Econ 122 Final

2 September 2023
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question
If a Florida strawberry wholesaler is in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market.
answer
small; standardized; little, if any
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If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a:
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price-taker.
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If all firms in an industry are price-takers, then:
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an individual firm cannot alter the market price even if it doubles its output.
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In a perfectly competitive industry, the market demand curve is usually:
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downward-sloping.
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In perfect competition, each firm:
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produces a standardized product.
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For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have ________ on prices and beef is a ________ product.
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no noticeable effect; standardized
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The assumptions of perfect competition imply that:
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individuals in the market accept the market price as given.
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Individuals in a market who must take the market price as given are:
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price-takers.
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The perfectly competitive model assumes all of the following except:
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that firms attempt to maximize their total revenue.
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An assumption of the model of perfect competition is:
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many buyers and sellers.
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Which of the following is not an assumption economists make when using the model of perfect competition?
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Each firm sets its price equal to its average total cost.
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The competitive model assumes all of the following except:
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patents and copyrights.
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Perfect competition is characterized by:
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the inability of any one firm to influence price.
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________ almost always take the market price as given, or are considered ________, but this is often not true of ________.
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Consumers and producers; price-takers; firms that produce a differentiated product
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People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for (or sell) food. This situation violates the perfect competition assumption of:
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ease of entry and exit.
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Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe?
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They are all price-takers.
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Marginal revenue:
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equals the market price in perfect competition.
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Firms in the model of perfect competition will:
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increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost.
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For a perfectly competitive firm, marginal revenue:
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is equal to price.
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A wheat farmer operating in the short run produces 100 bushels of wheat. Her average total cost per bushel is $1.75, total revenue is $450, and (total) fixed costs are equal to $100. Then:
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profit per bushel is equal to $2.75.
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Zoe's Bakery determines that P < ATC and P > AVC. Zoe should:
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continue to operate even though she is experiencing an economic loss.
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A perfectly competitive firm is definitely earning an economic profit when:
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P>ATC.
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Suppose Sarah's pottery studio is currently charging the market price that is just higher than her minimum average total cost. This means that Sarah:
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is earning a small economic profit.
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If a perfectly competitive firm is producing a quantity that generates MC > MR, then profit:
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can be increased by decreasing production.
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If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit:
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is maximized.
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If a perfectly competitive firm is producing a quantity that generates P = MC, then profit:
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is maximized.
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In the short run, if AVC < P < ATC, a perfectly competitive firm:
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produces output and incurs an economic loss.
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The shut-down point in the short run is:
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the minimum point of AVC.
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Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total costs of producing candy canes by $0.05. Based on the information given, we can conclude that in the short run a typical producer of candy canes will be making:
answer
negative economic profits.
question
Suppose that the market for haircuts in a community is a perfectly competitive constant-cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long run, we expect that:
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more firms will enter the market, driving the price of haircuts down and the profits of individual firms back down to zero.
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Market structures are categorized by the following two criteria:
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the number of firms and whether or not products are differentiated
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Which of the following is(are) true concerning monopoly?
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All of the statements are true.
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The market structure called ________ is described as having a single producer selling a single, undifferentiated product.
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monopoly
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A monopoly is likely to ________ and ________ than a perfectly competitive firm.
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produce less; charge more
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Because of monopoly, consumers typically have:
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higher prices.
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Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:
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increasing returns to scale.
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If your farm has the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from:
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control of a scarce resource or input.
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The De Beers company is described as a monopolist in the production of:
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diamonds.
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Compared to a perfectly competitive market, a monopolist will produce ________ and charge a ________ price.
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less; higher
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A natural monopoly exists whenever a single firm:
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experiences economies of scale over the entire range of production that is relevant to its market.
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A firm that experiences economies of scale:
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over the entire range of outputs demanded is called a natural monopoly.
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Situations in which the more users of a product there are, the more useful the product becomes are called:
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network effects.
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The demand curve for a monopoly is:
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the industry demand curve.
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Which of the following is a barrier to entry?
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control of scarce resources, economies of scale, and government-created barriers (i.e., patents and copyrights)
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Critics of the National Collegiate Athletic Association (NCAA) argue that the NCAA monopolizes college athletics and prevents student-athletes from earning money while in college. If this is true, what type of entry barrier does the NCAA have?
answer
control of a scarce resource or input
question
Lenoia runs a natural monopoly producing electricity for a small mountain village. The barrier preventing other firms from competing with her is:
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economies of scale.
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Which of the following is not a barrier to entry?
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a ban on certain kinds of advertising
question
Diamond rings are relatively scarce because:
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De Beers limits the quantity of diamonds supplied to the market.
question
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she must charge $20,000 each. The quantity effect of selling the sixth motor home is:
answer
$20,000.
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After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price at which that unit is sold because of:
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a downward-sloping demand curve.
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Suppose a monopoly is producing the level of output where marginal revenue equals marginal cost. If the monopolist reduces output, it:
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can charge a higher price.
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Suppose a monopoly is producing at the profit-maximizing level of output. At that level of output:
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marginal revenue equals marginal cost.
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A monopoly is producing where average total cost equals $30, marginal revenue is $40, and the price is $50. If ATC is at its minimum level and the ATC curve is U-shaped, in order to maximize profits this firm should:
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increase output.
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A monopoly responds to an increase in demand by ________ price and ________ output.
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increasing; increasing
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A monopoly responds to an increase in marginal cost by ________ price and ________ output.
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increasing; decreasing
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If a monopolist is producing a quantity that generates MC > MR, then profit:
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can be increased by increasing price.
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If a monopolist is producing a quantity that generates MC < MR, then profit:
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can be increased by increasing production.
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If a monopolist is producing a quantity that generates MC = MR, then profit: A) is maximized.
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is maximized.
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Public policies toward monopoly in the United States consist of:
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regulation of natural monopolies.
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Because tourist demand for airline flights is relatively ________, small ________ in price will result in relatively ________ in additional tourists.
answer
elastic; reductions; large increases