Quiz 6 - Econ 202 KEY

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Quiz 6 - Econ 202 KEY

In general, the quantity of output in an oligopoly market is: lower than in perfect competition. A monopolist maximizes profits by setting the quantity where: marginal revenue equal to marginal cost. Market power is the power to control prices. The above shows the market for a successful price-fixing arrangement (cartel) between two identical firms. When the two firms act like one and charge the same price, the market price will be ________ and each firm will produce and sell a quantity of ________. $10; 200 A benefit to consumers of monopolistically competitive markets is that: consumers have a variety of products from which to choose. When oligopolists collude the results are generally smaller output and higher price The perfectly competitive firm charges a price ____ while the monopoly charges a price ____. equal to marginal cost, greater than marginal cost Which of the following is an assumption of the theory of oligopoly? none of the above A group of firms that coordinate their pricing decisions is called: a cartel. A firm switching from a single price to a price discrimination scheme will ________ the price for the group of consumers with relatively elastic demand and ________ the price for the group of consumers with relatively inelastic demand. decrease; increase Mutual interdependence means that each firm must consider the reactions of its rivals when it determines its price policies To be successful, collusion requires that oligopolists be able to block or restrict the entry of new producers Which of the assumptions in the theory of perfect competition assures us that economic profit will be zero in the long-run? free entry and exit of firms in the market Ownership of a necessary input creates what type of barrier to entry? natural barrier to entry The monopolist's with a linear downward sloping demand curve has a marginal revenue curve that is downward sloping and twice as steep as demand. Monopolistically competitive firms differentiate their products by: all of the above

At the profit maximizing level of production, the above firm will make a positive economic profit. Suppose you operate in a monopolistically competitive market. If you sell your good at a price of $20 and your average cost of production is $15: you should expect competing firms to enter your market and shift the demand curve for your good to the left. Which of the following firms are examples of price discrimination? United Airlines charges customers who book 14 days ahead a lower price than those who don't. 2

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