Test 4 Agricultural Economics

Question 1

t/f even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices

Answer 1

true

Question 2

t/f the fundamental cause of monopolies is barriers to entry

Answer 2

true

Question 3

t/f the amount of power that a monopoly has depends on whether there are close substitutes for its product

Answer 3

true

Question 4

t/f deadweight loss measures the loss in society’s welfare that occurs because a monopolist does not produce the socially efficient level of output

Answer 4

true

Question 5

t/f in order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage

Answer 5

true

Question 6

t/f a monopolist that can practice perfect price discrimination will not impose a deadweight loss on society

Answer 6

true

Question 7

t/f a monopolist maximizes profit by producing an output level where marginal cost equals price

Answer 7

false, MR

Question 8

t/f a monopoly creates a deadweight loss to society because it produces less output than the socially efficient level

Answer 8

true

Question 9

t/f by selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits

Answer 9

true

Question 10

t/f the government may choose to do nothing to reduce monopoly inefficiency because the fix may be worse than the problem

Answer 10

true

Question 11

t/f a monopolist produces where P=MC=MR

Answer 11

false, MR<p></p>

Question 12

patent and copyright laws are major sources of what?

Answer 12

government created monopolies

Question 13

encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for…

Answer 13

government created monopolies

Question 14

a reduction in a monopolist’s fixed costs would….

Answer 14

not effect the profit maximizing price or quantity

Question 15

what is the formula for calculating profit for monopolists

Answer 15

P= (price- average total cost) times quantity

Question 16

in reality perfect price discrimination is…

Answer 16

rarely possible

Question 17

what is an example of public ownership of a monopoly

Answer 17

U.S. Postal Service

Question 18

what are the characteristics needed for a monopoly

Answer 18

the firm is the sole seller of the product

the firm’s product does not have close substitutes

Question 19

a natural monopoly occurs when…

Answer 19

there are economies of scale over the relevant range of output

Question 20

what is the shape of the monopolist’s marginal revenue curve

Answer 20

a downward sloping line that lies below the demand curve

Question 21

when a monopolist is able to sell its product at different prices, it is engaging in…

Answer 21

price discrimination

Question 22

the collection of statutes aimed at curbing monopoly power is called…

Answer 22

antitrust law

Question 23

t/f if firms in a oligopoly agree to produce according to the monopoly outcome, they will produce the same level of output as they would produce in the Nash equilibrium

Answer 23

false, they need to collude

Question 24

t/f if all firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly

Answer 24

true

Question 25

t/f all examples of the prisoner’s dilemma game are characterized by one and only one Nash equilibrium

Answer 25

false, can be multiple or none

Question 26

t/f in the prisoner’s dilemma, one prisoner is always better off confessing, no matter what the other prisoner does

Answer 26

true

Question 27

t/f in the prisoner’s dilemma game, confessing is the dominant strategy for each of the players

Answer 27

true

Question 28

t/f the game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoner’s dilemma

Answer 28

true

Question 29

t/f when prisoners’ dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate

Answer 29

true

Question 30

why does an agreement between two duoplolists to function as a monopolist usually break down?

Answer 30

each duopolist is wants a larger share of the market in order to capture more profit

Question 31

when oligopolistic firms interacting with each other each choose their best strategy given the strategies chosen by other firms in the market, we have…

Answer 31

a Nash equilibrium

Question 32

cartel

Answer 32

a group of firms that act in unison to maximize collective profits

Question 33

when strategic interactions are important to pricing and production decisions, atypical firm will…

Answer 33

consider how competing firms might respond to its actions

Question 34

in the prisoner’s dilemma game with Bonnie and Clyde as the players, the likely outcome is…

Answer 34

a bad outcome for both players, both confessing

Question 35

monopoly

Answer 35

a firm that is the sole seller of a product without close substitutes

Question 36

natural monopoly

Answer 36

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

Question 37

price discrimination

Answer 37

the business practice of selling the same good at different prices to different customers

Question 38

collusion

Answer 38

an agreement among firms in a market about quantities to produce or prices to charge

Question 39

Nash equilibrium

Answer 39

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

Question 40

dominant strategy

Answer 40

a strategy that is best for a player in a game regardless of the strategies chosen by the other players