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Flashcards in Test 4 Agricultural Economics Deck (40)
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1

t/f even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices

true

2

t/f the fundamental cause of monopolies is barriers to entry

true

3

t/f the amount of power that a monopoly has depends on whether there are close substitutes for its product

true

4

t/f deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output

true

5

t/f in order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage

true

6

t/f a monopolist that can practice perfect price discrimination will not impose a deadweight loss on society

true

7

t/f a monopolist maximizes profit by producing an output level where marginal cost equals price

false, MR

8

t/f a monopoly creates a deadweight loss to society because it produces less output than the socially efficient level

true

9

t/f by selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits

true

10

t/f the government may choose to do nothing to reduce monopoly inefficiency because the fix may be worse than the problem

true

11

t/f a monopolist produces where P=MC=MR

false, MR

12

patent and copyright laws are major sources of what?

government created monopolies

13

encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for...

government created monopolies

14

a reduction in a monopolist's fixed costs would....

not effect the profit maximizing price or quantity

15

what is the formula for calculating profit for monopolists

P= (price- average total cost) times quantity

16

in reality perfect price discrimination is...

rarely possible

17

what is an example of public ownership of a monopoly

U.S. Postal Service

18

what are the characteristics needed for a monopoly

the firm is the sole seller of the product
the firm's product does not have close substitutes

19

a natural monopoly occurs when...

there are economies of scale over the relevant range of output

20

what is the shape of the monopolist's marginal revenue curve

a downward sloping line that lies below the demand curve

21

when a monopolist is able to sell its product at different prices, it is engaging in...

price discrimination

22

the collection of statutes aimed at curbing monopoly power is called...

antitrust law

23

t/f if firms in a oligopoly agree to produce according to the monopoly outcome, they will produce the same level of output as they would produce in the Nash equilibrium

false, they need to collude

24

t/f if all firms in an oligopoly successfully collude and form a cartel, then total profit for the cartel is equal to what it would be if the market were a monopoly

true

25

t/f all examples of the prisoner's dilemma game are characterized by one and only one Nash equilibrium

false, can be multiple or none

26

t/f in the prisoner's dilemma, one prisoner is always better off confessing, no matter what the other prisoner does

true

27

t/f in the prisoner's dilemma game, confessing is the dominant strategy for each of the players

true

28

t/f the game that oligopolists play in trying to reach the oligopoly outcome is similar to the game that the two prisoners play in the prisoner's dilemma

true

29

t/f when prisoners' dilemma games are repeated over and over, sometimes the threat of penalty causes both parties to cooperate

true

30

why does an agreement between two duoplolists to function as a monopolist usually break down?

each duopolist is wants a larger share of the market in order to capture more profit