question

For a monopolist that produces in the short run and does not price discriminate, price always has to be

answer

greater than marginal cost at the profit-maximizing quantity

question

A monopolist is

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a single seller of a product with no close substitutes

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Which level of output maximizes profit for this non-discriminating monopolist?

answer

MC = MR

question

What price will be charged by the profit-maximizing monopolist that does not price discriminate?

answer

Where MR = MC, up to the Demand curve, and over to the Y-axis to find price

question

Maximum profit for the profit-maximizing (non discriminating) monopoly will be

answer

MR = MC, up to Demand curve over to price axis MINUS MR=MC, up to ATC over to price TIMES MR=MC quantity

question

For a monopolist that does not price discriminate, consumer surplus at the profit-maximizing level of output is

answer

The area under the demand curve bounded by the price where MR = MC, up to demand and over to the price axis

question

The level of output that would achieve allocative efficiency is

answer

Where MC = D, down to the x-axis

question

If the monopolist engages in perfect price discrimination, price would

answer

Be between where MC=D and MR=D

question

In the monopoly market structure, new firms

answer

cannot profitably enter the industry, even in the long run

question

If the monopolist engages in perfect price discrimination, total revenue would be

answer

The area under the demand curve bounded by the horizontal axis and the vertical line running through D=MC

question

Natural monopolies form when...

answer

long-run average cost declines as a firm expands output

question

A profit-maximizing monopolist produces an output level at which

answer

Marginal revenue equals marginal cost

question

A natural monopoly results when a firm has

answer

decreasing average costs over the range of market demand

question

Economic regulation of business is justified if, by intervening, government can

answer

improve the allocation of resources in society

question

A monopoly is likely to charge a higher price than an otherwise similar competitive industry would be

answer

True

question

Government controls of price, output, entry of new firms, and quality of service in industries where monopoly appears desirable are known as

answer

economic regulation

question

Public utilities are either government-owned or government-regulated firms

answer

True

question

In a natural monopoly, throughout the range of market demand

answer

marginal cost is below average cost and therefore pulls average cost downward

question

Which of the following is the best example of a natural monopoly: 1) Electrical service to homes in Seattle 2) Production of film by Kodak 3) Production of computers by IBM 4) filmaking in Hollywood 4) Gold mining in the Colorado Rocky Mountains

answer

1) Electrical service to homes in Seattle

question

In order to ensure allocative efficiency on the part of a natural monopoly

answer

regulators would set price= MC

question

The consumer surplus that results from a regulated monopoly that charges a price equal to MC, is shown by the area

answer

MC=D over to price axis, up to MR=D, back down to MC=D

question

The welfare loss associated with the unregulated natural monopoly is shown by the area

answer

MC=MR up to D, down to MC=D, than back to MC=MR

question

Compared to the profit-maximizing outcome, marginal cost pricing in natural monopoly leads to

answer

greater output

question

Production by a monopoly would result in the socially optimal allocation of resources if

answer

price is set equal to MC

question

If the natural monopoly is regulated so that it earns a normal profit,

answer

Then price and quantity can be found from the point when average cost = Demand

question

Oligopolistic industries consist of

answer

a few interdependent firms

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Firms may easily enter a monopolistically competitive market

answer

True

question

Product differentiation helps determine the slope of the demand curve facing a firm in monopolistic competition

answer

true

question

The forces that determine the cost of production are largely independent of the forces that shape demand

answer

True

question

Monopolistic competition

answer

Denotes an industry with many sellers of differentiated products

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What is unique to oligopoly among all the market structures?

