Ap Micro corrections

Economic analysis of a monopolistically competitive industry is more complicated than that of pure

competition because:

• the number of firms in the industry is larger

• monopolistically competitive cannot realize an economic profit in the long run

• of product differentiation and consequent product promotion activities

• Monopolistically competitive producers are mutually interdependent in their pricing strategies

Concentration ratios measure

• geographic location of the largest corporation in each industry

• degree to which product price exceeds marginal cost in various industries

• percentage of total sales accounted for by the four largest firms in the industry

• number of firms in an industry

Mutual interdependence means that each oligopolistic firm

• faces a perfectly elastic demand for its product

• must consider the reactions of its rivals when it determines its price policy

• produces a product identical to the products produced by its rivals

• produces a product similar but not identical to the products of its rivals

If the several oligopolistic firms which comprise an industry behave collusively, the resulting price and

output will most likely resemble that of

• regulated monopoly

• monopolistic competition

• perfect competition

• unregulated monopoly

Which of the following is true in the elastic range of the firm’s demand curve

• the firm should expand output to increase economic profits

• an increase in price will also lead to an increase in total costs

• a decrease in the price will likely lead to an increase in total revenue

• . marginal revenue is negative

As a general rule, oligopoly exists when the four-firm concentration ratio:

• exceeds the Herfindahl index

• is less than the Herfindahl index

• is 40% or more

• is 15% or more

A pure monopolist

• will realize an economic profit if price exceeds ATC at the equilibrium output

• will realize an economic profit if price exceeds MR at the equilibrium output

• will realize an economic loss if MC intersects the downsloping portion of MR

• will always realize an economic profit

Unregulated monopolists may earn economic profits in the long run because

• of barriers to entry

• of advertising

• marginal revenue is constant as sales increase

• f rising average fixed costs

A strategy that gives the player the best outcome regardless of the action of the other player is called the:

• Nash Equilibrium

• Dominated strategy

• Dominant Strategy

• prisoner’s dilemma

he combination of strategies for each player, such that each chooses his or her best response to the other’s

choice (hence, there is no incentive to cheat) is called

• Nash Equilibrium

• Dominated strategy

• Dominant Strategy

• prisoner’s dilemma