ECON 102 Midterm #3

____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
Select one:
a. Collusion
b. A monopoly
c. An oligopoly
d. A cartel

c. An oligopoly

A successful advertising campaign may allow competing monopolists to
Select one:
a. sell a greater quantity.
b. charge a higher price.
c. increase its profits.
d. do all of the above.

d. do all of the above

____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
Select one:
a. Collusion
b. A monopoly
c. An oligopoly
d. A cartel

c. An oligopoly

A successful advertising campaign may allow competing monopolists to
Select one:
a. sell a greater quantity.
b. charge a higher price.
c. increase its profits.
d. do all of the above.

d. do all of the above

General Motors, Ford, and Honda all manufacture automobiles and exemplify which of the following?
Select one:
a. an oligopoly
b. a monopoly
c. a cartel

a. an oligopoly

If a perfectly competitive firm raises its price, the quantity demanded of its product ____________.
Select one:
a. diminishes temporarily in the short run
b. falls to zero
c. stays the same
d. falls below marginal cost

b. falls to zero

If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is
Select one:
a. they will both increase market share.
b. they will simply neutralize one another's efforts.
c. they will both lose market share.
d. they will both improve their industrial position.

b. they will simply neutralize one another's efforts

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
Select one:
a. they will be unable to earn higher-than-normal profits in the short run.
b. they will wish to cooperate to make decisions about what price to charge.
c. they will wish to cooperate to make decisions about what quantity to produce.
d. they will be unable to earn higher-than-normal profits in the long run.

they will be unable to earn higher-than-normal profits in the long run.

If one firm operating in an oligopoly raises its price and other firms do not do so, Select one:
a. the sales of the firm with the higher price will decline slightly.
b. the egos of all the top executives will eventually lead to cooperation at that higher price.
c. the sales of the firm that increased its price will decline sharply.
d. the firm with the increased price will have its higher profits sustained through cooperation.

The correct answer is: the sales of the firm that increased its price will decline sharply.

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then,
Select one:
a. the firm's perceived demand will shift to the left.
b. the firm should keep expanding production.
c. each marginal unit adds profit by bringing in less revenue than its cost.
d. the firm is now earning zero for profit.

The correct answer is: the firm should keep expanding production.

In 2013, the Mall of America in Minnesota, the largest shopping mall in the United States, had 22 stores that sold women's "ready-to-wear" clothing (like Ann Taylor), another 50 stores that sold clothing for both men and women (like Nordstrom's), plus 14 more stores that sold women's specialty clothing (like Victoria's Secret). These many clothing stores, competing in the same shopping mall to sell similar but not identical products, engage in what economists call ____________.
Select one:
a. oligopolistic competition
b. perfect competition
c. monopolistic competition
d. collusion

monopolistic competition

In a monopolistic competitive industry, firms can try to differentiate their products by
Select one:
a. creating optimal perceptions of the product.
b. choosing optimal locations from which the product is sold.
c. enhancing the intangible aspects of the product.
d. enhancing product's physical aspects and all of the above.

The correct answer is: enhancing product's physical aspects and all of the above.

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means
Select one:
a. price is higher than marginal revenue.
b. price is equal to marginal revenue.
c. price is equal to marginal cost.
d. price is lower than marginal revenue.

The correct answer is: price is higher than marginal revenue.

In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies
Select one:
a. on the upward-sloping portion of the average cost curve.
b. at the very bottom of the AC curve.
c. on the downward-sloping portion of the average cost curve.
d. at the very top of the AC curve.

The correct answer is: on the downward-sloping portion of the average cost curve.

Monopolistic competitors can make a ____________ in the short-run, but in the long run, ____________ will drive these firms toward ____________.
Select one:
a. profit or loss; entry and exit; a zero-profit outcome
b. loss; exit; losses on their earnings
c. profit or loss; exit; economic profits
d. profit; entry; a price that lies at the very bottom of the AC curve

The correct answer is: profit or loss; entry and exit; a zero-profit outcome

Oligopoly firms acting individually may seek to gain profits ____________.
Select one:
a. by expanding levels of output and cutting prices
b. by selling products that are distinctive in some way
c. by having a mini-monopoly on a particular brand name
d. by having a mini-monopoly or through tough competition

The correct answer is: by expanding levels of output and cutting prices

Perfect competition and monopoly stand at ____________ of the spectrum of competition.
Select one:
a. opposite ends
b. the high end
c. the low end
d. the mid-way point

The correct answer is: opposite ends

Product differentiation may occur in ____________ because ____________ created strong preferences for certain brands.
Select one:
a. shaping intangible preferences; predatory pricing
b. the minds of buyers; past habits and advertising
c. imperfect competition; the concept of differentiated products
d. imperfect competition; advertising and consumer habits

The correct answer is: the minds of buyers; past habits and advertising

The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is
Select one:
a. oligopoly collusion.
b. prisoner's dilemma.
c. game theory.
d. collusion theory

The correct answer is: game theory.

