Econ 2302 Midterm Iii

Front 1

In a perfectly competitive market:

Back 1

a. There are many buyers and sellers
b. All the firms sell an identical product
c. It’s easy to enter or exit the market

Front 2

In perfectly competitive markets, firms are price takers: the ________________________
determines the price that prevails for a product

Back 2

Interaction of market supply and market demand

Front 3

The market demand in a perfectly competitive market is _____________ while the demand faced by
a single firm is ____________________________.

Back 3

Downward sloping / perfectly elastic

Front 4

For a perfectly competitive firm, Marginal Revenue ___________________ as quantity supplied
increases.

Back 4

Remains constant

Front 5

To maximize profits, a perfectly competitive firm will produce up to the point where:

Back 5

Marginal Revenue = Marginal Cost

Front 6

In the short run perfectly competitive firms might have economic profits or economic losses.
However, in the long run, firms in a perfectly competitive market:

Back 6

Have zero economic profits

Front 7

In a perfectly competitive market there is a lot of advertising. Firms will use advertising to convince
consumers to switch to their brands.

Back 7

False

Front 8

If firms in a perfectly competitive market have positive economic profits in the short run:

Back 8

New firms will enter the market, driving the price down and eliminating those profits in
the long run

Front 9

Perfect competition is:

Back 9

a. Productively efficient
b. Allocatively efficient

Front 10

We have a monopoly if:

Back 10

a. There’s only a firm in a market, providing a good with no close substitutes
b. There are barriers to entry to the market

Front 11

An example of a barrier to entry into a market is:

Back 11

a. Natural barriers (economies of scale)
b. Ownership of a key resource for the production of a good (like ALCOA with bauxite)
c. Legal restrictions (patents or copyrights)

Front 12

For a monopolist,

Back 12

Price > Marginal Revenue

Front 13

A single price monopolist will always produce in the ____________________ zone of the demand

Back 13

Elastic

Front 14

A single price monopolist maximizes profits where:

Back 14

Marginal Revenue = Marginal Cost

Front 15

Compared to perfect competition, a single price monopolist produces:

Back 15

A lower quantity at a higher price, so there is a deadweight loss

Front 16

When a monopolist price-discriminates:

Back 16

He will sell different units of a good or service for different prices, with such difference in
prices being unrelated to difference in costs

Front 17

To be able to price discriminate, a monopolist has to:

Back 17

a. Identify and separate different types of consumers
b. Make sure that the good can’t be resold

Front 18

If a monopoly can perfectly price discriminate and there’s no rent seeking:

Back 18

a. Every consumer will pay exactly his / her valuation of the product
b. The demand becomes the marginal revenue curve
c. Economic profits are higher than with a single price monopoly
d. Deadweight loss is eliminated