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Spring 2018 > Eco Final > Flashcards

Eco Final Flashcards

1
Q

_____ 1. Copyrights and patents are examples of barriers to entry under an oligopoly market.

A

T

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2
Q

_____ 2. Monopolistic competitive firms are similar to perfectly competitive firms in the sense that the both face horizontal demand curves for their products.

A

F

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3
Q

_____ 3. Strategic interdependence is unique to the oligopoly market structure.

A

T

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4
Q 
\_\_\_\_\_ 4.  Game theory is the study of how people behave in random situations.
MULITPLE CHOICE (3 Points)
A

F

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5
Q

_____ 5. In the long run entry ensures that monopolistically competitive firms will

a. Earn an economic profit
b. Earn zero economic profit
c. Earn an economic loss
d. Differentiate its products

A

c

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6
Q

_____ 6. Globalization can reduce oligopoly power by

a. Bypassing antitrust legislation in a particular community
b. Increase market prices
c. Identifying new trading markets
d. Increasing the number of competitors

A

d

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7
Q

_____ 7. Which of the following are the two reasons for advertising?

a. Decrease total size of the market and decrease prices in the market
b. Decrease total size of the market and increase prices in the market
c. Increase total size of the market and increase prices in the market
d. Increase total size of the market and decrease prices in the market

A

c

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8
Q

_____ 8. Any action taken by a firm to increase the demand for their product other than decreasing prices is known as:

a. Diversity of competition
b. Non price competition
c. Strategic competition
d. Noncompetitive competition

A

b

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9
Q

_____ 9. A form of tacit collusion where one firm sets the price and the other firms in the market copy that price is known as:

a. Price Leadership
b. Price Following
c. Collusion Leadership
d. Collusion Following

A

a

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10
Q

_____ 10. The following type of industries are examples of what you may find operating under monopolistic competition

a. Soft Drink Industry
b. Cell Phone Industry
c. Retail/Grocery Stores
d. Automobile Industry

A

c

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11
Q

_____ 1. One of the four characteristics of firms in a monopoly market structure is that the firms are price takers.

A

False

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12
Q

_____ 2. Under perfect competition the firms can sell all they want at a particular price.

A

True

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13
Q

_____ 3. Firms always benefit from price discrimination because they have an increase in profit.

A

True

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14
Q

_____ 4. If a firm does not cover its Average Variable Cost (Price

A

True

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15
Q

_____ 5. A monopolist earns an economic profit whenever

a. Marginal costs are positive
b. Total revenue equals total cost
c. Price exceeds average total cost
d. Marginal revenue is positive

A

Price exceeds average total cost

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16
Q

_____ 6. In the long run entry ensures that perfectly competitive firms will

a. Earn an economic profit
b. Earn zero economic profit
c. Earn an economic loss
d. Earn super economic profit

A

Earn zero economic profit

17
Q 
\_\_\_\_\_ 7.  In the long run the exit of firms from a perfectly competitive market is typically caused by
a.	Economic loss
b.	Economic profit
c.	Government regulations
d.	Taxes
e.
A

Economic loss

18
Q

_____ 8. The practice of selling the same good at different prices to different customers is known as?

a. Collusion
b. Price Takers
c. Price Searchers
d. Price Discrimination

A

Price Discrimination

19
Q

_____ 9. Under this type of cost industry the long run supply curve is horizontal

a. No cost industry
b. Constant cost industry
c. Increasing cost industry
d. Decreasing cost industry

A

Constant cost industry

20
Q

_____ 10. Any costly action a firm undertakes to establish or maintain its monopoly power is known as

a. Government regulation
b. Tax evasion
c. Rent seeking activity
d. Bribery

A

Rent seeking activity

21
Q

What is the profit maximum output level?

A

MR = MC @ output 4

22
Q

What is profit per unit? (Price-ATC). Show all necessary work.

A 
(Price) – ( ATC)
1000 -  ATC
ATC = TC output profit maximum output level / profit maximum output level
ATC = 3600 /  4
ATC = 900
(Price)1000 – (ATC) 900 = 100
23
Q

What is total profit? Show all necessary work.

A

(Profit per unit ) 100 * (profit max output level) 4 = 400

24
Q

Market Structure-

A

the characteristics of a market that influence how trading takes place

25
Q

Market spectrum

A

Perfect Competition monopolistic competition oligopoly monopoly

26
Q

Characteristics of Perfect Competition

A
  1. Large number of buyers and sellers
  2. Sellers offer a standardized product
  3. Easy entry or exit from the market by the sellers (no long run economic profits)
  4. Sellers are price takers. Price takers treat the price as given and decide the output level
27
Q

Perfect competition

A
  1. firms can sell all they want at a particular price
  2. Demand Curve and the Marginal Revenue curve are the same curve
  3. Price=Demand=Marginal Revenue
28
Q

Perfect Price Discrimination

A

Charges each customer the most they would be willing to pay for each unit they purchase
Example; yard sales, flea markets, any negotiating buying

29
Q

MONOPOLISTIC COMPETITON: Imperfect Competition

A

More than one seller, but too few to create a perfectly competitive market. Firms in this market structure also offer differentiated products and can violate the free entry free exit requirement.
Monopolistic Competition and Oligopoly are both examples of Imperfect Competition

30
Q

Monopolistic Competition

Short Run economic profit

A

When Price>ATC a firm earns an economic profit in the short run

31
Q

Monopolistic Competition

Short Run economic loss

A

When Price

32
Q

Monopolistic competition

Excess capacity

A

In the long run firms under monopolistic competition produce too little output to achieve minimum cost per unit (min ATC). This is caused by the cost of having different products

33
Q

Advertise for two reasons

A
  1. Increase demand for your product (shift demand to the right)
  2. Make demand less elastic
34
Q

Oligopoly

A

Characteristics
1. Few sellers
2. Price searchers (downward sloping demand curve)
3. Standardized or differentiated products
4. High barriers to entry (long run economic profit)
5. Firms are strategically interdependent (firms look at how their production decisions affect themselves and their competitors)
Examples of Oligopoly Markets
Airlines, Car companies, Cell Phone Providers

35
Q

FACTORS MARKET
Products Market-

Factors Market-

A

markets in which firms sell goods and services to households and other firms

markets in which resources-land, labor, capital, entrepreneurship-are sold to firms

36
Q

Profit Maximizing Quantity (Factors Market)

A

MRP=MFC

Spring 2018 (13 decks)

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