MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Size: px
Start display at page:

Download "MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question."

Transcription

1 Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A) a product for which there are no close substitutes. B) a single firm. C) barriers to entry. D) all of the above 2) Natural monopolies occur when there are 2) A) external economies. B) diseconomies of scale. C) economies of scale. D) natural resources involved. 3) A single-price monopolist's demand curve is 3) A) more elastic than the market demand curve. B) its marginal revenue curve. C) the same as the market demand curve. D) perfectly elastic. 4) Which of the following is a characteristic of a single-price monopoly? 4) A) There are many close substitutes for the firm's product. B) Demand is perfectly elastic. C) Price exceeds marginal revenue. D) The firm is a price taker. 5) For a single-price monopolist, marginal revenue is less than price because 5) A) total revenue always decreases as output increases. B) the price does not have to be lowered on all previous units sold. C) the revenue gain from the last unit sold is offset by further gains in price on units not sold at all. D) the revenue gain from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price. 6) Which of the following statements applies to a single-price monopolist? 6) A) In order to maximize profits, the monopolist should produce where its demand is unit elastic. B) In order to maximize profits, the monopolist should only produce an output in the inelastic range of its supply. C) In order to maximize profits, the monopolist should only produce an output that lies in the elastic range of its demand. D) In order to maximize profits, the monopolist should only produce an output that lies in the inelastic range of its demand. 7) Which of the following is a characteristic of monopoly in the long run? 7) A) Economic profits can exist. B) Economic profits are driven to zero so that the firm earns only a normal profit. C) Price equals marginal revenue. D) Price equals marginal cost. 8) A single-price monopolist maximizes profits by producing the output at which 8) A) marginal cost equals average cost. B) marginal revenue equals marginal cost. C) price equals marginal cost. D) price equals marginal revenue. 9) Which of the following is ALWAYS true for a single-price monopolist in equilibrium? 9) A) P > MC B) MR = MC C) P > MR D) All of the above are always true.

2 10) A profit maximizing single-price monopolist charges a price equal to 10) A) the price consumers are willing and able to pay for the profit maximizing quantity. B) marginal revenue. C) average total cost. D) the price necessary for the firm to earn a normal return on its investment. 11) The figure above shows the demand and cost curves for a single-price monopolist. What level of output maximizes the firm's economic profit? 11) A) 50 units B) 0 units C) 30 units D) 20 units 12) The figure above shows the demand and cost curves for a single-price monopolist. What price will the firm charge? 12) A) $20 per unit B) $50 per unit C) $10 per unit D) $30 per unit 13) The figure above shows the demand and cost curves for a single-price monopolist. What economic profit does this firm earn? 13) A) $200 B) $600 C) $400 D) zero Price (dollars per unit) Quantity (units per day) Total cost (dollars) ) The table above shows the demand and costs for a single-price monopolist. The firm maximizes its profits by selling 14) A) 0 units. B) 20 units C) 60 units D) 40 units. 15) The table above shows the demand and costs for a single-price monopolist. The firm can maximize its profits by setting its price at 15) A) $35 per unit. B) $45 per unit. C) $30 per unit. D) $40 per unit. 16) The table above shows the demand and costs for a single-price monopolist. The maximum economic profit this firm can earn equals 16) A) $1,390. B) $2,400. C) $1,580. D) $1,550.

3 17) Why can a monopoly earn an economic profit in the long run? 17) A) Because there are close substitutes for the firm's product. B) Because there is only a single firm in the market. C) Because the firm is protected by barriers to entry. D) ALL of the above are reasons why a monopoly can earn an economic profit in the long run. Use the figure below to answer the following question(s). Figure ) Refer to Figure What is the profit-maximizing output level for this monopolist? 18) A) 1 1/2 units per day. B) 3 units per day. C) 4 units per day. D) 5 1/2 units per day. E) 5 units per day. 19) Refer to Figure What price will the monopolist charge in order to maximize profit? 19) A) $6. B) $5. C) $4. D) $3. E) $7. 20) Refer to Figure At the profit-maximizing price and output, the total revenue is 20) A) $21. B) $16. C) $7. D) $18. E) $10. 21) Refer to Figure At the profit-maximizing price and output, the total cost is 21) A) $8. B) $6. C) $14. D) $18. E) $22. 22) Refer to Figure The total profit for this monopolist is 22) A) $9. B) $1. C) $3. D) $0. E) impossible to compute without more information concerning the fixed costs. 23) Refer to Figure The monopolist would not shut down the firm since, at the profitmaximizing output, the price is greater than the 23) A) average fixed cost. B) marginal revenue. C) average variable cost. D) average total cost. E) marginal cost.

