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Microeconomics - Chapter 8 (ISBN-10: 1429218290)

Microeconomics - Chapter 8 (ISBN-10: 1429218290)

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Published by Brooke Mitchelle
These answers are ALL correct.

ISBN-10: 1429218290
ISBN-13: 9781429218290
These answers are ALL correct.

ISBN-10: 1429218290
ISBN-13: 9781429218290

More info:

Published by: Brooke Mitchelle on Jun 11, 2011
Copyright:Attribution Non-commercial

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08/05/2013

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 Page 1
1. Assume an industry is dominated by a few firms. Each of these firms acknowledges that its own choices affect thechoices of its rivals. Each firm also recognizes that its rivals' choices affect the decisions it makes. This industry isan example of a(n):A) monopoly.B)
oligopoly.
C) monopolistic competition.D) perfect competition.2.
 
An industry with a large number of relatively small firms producing differentiated products in a market with easyentry and exit of firms is:A) a monopoly.B) a duopoly.C) an oligopoly.D)
one of monopolistic competition.
3.
 
A cartel is an example of:A) price extortion.B) price leadership.C)
overt collusion.
D) tacit collusion.4.
 
One of the earliest attempts to curb monopoly power in the United States was the ________.A) breakup of Microsoft CorporationB) breakup of El Paso Natural Gas companyC) breakup of the steel industryD)
breakup of the Standard Oil company
5.
 
In the 1960s and 1970s, General Motors often set prices for the new model year and Ford and Chrysler wouldfollow. This was a form of tacit collusion.A)
True
B) False6.
 
Cartels are illegal in the United States.A)
True
B) False
7.
 
The profit-maximizing rule
MR
=
MC 
is:A) followed by a monopoly, but not by a perfectly competitive firm.B) followed by a perfectly competitive firm but not by a monopoly.C)
followed by all types of firms.
D) not followed by a monopoly, because it would reduce economic profit to zero.8.
 
A monopoly increases price by limiting the quantity supplied to a market.A)
True
B) False9.
 
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output isknown as:A) product differentiation.B) barrier to entry.C)
market power.
D) patents and copyrights.
 
 Page 2
10.
 
In monopolistic competition, each firm:A) is a price-taker.B)
has some ability to set the price of its differentiated good.
C) will set price equal to marginal cost.D) has marginal revenue that is greater than price.11.
 
A firm that experiences economies of scale:A) at lower levels of output and then encounters diseconomies of scale at higher levels of output is a naturalmonopoly.B)
over the entire range of outputs demanded is called a natural monopoly.
C) at any particular level of output is called a natural monopoly.D) has a continually rising long-run average cost curve.12.
 
After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is lessthan the price at which that unit is sold because of:A) diminishing marginal returns.B) increasing marginal cost.C)
a downward-sloping demand curve.
D) declining average fixed cost.13.
 
A demand curve that is downward sloping will ensure that:A)
 P 
=
MR.
 B)
 P 
>
 MR.
 
C)
 P 
<
MR.
 D)
 P 
=
MC.
 14.
 
If the only two firms in an industry openly agree to fix the price or output level, then this is an example of:A)
cartel behavior.
B) price leadership.C) perfect competition.D) tacit collusion.15.
 
The women's dress industry is monopolistically competitive. This means that the following condition applies to thisindustry:A) There are thousands of dress suppliers, all selling identical products.B)
Dresses tend to be differentiated among the many sellers serving this market.
C) There is freedom of entry but not exit in this industry.D) Prices tend to be lower than if the dress industry approximated perfect competition.16.
 
If a firm has market power, the marginal revenue curve always lies below the demand curve.A)
True
B) False17.
 
Each firm in a cartel has an incentive to break its word and produce more than the agreed quantity.A)
True
B) False18.
 
Compared to a perfectly competitive industry, a monopolist:A) produces a large quantity.B)
charges a higher price.
C) increases consumer surplus.D) earns less profit in the long run.
 
 Page 3
19.
 
If the state government gives you the exclusive right to sell cement to municipalities, your monopoly would resultfrom:A) sunk costs.B)
government-created barriers.
C) economies of scale.D) location.20.
 
In monopolistic competition:A)
firms advertise to increase demand for their product.
B) entry of new firms shifts the demand curve for existing firms to the right.C) when some firms exit, the demand curve for the firms that remain in the industry shifts to the left.D) firms earn large economic profits in the long run.21.
 
You own a lemonade stand in a very competitive lemonade market, and as such, you are a price-taking firm. Whichof the following events would most likely increase your market power?A) The government abolishes the system of patents and copyrights.B) A booming economy increases the demand for lemonade and attracts entry into the market.C) The average total cost curve for firms in the industry is horizontal.D)
You own exclusive rights to harvest lemons from all domestic citrus orchards.
22.
 
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants tosell six, she must charge $20,000 each. The quantity effect of selling the sixth motor home is:A)
$20,000.
B) $10,000.C) $15,000.D) $21,000.Use the following to answer questions 23-26:
 
Figure: A Profit-Maximizing Monopoly Firm
23.
 
(Figure: A Profit-Maximizing Monopoly Firm) The profit-maximizing firm in this figure will produce ________ units of output per week.A) 160B)
220
C) 250D) 300

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