One difference between a perfectly competitive firm and a monopoly is that perfectly competitive firm produces where
marginal cost equals price, while monopolist produces where price exceeds marginal cost
Additional firms often do not try to compete with natural monopoly because
they know they cannot achieve the same low costs that the natural monopolist enjoys
Allowing an inventor to have the exclusive rights to market her new invention will lead to
i) a product that is priced higher than it would be without the exclusive rights
ii) desirable behavior in the sense that inventors are encouraged to invent
iii) hi
i, ii, and iii
Which of the following statements is true about patents and copyrights
i) they have benefits and costs
ii) they lead to higher prices
iii) they enhance the ability of monopolists to earn above-average profits
i, ii, and iii
Which of the following are necessary characteristics of a monopoly
i) the firm is the sole seller of its product
ii) the firm's product does not have close substitutes
iii) the firm generates a large economic profit
iv) the firm is located in a small geog
i and ii
Which of the following statements is true
i) when a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price
ii) when a monopoly firm sells an additional unit of output, its revenue increases by an amount
ii and iii
A reduction in a monopolist's fixed costs would
not effect the profit-maximizing price or quantity
Customers who purchase a book from Dave's Bookstore are charged 20% more than customers who purchase the same book from the Dave's Bookstore website. This is an example of
price discrimination
If firms in a particular market sell identical products, then the market is
i) perfectly competitive
ii) monopolistically competitive
iii) an oligopoly
i
An oligopoly is a market in which
there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market
monopolistic competition is an
inefficient market structure because there is deadweight loss
Consider a monopolistic competitive firm in a market in a long-run equilibrium. This firm is likely earning
no economic profit since it is charging a price equal to its average total cost
Which 2 curves are tangent to each other in a monopolistically competitive market with 0 economic profit
demand and average total cost
In monopolistically competitive markets, economic losses
suggest that some existing firms will exit the market
In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome
i) perfect competition
ii) monopolistic competition
iii) monopoly
i and ii
Like monopolists, oligopolists are aware that an increase in the quantity of output always
reduces the price of their profit
An equilibrium occurs in a game when
all players follow a strategy that they have no incentive to change
What happens when the prisoners' dilemma game is repeated numerous times in an oligopoly market
i) the firms may well reach the monopoly outcome
ii) the firms may well reach the competitive outcome
iii) buyers of the oligopolists' product will likely be w
i and iii
A dominant strategy is one that
is best for the player, regardless of what strategies other players follow
Game theory is important for the understanding of
oligopolies
When strategic interactions are important to pricing and production decisions, a typical firm will
consider how competing firms might respond to its actions