economics-2

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1

In Figure 24.1, the profit-maximizing monopolist will charge a price of

A - the highest price possible

2

In Figure 24.2, the profit-maximizing level of output is

4 units (intersection of MR & MC)

3

In Figure 24.2, the profit-maximizing monopolist will earn a profit per unit of

$1.50

4

The profit-maximizing rate of output in Figure 24.1 is

F (quantity where MR = MC)

5

A barrier to entry is

An obstacle that makes it difficult for new firms to enter a market.

6

A major difference between monopoly and monopolistic competition is

The number of firms in the market.

7

A monopolist will find that its marginal revenue curve

Lies below its demand curve and is steeper than its demand curve

8

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because

Of product differentiation and brand loyalty

9

An industry's market structure refers to

The number and size of the firms in the industry

10

Both perfect competitors and monopolistic competitors

Earn zero economic profit in the long run

11

Each producer in monopolistic competition has

Some market power.

12

Entry into a market characterized by monopolistic competition

Is frequent because barriers to entry are low.

13

Firms in a monopolistically competitive market will

Use the profit-maximizing rule MC = MR

14

If a firm can change market prices by altering its output, then it

Has market power

15

If the entire output of a market is produced by a single seller, the firm

Is a monopoly

16

If there are many firms in an industry producing goods that are similar but slightly different, this is an example of

Monopolistic competition.

17

In monopolistic competition, a firm

Has a downward-sloping demand curve

18

Large cities typically have many drugstores that offer different levels of service and product selection. The drugstore market in big cities can best be classified as

Monopolistic competition.

19

Market power is the ability of a firm to

Control the price and quantity supplied

20

Market share is the percentage of total

Market output produced by a single firm

21

Monopolists set prices

At the output where marginal revenue equals marginal cost.

22

Product differentiation

Involves advertising unique product features

23

Product differentiation refers to

Features that make one product appear different from competing products in the same marke

24

Reductions in minimum average costs that come about through increases in the size of plants and equipment are called

Economies of scale

25

The concentration ratio measures the

Proportion of total output produced by the four largest producers in a specific marke

26

The demand curve faced by a monopolistically competitive firm is

Downward-sloping

27

The demand curve will be kinked if rival oligopolists

Match price reductions but not price increases.

28

The goal of a company in an oligopoly industry is to

Increase market share and profits

29

The kinked demand curve explains the observation that in oligopoly markets

Prices may not change even in the face of cost increases

30

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

Oligopoly

31

The soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as

Oligopoly

32

There are many corn farmers, each of whom produces the same product. The corn market can best be classified as

Perfect competition.

33

What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?

Cut their prices

34

When firms are interdependent,

The profit of one firm depends on how its rivals respond to its strategic decisions.

35

Which of the following characterizes monopolistic competition?

Many firms produce a particular type of product, but each maintains some independent control over its own price

36

Which of the following industries is likely to have the highest concentration ratio?

Video game systems

37

Which of the following is a barrier to entry in a monopoly market?

A patent on a new product.

38

Which of the following is a barrier to entry in a monopoly market?

Economies of scale

39

Which of the following is likely to be a monopolist?

A drug firm that has a patent granting it the exclusive right to produce a drug.

40

Which of the following is not characteristic of monopolistic competition?

Firms have zero control over price

41

Which of the following is not true about a monopolistic competitor?

It can earn economic profits in the long run

42

Which of the following is true about a monopolistically competitive firm in the long run?

It tends to realize only a normal profit

43

Which of the following is true for a monopolist?

It must lower its price on all of its units in order to sell any additional units.

44

Which of the following may not characterize an oligopoly?

No market power.

45

Which of the following rules is satisfied when a monopoly maximizes profits?

MR = MC.