Exam 10: Market Power

Use Figure: Payoff Matrix Shell and BP II. The figure shows the payoff matrix where the hypothetical daily profits of BP and Shell (in millions of dollars) depend on each other's decision about whether to lower prices. If each firm follows its dominant strategy, then BP's payoff would be _____, and Shell's payoff would be: ​ Figure: Payoff Matrix Shell & BP II

For a monopolist, which one of the following variables can take a negative value?

Which one of the following statements is true about a monopolistically competitive market?

In both perfectly competitive markets and monopolistically competitive markets, there is free entry and exit, and there are many firms. Why does a firm in a perfectly competitive market have a horizontal demand curve, while a firm in a monopolistically competitive market has a downward-sloping demand curve?

Use Figure: Demand for Gasoline. The figure shows the demand curve for gasoline in a small town that has only one provider, which therefore is a monopolist. The total revenue to the monopolist from selling three gallons is: ​ Figure: Demand for Gasoline

Use Figure: Monopoly Profit-Maximization and Deadweight Loss. The figure shows the demand curve, marginal revenue curve, marginal cost curve, and average total cost curve that are facing a monopolist. Suppose that the firm is operating at its profit-maximizing point. Given this, the total revenue from selling the profit-maximizing level of output is: ​ Figure: Monopoly Profit-Maximization and Deadweight Loss

Use Figure: Profit-Maximizing Quantity and Price. The figure depicts the demand curve, marginal revenue curve, and marginal cost curve that are facing a monopolist. Assume that the monopolist is operating at its profit-maximizing point. If the total profit of the monopolist is $200, then the total cost of production is: ​ Figure: Profit-Maximizing Quantity and Price

Use Figure: Monopoly Profit Maximization. The figure shows the demand, marginal revenue curve, marginal cost curve, and average total cost curve that are faced by a monopolist. The profit-maximizing price for the monopolist is _____, and the profit-maximizing quantity is _____ units. ​ Figure: Monopoly Profit Maximization

Firms in a perfectly competitive market have:

Which of the following statements is FALSE for a monopolist that practices perfect price discrimination?

Which one of the following is NOT a characteristic of monopolistically competitive markets?

Which of the following statements is FALSE for a monopolistically competitive firm in the long run?

In the long run, the price of a good that is sold by a monopolistically competitive firm is equal to the _____ cost of production.

Use Figure: Payoff Matrix Alpha and Beta Motors I. The figure shows the payoff matrix where the hypothetical daily profits of Alpha Motor and Beta Motor (in millions of dollars) depend on each other's decision about whether to hold onto its inventories or release them at a discount at the end of the year. If both firms follow their dominant strategy, then Alpha Motor's payoff will be _____, and Beta Motor's payoff will be: ​ Figure: Payoff Matrix Alpha and Beta Motors I

Use Figure: Monopoly Profit-Maximization and Deadweight Loss. The figure shows the demand curve, marginal revenue curve, marginal cost curve, and average total cost curve that are facing a monopolist. Suppose that the firm is operating at its profit-maximizing point. Given this, the total cost of producing the profit-maximizing level of output is: ​ Figure: Monopoly Profit-Maximization and Deadweight Loss

Which one of the following situations can create a natural monopoly?

Suppose that a firm in a monopolistically competitive market is operating at its profit-maximizing point in the long run. The firm has a total revenue of $800 and sells 50 units of output. Given this, we can conclude that the average total cost of the firm is _____ and the price of the good is:

In which of the following types of markets does the business strategy of each firm affect the other firms in the market?

Suppose that a monopolist is operating at its profit-maximizing point. If the marginal revenue at this point is $4, the price is $12, and the profit per unit is $6, then the marginal cost is _____, and the average total cost is:

Suppose that a firm in a monopolistically competitive market is operating at its profit-maximizing point in the long run. The firm has an average total cost of $8 and produces 100 units of output. Given this, we can conclude that the total revenue of the firm is _____ and the price that it charges is: