Questions:
Question 1
Perfectly competitive firms and monopolist firms both maximize profit where
price equals marginal cost
total revenue is maximized
average total cost is minimized
marginal cost equals marginal revenue
price is as high as possible
Question 2
For which of the following products would price discrimination be easiest?
orange juice
diamonds
compact disks
haircuts
gasoline
Question 3
A nondiscriminating monopolist earning positive short-run economic profit determines that its current marginal cost is $15 and its current marginal revenue is $20. To maximize profit, a firm should
raise price and increase output
raise price and decrease output
maintain a constant price and increase output
reduce price and increase output
shut down
Question 4
If a perfectly competitive industry is monopolized, consumer surplus
can be expected to decrease
will usually remain constant
can be expected to increase
drops from a high value to zero
increases from zero to a high value
Question 5
A monopolist that engages in perfect price discrimination
divides all buyers into two mutually exclusive groups
refuses to sell to consumers of certain races, sexes, or creeds
charges the same price for every unit sold
charges a different price for every unit sold
charges buyers who want a little of the good a low price and charges buyers who want a lot of the good a high price
Question 6
For a monopolist, marginal revenue is
equal to price
greater than price
less than price
represented by a horizontal curve
equal to average revenue
Question 7
In the monopoly market structure, new firms
cannot profitably enter the industry, even in the long run
may freely enter and leave the industry in both the short run and the long run
may freely enter and leave the industry in the long run only
may freely enter and leave the industry in the short run only
have no incentive to enter the industry, even if economic profits are present
Question 8
The practice of charging different prices to different consumers of the same product is called
monopolistic pricing
unit pricing
price discrimination
elasticity pricing
marginal cost pricing
Question 9
A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers. What is a possible explanation for this failure?
There was nothing to prevent the students from reselling the fruit juice to other consumers.
The fruit juice manufacturer produced in a perfectly competitive market.
The two groups of consumers probably have the same demand elasticity for fruit juice.
The cost of producing the product is relatively high.
Demand for fruit juice is probably inelastic.
Question 10
A monopolist is
one of a large number of small firms that produce a homogeneous good
one of a small number of large firms that produce a differentiated good
a single seller of a product with many close substitutes
one of a small number of large firms that produce a homogeneous good
a single seller of a product with no close substitutes
Question 11
In economics, products are considered "differentiated" only if
they are physically or chemically different
sellers decide that they are different
buyers think that they are different
the government determines that they are different
they are produced by different firms
Question 12
A firm will only earn normal profit in the long run
if firms can freely enter or leave the market
if firms do not try to maximize profit
only if the industry is perfectly competitive
whenever products are not differentiated
if barriers to entry exist
Question 13
Collusion occurs when
a firm chooses a level of output to maximize its own profit
firms get together to maximize joint profits
firms refuse to follow their price leaders
firms petition their U.S. senators for favors
two firms' price and output decisions come into conflict
Question 14
The term monopolistic competition
is an alternate expression for monopoly
is used to describe perfect competition with strong entry barriers
denotes an industry with one seller of many differentiated products
denotes an industry with many sellers of homogeneous products
denotes an industry with many sellers of differentiated products
Question 15
A monopolistically competitive firm can raise price somewhat due to
product differentiation
barriers to entry
product similarity
its homogeneous product
high tariffs
Question 16
What do monopolistic competition, pure monopoly, and perfect competition have in common?
free entry
long-run economic profits
differentiated product
price taking
the rule of profit maximization
Question 17
Tacit collusion occurs in industries that
are monopolistically competitive
contain price leaders
experience rapid technological change
are regulated
produce very differentiated products
Question 18
Under which of the following market conditions is it most difficult to maintain a cartel agreement?
There are many firms in the industry and these firms have similar costs.
There are many firms in the industry and these firms have different costs.
There are few firms in the industry and these firms have similar costs.
There are few firms in the industry and these firms have different costs.
There are many firms in the industry and these firms produce homogeneous products.
Question 19
Monopolistically competitive firms do not achieve allocative efficiency in the long run because
marginal cost equals marginal revenue
marginal cost is greater than marginal revenue
marginal cost is less than marginal revenue
price is less than marginal cost
price is greater than marginal cost
Question 20
Which of the following is an example of an actual cartel?
the three largest cereal producers in the United States
General Motors, Ford, and Chrysler
the Organization of Petroleum Exporting Countries (OPEC)
the three major U.S. cigarette manufacturers
U.S. television networks -- ABC, NBC, CBS, and Fox