ECON111 Lecture Notes - Lecture 10: Perfect Competition, Australia Post, Marginal Cost

35. If your competitors will follow your price cuts and ignore price hikes, your firm:
A. faces perfect competition.
B. faces a kinked demand curve.
C. is the marginal price leader of an oligopoly.
D. must be the most efficient firm in the industry.

36. Sticky prices in oligopoly markets are:
A. represented by the kinked demand curve model.
B. typical of cartels.
C. most common for highly differentiated products.
D. a result of price discrimination.

37. Oligopoly is characterized by all of the following except:
A. some industries that produce identical products.
B. frequent price wars.
C. high barriers to entry.
D. prices that are above the minimum of the ATC curve.

38. Which statement is false?
A. A monopoly is both a firm and an industry.
B. A monopoly is an imperfect competitor.
C. There are monopolies in the United States at the regional and local levels.
D. None of these statements is false.

39. Each of the following is a legal barrier to entry into an industry except:
A. government licensing.
B. patents.
C. government franchising.
D. All of these choices are legal barriers.

40. Which one of these is not a natural monopoly?
A. A local electric company
B. A local natural gas company
C. A local cable TV company
D. All of these choices are examples of natural monopolies.

In which of the following ways is a monopoly beneficial to an economy?

A. Monopoly profits give firms more reason to invest in the creation of new products through research and development.

B. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market.

C. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers.

D. All of the above.

Which of the following is a difference between a perfectly competitive market and a monopoly?

A. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

B. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Although the fatality rate in this industry is so high, many workers still choose to work as loggers.

What could explain this?

A. Workers choose these high-risk jobs because they are willing to bear an occupational risk to earn a higher wage.

B. Low-risk jobs are already taken, so workers must choose their next-best alternative, which in this case is logging.

C. Workers in these industries lack human capital and must choose to work as loggers.

D. Loggers must be indifferent between low-risk and high-risk jobs.

In the case of a decrease in product prices:

A. the quantity effect always dominates the price effect.

B. the price effect always dominates the quantity effect.

C. when the price effect dominates the quantity effect, total revenue decreases.

D. when the quantity effect dominates the price effect, total revenue decreases

Your feedback will be greatly appreciated. Thanks in advance.

Q: Point out one product that you believe is produced by a “pure” monopoly firm (or a firm with a high degree of monopoly power).

Is it a local, regional or national monopoly?

What are some of the Barriers to Entry into this industry?

For the product listed, list substitute(s) for this “monopoly.”

Demonstrate how the relative “closeness” of the substitutes listed determines, to a large degree, effective limits to the monopoly power of these firms.

A: I believe Amtrak is a monopoly. This is a national monopoly because its available coast to coast, you may travel locally with Amtrak, state to state as well. The barrier for entry are the limited railroad systems for Amtrak, limited resource, cost to produce additional train system, and fact that Amtrak is not producing a profit even though they are a monopoly. Train transportation is not popular anymore, and is difficult for them to cut costs because they don’t have a lot of train tickets purchased. So, they increase their prices for what they do sell. Other forms of transportation are not changing the fact that it is a monopoly, but has affected it from taking control of transportation. Purchasing a rental car, bus ticket or a plane ticket has been more convenient and inexpensive. I personally have wanted to purchase a train ticket multiple times, but the routes are wrong, or the length of trip duration has exceeded my availability, and costs are not worth the time. There are smaller train lines but are not monopolized like Amtrak. Example you travel and look up Amtrak station, name of the company. When you fly the airlines is not called the airport which has multiple airlines. Train station is usually Amtrak.