Module 8

Question 1

In characteristics of IC, Individual firms have SOME degree of control over the price of the commodity in an industry

Answer 1

true

Question 2

IC arises when an industry’s output is supplied only by only one or a relatively small number of firms.

Answer 2

TRUE

Question 3

Firms may or may not sell differentiated products

Answer 3

true

Question 4

What differences in output allows the firm to have some control over price?

Answer 4

Product discrimination or discernible

Question 5

Sources Of Market Imperfection

Answer 5

Barriers to entry
Existence of significant differences or advantages in cost conditions
Artificial barriers exist when institutions set conditions that hinder the entry of firms in the industry
Patents
Exclusive franchises

Question 6

This gives the inventor exclusive rights to produce, sell, and use the product over a period off time.

Answer 6

Patent

Question 7

Example of Patent

Answer 7

Biotech’s Bio-N

Question 8

These are permits granted to firms to produce a commodity or service.

Answer 8

Exclusive franchise

Question 9

Maynilad and Manila Water;
GMA and ABS-CBN

Answer 9

Exclusive Franchise

Question 10

These are factors that may make it difficult to enter or leave an industry

Answer 10

Barriers to entry

Question 11

KINDS OF Barriers to entry

Answer 11

Artificial and Natural

Question 12

The firm has average and marginal costs that continuously fall as the amount of output increases, this is likely cause of what??

Answer 12

natural monopoly

Question 13

a barrier that exist when institutions set conditions that hinder the entry of firms in the industry.

Answer 13

Artificial

Question 14

Example of Artificial

Answer 14

Patent and exclusive franchise

Question 15

barriers due to the existence of advantages in cost conditions.

Answer 15

Natural

Question 16

demand for commodity may
be too small

Answer 16

natural

Question 17

The firm’s production function may exhibit increasing returns to scale

Answer 17

natural

Question 18

T OR F
Long run average cost curve
shows economies of scale over all profitable output levels.

Answer 18

T

Question 19

(6) Barriers to entry

Answer 19

Brand loyalty
Economies scale
Geographical barriers
Being the first mover
Vertical integration
Patent

Question 20

Consumer attachment to existing products

Answer 20

Brand loyalty

Question 21

Existing firm benefits from lower average costs due to size

Answer 21

Economies of scale

Question 22

firm operating in an imperfect market faces the downward
sloping market supply curve

Answer 22

FALSE; DEMAND

Question 22

No access to suitable location prevents new entry

Answer 22

Geographical barriers

Question 23

Strong position being first to dominate a market

Answer 23

Being first mover

Question 24

No access to suppliers

Answer 24

Vertical integration

Question 24

legal barrier to copying product

Answer 24

Product

Question 25

The firm needs to offer a lower price if it wants to sell more. If it charges a higher price, it will sell less.

Answer 25

true

Question 26

In IC, firms can sell whatever amount it wants at a given price

Answer 26

FALSE, PCM

Question 27

Types of IM

Answer 27

Monopoly Oligopoly

Question 28

single seller exists in an industry.

Answer 28

Monopoly

Question 29

a situation where there are many firms that sell differentiated products.

Answer 29

Monopolistic competition

Question 30

Monopoly competition examples

Answer 30

Jollibee, Angel's burger, Nike, Mcdo...

Question 31

only few sellers in the industry

Answer 31

Oligopoly

Question 32

Types of oligopoly

Answer 32

Pure, Differentiated

Question 33

Firms sell homogenous products

Answer 33

PURE; cement

Question 34

Firms sell diffreentiated products.

Answer 34

Differentiated; cars

Question 35

Marketing strategies for oligopoly

Answer 35

may collude / act independently

Question 36

Monopolist do always earn profits. These firms cannot experience losses.

Answer 36

FALSE; DO NOT

Question 37

It still has to think of the market (i.e., demand).

Answer 37

true

Question 38

monopolist cannot maximize profit at the inelastic portion of the market demand curve.

Answer 38

TRUE

Question 39

The ___ curve is also below the demand curve.

Answer 39

MR

Question 40

Formula for MR

Answer 40

ΔTR / ΔQ

Question 41

Q > 1

Answer 41

TRUE

Question 42

P < MR

Answer 42

FALSE; P is greater than MR

Question 43

P = MR, in IM

Answer 43

No, In PCM

Question 44

MR decreases ___ as fast as the demand curve.

Answer 44

Double

Question 45

Maximum profit is at the largest vertical difference between total revenue TR and total cost TC.

Answer 45

TRUE

Question 46

At maximum vertical difference, the slopes of T___ and ___ are equal.

Answer 46

TR, TC ; MC = MR

Question 47

Firm will produce ____ unless price falls below ____

Answer 47

MR = MC, AVC

Question 48

IN MONOPOLY, P < MR = MC

Answer 48

NO, P IS GREATER THAN!

Question 49

It produces output at MR=MC to maximize profit.

Answer 49

tRUE

Question 50

The MC curve of the monopolist is THE short run supply curve

Answer 50

FALSE ; it does not produce output at the levels where MC = P.

Question 51

MC curve does reflect its price

Answer 51

FALSE

Question 52

The price set by monopolist is greater compared to what would have prevailed under perfect competition.

Answer 52

tRUE;

Question 53

consumers are unable to purchase the commodity implying some ______

Answer 53

WELFARE LOSS

Question 54

level of output under monopoly is also _____ compared to what the firm would have sold under perfect competition.

Answer 54

LOWER

Question 55

A firm under monopoly will operate at P = MC

Answer 55

FALSE: perfect

Question 56

(2) Regulating monopolies

Answer 56

Taxation & price regulatin

Question 57

government can force the monopolist to charge a price that is lower than what it wants.

Answer 57

Price regulation

Question 58

One possibility is to force the monopolist to charge a price equal to its marginal cost.

Answer 58

Marginal cost pricing

Question 59

government can also impose taxes on the monopolist in order to reduce or eliminate its “excess profits”.

Answer 59

Taxation

Question 60

(2) FORMS OF TAXATION

Answer 60

LUMP SUM SPECIFIC TAXES

Question 61

have the effect of raising the fixed costs of the monopolist

Answer 61

fixed

Question 62

will have the effect of raising the average variable and marginal costs of the monopolist

Answer 62

specific taxes