4 24) Refer to Figure At the profit-maximizing output level 24) A) the efficiency of the resource allocation is assured since profit is maximized. B) the resource allocation is inefficient in the economy since the price exceeds the marginal cost. C) the resource allocation is efficient in the economy since the marginal revenue equals the marginal cost. D) the resource allocation is efficient in the economy since the price is less than the highest price some buyers would be willing to pay. E) the efficiency of the resource allocation is assured since cost is minimized. 25) Four monopolists were overheard talking at an expensive restaurant. Which one of their statements below contains a correct strategy for maximizing profits? 25) A) "I think cost minimization is the key to maximizing profits." B) "I don't really keep close tabs on total profits, but I don't approve any business deal unless it increases my revenue more than it increases my costs." C) "In my company, we don't increase output unless we know that the larger output will raise total revenue." D) "We try to make the most of our equipment by producing at maximum capacity." E) None of the above. 26) Relative to a perfectly competitive industry with the same cost and demand curves, a single-price monopolist produces 26) A) less output and has a lower price. B) less output and has a higher price. C) more output and has a lower price. D) more output and has a higher price. 27) The deadweight loss from monopoly represents 27) A) a loss to society of consumer and producer surplus. B) the consumer surplus captured by the monopolist. C) the lost profits of output not produced. D) the benefit to society of output not produced. 28) The creation of a monopoly results in gains to 28) A) consumers at the expense of producers. B) producers at no expense to consumers. C) consumers at no expense to producers. D) producers at the expense of consumers. 29) Rent seeking is best defined as 29) A) attempts by landlords to get tenants. B) attempts by owners of a monopoly to sell the firm. C) attempts to achieve monopoly power and the resulting economic profit. D) attempts by individuals to avoid paying taxes. 30) Which of the following is necessary for a monopolist to price discriminate between groups? 30) A) A customer from one group cannot resell to a customer in another group. B) The groups have different average willingness to pay. C) The groups are easily identifiable. D) ALL of the above conditions are necessary for the monopolist to price discriminate. 31) Price discrimination is the practice of charging different prices to 31) A) different countries because of tariffs and transportation costs. B) different customers even though cost of selling to each is the same. C) the same customers because of changes in cost. D) different customers because the costs of selling are different. 32) Compared to a single-price monopolist, a price-discriminating monopolist 32) A) produces more output. B) generates a larger deadweight loss. C) produces the same amount of output but charges a higher price. D) produces less output but charges a lower price.

5 33) If a monopolist can perfectly price discriminate, it will 33) A) produce until price elasticity of demand equals one. B) charge a different price for every unit sold. C) not be concerned with the market demand. D) charge the same price for each unit sold. 34) Which of the following is true about a perfect price discriminating monopolist? 34) A) There is no consumer surplus. B) There is zero economic profit. C) There is inefficiency. D) All consumers pay marginal cost. Use the figure below to answer the following question(s). Figure ) Consider Figure Suppose we have a market with perfect competition. If the slanted-barred area shows the consumer surplus, and the vertical-barred area shows the producer surplus, which graph(s) correctly represents this market? 35) E) (b) and (d). 36) Consider Figure Suppose we have a market with a single-price monopolist. If the slantedbarred area shows the consumer surplus, and the vertical-barred area shows the producer surplus, which graph(s) correctly represents this market? 36) E) (b) and (c). 37) Consider Figure Suppose we have a market with a two-price monopolist. If the slantedbarred area shows the consumer surplus and the vertical-barred area shows the producer surplus, which graph(s) correctly represents this market? 37) E) (b) and (d).

