AP Microeconomics Unit 4 Homework

An industry consists of 100 small firms, and the largest firm accounts for only 2 percent of sales. Brand names are considered a signal of quality. The industry described is best classified as 4MI45.

• monopoly

• perfectly competitive

• monopsonistic

• oligopolistic

• monopolistically competitive

Which of the following is true for a price-discriminating firm?

• The firm charges different prices for different products

• The firm pays more per unit of labor than it pays per unit of capital

• The firm charges different prices to different consumers for the same product

• The firm sells different quantities to its consumers but charges each of them the same price

• The firm pays more per unit of capital than it pays per unit of labor

The graph above shows a firm's cost and revenue curves. This profit-maximizing firm will

• charge a higher price than that necessary to maximize revenues

• have many profit-maximizing price and quantity combinations

• produce where demand is inelastic

• never have a region of falling average total cost

• be unable to increase sales and total revenues by lowering its price

A monopolistically competitive firm advertises in order to 4MI44.

• reduce the industry's barriers to entry

• increase its positive externalities

• make its product more similar to its competitors'

• make the demand for its product less price elastic

• shift the demand curve for its product to the left.

Which of the following statements about the firm whose cost and revenue curves are shown above is correct? 4MI49

• Its profit-maximizing output level is 200 units.

• Its profit-maximizing price is $5.

• Its maximum profit is $4,000.

• If it produces 250 units, it will earn no economic profits.

• At the profit-maximizing level of output, its total cost is $1,000.

A cartel is difficult to maintain for which of the following reasons?

• Individual cartel members are tempted to cheat on the agreement.

• Although the total gain to cartel members is positive, all members lose when everyone sticks to the agreement.

• Some firms will reduce output in an effort to lower costs of production.

• Oligopolistic behavior is generally predictable.

• Consumers substitute away from the good when the price increases.

A firm with market power engages in price discrimination to

• make its demand more elastic

• decrease deadweight loss

• make its demand more inelastic

• increase consumer surplus

• earn a higher profit

When two firms interact in an oligopolistic market, which of the following statements is true?

• If one firm has a dominant strategy, then the other firm does not have a dominant strategy.

• If both firms have dominant strategies, then there is a Nash equilibrium.

• If one firm has a dominant strategy, then the other firm also has a dominant strategy

• Both firms must have dominant strategies

• If one firm has a dominant strategy, then there is no Nash equilibrium.

Which of the following is more likely to occur when there are high barriers to entry in an industry?

• The industry will be characterized by diseconomies of scale

• The firm(s) in the industry earn economic profits in the long run

• The firm(s) in the industry are price takers.

• The firm(s) will charge a price on the inelastic portion of the demand curve.

• The firm(s) in the industry will charge a price equal to average total cost

If the three largest widget producers control 85 percent of the total widget market, then these producers are operating in 4MI42.

• monopolistic competition

• perfect competition

• an oligopoly

• a cartel

• a monopoly