Economics Homework 5 Recap

  _____ firms have the MOST market power.

•     Monopolistic

•  Duopolistic

• Oligopolistic

• Monopolistically competitive

  A(n) ______ exists when increasing returns to scale provide a large cost advantage to a single firm that produces all of an industry's output.

•     Oligopoly

•   Competitive equilibrium

•     Legal monopoly

• Natural monopoly

Most electric, gas, and water companies are examples of _____ monopolies.

• Unregulated

•   Natural

•   Restricted-Input

• Sunk-Cost

You own an orange juice stand in a competitive market, and so you are a price-taking firm. Which event would MOST likely increase your market power?

• The government abolishes the system of patents and copyrights.

• A booming economy increases the demand for orange juice and attracts entry into the market.

• The average total cost curve for firms in the industry becomes horizontal.

• You acquire exclusive rights to harvest oranges from all domestic citrus orchards.

  If Penelope, a monopolist, is producing a quantity where MC > MR, then profit?

•     Is maximized.

•   Is maximized only if MC = P.

•     Can be increased by increasing production.

• Can be increased by decreasing production.

  A monopolist responds to an increase in marginal cost by _____ price and _____ output.

• Increasing; Decreasing

•   Increasing; Increasing

•   Decreasing; Increasing

• Decreasing; Decreasing

One government policy sometimes used to address natural monopolies is to?

•   Set a price floor to eliminate deadweight loss.

•     Impose a price ceiling to reduce economic profit.

• Break up a natural monopoly into smaller firms.

•   Increase taxes considerably to reduce economic profit.

A doctor charges an insured patient $12,000 for a surgical procedure and an uninsured patient $5,000 for the same procedure. This is an example of?

•   Price Elimination.

• Price Domination.

• Price Discrimination.

• Competitive Pricing.

A perfectly price-discriminating monopolist produces?

•     Less than a non-price-discriminating monopolist.

•   More than a non-price-discriminating monopolist but less than a perfectly competitive industry.

•     Less than a monopolist that practices price discrimination but not perfect price discrimination.

• The same amount as a perfectly competitive industry.

What is  Delta Airlines price discriminates by charging higher prices to business travelers than to vacation travelers. This pricing strategy reflects the fact that business travelers' _____ air travel is more _____ than that of vacation travelers.

•   Demand for; Elastic

• Demand for; Inelastic

• Supply of; Elastic

• Supply of; Inelastic