Chap12MktPwr-1

Chap12MktPwr-1 - Chapter 12: MANAGERIAL DECISIONS FOR FIRMS...

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Chapter 12: MANAGERIAL DECISIONS FOR FIRMS WITH MARKET POWER Multiple Choice 12-1 Which of the following is a characteristic of a monopoly market? a. one firm is the only supplier of a product for which there are no close substitutes b. entry into the market is blocked c. the firm can influence market price d. all of the above 12-2 In a monopoly market, a. other firms have no incentive to enter the market. b. profits will always be positive because the firm is the only supplier in the market. c. the demand facing the firm is downward-sloping because it is the market demand. d . a and b e. none of the above 12-3 A monopolist a. can raise its price without losing any sales because it is the only supplier in the market. b. can earn a greater than normal rate of return in the long run. c. always charges a price that is higher than marginal revenue. d. both a and b e. both b and c 12-4 A firm with market power a. can increase price without losing all sales. b. faces a downward-sloping demand curve. c. is the only seller in a market. d. both a and b e. all of the above 12-5 One method of measuring the extent of a firm's market power is a. the Lerner index. b. price elasticity of demand for the firm's product. c. income elasticity of demand for the firm's product. d. both a and b e. all of the above 12-6 In a monopolistically competitive market, a. firms are small relative to the total market. b. no firm has any market power. c. there is easy entry and exit in the market. d. a and b e. a and c 12-7 Which of the following would indicate a relatively large amount of market power? a. Highly price elasticity demand b. Low cross-price elasticity with other products c. Low Lerner index d. all of the above e. none of the above 228
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12-8 A monopolistic competitor is similar to a monopolist in that a. both have market power. b. both earn positive economic profit in the long run. c. both produce the output at which long-run average cost is at a minimum. d. a and b e. all 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 12-9 What is marginal revenue for a price decrease from $50 to $40? a. $9,000 b. $24,000 c. $30 d. $20 e. $40 12-10 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 229
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The next two questions refer to the following figure showing demand and marginal revenue for a monopoly. 2 0 0 3 0 0 4 0 0 5 0 0 0 1 0 0 1 5 5 2 0 2 5 3 5 1 0 3 0 D em and and m arginal revenue (dollars) O u t p u t $ Q M R D 12-11 At any price above $______ demand is elastic. a. $5 b. $10 c. $15 d. $20 e. zero 12-12 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 12-13 In a monopolistically competitive market, a. a firm has market power because it produces a differentiated product.
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Chap12MktPwr-1 - Chapter 12: MANAGERIAL DECISIONS FOR FIRMS...

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