Quiz 3

Question 1

Which of the following is a barrier to entry for a monopoly?

Answer 1

a patent

Question 2

a monopolist

Answer 2

can increase the price only if it is willing to decrease the quantity sold

Question 3

for a monopolist, marginal revenue

Answer 3

is less than price.

Question 4

which of the following is ALWAYS true for a monopolist at its optimal output?

Answer 4

MR=MC

Question 5

a profit maximizing monopolist charges a price equal to

Answer 5

the price consumers are willing and able to pay for the profit maximizing quantity

Question 6

the primary reason why a monopoly can earn a long-run economic profit is the existence of

Answer 6

barriers to entry.

Question 7

compared to an efficient perfectly competitive industry in the long-run, a monopoly with the same costs will

Answer 7

1. charge a higher price

2. produce less output

Question 8

price discrimination takes place when a firm

Answer 8

charges different prices to different customers, not based on cost differences.

Question 9

what condition must exist for a monopolist to effectively price discriminate?

Answer 9

the monopolist must produce a good that cannot be resold.

Question 10

ACME, Inc. operates in a market structure in which there are many other firms that find it easy to enter or exit. ACME is operating in _______ market.

Answer 10

a perfectly competitive or a monopolistically competitve

Question 11

a characteristic of monopolistic competition is

Answer 11

each firm produces a differentiated product.

Question 12

in monopolistic competition, each firm supplies a _____ part of the total industry output and its actions ______ the actions of the other firms.

Answer 12

small; do not directly affect

Question 13

brand name drugs are chemically identical to their generic counterparts. yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic product. making consumers think that a brand name drug differs from its generic counterpart is an example of.

Answer 13

product differentiation

Question 14

in the short run, a firm in a monopolistic competition will produce the amount of output where itsw

Answer 14

marginal revenue equals marginal cost and will set its price according to the demand for that output level.

Question 15

which of the following is true regarding the long run for a firm in monopolistic competition?

Answer 15

P=ATC

Question 16

when new firms enter a monopolistically competitive industry, each firm’s

Answer 16

demand curve shifts leftward

Question 17

in ____ market structure, a firm’s output depends _____..

Answer 17

an oligopoly; in part on its competitors’ price and quantity decisions

Question 18

an oligopoly is a market structure in which there are

Answer 18

only a few sellers selling either an identical or differentiated product.

Question 19

a low concentration ratio indicates

Answer 19

a high degree of competition

Question 20

the Herfindahl-Hirschman Index measures an industry’s concentration of

Answer 20

sales.

Question 21

the maximum value that the Herfindahl-Hirschman Index can attain is

Answer 21

10,000

Question 22

One of the reasons that concentration ratios are not a perfect measure of competitiveness is that they

Answer 22

ignore foreign competition

Question 23

a barrier to entry is

Answer 23

a natural or legal impediment that makes it difficult for new firms to enter a market.

Question 24

which of the following is NOT a barrier to entry for an oligopoly market

Answer 24

the ability to charge a price that is above marginal cost

Question 25

the model of oligopoly is based on the assumption that each firm believes that if it raises its price, other firms will _____, and if it cuts its price, other firms will ______.

Answer 25

not follow; follow

Question 26

mutual interdependence means that

Answer 26

each firm must consider the reactions of its rivals when it determines its price policy.

Question 27

which of the following contributes to the existence of oligopoly in an industry?

Answer 27

tariffs or quotas

Question 28

many economists would conclude that in a highly oligopolistic market there is

Answer 28

neither allocative nor productive efficiency

Question 29

which of the following is a characteristic of oligopoly in the long run?

Answer 29

economic profits can exist

Question 30

is an oligopoly firm allocatively efficient?

Answer 30

No, because price is greater than marginal cost.