Download REVIEW FOR UNIT 2/3 MICROECONOMICS EXAMINATION Perfect

REVIEW FOR UNIT 2/3 MICROECONOMICS EXAMINATION
Perfect Competition:
1. In a perfectly competitive market how is the price of one product compared
to another similar product?
2. What assumptions lie in a perfectly competitive market model?
3. Who is a price-taker?
4. Can individuals or firms impact prices in this type of market?
5. If price of a product is $5, output is 30 and ATC is $2, what is the firm’s
profit?
6. Can you sketch a graph in a perfectly competitive market where a firm is
making a profit? Where a firm is experiencing a loss?
7. If price is greater than ATC in the short run a perfectly competitive firm will
experience a Loss/Profit?
8. When will a firm choose to shut down in this type of market?
9. What happens to a perfectly competitive market in the short-run if
production costs decrease?
10. Do fixed costs play a role in determining products levels in the short-run?
11. What can be said about fixed costs in the short-run?
12. What can be said about firm’s ability to earn profit in the long run?
13. If the supply curve for a perfectly competitive market is horizontal we can
assume that each industry?
Monopoly:
14. What is the quantity effect and how does it differ from the price effect?
15. How do you figure out marginal revenue for a unit of production, if you have
the following information:
Quantity
Price
Total cost
TOTAL
MARGINAL
REVENUE
REVENUE
1
$550
$1000
$550
550
2
$500
1,075
$1,000
450
3
$450
1,200
$1,350
?????
4
$400
1,375
$1,600
??????
16. Where does the demand curve lie on a monopoly compared to the marginal
revenue curve?
17. In a monopoly what happens to revenue when the quantity effect dominates
the price effect?
18. Check out figure 14-7 to see how a graph would look in a monopoly that is
trying to maximize its profits.
19. If a perfectly competitive market suddenly became a monopoly what would
happen to: price, output, consumer surplus, producer surplus and
deadweight loss?
20. If you are trying to maximize profits and you are selling a product with
inelastic demand, you would charge higher or lower prices?
21. How can a monopoly maintain profits in the long run?
22. What is perfect price discrimination? Pay attention to figure 14-11.
23. How do you calculate the deadweight loss from monopolist’s production, if
you know the demand curve, the MC and the ATC?
24. If a monopolist knows that its price elasticity of demand is greater than one,
what happens if he decreases price?
25. If monopolist perfectly price-discriminates, can you interpret a graph of what
that would look like? (Hint: See 14-6)
Oligopoly:
26. What are the main characteristics of an oligopoly?
27. If a few interdependent firms compete with barriers to entry, this is called?
28. What does the HHI index tells us? What if a firm has an HHI equal to about
10,000, then it is a?
29. How much would a duopoly produce if it were in collusion with another
firm?
30. What does the graph look like of a monopoly in collusion?
31. If two gas stations created a cartel, what factor would set them apart from
one another?
32. When does dominant strategy equilibrium exist in a game?
33. Can you create a payoff matrix and determine what a firm like Coke will do
during the super bowl? To advertise or not?
34. What is antitrust policy?
35. When did monopolies become illegal in the US?
36. Does a firm who is in a cartel have an incentive to break their word and
produce more than the other?
37. If an industry has a HHI of 1,250 would a merger between the two largest
firms be allowed? Why?
Monopolistic Competition:
38. What is the profit margin in the long run in a monopolistic competition?
39. In a monopolistic competition how many firms are producing similar product
and how easy is it to enter the market?
40. What type of market is the florist industry?
41. When the demand is below the ATC in a monopolistic competition the firm is
experiencing a loss/profit in the short run.
42. How is the demand curve in a monopolistic competition?
43. The demand curve in a monopolistic competition is different from a perfectly
competitive market HOW?
44. Monopolistic competition has a marginal cost that equals?
45. A monopolistic competition that is in long run equilibrium would have a
price equal to?
46. If an industry is characterized by excess capacity, this means that the profitmaximizing level is less/more than the level that minimizes ATC.
47. Describe the conditions for profit maximization and the analysis of short-run
equilibrium in a monopoly and for a monopolistically competitive firm.
48. If a monopolistically competitive firm has the same long-run profits as a
perfectly competitive firm, would both be considered efficient?
49. Why is a brand name important to a firm?
50. Which industry type, perfect competition or monopolistic competition
produces the least deadweight loss? Which type is preferred by society?
Possible CRQ:
Can you draw a correctly labeled graph for perfectly competitive firms, monopolies,
oligopolies and monopolistic competitive firms? Each graph should include price,
quantity of output, and areas of economic profits.
What are the relationship between price and marginal revenue for each?
How do profits change in the long run?
Do any of these graphs include deadweight loss? What does that represent?