6 38) Consider Figure Suppose we have a market with a perfect price-discriminating monopolist. If the slanted-barred area shows the consumer surplus and the vertical-barred area shows the producer surplus, which graph(s) correctly represents this market? 38) E) None of the graphs. Use the figure below to answer the following question(s). Figure ) Refer to Figure This figure represents a natural monopoly since 39) A) positive profits will be made. B) the sellers of electricity can price discriminate between residential users of electricity and business users of electricity. C) the average and marginal costs decline throughout the relevant range of demand. D) marginal revenue is declining over the relevant range. E) the demand faced by the firm is downward sloping. 40) Refer to Figure The profit-maximizing output of electricity is 40) A) 300 kwh. B) 100 kwh. C) 500 kwh. D) 200 kwh. E) 400 kwh. 41) Refer to Figure The profit-maximizing price charged per kwh would be 41) A) $0.50. B) $0.90. C) $0.40. D) $0.70. E) $ ) Refer to Figure The output of electricity that would be allocatively efficient is 42) A) 400 kwh. B) 200 kwh. C) 500 kwh. D) 100 kwh. E) 300 kwh.

7

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is

More information

Economics 103h Fall 2012: Part 1 of review questions for final exam

Economics 103h Fall 2012: Part 1 of review questions for final exam Economics 103h Fall 2012: Part 1 of review questions for final exam This is the first set of review questions. The short answer/graphing go through to the end of monopolistic competition. The multiple

More information

Intermediate Microeconomics. Chapter 13 Monopoly

Intermediate Microeconomics. Chapter 13 Monopoly Intermediate Microeconomics Chapter 13 Monopoly Non-competitive market Price maker = economic decision maker that recognizes that its quantity choice has an influence on the price at which it buys or sells

More information

12 MONOPOLY. Chapter. Key Concepts

12 MONOPOLY. Chapter. Key Concepts Chapter 12 MONOPOLY Key Concepts Market Power Monopolies have market power, the ability to affect the market price by changing the total quantity offered for sale. A monopoly is a firm that produces a

More information

LECTURE #13: MICROECONOMICS CHAPTER 15

LECTURE #13: MICROECONOMICS CHAPTER 15 LECTURE #13: MICROECONOMICS CHAPTER 15 I. WHY MONOPOLIES ARISE A. Competitive firms are price takers; a Monopoly firm is a price maker B. Monopoly: a firm that is the sole seller of a product without close

More information

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a

More information

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination CHAPTER CHECKLIST Monopoly Chapter 13 1. Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly. 2. Explain how a single-price monopoly determines its

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 12 Monopoly - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Unregulated monopolies A) cannot change the market quantity.

More information

5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal.

5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal. Chapter 12 monopoly 1. A monopoly firm is different from a competitive firm in that A) there are many substitutes for a monopolist's product but there are no substitutes for a competitive firm's product.

More information

Summary Chapter 12 Monopoly

Summary Chapter 12 Monopoly Summary Chapter 12 Monopoly Defining Monopoly - A monopoly is a market structure in which a single seller of a product with no close substitutes serves the entire market - One practical measure for deciding

More information

Microeconomics Instructor Miller Practice Problems Monopolistic Competition

Microeconomics Instructor Miller Practice Problems Monopolistic Competition Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.

