Imperfect Markets

Assume that the government regulates a monopoly so that it definitely won't have to subsidize the firm. In this case, regulators would set a price equal to:

• Average variable cost

• Average total cost

• Average fixed cost

• Marginal cost

Compared to a perfectly competitive industry, a monopoly’s price and quantity will be which of the following?

• P=Higher; Q=Same

• P=Lower; Q=Same

• P=Lower; Q=Higher

• P=Higher; Q=Lower

What are the main characteristics of oligopoly?

• Few firms, independent, high barriers of entry
• Few firms, interdependent, high barriers of entry 
• Many firms, interdependent, low barriers of entry
• Many firm, independent, low barriers of entry

A monopoly introduces a technological innovation that lowers the marginal cost of production. The price of the good and the quantity are most likely to change in which of the following ways?

• P=Decrease; Q=Increase

• P=Decrease; Q=Decrease

• P=Increase; Q=Increase

• P=Increase; Q=Decrease

If a monopolist wants to sell a larger quantity of its good, it must

• set a higher price

• maintain the current price

• set a lower price

• implement new technology

In a normally functioning monopoly, if the firm's total revenue is falling, it marginal revenue must be

• positive

• negative

• zero

• greater than TR

A formal organization of sellers or producers who cooperate on the production, pricing, and marketing of a product

• Imperfect competition

• Monopoly

• Cartel

• Market structure

What is the main difference between the profit-maximizing actions a perfectly competitive firm can take and those a monopoly can take?

• Perfectly competitive firms maximize profits where MC=MR while monopolies do so where P=MC

• they both face downward-sloping demand curves but a perfectly competitive firm's demand is inelastic

• a monopoly chooses the highest possible price while a perfect competitor chooses the lowest

• a competitive firm can only change output, monopoly can change output or price

Offering a senior citizen discount is an example of

• Perfect price discrimination.

• Illegal collusion

• 3rd degree price discrimination.

• Product differentiation

The cartel model of oligopoly predicts that: 

• all the firms in the industry act in unison to set a monopoly price 
• each producer acts independently of others 
• firms follow the low-price firm in the industry
  
• differences in cost of production discourage individual firms from cheating