Unit three

Question 0

To sell more goods, a monopolist must

Answer 0

lower the price

Question 1

A monopolist is a

Answer 1

price maker–put up barriers of entry

Question 2

In the long run of a monopoly

Answer 2

NOTHING WILL HAPPEN

Question 3

A monopoly’s demand curve is

Answer 3

down sloping

Question 4

The quantity produced by a monopoly is determined by

Answer 4

the intersection of MR and MC

Question 5

The price of a monopoly is determined by

Answer 5

the intersection of the quantity and the demand

Question 6

How do we determine elasticity?

Answer 6

The marginal revenue intersects the x axis when it is unit elastic and to the right it is inelastic and to the left it is elastic

Question 7

Allocative efficiency is found where

Answer 7

The graph is unit elastic

Question 8

Socially optimal is when

Answer 8

p=mc

Question 9

The result of perfect price discrimination is

Answer 9

Marginal revenue=demand

Question 10

Regulation of a typical monopoly leads to

Answer 10

less monopoly profit but it is socially optimal

Question 11

Regulation of a natural monopoly leads to

Answer 11

loss for the firm and ends up being a compromise with zero economic profit

Question 12

Lump Sum

Answer 12

• Fixed costs

- If there is an increase in the lump sum, the ATC increases, the profit decreases and nothing else changes

Question 13

Per unit

Answer 13

• Variable costs

- If there is an increase in per unit, the ATC, MC, and Price increase and output decreases

Question 14

Three things necessary to price discriminate

Answer 14

1) Monopoly power (price setting)
2) Ability to separate people into groups
3) No resale

Question 15

Characteristics of monopolistic competition

Answer 15

• relatively easy entry and exit
• advertising
• not the exact same product

Question 16

Order of market structures from most firms to least

Answer 16

Perfect competition, monopolistic competition, oligopoly, monopoly

Question 17

Monopolistic competition graph is

Answer 17

The same is PC graph

Question 18

Firms have a dependent nature which gives incentive to

Answer 18

Collude and to cheat

Question 19

Dominant strategy

Answer 19

No matter what the opponent does, one option is better

Question 20

NASH equilibrium

Answer 20

When no player can independently make themselves better off

Question 21

Herfindahl Index

Answer 21

A measure of the concentration and competitiveness of an industry. The sum of the squared percentage market shares of the individual firms in the industry.

Question 22

As output increases, total fixed cost

Answer 22

stays the same

Question 23

Relationship between MC and MP is

Answer 23

inverse

Question 24

Only cost on a long run graph is

Answer 24

ATC

Question 25

In Perfect Competition, if more firms enter then the output and price will

Answer 25

decrease for the typcial firm

Question 26

What costs change the output?

Answer 26

Variable costs

Question 27

Order of monopolies from the smallest to the greatest amount of consumer surplus

Answer 27

Price discriminant monopolist, single price monopoly, perfectly competitive monopoly

Question 28

In a natural monopoly,

Answer 28

the long run ATC is still declining when it intersects demand

Question 29

Price Leadership

Answer 29

Collusion when the “dominant firm” initiates the price

Question 30

If a typical firm in monopolistic competition is making economic profits then in the long run,

Answer 30

demand will decrease

Question 31

Which market structures have differentiated products?

Answer 31

Oligopoly and monopolistic competition

Question 32

Which market structures have economic profit in the long run?

Answer 32

Oligopoly and monopoly

Question 33

Which structures achieve productive efficiency in the long run?

Answer 33

Perfect Competition

Question 34

Which structures have zero economic profit in the long run?

Answer 34

Perfect competition and monopolistic competition

Question 35

Do ologopolists have incentive to change price?

Answer 35

No

Question 36

Economies of Scale

Answer 36

The situation when the firm’s total cost of producing a product decreases in the long run as the firm increases the size of its plant and its output

Question 37

Diseconomies of scale

Answer 37

The situation when a firm’s average total cost increases in the long run as the size of its plant and output increases

Question 38

Shut down point

Answer 38

Minimum AVC