More information

Pre-Test Chapter 22 ed17

Pre-Test Chapter 22 ed17 Pre-Test Chapter 22 ed17 Multiple Choice Questions 1. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB. 2. For a pure

More information

Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

More information

Eco 200 Group Activity 4 Key Chap 13 & 14 & 15

Eco 200 Group Activity 4 Key Chap 13 & 14 & 15 Eco 200 Group Activity 4 Key Chap 13 & 14 & 15 Chapter 13: 1. 4 th Edition: p. 285, Problems and Applications, Q4 3 rd Edition: p. 286, Problems and Applications, Q4 a. The following table shows the marginal

More information

Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003

Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003 Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003 Answers to Problem Set 10 Chapter 15 1. The following table shows revenue, costs, and profits, where quantities

More information

Practice Questions Week 8 Day 1

Practice Questions Week 8 Day 1 Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants

More information

Test 3: April 5, 2002

Test 3: April 5, 2002 Test 3: April 5, 2002 Multiple Choice 50 points (1 each) Answer the questions on the Scantron sheet. Select the best answer for each question. (See answers on the last page) 1. If the supply curve shifts

More information

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision

More information

Find the competitive equilibrium. The competitive equilibrium is where supply equals demand. Since MC=S, where MC = 2Q/3

Find the competitive equilibrium. The competitive equilibrium is where supply equals demand. Since MC=S, where MC = 2Q/3 Problem Set #13-Key Sonoma State University Economics 305-Intermediate Microeconomic Theory Dr. Cuellar (1) Consider the following demand and cost functions for a monopolistic firm. The industry demand

More information

Monopoly. Problem 1 (APT 93, P3) Sample answer:

Monopoly. Problem 1 (APT 93, P3) Sample answer: Monopoly Problem 1 (APT 93, P3) A single airline provides service from City A to City B. a) Explain how the airline will determine the number of passengers it will carry and the price it will charge. b)

More information

MPP 801 Monopoly Kevin Wainwright Study Questions

MPP 801 Monopoly Kevin Wainwright Study Questions MPP 801 Monopoly Kevin Wainwright Study Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The marginal revenue facing a monopolist A) is

More information

A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost. 1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

More information

Econ 101 Kong CMP final review session - solution 2014 fall. Benji Huang

Econ 101 Kong CMP final review session - solution 2014 fall. Benji Huang Econ 101 Kong CMP final review session - solution 2014 fall Benji Huang practice monopoly 1 A monopoly make positive economic profit in the long run because. A) can; barriers to entry prevent other firms

More information

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on

More information

Perfect Competition. Chapter 12

Perfect Competition. Chapter 12 CHAPTER CHECKLIST Perfect Competition Chapter 12 1. Explain a perfectly competitive firm s profit maximizing choices and derive its supply curve. 2. Explain how output, price, and profit are determined

More information

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) A major characteristic of monopoly is A) a single seller of a product. B) multiple sellers of a product. C) two sellers of a product. D) a few sellers

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a

More information

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

More information

Principle of Microeconomics Econ 202-506 chapter 13

Principle of Microeconomics Econ 202-506 chapter 13 Principle of Microeconomics Econ 202-506 chapter 13 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The WaveHouse on Mission Beach in San Diego

More information

Microeconomics Instructor Miller Perfect Competition Practice Problems

Microeconomics Instructor Miller Perfect Competition Practice Problems Microeconomics Instructor Miller Perfect Competition Practice Problems 1. Perfect competition is characterized by all of the following except A) heavy advertising by individual sellers. B) homogeneous

More information

Answers to Text Questions and Problems Chapter 8

Answers to Text Questions and Problems Chapter 8 Answers to Text Questions and Problems Chapter 8 Answers to Review Questions 1. The pure monopolist, the oligopolist, and the monopolistically competitive firm all face downward-sloping demand curves.

More information

Price discrimination by a monopolist

Price discrimination by a monopolist Review Imperfect Competition: Monopoly Reasons for monopolies Monopolies problem: Choses quantity such that marginal costs equal to marginal revenue The social deadweight loss of a monopoly Price discrimination

More information

Monopoly and Perfect Competition Compared

Monopoly and Perfect Competition Compared Monopoly and Perfect Competition Compared I. Definitions of Efficiency A. Technological efficiency occurs when: Given the output produced, the costs of production (recourses used) are minimized. or Given

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Economics 103 Spring 2012: Multiple choice review questions for final exam. Exam will cover chapters on perfect competition, monopoly, monopolistic competition and oligopoly up to the Nash equilibrium

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MBA 640, Survey of Microeconomics Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The "law of demand" states that, other