The demand curve as perceived by a monopolistic competitor is ____________.
Select one:
a. upward-sloping
b. U shaped
c. downward-sloping
d. flat

The correct answer is: downward-sloping

The demand curve as perceived by a perfectly competitive firm is ____________.
Select one:
a. flat
b. downward sloping
c. upward sloping
d. hump shaped

The correct answer is: flat

The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to
Select one:
a. determine total revenue, total cost, and profit
b. select the profit maximizing quantity to produce
c. determine what price to charge for the product
d. determine average costs, total revenue, and profit

The correct answer is: select the profit maximizing quantity to produce

A monopolist is able to maximize its profits by
Select one:
a. setting the price at the level that will maximize its per-unit profit.
b. producing output where MR = MC and charging a price along the demand curve.
c. setting output at MR = MC and setting price at the demand curve's highest point.
d. producing maximum output where price is equal to its marginal cost.

The correct answer is: producing output where MR = MC and charging a price along the demand curve.

A natural monopoly occurs when the quantity demanded is ____________ the minimum quantity it takes to be at the bottom of the long-run average cost curve.
Select one:
a. greater than
b. less than or equal to
c. equal to
d. a or c above

The correct answer is: less than or equal to

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
Select one:
a. output will be too small and its price too high.
b. output will be too large and its price too high.
c. output will be too small and its price too low.
d. output will be too large and its price too low.

The correct answer is: output will be too small and its price too high.

For a pure monopoly to exist,
Select one:
a. there is a single seller in a particular industry
b. there is only one seller, therefore no industry
c. there are a few sellers in a given industry
d. there are limited sellers in a particular industry

The correct answer is: there is a single seller in a particular industry

Government ____________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ____________.
Select one:
a. patent; a limited time
b. trademark; an unlimited time
c. copyright; a limited time
d. trade secret; an unlimited time

The correct answer is: patent; a limited time

If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is
Select one:
a. $3.90 or less
b. $3.40 or less
c. $3.50 or less
d. $4.00 or less

The correct answer is: $3.40 or less

In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely
Select one:
a. have a patent giving it exclusive legal rights to make, use, and sell for a limited time.
b. raise prices, cut production, and realize positive economic profits.
c. have legal protection to prevent copying its methods of production for commercial use.
d. acquire rights for its investors to produce and sell their product.

The correct answer is: raise prices, cut production, and realize positive economic profits.

The form of legal protection intended to prevent reproduction of original works is referred to as ____________ law.
Select one:
a. patent
b. trademark
c. copyright
d. trade secret

copyright

The largest cattle rancher in a given region will be unable to have a ____________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
Select one:
a. oligopoly
b. patent
c. monopoly
d. monopolistic competition

monopoly

The marginal revenue curve for a single price monopolist ____________ the market demand curve.
Select one:
a. always rises above
b. always lies beneath
c. always runs parallel
d. always is the same

The correct answer is: always lies beneath

The slope of the demand curve for a monopoly firm is
Select one:
a. horizontal, parallel to the x-axis
b. vertical, parallel to the y-axis
c. upward sloping
d. downward sloping

downward sloping

The two primary factors determining monopoly market power are the firm's
Select one:
a. revenues and size of its customer base
b. demand curve and its cost structure
c. variable cost curve and its fixed cost structure
d. demand curve and level of wealth within its market

The correct answer is: demand curve and its cost structure

The use of sharp, temporary price cuts as a form of ____________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
Select one:
a. natural monopoly
b. monopolistic competition
c. predatory pricing
d. oligopolistic competition

The correct answer is: predatory pricing

What is meant by predatory pricing?
Select one:
a. A firm that faces no competitors.
b. Competition that does not fit the definition of perfect competition either because it involves a smaller number of firms or only one firm, or products that aren't identical.
c. Removing government controls over setting prices and quantities in certain industries.
d. When an existing firm uses sharp but temporary price cuts to discourage new competition.

The correct answer is: When an existing firm uses sharp but temporary price cuts to discourage new competition.

What name is given to the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market?
Select one:
a. Barriers to entry
b. Intellectual property
c. Trade secrets
d. Copyright

Barriers to entry

What term is used to describe a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time?
Select one:
a. Trademark
b. Copyright
c. Patent
d. Trade secret

patent

When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale,
Select one:
a. the firm is a natural monopoly.
b. there are close substitutes for the good the firm produces.
c. firm is a single-price monopoly.
d. firm is well protected from competition by a legal barrier.

The correct answer is: the firm is a natural monopoly

Which of the following is most likely to be a monopoly?
Select one:
a. local fast-food restaurant
b. local electricity distributor
c. local bathroom fixtures shop
d. local television broadcaster

The correct answer is: local electricity distributor