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ECON 101 Study Guide - Final Guide: Monopolistic Competition, Average Variable Cost, Marginal Revenue

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School
UW-Madison
Department
Economics
Course
ECON 101
Professor
All

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Document Summary

Professor korinna k. hansen: the _____ broadly a market is defined; the more difficult it becomes to find. So, although there is a lot more competition after the introduction of all the generic drugs (same chemical entity, not original manufacturer) the price of the brand name drug tends to increase and not decrease. This monopolist will produce _______ units and sell them at a price of ________: a profit maximizing monopolist has the average cost function ac = 4 + 5/q. Demand in this market is given by the equation qd = 10 p/2. You know only that demand is given by p = 100 2q and the cost function is given by tc = 20 + 12q, marginal cost is given by mc= 12. Use the graph below to answer the following question: Chuck e. cheese is applying ____________________: price leadership. Use the information below to answer the next three questions:

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Related Questions

A. A competitive firm

  1. can consider only its location in setting the price.
  2. must base its competitive price on product differentiation.
  3. has the ability to set its own price.
  4. must accept the price determined by the intersection of the market supply and demand curves.
  5. has no supply curve.

B. If a firm is making an economic profit, then

  1. the factors of production are being paid their opportunity costs.
  2. there will be no change in the number of firms if the industry is perfectly competitive.
  3. the factors of production are being paid less than their opportunity costs.
  4. the factors of production are being paid more than their opportunity costs.
  5. the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

  1. marginal revenue is greater than price.
  2. the elasticity of demand is constant.
  3. marginal revenue decreases when the price decreases.
  4. marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

  1. shut down because economic profits are negative.
  2. continue to produce as long as P > AVC.
  3. continue to produce because accounting profits are positive.
  4. set a higher price for its output.
  5. set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

  1. the marginal revenue curve.
  2. perfectly inelastic.
  3. always equal to marginal cost.
  4. the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

  1. monopolistic
  2. oligopolistic
  3. monopolistically competitive
  4. perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

  1. total revenue will fall if the price increases.
  2. total revenue will be unchanged if the price increases.
  3. total revenue will rise if the price increases.
  4. the total supply will increase by an equal amount if demand increases.
  5. the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

  1. monopoly.
  2. perfect competition.
  3. theories of consumer behavior.
  4. imperfect competition.
  5. the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

  1. perfect competition
  2. monopolistic competition
  3. oligopoly
  4. monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

  1. economic profits are zero.
  2. TR > TC.
  3. TR < TC.
  4. P = AVC.
  5. normal profits are zero.

13. One of the limitations of Five Forces is that:

a. These tools reduce producer surplus

b. For one firm to increase profit, it takes it from other participants in the industry

c. Does not provide a firm with sustainable competitve advantage

d. both b & c.

15. All these are characterisctics of a monopoly except,

a. There is one seller of the product

b. Has few substitutes

c. Controls a large share of the market

d. Controls a small share of the market

22. Industries with high barriers to entry

a. Pushes profits to normal returns

b. increases the likelihood of firms entering the industry

c. help firms sustain profits

d. increases the number of competitors

14. How does Ebay differ from an economist's view of a perfect competitve market?

a. Ebay has few buyers whereas perfect competitve industry assumes many buyers

b. Ebay has few sellers whereas perfect competitve industry assumes many sellers

c. There is limited information in ebay whereas perfect competitive industry assumes full information for both buyers and sellers

d. There is no difference between these two markets

26. Low cost strategies are usually found in industries where

a. Products are not particularly differentiated

b. Price competion tends to be fierce

c. Both a and b

d. None of the above

Cigarettes - Price Elasticity of demand = - 0.67

A. Cigarettes

B. Alcohol

C. Sodas

D. None of the above

2. The demand for insulin will be ______________ than the demand for a Caribbean cruise in general

a. More elastic

b. More inelastic

c. Less elastic

d. Less inelastic

With two-part pricing

Select one:

A. consumers are required to buy two units of a good.

B. the consumer is limited in the number of units that can be purchased.

C. the average price paid varies with the number of units purchased.

D. the consumer puts down a deposit and then pays the rest when she picks up the goods purchased.

Which of the following sellers is most able to perfectly price discriminate?

Select one:

A. the post office

B. a clothing store

C. a grocery supermarket

D. a college or university

3.Consumers are better off with pricing in the following order: 1)________; 2)________; 3)________.

Select one:

A. competitive market; single-price monopoly; perfect price discrimination

B. single-price monopoly; competitive market; perfect price discrimination

C. competitive market; perfect price discrimination; single-price monopoly

D. Unable to determine.

4.Group price discrimination has ________ consumer surplus than under ________.

Select one:

A. more; an elastic demand curve

B. less; single-price monopoly

C. less; perfect competition

D. more; perfect competition


6. If a firm is to capture all consumer surplus with two-part pricing when customers are different

Select one:

A. it must be able to charge different access fees.

B. it must set unit price below marginal cost.

C. it must set unit price above marginal cost.

D. it cannot charge different prices for access fees.

7. All firms can increase profits using price discrimination.

Select one:

A. true, because firms can sell different versions of a product that is just right for an individual consumer

B. true, because market demand curves are downward sloping

C. false, because consumers aren't forced to buy a producer's products

D. false, because some firms are in competitive markets

8.

For a perfect-price-discriminating monopoly, the marginal revenue curve

Select one:

A. varies for each consumer.

B. is the demand curve.

C. is the same as the monopolist's marginal revenue curve.

D. lies below the demand curve.

A good example of perfect price discrimination is

9. Select one:

A. buying a concert ticket on the street corner.

B. selling concert tickets to individuals on the street corner.

C. buying concert tickets at the ticket window.

D. selling concert tickets at the ticket window.

10. Suppose all individuals are identical, and their monthly demand for Internet access from a certain leading provider can be represented as p = 5 - (1/2)q where p is price in $ per hour and q is hours per month. The firm faces a constant marginal cost of $1. The profit-maximizing two-part tariff yields total revenue of

Select one:

A. $32.

B. $40.

C. $24.

D. $16.