More information

Econ 111 (04) 2nd Midterm A

Econ 111 (04) 2nd Midterm A Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)

More information

Monopolistic Competition 13A CHAPTER

Monopolistic Competition 13A CHAPTER Monopolistic Competition 13A CHAPTER After studying this chapter you will be able to Define and identify monopolistic competition Explain how output and price are determined in a monopolistically competitive

More information

N. Gregory Mankiw Principles of Economics. Chapter 15. MONOPOLY

N. Gregory Mankiw Principles of Economics. Chapter 15. MONOPOLY N. Gregory Mankiw Principles of Economics Chapter 15. MONOPOLY Solutions to Problems and Applications 1. The following table shows revenue, costs, and profits, where quantities are in thousands, and total

More information

Lecture 8: Market Structure and Competitive Strategy. Managerial Economics September 11, 2014

Lecture 8: Market Structure and Competitive Strategy. Managerial Economics September 11, 2014 Lecture 8: Market Structure and Competitive Strategy Managerial Economics September 11, 2014 Focus of This Lecture Examine optimal price and output decisions of managers operating in environments with

More information

Chapter 13 Perfect Competition

Chapter 13 Perfect Competition Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small

More information

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

More information

ECON 202: Principles of Microeconomics. Chapter 11 Firms in Perfectly Competitive Markets

ECON 202: Principles of Microeconomics. Chapter 11 Firms in Perfectly Competitive Markets ECON 202: Principles of Microeconomics Chapter 11 Firms in Perfectly Competitive Markets Firms in Perfectly Competitive Markets 1. Market Structures. 2. Perfectly Competitive Markets. 3. Maximizing Profit

More information

Perfect Competition and Pure Monopoly

Perfect Competition and Pure Monopoly In the Name of God Sharif University of Technology Graduate School of Management and Economics Microeconomics (for MBA students) 44111 (1393-94 1 st term) - Group 2 Dr. S. Farshad Fatemi Perfect Competition

More information

PART 1: MULTIPLE CHOICE

PART 1: MULTIPLE CHOICE ECN 201, Winter 1999 NAME: Prof. Bruce Blonigen SS#: MIDTERM 2 - Version A Tuesday, February 23 **************************************************************************** Directions: This test is comprised

More information

Firms in Perfectly Competitive Markets

Firms in Perfectly Competitive Markets Chapter 11 Firms in Perfectly Competitive Markets Chapter Outline 11.1 LEARNING OBJECTIVE 11.1 Perfectly Competitive Markets Learning Objective 1 Define a perfectly competitive market, and explain why

More information

LABOR UNIONS. Appendix. Key Concepts

LABOR UNIONS. Appendix. Key Concepts Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of

More information

Problems on Perfect Competition & Monopoly

Problems on Perfect Competition & Monopoly Problems on Perfect Competition & Monopoly 1. True and False questions. Indicate whether each of the following statements is true or false and why. (a) In long-run equilibrium, every firm in a perfectly

More information

Monopoly WHY MONOPOLIES ARISE

Monopoly WHY MONOPOLIES ARISE In this chapter, look for the answers to these questions: Why do monopolies arise? Why is MR < P for a monopolist? How do monopolies choose their P and Q? How do monopolies affect society s well-being?

More information

Unit 7. Firm behaviour and market structure: monopoly

Unit 7. Firm behaviour and market structure: monopoly Unit 7. Firm behaviour and market structure: monopoly Learning objectives: to identify and examine the sources of monopoly power; to understand the relationship between a monopolist s demand curve and

More information

Describe the characteristics of different market structures: perfect competition, monopolistic competition, oligopoly, and pure monopoly

Describe the characteristics of different market structures: perfect competition, monopolistic competition, oligopoly, and pure monopoly www.edupristine.com Describe the characteristics of different market structures: perfect competition, monopolistic competition, oligopoly, and pure monopoly Prerequisite Characteristics of different market

More information

Chapter 6 Competitive Markets

Chapter 6 Competitive Markets Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a

