ECON 1002 Microeconomics Unit 3 Challenges ECON1002 Microeconomics Unit 3 Challenges
Published on Apr 30, 2020
ECON 1002 Microeconomics Unit 3 Challenges Click below link for Answer //www.sobtell.com/q/tutorial/default/206915-econ-1002-microeconomics-unit...
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Terms in this set (30)
TRUE OR FALSE
monopolies produce differentiated products
false
TRUE OR FALSE
monopolistic competition is a market structure that consists of a small number of producers
false
TRUE OR FALSE
perfect (pure) competition is characterized by product differentiation
false
TRUE OR FALSE
oligopolies exist in a market that has a small number of producers that may or may not exhibit product differentiation
true
a monopoly is characterized by the which of the following?
a. many
firms producing identical products with no control over the market price
b. many firms producing differentiated products with control over market price
c. a single firm producing a product with no close substitutes and control over the market price
d. a single firm producing a product with many close substitutes and limited control over the market price
c. a single firm producing a product with no close substitutes and control over the market price
EXAMPLE OF A BARRIER TO ENTRY OR NOT
pfizer being the only firm that is legally allowed to produce and sell lipitor, a best-selling cholesterol drug
an example
EXAMPLE OF A BARRIER TO ENTRY OR NOT
debeers owning nearly all of the worlds diamond mines
an example
EXAMPLE OF A BARRIER TO ENTRY OR NOT
tinseltown theaters shows almost all the most popular newly-released movies
not an example
EXAMPLE OF A BARRIER TO ENTRY OR NOT
boeing already serves a large fraction of the jumbo jet market and is able to produce at a lower average cost than any potential competitors
an example
what is a natural monopoly?
a. a monopoly that results from government issuing patents
b. a monopoly resulting from one firm's exclusive ownership of a natural resource required to produce a good
c. a monopoly that results when one firm is able to produce at a lower cost than multiple firms, giving large firms with higher levels of output an advantage over smaller competitors
d. a market in which there is only one firm
c. a monopoly that results when one firm is able to produce at a lower cost than multiple firms, giving large firms with higher levels of output an advantage over smaller competitors.
which of the following firms is most likely to be a natural monopoly?
a. a pharmaceutical company that has the exclusive right to sell a patented drug
b. municipal power light, the local supplier of electricity
c. a restaurant that is unable to practice price discrimination and must charge all
consumers the same price
d. a firm that owns nearly all of the diamond mines in the world
b. municipal power light, the local supplier of electricity
MONOPOLY OR PERFECT COMPETITION
an efficient quantity is produced
perfect competition
MONOPOLY OR PERFECT COMPETITION
price is higher than in other market structures
monopoly
MONOPOLY OR PERFECT COMPETITION
firms can earn positive economic profit in the long run
monopoly
MONOPOLY OR PERFECT COMPETITION
firms have no market power
perfect competition
MONOPOLY OR PERFECT COMPETITION
there are significant barriers to entry
monopoly
TRUE OR FALSE
price discrimination is illegal under all circumstances
false
TRUE OR FALSE
firms do not have incentive to price discriminate because it results in some groups paying a lower price than others
false
TRUE OR FALSE
airlines are often able to price discriminate
true
TRUE OR FALSE
all else equal, single price monopolies earn lower profits than firms that can price discriminate
true
TRUE OR FALSE
perfect price discrimination is when perfectly competitive firms charge some people higher prices than others
false
TRUE OR FALSE
price discrimination only occurs with natural monopolies
false
If a monopolist is producing a quantity that generates MC > MR, then profit:
a. can be increased by increasing production.
b. can be increased by decreasing production.
c. is maximized only if MC =
P.
d. is maximized.
b. can be increased by decreasing production.
Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively, an increase of _____ and a decrease of _____.
a. $45; $50
b. $45; $5
c. $495; $550
d. $450; $500
a. $45; $50
Price discrimination leads to a _____ price for consumers with a _____ demand.
a. higher; less elastic
b. lower; less elastic
c. higher; perfectly elastic
d. higher; more elastic
a. higher; less elastic
Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:
a. $9.
b. $1.
c. $19.
d. $29.
c. $19.
The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a _____ demand for bus service than other passengers.
a. lower
b. greater
c. more elastic
d. less elastic
c. more elastic
The large barriers to entry are a reason a monopoly:
a. earns an economic profit in the long run.
b. maximizes its profits by producing where P = MC.
c. produces at the minimum average total cost in the long run.
d. produces with no fixed costs in the long run.
a. earns an economic profit in the long run.
Which of the following statements about the differences between monopoly and perfect competition is INCORRECT?
a. Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
b. A monopolist has market power, while a perfect competitor does not.
c. A monopoly will charge a higher price and produce a
smaller quantity than a competitive market with the same demand and cost structure.
d. Unlike a perfectly competitive firm, a monopoly can make positive economic profits in the long run.
a. Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.
You own a lemonade stand in a competitive market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power?
a. A booming economy increases the demand for lemonade and attracts entry into the market.
b. You own exclusive rights to harvest lemons from all domestic citrus orchards.
c. The average total cost curve for firms in the industry is horizontal.
d. The government abolishes the system of patents and copyrights.
b. You own exclusive rights to harvest lemons from all domestic citrus orchards.
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