Business Finance - Economics Chapter 9 &10 Assignments Principles of Economics
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Ch910.docxCh 9& 10
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Q. 1 |
List the characteristics of monopolistic competition.
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Q.2 |
Explain why monopolistic competitors earn only a normal profit in the long run.
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Q.3 |
Explain why monopolistic competition delivers neither productive nor allocative efficiency.
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Q.4 |
Relate how the ability of monopolistic competition to deliver product differentiation helps to compensate for its failure to deliver economic efficiency.
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Q. 5 |
Describe the characteristics of oligopoly.
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Q.6 |
Discuss how game theory relates to oligopoly.
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Q. 7 |
Explain the models of oligopoly pricing and output: kinked-demand theory, collusive pricing, and price leadership three main.
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Q.8 |
Contrast the potential positive and negative effects of advertising.
Q.9. What is the relationship between product differentiation and monopolistic competition?
Q.10-How is the perceived demand curve for a monopolistically competitive firm different from the perceived demand curve for a monopoly or a perfectly competitive firm?
Q-11-How does a monopolistic competitor choose its profit-maximizing quantity of output and price?
Q-12-How can a monopolistic competitor tell whether the price it is charging will cause the firm to earn profits or experience losses?
Q-13-If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
Q-14-Is a monopolistically competitive firm productively efficient? Is it allocatively efficient? Why or why not?
Q-15-Will the firms in an oligopoly act more like a monopoly or more like competitors? Briefly explain.
Q-16-Does each individual in a prisoner’s dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.
Q-17-What stops oligopolists from acting together as a monopolist and earning the highest possible level of profits?
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Ch 11- Monopoly and Antitrust Policy
Q.1-What is predatory pricing? How might it reduce competition, and why might it be difficult to tell when it should be illegal?
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Q-2-If public utilities are a natural monopoly, what would be the danger in deregulating them?
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Q-3-If public utilities are a natural monopoly, what would be the danger in splitting them into a number of separate competing firms?
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Q-4-What is cost-plus regulation?
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What is price cap regulation?
Q-5- What is deregulation? Name some industries that have been deregulated in the United States.
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Q-6- What is the goal of antitrust policies?
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Q-7-How do we measure a four-firm concentration ratio? What does a high measure mean about the extent of competition?
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Q-8-How do we measure a Herfindahl-Hirschman Index? What does a low measure mean about the extent of competition?
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QUIZ
Note- Answers are there. Please explain the answers-
1. In moving down the elastic segment of the monopolist's demand curve, total revenue is:
A. Increasing, and marginal revenue is negative
B. Decreasing, and marginal revenue is positive
C. Decreasing, and marginal revenue is negative
D. Increasing, and marginal revenue is positive
Answer: D
2. Suppose that a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:
A. Decreasing price and increasing output
B. Increasing price and decreasing output
C. Decreasing price and leaving output unchanged
D. Decreasing output and leaving price unchanged
Answer: B
3. Which of the following is not a barrier to entry?
A. Patents
B. X-inefficiency
C. economies of scale
D. ownership of essential resources
Answer: B
4. A pure monopolist should never produce in the:
A. elastic segment of its demand curve because it can increase total revenue and reduce total cost by lowering price.
B. inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.
C. inelastic segment of its demand curve because it can always increase total revenue by more than it increases total cost by reducing price.
D. segment of its demand curve where the price elasticity coefficient is greater than one.
Answer: B
5. Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:
A. Marginal cost = demand
B. Marginal revenue = demand
C. Average total cost = demand
D. Marginal cost = marginal revenue
Answer: D
6. Allocative inefficiency due to unregulated monopoly is characterized by the condition:
A. P = MC
B. P = MR
C. P > MC
D. P > AVC
Answer: C
7. If a monopolist produces 100 units of output at a market price of $5 per unit with marginal revenue per unit equaling $4, we would expect that if the monopolist's good was provided under pure competition, quantity would be:
A. Higher than 100 units, price lower than $5, and MR = price
B. Lower than 100 units, price greater than $5, and MR = price
C. Higher than 100 units, price greater than $5, and MR = price
D. Lower than 100 units, price lower than $5, and MR = price
Answer: A
8. X-inefficiency is said to occur when a firm's:
A. Average costs of producing any output are greater than the minimum possible average costs
B. Marginal costs of producing any output are greater than the minimum possible total costs
C. Total costs of producing any output are greater than the minimum possible average costs
D. Short-run costs of producing any output are greater than the long-run costs
Answer: A
9. Other things equal, a price discriminating monopolist will:
A. realize a smaller economic profit than a nondiscriminating monopolist.
B. produce a larger output than a nondiscriminating monopolist.
C. produce the same output as a nondiscriminating monopolist.
D. produce a smaller output than a nondiscriminating monopolist.
Answer: B
10. Price discrimination refers to:
A. selling a given product for different prices at two different points in time.
B. any price above that which is equal to a minimum average total cost.
C. the selling of a given product at different prices that do not reflect cost differences.
D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
Answer: C
