Quiz 3 Flashcards
Which of the following is a barrier to entry for a monopoly?
a patent
a monopolist
can increase the price only if it is willing to decrease the quantity sold
for a monopolist, marginal revenue
is less than price.
which of the following is ALWAYS true for a monopolist at its optimal output?
MR=MC
a profit maximizing monopolist charges a price equal to
the price consumers are willing and able to pay for the profit maximizing quantity
the primary reason why a monopoly can earn a long-run economic profit is the existence of
barriers to entry.
compared to an efficient perfectly competitive industry in the long-run, a monopoly with the same costs will
- charge a higher price
2. produce less output
price discrimination takes place when a firm
charges different prices to different customers, not based on cost differences.
what condition must exist for a monopolist to effectively price discriminate?
the monopolist must produce a good that cannot be resold.
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.
a perfectly competitive or a monopolistically competitve
a characteristic of monopolistic competition is
each firm produces a differentiated product.
in monopolistic competition, each firm supplies a _____ part of the total industry output and its actions ______ the actions of the other firms.
small; do not directly affect
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.
product differentiation
in the short run, a firm in a monopolistic competition will produce the amount of output where itsw
marginal revenue equals marginal cost and will set its price according to the demand for that output level.
which of the following is true regarding the long run for a firm in monopolistic competition?
P=ATC
when new firms enter a monopolistically competitive industry, each firm’s
demand curve shifts leftward
in ____ market structure, a firm’s output depends _____..
an oligopoly; in part on its competitors’ price and quantity decisions
an oligopoly is a market structure in which there are
only a few sellers selling either an identical or differentiated product.
a low concentration ratio indicates
a high degree of competition
the Herfindahl-Hirschman Index measures an industry’s concentration of
sales.
the maximum value that the Herfindahl-Hirschman Index can attain is
10,000
One of the reasons that concentration ratios are not a perfect measure of competitiveness is that they
ignore foreign competition
a barrier to entry is
a natural or legal impediment that makes it difficult for new firms to enter a market.
which of the following is NOT a barrier to entry for an oligopoly market
the ability to charge a price that is above marginal cost
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 ______.
not follow; follow
mutual interdependence means that
each firm must consider the reactions of its rivals when it determines its price policy.
which of the following contributes to the existence of oligopoly in an industry?
tariffs or quotas
many economists would conclude that in a highly oligopolistic market there is
neither allocative nor productive efficiency
which of the following is a characteristic of oligopoly in the long run?
economic profits can exist
is an oligopoly firm allocatively efficient?
No, because price is greater than marginal cost.
