Microeconomics

10 October 2022
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84 test answers

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A distinguishing feature of an oligopolistic industry is the tension between
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cooperation and self interest.
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A dominant strategy is one that
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is best for the player, regardless of what strategies other players follow.
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An agreement between two duopolists to function as a monopolist usually breaks down because
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each duopolist wants a larger share of the market in order to capture more profit.
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An equilibrium occurs in a game when
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all players follow a strategy that they have no incentive to change.
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As a group, oligopolists would always be better off if they would act collectively
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as a single monopolist.
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As the number of firms in an oligopoly increases, the
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price approaches marginal cost, and the quantity approaches the socially efficient level.
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Copy of In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a
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strategic situation.
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In an oligopoly, each firm knows that its profits
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depend on both how much output it produces and how much output its rival firms produce.
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In order to be successful, a cartel must
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agree on the total level of production and on the amount produced by each member.
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In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a
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strategic situation.
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In the prisoners' dilemma game, self-interest leads
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all are correct
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The equilibrium price in a market characterized by oligopoly is
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lower than in monopoly markets and higher than in perfectly competitive markets.
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The equilibrium quantity in markets characterized by oligopoly is
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higher than in monopoly markets and lower than in perfectly competitive markets.
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The prisoners' dilemma game
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Correctc. has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other.
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The simplest type of oligopoly is
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duopoly.
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When an oligopoly market reaches a Nash equilibrium,
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a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
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Which of the following is a characteristic of monopolistic competition?
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free entry
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A monopolistically competitive market has characteristics that are similar to
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both a monopoly and a competitive firm.
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A concentration ratio
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all are correct
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A monopolistically competitive industry is characterized by
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many firms selling products that are similar but not identical.
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In which of the following market structures is(are) there a large number of sellers?
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(i) monopolistic competition (ii) perfect competition
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A business-stealing externality is
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. the negative externality associated with entry of new firms in a monopolistically competitive market.
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A firm in a monopolistically competitive market faces a
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downward-sloping demand curve because the firm's product is different from those offered by other firms.
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A firm operating in a monopolistically competitive market can earn economic profits in
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the short run but not in the long run.
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A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?
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all correct
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As firms exit a monopolistically competitive market, profits of remaining firms
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rise, and product diversity in the market decreases.
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Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its
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demand curve and its average total cost curve.
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In a long-run equilibrium,
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excess capacity applies to monopolistically competitive firms but not to competitive firms.
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Monopolistic competition is an inefficient market structure because
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it has a deadweight loss, just as monopoly does.
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Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full). This kind of excess capacity is indicative of what kind of market?
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monopolistic competition
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In a perfectly competitive market, one farmer's barley is
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a perfect substitute for another farmer's barley.
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A monopoly produces a product ________ and there ________ barriers to entry into the market.
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with no close substitutes; are
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We know that a perfectly competitive firm is a price taker because
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its demand curve is horizontal.
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How does the demand for any one seller's product in perfect competition compare to the market demand for that product?
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The demand for any one seller's product is perfectly elastic while the market demand curve is downward sloping.
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The rutabaga market is perfectly competitive. Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases. The permanent decrease in demand results in a
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8) Price discrimination occurs when a firm lower price, economic losses by rutabaga farmers, and exit from the market.
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Price discrimination occurs when a firm
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is able to sell different units of a good at different prices.
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A perfectly competitive firm's short-run supply curve is
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its marginal cost curve above the AVC curve.
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A perfectly competitive firm maximizes its profit by producing at the point where
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marginal revenue is equal to marginal cost.
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Suppose that marginal revenue for a perfectly competitive firm is $20 . When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17. Then to maximize its profit in the short run, the firm
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should stay open and incur an economic loss of $20.
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The relationship between marginal revenue and elasticity is
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when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative.
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Consider a perfectly competitive market that was in a long-run equilibrium when a permanent increase in demand occurs. Which of the following will occur as a result?
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i. The existing firms will start to earn an economic profit. ii. New firms will be motivated to enter the market.
