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Question;MULTIPLE CHOICE31) Which of the following is correct?;A) In the long run, a firm in monopolistic competition earns;zero economic profit and its;price is equal to the minimum average total cost.;B) In the long run, a firm in monopolistic competition can earn;an economic profit because of;product differentiation.;C) A firm in perfect competition operates at maximum average;total cost in the long run.;D) In the long run, a firm in monopolistic competition;maximizes its profit at a point where;price is equal to average total cost but the average total cost;is not minimized.;E) A firm in monopolistic competition does not have excess;capacity in the long run.;31);8;32) A cartel is most likely to occur in;A) perfect competition as firms compete by reducing cost.;B) oligopoly as firms compete to lower price and increase their;own profits.;C) monopolistic competition where firms collude to increase;profits.;D) monopoly because it faces no competition.;E) oligopoly as firms act together to raise prices and increase;profits.;32);33) When firms in monopolistic competition are making an;economic profit, firms will;A) enter the industry, and demand will decrease for the;original firms.;B) exit the industry, and demand will increase for the firms;that remain.;C) enter the industry and then will exit the industry.;D) enter the industry, and demand will increase for the;original firms.;E) exit the industry, and demand will decrease for the firms;that remain.;33);34) Herb's Inc. has a large share of its market and is tempted;to collude with the few firms that are in;its market. Herb's operates in;A) a perfectly competitive market.;B) collusively protected market.;C) a monopoly market.;D) a monopolistically competitive market.;E) an oligopoly.;34);35) A cartel is;A) a market structure with a large number of small firms.;B) a market with only two firms.;C) a group of firms acting together to raise price, decrease;output, and increase economic;profit.;D) a market structure with a small number of large firms.;E) another name for an oligopoly.;35);36) For a firm in monopolistic competition, the efficient scale;is the amount of output at which;is a minimum.;A) marginal cost;B) fixed cost;C) average total cost;D) average variable cost;E) average fixed cost;36);37) A firm in monopolistic competition ________ influence its;price and ________ influence the;market average price.;A) cannot, cannot;B) can, only in the short run can;C) can, cannot;D) cannot, can;E) can, can;37);9;38) At a long-run equilibrium in monopolistic;competition, price equals;A) marginal cost but not marginal revenue.;B) average total cost.;C) marginal revenue and marginal cost.;D) marginal revenue but not marginal cost.;E) zero.;38);39) In monopolistic competition there are ________ barriers to;entry, so therefore in the long run;economic profit ________.;A) no, is substantial;B) many, equals zero;C) no, equals zero;D) many, is substantial;E) many, might be earned depending on the degree of product;differentiation;39);40) The major difference between monopolistic competition and;monopoly is;A) monopoly is a price setter and a firm in monopolistic;competition is a price taker.;B) how the quantity of output is determined.;C) only a monopoly can earn an economic profit in the long run.;D) only a firm in monopolistic competition can earn an economic;profit in the short run.;E) only firms in monopolistic competition are protected by;barriers to entry.;40);41) If a monopolistically competitive seller's marginal cost is;$3.56, the firm will decrease its output;if;A) its marginal revenue is less than $3.56.;B) its marginal revenue is equal to $3.56.;C) its marginal revenue is more than $3.56.;D) its average total cost is equal to $4.00.;E) Both answers B and D are correct.;41);42) In monopolistic competition, profit is maximized by;producing so that marginal revenue;A) equals price.;B) equals average total cost but not marginal cost.;C) equals marginal cost and which are less than price.;D) equals marginal cost and equals price.;E) is negative.;42);43) The absence of barriers to entry in monopolistic;competition means that in the long run firms;A) earn either an economic profit or zero economic profit.;B) earn zero economic profit.;C) incur an economic loss.;D) earn an economic profit.;E) earn either zero economic profit or suffer an economic loss.;43);10;44) With an average cost pricing rule, the quantity produced by;the natural monopoly is;the quantity produced with a marginal cost pricing rule.;A) less than;B) greater than;C) not comparable to;D) equal to;E) greater than in the long run and less than in the short run;than;44);45) Because of the number of firms in monopolistic competition;A) each firm has a large market share.;B) it is possible for the firms to collude.;C) one firm has the ability to dictate market conditions.;D) each firm must carefully monitor what its competitors do.;E) no one firm can dominate the market.;45);46) If a large number of firms are competing, the market could;be;A) monopolistic competition or monopoly.;B) perfect competition or monopoly.;C) oligopoly or monopoly.;D) perfect competition or monopolistic competition.;E) monopolistic