More information

Monopolistic Competition

Monopolistic Competition CHAPTER 13A After studying this chapter you will be able to Monopolistic Define and identify monopolistic competition Explain how output and price are determined in a monopolistically competitive industry

More information

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates

More information

Lab #11. Chapter 11 Perfect Competition

Lab #11. Chapter 11 Perfect Competition University of Lethbridge Department of Economics ECON 1010 Introduction to Microeconomics Instructor: Michael G. Lanyi Lab #11 Chapter 11 Perfect Competition 1) Perfect competition occurs in a market where

More information

Online Review Copy. AP Micro Chapter 8 Test. Multiple Choice Identify the choice that best completes the statement or answers the question.

Online Review Copy. AP Micro Chapter 8 Test. Multiple Choice Identify the choice that best completes the statement or answers the question. AP Micro Chapter 8 Test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. There would be some control over price within rather narrow limits in which market

More information

MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition

MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter 16 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Summary This chapter presents the traditional, idealized model of perfect competition. In it, you will

More information

Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All

More information

Final Exam (Version 1) Answers

Final Exam (Version 1) Answers Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal

More information

Chapter 10. Perfect Competition

Chapter 10. Perfect Competition Chapter 10 Perfect Competition Chapter Outline Goal of Profit Maximization Four Conditions for Perfect Competition Short run Condition For Profit Maximization Short run Competitive Industry Supply, Competitive

More information

ECMC02H Intermediate Microeconomics - Topics in Price Theory

ECMC02H Intermediate Microeconomics - Topics in Price Theory 1 ECMC02H Intermediate Microeconomics - Topics in Price Theory Term Test October 19, 2009 Professor Gordon Cleveland Time: 80 minutes ANSWERS TO THE TEST QUESTIONS ARE SHOWN BELOW EACH QUESTION. DIFFERENT

More information

How Wages Are Determined in Labor Markets

How Wages Are Determined in Labor Markets ACTIVITY 4-5 How Wages Are Determined in Labor Markets This activity examines how wages and employment are determined in two types of labor s. A perfectly competitive labor is one in which all buyers and

More information

(Perfect) Competition

(Perfect) Competition (Perfect) Competition (Perfect) Competition The model of perfect competition is based on the following assumptions: (Perfect) Competition The model of perfect competition is based on the following assumptions:

More information

Econ 170: Contemporary Economics Spring 2008 Exam 1 / Section F: SOLUTIONS. 1. Production possibilities and opportunity costs of missiles and houses

Econ 170: Contemporary Economics Spring 2008 Exam 1 / Section F: SOLUTIONS. 1. Production possibilities and opportunity costs of missiles and houses Econ 170: Contemporary Economics Spring 2008 Exam 1 / Section F: SOLUTIONS 1. Production possibilities and opportunity costs of missiles and houses The table below shows the tradeoff between different

More information

2. State whether the following statements are true or false, and explain why.

2. State whether the following statements are true or false, and explain why. 1 Chapter 9 Problems 2. State whether the following statements are true or false, and explain why. a. In a perfectly competitive industry the industry demand curve is horizontal, whereas for a monopoly

More information

Monopoly. Examples: Microsoft and Windows, DeBeers and diamonds, your local natural gas company.

Monopoly. Examples: Microsoft and Windows, DeBeers and diamonds, your local natural gas company. Monopoly A monopoly is a firm who is the sole seller of its product, and where there are no close substitutes. An unregulated monopoly has market power and can influence prices. Examples: Microsoft and

More information

國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost

國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost 國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost 1. The short run is the time frame A. during which the quantities of all resources are fixed.

More information

12.1 Why and How Firms Price Discriminate

12.1 Why and How Firms Price Discriminate Chapter 12 Pricing and Advertising 12.1 Why and How Firms Price Why does Disneyworld charge local residents $369 for an annual pass and out-of-towners $489? Why are airline fares less if you book in advance?