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Business stealing externality occurs in which type of market
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Monopolistic competition
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When a firm is able to engage in perfect price discrimination, its marginal revenue curve
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is the same as its demand curve.
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A monopolist can make an economic profit in the long run because of
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barriers to entry.
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Because of the number of firms in monopolistic competition,
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no one firm can dominate the market.
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An example of a firm in monopolistic competition is
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the many Chinese restaurants in San Francisco.
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Financial aid to college students is an example of
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subsidies.
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n the long run, firms in perfectly competitive market produce at a level that is ________ the efficient scale of output.
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equal to
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For a firm in monopolistic competition, the efficient scale is the amount of output at which ________ is a minimum.
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average total cost
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If a monopolistically competitive seller's marginal cost is $3.56, the firm will decrease its output if
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its marginal revenue is less than $3.56.
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When a monopolistically competitive firm's demand curve shifts leftward, what happens to its marginal revenue curve?
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It shifts leftward.
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Product differentiation allows a firm to compete with another firm on the basis of
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quality, price, and marketing.
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A cartel is
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a group of firms acting together to raise price, decrease output, and increase economic profit.
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Even though four firms can profitably sell hotdogs downtown, the government licenses only two firms. This market is a
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legal duopoly.
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In an oligopoly, output is
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somewhere between the output in monopoly and that in perfect competition outcomes
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If a firm, Best Computer Buys, requires its customers to buy software from it whenever the customers purchase a computer, the company's policy is called
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a tying arrangement
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the focus of antitrust legislation is to
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maintain competition
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If two duopolists can stick to a cartel agreement to boost their prices, then both
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make greater economic profits than if they did not collude
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Economists use game theory to analyze strategic behavior, which takes into account
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the expected behavior of others and the recognition of mutual interdependence.
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A distinguishing feature of an oligopolistic industry is the tension between
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cooperation and self interest
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In which of the following markets is economic profit driven to zero in the long run
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monopolistic competition
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Monopolies are socially inefficient because the price they charge is
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above marginal cost
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an outcome in which all players choose the best strategy they can, given the choices of all other players
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a Nash equilibrium
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When a firm's average total cost curve continually declines, the firm is a
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natural monopoly
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The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which
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marginal revenue is equal to marginal cost
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entry into a competitive market by new firms will increase the
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supply of good
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The free entry and exit of firms in a monopolistically competitive market guarantees that
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economic losses, but not economic profits, can persist in the long run.
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excess capacity is
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a characteristic of rising average total cost curves.
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in the long run, each firm in a competitive industry earns
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zero economic profits
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A firm's marginal cost has a minimum value of $50, its average variable cost has a minimum value of $80, and its average total cost has a minimum value of $90. Then the firm will shut down once the price of its product falls below
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$80
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the prisoners dilemma provides insights into the
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disadvantages of not having cooperation
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The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above
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average total cost
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antitrust laws allow the government to
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all of the above are correct
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When consumers are exposed to additional choices that result from the introduction of a new product in monopolistic competitive market,
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a product-variety externality is said to occur
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which of the following goods are not likely to be sold in monopolistically competitive markets?
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Cable Services
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In general, game theory is the study of
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how people behave in strategic situations
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In a market characterized by oligopoly:
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firms will earn the highest profit when they cooperate and behave like a monopolist
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in a game, a dominant strategy is
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the best strategy for a player to follow, regardless of the strategies followed by other players
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as a group, oligopolists would always be better off if they would act collectively
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as a single monopolist.
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The outcome of a colluding oligopoly is
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Same as monopolist
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42) For a monopolistically competitive firm,
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at the profit-maximizing quantity of output, price equals the minimum of average total cost.
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44) In a perfectly competitive market, at the profit‐maximizing level of output,
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a. marginal revenue equals marginal cost.
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45) Patents, copyrights, and trademarks
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a. are examples of government-created monopolies.
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46) Monopolies are socially inefficient because the price they charge is
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b. above demand .