competition or oligopoly.;46);47) With a natural monopoly;A) no regulation is necessary because it is a natural monopoly.;B) regulation takes the form of breaking the company into;several competing firms.;C) regulation takes the form of forcing the company out of;business.;D) regulation can take the form of average cost pricing to;allow coverage of costs.;E) regulation takes the form of forcing competition from new;firms.;47);48) If a natural monopoly is regulated using;A) a total cost pricing rule, the firm will exit the industry.;B) a marginal cost pricing rule, the firm maximizes its profit.;C) an average cost pricing rule, the firm maximizes its profit.;D) a marginal cost pricing rule, the firm incurs an economic;loss.;E) an average cost pricing rule, the firm incurs an economic;loss.;48);49) Price cap regulation is defined as regulation that;A) imposes a price ceiling on the regulated firm.;B) is essentially the same as rate of return regulation.;C) uses average cost pricing to ensure costs are covered.;D) uses marginal cost pricing to ensure efficient output.;E) encourages firms to exaggerate costs to increase profits.;49);50) The process of price cap regulation includes which of the;following?;i. a price ceiling.;ii. marginal cost pricing.;iii. average cost pricing;A) i and ii B) i and iii C) ii only D) ii and iii E) i only;50);11;51) The above figure represents the market for cable television;in Oakland, Florida. Time Warner;Communications (TWC) is the sole provider of cable television;to the residents of this Central;Florida community. If TWC is left unregulated, what is the;price of cable television in Oakland?;A) $10 B) $20 C) $50 D) $30 E) $40;51);52) The above figure represents the market for cable television;in Oakland, Florida. Time Warner;Communications (TWC) is the sole provider of cable television;to the residents of this Central;Florida community. If TWC is left unregulated, how many;households in Oakland are served?;A) 40,000 B) 50,000 C) 10,000 D) 30,000 E) 20,000;52);53) If a regulatory agency sets the price equal to marginal;cost for a natural monopoly, the;A) price is the same as the unregulated monopoly price.;B) firm earns an economic profit, though not the maximum;economic profit.;C) firm earns a normal profit.;D) firm earns the maximum economic profit.;E) government might have to provide a subsidy to the firm to;keep it in business.;53);54) Capture theory is;A) a model about perfect competition.;B) a theory that explains behavior of competitive firms.;C) an economic theory of regulation.;D) the theory that regulators capture firms' attention by;dictating a very low price.;E) the same as the public interest theory.;54);55) A monopoly creates a deadweight loss because the monopoly;A) sets a price that is too low.;B) produces less than the efficient quantity.;C) produces more than the efficient quantity.;D) does not maximize profit.;E) earns a normal profit.;55);12;56) Which of the following explains why the marginal cost;pricing rule results in an economic loss;for a natural monopoly?;A) TheATC;curve is downward sloping throughout the;relevant range, therefore theMC;is;lower than theATC.;B) TheMC;is constant and equal to price.;C) Because output is determined by settingMCequal to the price, consumer surplus is;maximized.;D) The demand curve is downward sloping, therefore price falls;as quantity increases.;E) The firm'sMR;is always less than its price.;56);57) ________ natural monopolies is a commonly used, potential;solution to the problems presented;by natural monopolies.;A) Giving incentives to firms to become;B) Breaking up firms that are;C) Regulating;D) Refusing to grant patents to;E) Outlawing price discrimination by;57);58) With perfect price discrimination, the level of output;A) is the same as the amount produced by any monopoly that;price discriminates.;B) equals the amount produced by a single-price monopoly.;C) is the same as the amount produced in a perfectly;competitive market.;D) exceeds the efficient quantity.;E) is unknown.;58);59) Comparing a perfectly competitive market to a single-price monopoly with the same costs, we;see that;A) the monopoly market always is more efficient in the use of;resources.;B) the monopoly market achieves efficiency in resource use while;perfectly competitive;market does not.;C) both markets are equally efficient in their use of;resources.;D) the perfectly competitive market achieves efficiency in;resource use while the monopoly;market does not.;E) None of the above answers is correct because comparing a;perfectly competitive market to;a monopoly is impossible.;59);60) When a perfectly competitive industry is taken over by a;monopoly, some consumer surplus is;transferred to the monopolist in the form of;A) taxes.;B) marginal cost.;C) deadweight loss.;D) economic profit.;E) average variable cost.;60);13;61) With price discrimination, a monopoly;A) produces less output than if it does not price discriminate.;B) converts consumer surplus into deadweight loss.;C) converts producer surplus into economic profit.;D) can charge a single price to all customers.;E) converts consumer surplus into economic profit.


Paper#57927 | Written in 18-Jul-2015

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