More information

1. Suppose demand for a monopolist s product is given by P = 300 6Q

1. Suppose demand for a monopolist s product is given by P = 300 6Q Solution for June, Micro Part A Each of the following questions is worth 5 marks. 1. Suppose demand for a monopolist s product is given by P = 300 6Q while the monopolist s marginal cost is given by MC

More information

Practice Questions and Answers from Lesson III-3: Monopoly

Practice Questions and Answers from Lesson III-3: Monopoly Practice Questions and Answers from Lesson III-3: Monopoly The following questions practice these skills: Explain the sources of market power. Apply the quantity and price affects on revenue of any movement

More information

1 of 18 10/19/ :51 PM

1 of 18 10/19/ :51 PM 1 of 18 10/19/2013 12:51 PM Which of the following is true about a competitive market supply curve? It is horizontal. It is downward-sloping to the right. It is the sum of the marginal cost curves of all

More information

CHAPTER 11 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 1 st Edition (Study Guide 2008)

CHAPTER 11 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 1 st Edition (Study Guide 2008) CHAPTER 11 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 1 st Edition (Study Guide 2008) Chapter Summary This chapter presents the traditional, idealized model of perfect competition.

More information

The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a

The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a In this chapter, look for the answers to these questions: What is a perfectly competitive market? What is marginal revenue? How is it related to total and average revenue? How does a competitive firm determine

More information

1 Monopoly Why Monopolies Arise? Monopoly is a rm that is the sole seller of a product without close substitutes. The fundamental cause of monopoly is barriers to entry: A monopoly remains the only seller

More information

Consumer and Producer Surplus. Consumer and Producer Surplus. Consumer Surplus. Consumer Surplus. Consumer Surplus Individual consumer surplus

Consumer and Producer Surplus. Consumer and Producer Surplus. Consumer Surplus. Consumer Surplus. Consumer Surplus Individual consumer surplus Consumer and Consumer and February 6, 2007 Reading: Chapter 6 Introduction Consumer surplus Producer surplus Efficiency and the gains from trade s 2 Introduction Connections to: Opportunity costs to consumers

More information

Lecture 6 Part I. Markets without market power: Perfect competition

Lecture 6 Part I. Markets without market power: Perfect competition Lecture 6 Part I Markets without market power: Perfect competition Market power Market power: Ability to control, or at least affect, the terms and conditions of the exchanges in which one participates

More information

Multiple Choice Answer Key 1. D 2. C 3. A 4. D 5. A 6. C 7. C 8. D 9. A 10. D. Page 3

Multiple Choice Answer Key 1. D 2. C 3. A 4. D 5. A 6. C 7. C 8. D 9. A 10. D. Page 3 Lab 11 1. The following are four differences between monopoly and perfect competition. Which of these is INCORRECT? A) A monopolist has market power while a perfect competitor does not. B) Unlike a perfectly

More information

Labelling Graph Axis Correctly

Labelling Graph Axis Correctly Labelling Graph Axis Correctly The Industry Price S D The Firm Quantity MC AC AR=MR Output Perfect Competition All of the units are sold at the same price because no single buyer or seller is large enough

More information

Unit 5.3: Perfect Competition

Unit 5.3: Perfect Competition Unit 5.3: Perfect Competition Michael Malcolm June 18, 2011 1 Market Structures Economists usually talk about four market structures. From most competitive to least competitive, they are: perfect competition,

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition

More information

COST OF PRODUCTION & THEORY OF THE FIRM

COST OF PRODUCTION & THEORY OF THE FIRM MICROECONOMICS: UNIT III COST OF PRODUCTION & THEORY OF THE FIRM (C) positive and $0 positive. At zero output, variable costs are zero. 2. Based on the information in the table above, the total cost of

More information

Good Luck writing the Mock Exam!!

Good Luck writing the Mock Exam!! PASS MOCK EXAM FOR PRACTICE ONLY Course: ECON 1000 B Facilitator: Ben Dates and locations of mock exam take up: FRIDAY DECEMBER 11: 10 12 ME 3380 1 3 ME 3380 It is most beneficial to you to write this

More information

Defn. Market power the abiliby of a single economic actor (or small group of actors) to have a substantial influence on market prices.

