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Exam 14: Market Structure and Market Power

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Question 51

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The basic logic behind the Rational Rule for Sellers is that a company owner should increase output as long as the extra output

A) moves the company toward maximum total revenue.
B) leads to a larger gap between price and average total costs.
C) leads the company toward minimum average total costs.
D) adds more to revenue than it adds to costs.

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Question 52

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Which of the following two market structures are LESS common?

A) Monopoly and perfect competition
B) Perfect competition and oligopoly
C) Oligopoly and monopolistic competition
D) Monopolistic competition and monopoly

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Question 53

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According to the Rational Rule for Sellers, the manager of this company should choose to produce _____ of output and charge a price of _____. $\begin{array} { | l | l | l | l | l | l | } \hline \text { Quantity } & \text { Price } & \begin{array} { l } \text { Total } \\\text { revenue }\end{array} & \begin{array} { l } \text { Total } \\\text { cost }\end{array} & \begin{array} { l } \text { Marginal } \\\text { revenue }\end{array} & \begin{array} { l } \text { Marginal } \\\text { cost }\end{array} \\\hline 1 & \$ 500 & \$ 500 & \$ 400 & \$ 500 & \$ 400 \\\hline 2 & \$ 450 & \$ 900 & \$ 800 & \$ 400 & \$ 400 \\\hline 3 & \$ 400 & \$ 1,200 & \$ 1,200 & \$ 300 & \$ 400 \\\hline 4 & \$ 350 & \$ 1,400 & \$ 1,600 & \$ 200 & \$ 400 \\\hline\end{array}$

If American Airlines purchased all of its competitors to become a monopoly, all else equal, price will _____, and output will _____.

What level of market power exists for sellers in a perfectly competitive market?

The output in a market with market power is

(Figure: The Profit-Maximizing Output and Price in the Diamond Market) Use Figure: The Profit-Maximizing Output and Price in the Diamond Market. Assume that there are no fixed costs and that AC = MC = $200. The profit-maximizing output for a monopolist is:

Why would the owner of the following company decide NOT to produce and sell the fourth unit, even though it adds less to costs than the price he could get for it? $\begin{array} { | l | l | l | l | l | l | } \hline \text { Quantity } & \text { Price } & \begin{array} { l } \text { Total } \\\text { revenue }\end{array} & \text { Total cost } & \begin{array} { l } \text { Marginal } \\\text { revenue }\end{array} & \begin{array} { l } \text { Marginal } \\\text { cost }\end{array} \\\hline 1 & \$ 300 & \$ 300 & \$ 100 & \$ 300 & \$ 100 \\\hline 2 & \$ 250 & \$ 500 & \$ 200 & \$ 200 & \$ 100 \\\hline 3 & \$ 200 & \$ 600 & \$ 300 & \$ 100 & \$ 100 \\\hline 4 & \$ 150 & \$ 600 & \$ 400 & \$ 0 & \$ 100 \\\hline\end{array}$

Which statement BEST describes a condition for the existence of a perfectly competitive market?

(Table: Prices and Demand for New York Rangers Signature Jerseys) Use Table: Prices and Demand for New York Rangers Signature Jerseys. The New York Rangers have a monopoly on Rangers jerseys. The Rangers sell at most 1 jersey to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a jersey is $18, and there are no fixed costs. How much is the Rangers' profit at the profit-maximizing output?

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market

A(n) _____ is an industry with only a small number of producers.

Imperfect competition puts company owners in a position to accomplish different outcomes than perfect competition. Identify five insights about companies operating in imperfectly competitive markets.

(Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The table shows the demand facing Valkyrie and Valkyrie's total costs. The firm's maximum profit is:

How can international trade increase the level of competition in a product market in a country when there are only three producers of the product in that country?

(Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The marginal revenue of the third unit of output is:

Market power determines the shape of a firm's

Which of the following conditions is NOT present in perfect competition?

Which of the following is a characteristic of a perfectly competitive market?

(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company has market power, what price will it charge?