monopolistic comp

1. A firm is operating in a monopolistically competitive market. Marginal revenue is $9 and the elasticity of demand is -4. What is the Lerner index? A) 5/9 B) 4 C) 0.25 D) -9 E) 0

C) 0.25

2. In which situation would you expect the Lerner Index of market power to be the lowest? A) A monopoly with few substitutes B) Monopolistic competition with many substitutes C) Monopolistic competition with few substitutes D) Cournot competition E) Bertrand competition

E) Bertrand competition

3. A company monopolizes enchanted mirrors. Demand is P = 200 - 3Q and total cost is TC = 1000 + Q². What is the Lerner index? A) 1 B) 0.6667 C) 0.6 D) 0.3333 E) None

C) 0.60

4. The pictures represent what? Mark all that apply. A) Perfect competition B) Monopoly C) Monopolistic competition D) Product differentiation E) None

C) Monopolistic competition and D) Product differentiation

5. A profit-maximizing monopolist has marginal revenue of $50 and price elasticity of demand of -2.0. What is the price? A) $50 B) $100 C) $150 D) $200 E) None

B) $100

6. A monopolist faces P = 100 - 2Q and TC = 20Q + 200. What is the deadweight loss? A) $200 B) $400 C) $600 D) $800 E) None

B) $400

7. A monopolist faces P = 200 - 2Q and TC = 100 + 20Q + Q². What price will the monopolist charge? A) $80 B) $100 C) $110 D) $140 E) None

D) $140

8. For a monopolist facing P = 200 - 2Q and TC = 100 + 20Q + Q², what is the deadweight loss? A) $0 B) $110 C) $225 D) $450 E) None

D) $450

9. What tactics could a firm use to gain market power? Select all that apply. A) Regulatory capture B) Vertical integration C) Horizontal integration D) A price war E) Frame mogging

A) Regulatory capture, B) Vertical integration, C) Horizontal integration, and D) A price war

10. Which market would likely have the highest Lerner Index? A) Perfect competition B) Monopolistic competition with many substitutes C) Monopolistic competition with few substitutes D) A commoditized market E) Bertrand competition

C) A firm in monopolistic competition with few substitutes

11. A firm is engaged in monopolistic competition. Which good would have the highest markup? A) Elasticity of -0.01 B) Elasticity of -0.10 C) Elasticity of -1

A) A good with elasticity of -0.01

12. A firm in monopolistic competition has marginal revenue of $6 and a price of $8. What is the Lerner index? A) 1/4 B) 1/2 C) 3/4 D) Need more information

A) 1/4

13. Which market would likely have the highest Lerner Index? A) Perfect competition B) Monopolistic competition with many substitutes C) Monopolistic competition with few substitutes D) A commoditized market E) Bertrand competition

C) A firm in monopolistic competition with few substitutes

14. A profit-maximizing monopolist has marginal revenue of $100 and price elasticity of demand of -4.0. What is the price? A) $4 B) $50 C) $100 D) $125 E) None

E) None of the above — price is approximately $133.33

15. A company monopolizes magic potions. Demand is P = 300 - 5Q and total cost is TC = 500 + Q². What is the Lerner Index to the nearest hundredth? A) 0.71 B) 0.50 C) 0.20 D) 0 E) None

A) 0.71

16. Lay’s Potato Chips spends $163 million on advertising annually. Which concept best explains why? A) Sunk-cost fallacy B) Monopoly C) Average total cost D) Opportunity cost E) Monopolistic competition

E) Monopolistic competition

17. A profit-maximizing monopolist has marginal revenue of $50 and price elasticity of demand of -2.0. What is the price? A) $50 B) $100 C) $150 D) $200 E) None

B) $100