Why can monopolies make long run positive economic profit?

They don't. Monopolies make a normal profit in the long run.

Why is the monopolistically competitive firm's marginal revenue curve below its demand curve?

To sell more products, the firm must lower the price of all of its products.

The competition forces the firm to lower its prices.

The firm's costs are lower than its revenues at each unit of output.

The firm has no rivals, so price is significantly higher than marginal cost.

As output increases, the firm's average total cost of production decreases.

The inelastic range of the demand curve for a monopoly occurs where:

MR is decreasing and TR is decreasing

MR is decreasing and TR is increasing

For a monopolist, Total Revenue is highest when

Marginal Revenue is equal to zero

Marginal Revenue is the highest

The exclusive possession or control of the supply or trade in a commodity or service.

A company that owns 0% of the market share

A company among many other companies

For a non-price discriminating monopoly, the marginal revenue is

negative when the firm is maximizing profit

A perfectly competitive industry is different from a monopoly in that

perfect competition produces the allocatively efficient quantity

monopolies produce a greater quantity

monopolies maximize profit where MC exceeds MR

monopolies have U-shaped average total cost curves

Assume a profit maximizing monopoly was subject to a lump sum tax. Which of the following will occur?

Price and quantity will stay the same

Price will increase and quantity will decrease

Price will increase but quantity will stay the same

The monopoly would produce the socially optimal quantity

If the entire output of a market is produced by a single seller, the firm

Faces perfectly inelastic demand.

Can charge any price it wants and not lose customers.

A barrier to entry is

An obstacle that makes it difficult for new firms to enter a market.

A law established by the government to protect new industries.

A commitment on the part of big business to allow smaller companies to compete.

An obstacle that prevents additional workers from entering an industry, such as a union.

One of the requirements for a monopoly is that

there is a unique product with no close substitutes

there are several close substitutes for the product

the product cannot be produced by small firms

Which is true about monopolies?

The market demand and the firm's demand are the same.

Monopolies always earn an economic profit.

Monopolies have perfectly inelastic demand.

The monopolist's supply curve is the same as the market demand curve.

Zoe's Bakery determines that P < ATC and P > AVC. Zoe should:

continue to operate even though she is taking an economic loss.

continue to operate, as she is making an economic profit.

shut down immediately, as she is taking an economic loss.

raise the price until she has maximized her profits.

What is the difference between perfect competition and monopolistic competition?

In PC, firms produce identical goods, while in MC, firms produce slightly different goods.

PC has a large # of small firms while MC does not.

PC has barriers to entry while MC does not.

In MC, firms produce identical goods, while in PC, firms produce slightly different goods.

PC has no barriers to entry while MC does.

List the four market structures in order from least competitive to most competitive.

Monopoly, Oligopoly, Monopolistic Competition, Perfect Competition

Perfect Competition, Oligopoly, Monopoly, Monopolistic Competition

Monopoly, Monopolistic Competition, Perfect Competition, Oligopoly

The marginal cost curve typically does which of the following?

Decreases and eventually increases.

Decreases at a decreasing rate.

Increases and eventually decreases.

The following table shows the profits associated with the pricing strategies of two oligopolistic firms, Agronomia and Farmingdale. Each firm has two possible strategies: to charge a low price or a high price. The first entry in each cell shows the profits to Agronomia and the second the profits to Farmingdale. If the two firms do not cooperate, what will be the profit for each firm?

Agronomia = $100; Farmingdale = $100

Agronomia = $50; Farmingdale = $100

Agronomia = $150; Farmingdale = $150

Agronomia = $300; Farmindale = $50

E Soda and R Soda are the only two firms in the soft-drink industry. The companies cannot cooperate. Each firm can follow a high-price strategy or a low-price strategy for pricing its product. In the payoff, the first entry in each cell shows the profits to E Soda and the second entry shows the profits to R Soda. It can be concluded that:

Both firms will choose the low-price strategy

neither E Soda nor R Soda has a dominant strategy

E Soda has a dominant strategy but R Soda does not

Both firms will choose the high-price strategy

Assume that Alpha and Beta are the only sellers of a product and they do not cooperate. Each firm has to decide whether to raise the product price. The payoff matrix gives the profits, in dollars, associated with each pair of pricing strategies. The first entry in each cell shows the profits to Alpha, and the second, the profits to Beta. What is the dominant strategy for each firm?

Alpha: Do Not Raise; Beta: Do Not Raise

Alpha: Do Not Raise; Beta: Raise

Alpha: No Dominant Strategy; Beta: Raise

Alpha: Raise; Beta: Do Not Raise

The cartel model of oligopoly predicts that:

all the firms in the industry act in unison to set a monopoly price

each producer acts independently of others

firms follow the low-price firm in the industry

differences in cost of production discourage individual firms from cheating

What is a collusive oligopoly?

Firms that act together to determine price or output

Firms produce homogeneous products

Firms that compete with each other in determining output

Firms that cheat to maximise profits

Game theory is used to explain

strategic behavior of firms in oligopoly

how monopolies evolve into oligopolies

profit maximization in monopoly

price leadership of monopolistic competition

The characteristic of oligopolistic firms that makes them different from all other types of firms is that oligopolistic firms:

Consider each other's decisions

Produce differentiated products

Unit IV: Imperfect Competition

Authored by Jon Hollander

Social Studies

11th - 12th Grade

Used 30+ times

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50 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In this market structure there is only one seller with a unique product

monopoly

perfect competition

monopolistic competition

oligopoly

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The airline industry is most likely in the market structure called

perfect competition

oligopoly

monopolistic competition

monopoly

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In this market structure there are many buyers and sellers with identical products

perfect competition

monopolistic competition

monopoly

oligopoly

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Which of the following is true of monopolists that practice price discrimination?

They charge all customers the same price.

They earn a smaller profit than those that do not practice price discrimination.

They charge customers different prices according to different elasticities of demand.

They produce lower quantities than pure monopolists.

They produce the same quantity of output as pure monopolists.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

In the long run, a monopolistically competitive firm will make

more economic profit than a perfectly competitive firm.

less economic profit than a perfectly competitive firm.

more economic profit than a monopoly.

more economic profit than an oligopolist.

zero economic profit.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Which of the following best characterizes the firms in an oligopoly industry?

Firms can easily enter the industry when profits are high.

There are more firms than in a monopolistically competitive industry.

They are independent.

They always collude to increase profits.

They use strategic decision making.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

What is the Nash Equilibrium?

Both fast-food restaurants should choose to concentrate on fries.

Both fast-food restaurants should choose to concentrate on burgers.

Brewer’s should choose to concentrate on fries, and Royal’s should choose to concentrate on burgers.

Brewer’s should choose to concentrate on burgers, and Royal’s should choose to concentrate on fries.

There is no Nash Equilibrium

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Unit IV: Imperfect Competition

In this market structure there is only one seller with a unique product

The airline industry is most likely in the market structure called

In this market structure there are many buyers and sellers with identical products

Which of the following is true of monopolists that practice price discrimination?

In the long run, a monopolistically competitive firm will make

Which of the following best characterizes the firms in an oligopoly industry?

What is the Nash Equilibrium?

Total revenue is maximized where:

The profit maximizing price and quantity are:

A profit maximizing monopoly will maximize profit where:

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