MicroEcon Exam 3 SG

Refer to the graph for a profit maximizing monopolist. At equilibrium, the firm will be earning

• zero profits

• positive profits

• negative profits

• profits that cannot be determined from the given graph.

A pure monopolist is producing an output such that ATC = $9, P = $11, MC = $5, MR = $6, and AVC = $4.50. This firm is realizing

• an economic profit that could be increased by producing less output.

• an economic loss that could be reduced by producing more output.

• an economic profit that could be increased by producing more output.

• an economic loss that could be reduced by producing less output.

The Herfindahl index for the industry described in this table is

• 1,600.

• 1,800.

• greater than it would be if there were only four firms in the industry.

• 80. 80.

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the 10th unit of sales per week is

• $9,000.

• $1,000.

• $10,000.

• -$1,000.

The demand curve faced by a monopolistically competitive firm

• is more elastic than the demand curve faced by the purely competitive firm.

• is more elastic than the monopolistic's demand curve.

• will shift outward as new firms enter the industry.

• is less elastic than the monopolistic's demand curve.

Which of the following conditions is not required for price discrimination?

• The good or service cannot be profitably resold by original buyers.

• The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand.

• Buyers with different elasticities must be physically separate from each other.

• The seller must possess some degree of monopoly power.

A monopolistically competitive firm is producing at a short-run output level where average total cost is $13.00, marginal cost is $10.00, marginal revenue is $8.00, and price is $16.00. In the short run, the firm should

• reduce product price.

• make no change in the level of output.

• decrease the level of output.

• increase the level of output.

The economic inefficiency in an oligopoly may be reduced by the following, except

• economic profits used to fund technological advance.

• increased competition from foreign producers.

• aggressive advertising by rivals.

• limit pricing due to potential entrants.

Which of the following statements is correct?

• Product variety and allocative efficiency are complementary; increasing one enhances the other.

• There is no relationship between product variation and allocative efficiency.

• There is a trade-off between product variety and allocative efficiency.

• Greater excess capacity reduces firms' ability differentiate products.

A profit-maximizing monopolist facing the situation shown in the graph should

• continue producing to minimize losses.

• continuing producing to make economic profits.

• shut down in the short run.

• continue producing as long as price is greater than marginal cost.