Microeconomics Final Exam Jules Yigma – Flashcards
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Refer to Figure 16-3. What is the profit-maximizing price, quantity, and resulting profit?
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P=$80
Q=20 units
Profit = $200
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As a group, oligopolists earn the highest profit when they
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produce a total quantity of output that falls short of the Nash - equilibrium total quantity.
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Two CEO's from different firms in the same market collude to fix the price in the market. This action violates the
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Sherman Antitrust Act of 1890
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When a monopolist is able to sell its product at different prices, it is engaging in
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Distribution pricing
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Which industry has the highest concentration ratio?
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Industry A
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Which market structure would likely have the highest concentration ratio?
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Monopoly
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A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
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Scenario 15-3
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Refer to scenario 15-3. At Q=500, the firm's profit is
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30,000 - 17,000 = 13,000
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Your company has recently requested that you travel to Dhaka, Bangladesh, to work on negotiations for a new factory to be located in one of the port cities. Your travel agent provides a list of several hundred local hotels and a sheraton. In this case, the Sheraton brand-name is likely to be used as a signal of
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quality when quality cannot be easily judged.
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Scenario 17-5
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Assume that a local restaurant sells two items, salads and steaks. The restaurant's only two customers on a particular day are Mr. Carnivore and Ms. Leafygreens. Mr. Carnivore is willing to pay $20 for a steak and $7 for a salad. Ms. leafygreens is willing to pay only $8 for a steak, but willing to pay $12 for a salad. Assume that the restaurant can provide each of these items at zero marginal cost.
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Refer to Scenario 17-5. How much additional profit can the restaurant earn by switching to the use of a tying strategy to price salads and steaks rather than pricing these goods separately?
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Don't need to know!!!
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Which of the following is an example of a monopolistically competitive industry?
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Sweaters
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Scenario 16-5
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Mcdonald's restaurants has recently announced intentions to open a new restaurant in Small town, Indiana. Assume that the fast-food restaurants market in Smalltown is characterized by monopolistic competition.
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Refer to Scenario 16-5. As a result of the new Mcdonald's, residents of Small-town are likely to benefit from
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a product-variety externality
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Refer to Table 17-13. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. They should both agree to
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refrain from increasing their store and parking lot sizes.
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refer to table 15-2. What is Tanya's profit-maximizing price?
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$8
(price x quantity) - (quantity x MC)
Look for the biggest profit at the end
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When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $9 it sells 62 units. The marginal revenue for the firm over this range is
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$23
$8 x 64 units = 512
$9 x 62 units = 558
subtract
558 - 512 = 46
46/2 = 23
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Refer to Figure 15-19. If the monopoly firm perfectly price discriminates then consumer surplus amounts to
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$0
If it's perfectly then it would be 0!!
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Refer to Figure 17-2. Which of the following statements is correct?
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Regardless of the strategy pursued by Acme, Pinnacle's best strategy is to produce a good quality product, and for that reason producing a goof quality product is a dominant strategy for pinnacle.
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Refer to Table 16-4. What price will this firm charge to maximize profit?
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Price x quantity
subtract quantity multiplied by ATC
$30
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A monopolist's profits with price discrimination will be
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higher than if the firm charged just one price because the firm will capture more consumer surplus.
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Monopolies are inefficient because they
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restrict output below the socially efficient level of production.
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Due to the nature of the patent laws on pharmaceuticals, the market for such drugs
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switches from monopolistic to competitive once the firm's patent runs out.
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If an oligopolist is part of a cartel that is collectively producing the monopoly level of output, then that oligopolist has the incentive to increase production with the aim of
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increasing profits for itself, regardless of the impact on profits for the group of firms as a whole.
Companies only care for profits for themselves
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Suppose that two poker players believe that they are superior players to the rest of the people at their table. Further suppose that the two players make an agreement to concede hands to each other in order to drive the other players from the game first, Economists would model such behavior as
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game theory
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A monopoly market is characterized by
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barriers to entry
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Refer to Table 17-21. What is (are) the Nash equilibrium in this Chicken game?
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Both b and c are Nash equilibria
b. John: turn Paul: Drive Straight
c. John: Drive Straight Paul: turn
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If this firm is in a typical monopolistically competitive market, in the long run it will likely produce
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8 or fewer units of output
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Which of the following is an example of a barrier to entry?
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Roseanne obtains a copyright for a short story that she wrote and published.
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lori and maya and a long ass paragraph
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advertise on tv and earn $10,000
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When existing firms lose customers and profits due to entry of a new competitor, a
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business-stealing externality occurs
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Refer to scenario 16-7. Which of the following is most likely?
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Bertollini will advertise, but YumYum will not advertise.
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The lower the concentration ratio, the
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more competitive the industry, because monopoly is the highest concentration ratio.
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Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have
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inferior or mediocre quality
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Generic drugs enter the pharmaceutical drug market once
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the patent on the name bran drug expires
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An oligopoly
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is a type of imperfectly competitive market
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Refer to Table 17-26. If both firms follow a dominant strategy, Firm A's profits (losses) will be
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$-24m
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Compared to the monopoly outcome with a single price, imperfect price discrimination
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Sometimes raises total surplus and sometimes lowers total surplus.
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The maximum profit this monopolist can earn is
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$28
30-3 = 27.... but might have marked the answer wrong on the practice exam.
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In monopolistically competitive markets, free entry and exit suggests that
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all firms earn zero economic profits in the long run.
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The entry of new firms into a monopolistically competitive market is accompanied by
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both positives and negatives externalities
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Which of the following is an example of a monopolistically competitive industry?
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movies
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One problem with regulating a monopolist on the basis of cost is that
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it does not provide an incentive for the monopolist to reduce its cost.
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Professional organizations and producer groups have an incentive to
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restrict advertising in order to reduce competition on the basis of price
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Reduced competition through merging of companies will raise social welfare
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if the benefit from the synergies exceeds the social cost of increased market power.
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Refer to figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?
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panel c, cause it has the most lines that touch Q
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Refer to figure 16-14. Which of the following represents the excess capacity of this firm?
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LM, it is on the quantity line
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A special kind of imperfectly competitive market that has only two firms is called
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a duopoly
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The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue
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decreases
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Refer to figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?
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Panel c, cause it has the most lines that touch Q
