Review_3_Firms_with_Market_Power

Review_3_Firms_with_Market_Power - BA315: Review #3 Ali...

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1 BA315: Review #3 Student Name:________ Ali Emami HW Team #:__________ MANAGERIAL DECISIONS FOR FIRMS WITH MARKET POWER Multiple Choice 7-7 Which of the following would indicate a relatively large amount of market power? a. Highly elasticity demand b. Low cross-price elasticity with other products c. Low Lerner index d. all of the above e. none of the above The next two questions refer to the following table showing a monopolist’s demand schedule: Price Quantity $50 300 40 600 20 800 10 1,000 7-9 What is marginal revenue for a price decrease from $50 to $40? a. $9,000 b. $24,000 c. $30 d. $20 e. $40 7-10 If price falls from $20 to $10, then a. MR = $10, and demand is inelastic. b. MR = $10, and demand is elastic. c. MR = $30, and demand is elastic. d. MR = $30, and demand is inelastic. e. none of the above
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2 The next two questions refer to the following figure showing demand and marginal revenue for a monopoly. 7-11 At any price above $______ demand is elastic. a. $5 b. $10 c. $15 d. $20 e. zero 7-12 If production costs are constant and equal to $10 (i.e., LAC = LMC = $10), what price will the monopoly charge? a. $5 b. $10 c. $15 d. $20 e. $25 7-13 In a monopolistically competitive market, a. a firm has market power because it produces a differentiated product. b. a firm earns economic profits in the long run because it has market power. c. there are a large number of firms. d. both a and b e. both a and c 7-14 Monopolistic competition is similar to perfect competition in that: a. there are a large number of firms b. firms earn economic profits in the long run c. firms face downward-sloping demand curves d. both a and b e. all of the above 200 300 400 500 0 100 15 5 20 25 35 10 30 Demand and marginal revenue (dollars) Output $ Q MR D
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3 7-15 A monopoly is producing a level of output at which price is $80, marginal revenue is $40, average total cost is $100, marginal cost is $40, and average fixed cost is $10. In order to maximize profit, the firm should a. produce more.
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This test prep was uploaded on 04/22/2008 for the course ECON 315 taught by Professor Aliemami during the Spring '08 term at University of Oregon.

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Review_3_Firms_with_Market_Power - BA315: Review #3 Ali...

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