ECON 208 Study Guide - Monopolistic Competition, Marginal Utility, Equal Pay For Equal Work

1) When a utility charges homeowners less on a per-unit basis than corporate users it is practicing:

a) first-degree price discrimination

b) second-degree price discrimination

c) third-degree price discrimination

d) markup pricing

e) tying

2) when an electrical utility charges higher prices during the day than at night it is practicing:

a) peak-load pricing

b) first-degree price discrimination

c) second-degree price discrimination

d) third-degree price discrimination

e) fourth-degree price discrimination

3) Gliberace's Fashion Accessories of Las Vegas produces gemstone-encrusted formal wear for sale in Los Angeles and San Francisco subject to total cost TC = 100 + 5(Q_LA + Q_SF). Demand for Gliberace's stones in the two cities is given by Q_LA = 70 - 2P_LA and Q_SF = 55 - P_SF. If Gliberace price discriminates between the two cities, how many stones will it sell in L?

a) 30

b) 36

c) 38

d) 43

e) 48

4) Game theory is useful for understanding oligopoly behavior because:

a) there are so many firms in an oligopoly that all are price takers

b) firms must differentiate their products if they are to remain in business

c) firms recognize that because there are only a few firms mutual interdependence is important

d) without it firms would not be able to maintain cartel agreements

e) it allows firms to develop greater monopoly power

5) A feasible strategy set is:

a) all actions with a nonzero probability of occurring

b) only actions that have a 50 percent or greater probability of occurring

c) actions that result in positive profits for the firm

d) actions hat a decision-maker is willing to take

e) the outcome that the decision-maker chooses

6) In a two-player game in which each player has four options how many outcomes can there be:

a) 1

b) 4

c) 8

d) 16

e) 64

A. When two goods must be bought in a package (with a fixed ratio), they are

1. tied
2. separated
3. aggregated
4. bundled

B. Assuming the same cost structure, a competitive market produces ________ output at ________ prices than a monopoly market.

1. less; lower
2. more; lower
3. more; higher
4. less; higher

C. A market is considered perfectly competitive if

I. there is a lot of product differentiation amongst sellers.

II. there are many sellers, each small relative to the total market.

III. the product sold is similar across sellers.

IV. there are only a few buyers.

1. I and II only
2. I, II, and III only
3. II, III, and IV only
4. II and III only

D. If most cartel members keep their agreement to cut back production:

1. the losses associated with cheating are internalized by the cheater
2. it's profitable in the short run for another member to increase production
3. cheating by another member won't be detected
4. it's not profitable in the short run for another member to increase production

E. A perfectly prices discriminating monopolist produces until:

1. P = MC
2. MR = AC
3. P = MR
4. MR = MC

F. A dominant strategy is a strategy that a player should take only if the other player cheats. True/False.

G. A cartel can remain powerful even when all the members engage in secret price cuts. True/False.

H. Competitive firms want to enter industries in which

1. P < MC
2. P = MC
3. P < AC
4. P > AC

I. If a homer operates a small bakery and sells donuts for $4/dozen, he should:

1. sell an additional dozen donuts as long as the total cost of producing an additional dozen donuts is less than $4.
2. sell an additional dozen donuts as long as the marginal cost of producing an additional dozen donuts is less than $4.
3. only sell more donuts if his total revenue is greater than his total cost.
4. sell an additional dozen donuts so long as the fixed cost of production is greater than $4.

1. A profit-maximizing monopolist will always charge _______ a perfect competitor would.

A. Less than

B. More than

C. The same as

D. Slightly more than cost than

2. A business with market power will typically:

A. Be more innovative than firms in perfect competition.

B. Force employees to work harder and longer.

C. Create new markets due to competitive forces.

D. Have lower productivity.

3. Which of the following is NOT an example of a barrier to entry?

A. Lower costs

B. Scarce land

C. Extreme start-up costs

D. Heavy government regulations

4. Which is an example of the government command approach?

A. The growth of community banks

B. Fast food franchises' growth

C. Public schools

D. Private college education

5. Between 1961 and 1972, the federal government spent as much on ______ as it did on building highways.

A. Welfare

B. Medicare

C. Crop subsidies

D. Space exploration

6. The inefficiency of taxation means that:

A. Governments tax only specific industries.

B. Taxes are applied more to consumers than businesses.

C. Imposing a tax on goods typically reduces the amount produced.

D. Imposing a tax on goods reduces prices and decreases supply.

7. A market where there are only one seller and buyers and have no good alternative is called a (n):

A. Oligopoly.

B. Oligarchy.

C. Monopoly.

D. Perfect completion market.

8. Among industrialized countries, the United States has one of the __________ public sectors, as a percentage of government spending and the economy.

A. Smallest

B. Largest

C. Fastest-growing

D. Slowest-growing

9. ______ is paid communication with potential customers in a public medium, such as newspapers and television.

A. Journalism

B. Advertising

C. Public Relations

D. Brand identification