answer

mutual interdependence

question

Monopolistically competitive industries consist of

answer

many firms, each selling a slightly different product

question

Collusion among firms to raise price is rare in monopolistically competitive markets because

answer

there are too many firms

question

Monopolistic competition is different from perfect competition because monopolistic competitors produce

answer

differentiated products

question

It is harder to explain the behavior of firms in oligopoly than in other market structures because in oligopoly,

answer

firms base their decisions on what their rivals do

question

The demand curve facing a monopolistically competitive firm

answer

Slopes downward because it sells a differentiated product

question

If a monopolistically competitive firm raises its price

answer

it loses some, but not all of its customers

question

A monopolistic competitor's demand curve is

answer

more elastic than a monopolist's or oligopolist's but less elastic than a perfect competitors

question

A monopolistic competitor is in short-run equilibrium when

answer

it is earning a positive economic profit (Where MC=MR, demand is higher than AC)

question

The resource market is different from the product market because

answer

in the resource market, firms are demanders and households are suppliers

question

The marginal revenue product curve slopes downward only if the firm is a price searcher in the product market

answer

False

question

As the price of a resource (like labor) decreases

answer

producers are more willing and able to hire that resource

question

The marginal revenue product curve represents a firm's demand curve for a resource

answer

true

question

Derived demand refers to

answer

demand for a resource derived from the demand for the product produced by that resource

question

for a firm hiring a resource in a perfectly competitive resource market its demand curve for the resource is its

answer

marginal revenue product curve

question

marginal revenue product is defined as

answer

the additional revenue generated by one additional unit of a resource, other things constant

question

The marginal revenue product of labor equals

answer

change in total revenue/change in units of labor

question

A worker's labor supply depends on, among other things, his ability, his preference for the task, and the opportunity cost of his time

answer

True

question

Leisure time is NOT subject to diminishing marginal utility

answer

false

question

As the wage rate increases, the income effect tends to reduce the quantity of labor supplied to the market

answer

True

question

According to Coase

answer

externality problems can be solved efficiently by the assignment of property rights if transaction costs are low

question

When consumption of a good or service produces benefits or costs that are not reflected in the market price of the good, this is a/an

answer

externality

question

When an activity results in the imposition of external costs, markets will produce more than the socially optimal level of that activity

answer

True

question

According to the Coase theorem, if bargaining costs are small, then there will be an efficient solution to the problem of toxic waste

answer

regardless of which party is assigned the property rights

question

The Coase theorem argues that the assignment of property rights will generate an efficient solution tot he problem of

answer

negative externalaties as long as bargaining costs are small...NOT any type of market failure

question

When an activity results in the creation of external benefits, markets will produce more than the socially optimal level of that activity

answer

Falso

question

Some pollution occurs because property rights to some resources are well defined

answer

false

question

An externality is

answer

any cost or benefit of a transaction that is not accounted for in the market price

question

Fish are renewable resources when

answer

they are taken and replaced at rates that provide a steady supply

question

Private markets can allocate resources optimally

answer

only if property rights are well defined and can be easily enforced

question

common pool problem

answer

one in which resources to which access is unrestricted will tend to be overused

question

In the short run, a perfectly competitive firm will always shut down if, at all positive output levels, total revenue is

answer

less than variable cost

question

Resources are efficiently allocated when production occurs at the point at which

answer

price = MC

question

The term productive efficiency refers to

answer

the production of a good at the lowest long-run average cost

question

At its present rate of output, a perfectly competitive firm finds that its marginal cost exceeds its marginal revenue and its price exceeds average variable cost. To maximize profit the firm should

answer

reduce output

question

Perfectly competitive firms are

answer

price takers

question

For a perfectly competitive firm operating at the profit-maximizing output level in the short run

answer

MC=price

question

In a perfectly competitive market

answer

-no barriers to entry -each firm knows the prices of outputs and inputs -each firm chooses the quantity it wants to sell -economic profit is zero -firms experience constant returns to scale

question

What area represents fixed cost at the loss-minimizing output?

answer

Find MC=D, go down to AVC and start there. Go straight up to ATC, then over to y-axis then draw straight down and back over to AVC.

question

You are hired as a production analyst at Monopoly-R-Us and you estimate that, at current output, demand is inelastic and marginal cost is positive. You advise them to increase profit by

answer

Raising price into the elastic range

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