Defn. Market power the abiliby of a single economic actor (or small group of actors) to have a substantial influence on market prices. Notes for Chapter 15 Monopoly Firms in perfect competition face the most competition. (They have no market power.) Monopolies face the least competition. (They have the most market power.) Defn. Market

More information

Chapter 15: Monopoly WHY MONOPOLIES ARISE HOW MONOPOLIES MAKE PRODUCTION AND PRICING DECISIONS

Chapter 15: Monopoly WHY MONOPOLIES ARISE HOW MONOPOLIES MAKE PRODUCTION AND PRICING DECISIONS Chapter 15: While a competitive firm is a taker, a monopoly firm is a maker. A firm is considered a monopoly if... it is the sole seller of its product. its product does not have close substitutes. The

More information

Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Econ 101: Principles of Microeconomics Chapter 14 - Monopoly Fall 2010 Herriges (ISU) Ch. 14 Monopoly Fall 2010 1 / 35 Outline 1 Monopolies What Monopolies Do 2 Profit Maximization for the Monopolist 3

More information

Chapter 16 Monopolistic Competition and Product Differentiation

Chapter 16 Monopolistic Competition and Product Differentiation Goldwasser AP Microeconomics Chapter 16 Monopolistic Competition and Product Differentiation BEFORE YOU READ THE CHAPTER Summary This chapter develops the model of monopolistic competition. It also discusses

More information

11 PERFECT COMPETITION. Chapter. Key Concepts. Perfectly Competitive Firm s Demand Curve

11 PERFECT COMPETITION. Chapter. Key Concepts. Perfectly Competitive Firm s Demand Curve Chapter 11 PERFECT COMPETITION Key Concepts FIGURE 11.1 Perfectly Competitive Firm s Demand Curve Competition Perfect competition is an industry with many firms, each selling an identical good; many buyers;

More information

Chapter 11 Perfect Competition

Chapter 11 Perfect Competition Chapter 11 Perfect Competition Perfect Competition Conditions for Perfectly competitive markets Product firms are perfect substitutes (homogeneous product) Firms are price takers Reasonable with many firms,

More information

Monopolistic Competition

Monopolistic Competition In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what

More information

AP Microeconomics Unit 5 Problem Set

AP Microeconomics Unit 5 Problem Set Goldwasser AP Microeconomics Unit 5 Problem Set NAME 1. For each of the following, is the industry perfectly competitive? Referring to market share, standardization of the product, and/or free entry and

More information

Pre-Test Chapter 21 ed17

Pre-Test Chapter 21 ed17 Pre-Test Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus

More information

University of Toronto February 18, ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 3

University of Toronto February 18, ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 3 Department of Economics Prof. Gustavo Indart University of Toronto February 18, 2011 SOLUTIONS ECO 100Y INTRODUCTION TO ECONOMICS Midterm Test # 3 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The

More information

1 st Exam. 7. Cindy's cross-price elasticity of magazine demand with respect to the price of books is

1 st Exam. 7. Cindy's cross-price elasticity of magazine demand with respect to the price of books is 1 st Exam 1. Marginal utility measures: A) the total utility of all your consumption B) the total utility divided by the price of the good C) the increase in utility from consuming one additional unit

More information

11 PERFECT COMPETITION. Chapter. Competition

11 PERFECT COMPETITION. Chapter. Competition Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

More information

1. a. What are the three sources of the barriers to entry that allow a monopoly to remain the sole seller of a product?

1. a. What are the three sources of the barriers to entry that allow a monopoly to remain the sole seller of a product? Chapter 15 1. a. What are the three sources of the barriers to entry that allow a monopoly to remain the sole seller of a product? A key resource is owned by a single firm (monopoly resource), the government

More information

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam. , Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR

More information

Chapter 7 Monopoly, Oligopoly and Strategy

Chapter 7 Monopoly, Oligopoly and Strategy Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are

More information

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and

More information

AP Microeconomics Chapter 12 Outline

AP Microeconomics Chapter 12 Outline I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Practice for Perfect Competition Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a defining characteristic of a

More information