UNT ECON 1100 EXAM 3

UNT ECON 1100 EXAM 3 A firm gains monopoly power when: - ✔✔barriers to entry can be erected and maintained. A natural monopoly can: - ✔✔supply the entire market at a lower cost than many competing firms. A monopolist ...

UNT ECON 1100 EXAM 3 A firm gains monopoly power when: - ✔✔barriers to entry can be erected and maintained. A natural monopoly can: - ✔✔supply the entire market at a lower cost than many competing firms. A monopolist maximizes short-run profit by producing the level of output where: - ✔✔MR = MC. A monopolist that earns positive economic profit in the short run will: - ✔✔earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in costs or market demand. The graph illustrates an unregulated, profit-maximizing monopolist that cannot price discriminate. Assuming the firm produces the profit-maximizing level of ouput, it will earn total revenue equal to _____ and pay total costs equal to _____. - ✔✔$7,200; $6,000 Suppose MR = MC = $3 at an output level of 2,000 units. If a monopolist produces and sells 2,000 units, charging a price of $6 per unit and incurring average total cost of $5 per unit, the monopolist will earn profit equal to: - ✔✔$2,000. Government addresses the inefficiency associated with monopoly by: - ✔✔restricting market power through antitrust laws and regulation. A monopolistically competitive market is characterized by: - ✔✔many firms, product differentiation, and easy entry in the long run. A firm in a monopolistically competitive market is similar to a monopoly firm in that: - ✔✔both maximize profit by producing the quantity where marginal revenue equals marginal cost. The monopolistically competitive firm represented in the graph is in: - ✔✔long-run equilibrium since it is earning zero profit. Oligopolistic industries are characterized by: - ✔✔a few dominant firms and interdependent decision making. The characteristic that distinguishes oligopoly from the other market models is: - ✔✔interdependence among firms in pricing and output decisions. To be successful in increasing the price of their product, members of a cartel must: - ✔✔restrict market output. Behavior in which a dominant firm's pricing strategy is followed by other firms in the industry is called: - ✔✔price leadership. Game theory assumes that: - ✔✔firms anticipate rival firms' decisions when they make their own decisions. Industry profit is likely to be lowest in an industry that: - ✔✔is a contestable market. Each of the following reflects labor demand as a derived demand except: - ✔✔The demand for the services of a babysitter by new parents Ceteris paribus, an increase in the marginal product of manufacturing workers causes the: - ✔✔demand for labor to shift to the right. The value of the marginal product of labor (VMPL) is the: - ✔✔additional revenue generated from employing one more unit of labor. Ceteris paribus, the demand for farm workers will increase in response to all of the following except an increase in the: - ✔✔wage paid to farm workers. abc manufactoring maximizes profit it will hire - ✔✔4 workers and produces 375 units of outputs An industry dominated by a few large firms whose pricing and output decisions are dependent on one another is: - ✔✔oligopolistic Government deals with imperfect competition by: - ✔✔restricting market power through antitrust laws and regulation natural monopoly can - ✔✔supply the entire market at a lower cost than many competing firms value marginal product of the second worker - ✔✔25 profit maximizing, unregulated monopolist choose a level of output that - ✔✔creates deadweightloss for society because marginal benefit exceeds marginal cost firm that is able to use price discrimination will seek - ✔✔charge customers with more elastic demand at lower price the short run, the best the firm can do is to - ✔✔produce where mr=mc and incur losses equal to 1000 defining characteristic of monopoly market - ✔✔single supplier, unique product, barriers to entry To be successful in increasing prices for their product, members of a cartel: - ✔✔agree to limit their power all of the following are characteristics of a monopolistically competitive market except - ✔✔the firms in the industry engage in interdependent decision making no barriers to entry - ✔✔constant returns to scale behavior in which a dominant firms pricing strategy is followed by other firms in the industry is called - ✔✔price leadership which of the following holds for both monopoly firms and monopolistically competitive firms in a long run equilibrium - ✔✔p>mc