global strategy involving competing the same way everywhere. Not being rooted in any particular country at all, unlike the BMW example. Competing all around the world, even though we saw that the typical US multinational just competes in three countries. Focusing on concentration, and being big as the way to win. Thinking about the world out there as a virtually limitless set of growth opportunities. And finally, treating global expansion as something that's an imperative, rather than subject to cost benefit analysis. It does turn out, from analyzing the data from previous batches of Coursera students, that inflated notions of how globalized the world is, tend to be correlated with beliefs along these lines.

And to see how dysfunctional beliefs like this can be, lets actually turn to an example of a company that at one point in time accepted all of these as planks of its global strategy. And ran into a great deal of trouble as a result. So the company is Coca Cola. And let's start off by looking at a video that Roberto Goizueta recorded when he was chairman of Coca Cola back in the 1980s. At this point in time in the United States, people consume more soft drinks than any other liquid, including ordinary tap water. If we take full advantage of our opportunities, someday, not too many years into our second century, we will see the same wave catching on in market after market. Until eventually, the number one beverage on earth will not be tea, or coffee, or wine, or beer. It will be soft drinks, our soft drinks. Talk about a plan for world domination. So under Goizueta, Coke was pursuing an extremely standardized strategy that involved competing in uniform ways around the world.

One system, one way, as he put it. That involved pretending that it wasn't from the US, but was just an international company that happened to be headquartered in Atlanta. Thinking that they had to compete everywhere around the world, and believing that with four of the top five soft drink brands, they were fated to be the winners in soft drink competition. This strategy led Coke into huge amounts of trouble in the latter part of the 1990s, the early part of the 2000s. And so it was really after 2005 that Neville Isdell, as the new chairman and CEO of Coca Cola, switched all these practices as a way of putting Coke back on solid ground.

So Isdell at Coca Cola, realized that uniformity had been carried too far. And that if the company was serious about growing its business in emerging markets, it needed to do more than wait for customers to come to it. It needed to very aggressively reposition by indigenizing packaging, reducing package sizes, cutting prices, and investing in rural distribution infrastructure. Second, Isdell rejected the notion of Coke being a company that was from nowhere in particular. And on the 10th anniversary of Goizueda officially dissolving the distinction between domestic and international led Coke, Isdell reinstated it. Because as he pointed out, the marketing challenges in the US, where Coke sold an average of 30 gallons per US citizen and elsewhere in the world where Coke averaged more like 3.5 gallons, were quite different. And no clarity was going to be gained by mushing them together.

Third, under Isdell, there did seem to be some attempts are more nuanced resource allocation at Coca Cola. And then finally, and perhaps most interestingly, instead of just stressing the four big mega brands, Isdell actually stressed learning from Japan. And why Japan? Well, turns out that Japan's market in which Coke offers two hundred products, most of which are unique just to Japan. Its leading seller there isn't even Coca Cola. It's something called Georgia Coffee, which was developed by Japanese bottlers, and named Georgia Coffee as a tribute to headquarters in Atlanta, Georgia, for not blocking the rollout. Other interesting drinks in the Coke lineup in Japan, are drinks like Real Gold, which is supposed to be a great hangover remedy. And Love Body, which is supposed to change your body in ways not normally associated with the consumption of lots of Coke products. So there are a lot of very different products in Japan. And although this might seem like a recipe for very poor profitability, it turns out that Japan is Coke's single most profitable major market. Whereas, the United States is the US's single least profitable major market. So the thought that Isdell had was, at a time when the soft drinks market was fragmenting into waters, fruit juices, sports drinks, new age drinks, etc, there was a lot to be learned by Coke in the US and elsewhere. From Japan's ability to actually compete in a very granular, very differentiated way, and generate huge profits for the company. So I stress this point to you because, again, when one looked at previous Coursera's respondents' degree of agreement with these dubious to semi-dubious propositions about globalization, close to half agreed that a truly global company should compete everywhere. And that concentration or economies of scale, are the way to win. More than 60% thought that globalization represented an avenue for limitless growth. And close to 80% thought that globalization was something that you should just do s an imperative, rather than analyzing. And this course, most broadly, is going to be about staying away from the just do it approach to globalization, and thinking hard about the costs and benefits of globalization moves.

ii.

48) In Table 9-2, if the price is $11, a perfectly competitive firm seeking maximum profit should produce A) 109 units. B) 110 units. C) 107 units. D) between 103 and 104 units. 49) If a firm shuts down it experiences losses equal to A) total marginal costs. B) total fixed costs. C) total variable costs. D) zero. 50) For a monopoly firm, marginal revenue is A) greater than price. B) equal to price. C) less than average revenue. Dj not relevant in the firm's pricing. 51) Which of the following is a necessary condition for a firm to find price discrimination profitable? A) The firm must be a price-taker. B) Buyers in different markets must have the same clasticities of demand. C) Resale of the product must be preventable. D) The firm's marginal cost curve must be declining. 52) If AVC is $6 and P= MC, a firm in a perfectly competitive industry A) should shut down if price is less than $6. B) is experiencing economies of scale. C) will have positive economic profits if price is greater than $6. D) is producing too little output.TRUE OR FALSE FOR ALL? 1. Monopolistic competition is a more realistic market model than the polar models of pure competition and pure monopoly. 2. Like the perfect competition model the monopolistic competition model assumes that the firms produce homogeneous goods. 3. Like the perfect competition model, the monopolistic competition model assumes that there are so many sellers in a particular industry that no one seller can influence market supply (and therefore price) by increasing or decreasing the quantity of output it produces. 4. The monopolistically competitive firm is a "price taker." If it tried to charge a higher price, it would lose all of its customers. 5. If you wanted Titleist golf balls or a Ralph Lauren sweater, you'd have to buy them from what is essentially a monopolist because, even though there are a lot of producers of golf balls and sweaters, there is only one producer of that brand. 6. To help distinguish it's product from the others in the industry, the monopolistically competitive firm often invests in advertising. 7. Advertising is more important in the perfectly competitive model than it is in the monopolistically competitive model. 8. Whether the distinction among products is physical, psychological or just imagined, the product distinction is designed to allow the firm to engage in non-price competition. 9. As a result of product differentiation, the demand curve for a firm's product is downward sloping rather than perfectly elastic. 10. Because of the "no barriers to entry" characteristic of this market model, the monopolistically competitive firm can expect to make significant economic profits in the long-run equilibrium