Suppose that a monopolistically competitive firm

Assessment 1 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… 1. Suppose that a monopolistically competitive firm must build a production facility in order toproduce a product. The fixed cost of this facility is FC = $24. Also, the firm has constantmarginal cost, MC = $3. Demand for the product that the firm produces is given by P =27-3Q. Fill in the table below. Some numbers have been filled in for you. Hint: All answers thatyou fill in will be integers (no decimals). Be sure to just type the numbers and do not type indollar signs. Another Hint: It may be best if you print out the table first and fill it in by handand then type in your answers.QuantityofOutput123456789 2. 3. 4. 5. Price Total Cost Average TotalCost TotalRevenue Profits 7.86.45.7 Enter just a number to answer this problem. How many units of output will the firm produceif maximizes its profit?Enter just a number to answer this problem. What price should this firm charge if it wants to maximize itsprofit?Monopolistic competition differs from perfect competition primarily because in monopolistic competition,A) firms can differentiate their products.B) entry into the industry is blocked.C) there are relatively few barriers to entry.The demand facing a monopolistically competitive firm is ________ a monopoly firm and ________ aperfectly competitive firm.A) as elastic as; less elastic than 11/18/2016 8:37 PM Assessment 2 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… 6. 7. 8. 9. B) less elastic than; more elastic thanC) more elastic than; less elastic thanD) more elastic than; as elastic as If firms in a monopolistically competitive industry are earning economic profits, then in the long runA) these firms can continue earning economic profits because entry into the industry is blocked.B) new firms producing close substitutes will enter the industry and this entry will continue untileconomic profits are eliminated.C) new firms producing the exact same product will enter the industry and this entry will continueuntil economic profits are eliminated.D) the government will most likely regulate firms in this industry to reduce these economic profits. For a monopolistically competitive firm in long-run equilibrium,A) the demand curve must intersect the average total cost curve at the ATC curve minimum.B) the demand curve must be tangent to the average total cost curve at the ATC curve minimum.C) at the profit-maximizing quantity, the demand curve must intersect the average total cost curve.D) at the profit-maximizing quantity, the demand curve must be tangent to the average total costcurve.We know that monopolistically competitive firms prevent the efficient use of resources because theyproduce whereA) P > ATC.B) P > MC.C) MR > P.D) P = MC.When monopolistically competitive firms earn ________ economic profits, other firms ________ anindustry in the long run.A) positive; enterB) zero; enterC) negative; enterD) zero; exit 10. Firms will ________ a monopolistically competitive market until ________ are eliminated.A) enter; lossesB) enter; profitsC) exit; short run profitsD) exit; long run profits11. When MR = MC and P = ATC for a monopolistically competitive firm, the firm is inA) short-run disequilibrium.B) long-run disequilibrium.C) long-run equilibrium.12. D) neither short-run nor long-run equilibrium. 11/18/2016 8:37 PM Assessment 3 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… Refer to the graph above, which represents the demand and cost curves for Neat and Trim Barber Shop,a monopolistically competitive firm. The profit-maximizing number of haircuts for the Barber Shop isA) 20B) 23C) 25D) 30E) some value less than 20 13. Refer to the graph again. The profit-maximizing price of haircuts by Neat and Trim isA) $10B) $12C) $14D) $16E) some price less than $1014. If Neat and Trim maximizes profits, it ________ of $80.A) receives a total revenueB) earns a profitC) has a total costD) suffers a loss 15. If Neat and Trim maximizes profits, its ________ equals $320.A) total costB) total revenueC) profitD) variable costE) average costF) marginal costG) marginal revenue16. If Neat and Trim maximizes profits, its ________ is $240.A) total revenueB) total cost 11/18/2016 8:37 PM Assessment 4 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… C) profitD) marginal revenueE) average costF) marginal costG) price 17. Refer to the graph. From society’s point of view, the efficient output level is ______ haircuts.A) 20B) 23C) 25D) 30E) whatever amount of haircuts that occur at the horizontal intercept of the demand function 18. Refer to the graph again. Suppose that the profits or losses incurred by Neat and Trim are a reflection ofthe Barber Shop industry as a whole. In the Barber Shop industry, in the long run,A) firms will continue to earn economic profits.B) firms will enter until all firms earn zero economic profit.C) product demand will become perfectly inelasticD) the government will impose price controls to eliminate any economic profits.19. Suppose that two players are playing the following game. Player A can choose either Top or Bottom, and Player B can choose either Left or Right. The two playerschoose their strategies simultaneously. The payoffs are given in the table, where the number on the leftis the payoff to Player A, and the number on the right is the payoff to Player B.How many possible outcomes are there in this game?A) 2B) 4C) 8D) 16 20. Does Player A have a dominant strategy? If so, what is it?A) Top is a dominant strategy for Player AB) Bottom is a dominant strategy for Player AC) Left is a dominant strategy for Player AD) Right is a dominant strategy for Player AE) There is no dominant strategy for Player A21. Does Player B have a dominant strategy? If so, what is it?A) Top is a dominant strategy for Player BB) Bottom is a dominant strategy for Player BC) Left is a dominant strategy for Player B 11/18/2016 8:37 PM Assessment 5 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… D) Right is a dominant strategy for Player BE) There is no dominant strategy for Player B 22. The following four questions are True/False. The strategy combination of Player A choosing Top andPlayer B choosing Left is a Nash Equilibrium.A) TrueB) False 23. The strategy combination of Player A choosing Top and Player B choosing Right is a Nash Equilibrium.A) TrueB) False 24. The strategy combination of Player A choosing Bottom and Player B choosing Left is a Nash Equilibrium.A) TrueB) False 25. The strategy combination of Player A choosing Bottom and Player B choosing Right is a Nash Equilibrium.A) TrueB) False26. What is the maximin strategy for Player A?A) TopB) BottomC) LeftD) RightE) There is no maximin strategy for Player A27. What is the maximin strategy for Player B?A) TopB) BottomC) LeftD) RightE) There is no maximin strategy for Player B28. Now suppose the same game is played with the exception that Player A moves first and Player B movessecond. Using the backward induction method discussed in the online class notes, what will be theoutcome of the game? Hint: Draw the game tree associated with this situation.A) Player A chooses Top and Player B chooses LeftB) Player A chooses Top and Player B chooses RightC) Player A chooses Bottom and Player B chooses LeftD) Player A chooses Bottom and Player B chooses Right 29. The table shows an industry with 12 firms and the market share (percentage) owned by eachfirm. 11/18/2016 8:37 PM Assessment 6 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… Calculate the HHI for this industry.30.31. If firms F and G decide to merge, what would the new HHI be?If firms C and D decide to merge, what would the new HHI be? (don’t assume that firms F andG have merged from the previous question).The new HHI after firms C and D merge is 32. 33. If firms C and D decide to merge. This merger would be ________ by the FTC because_______.A) challenged, the post merger HHI > 1800B) challenged, the merger would increase HHI by more than 100C) unchallenged, the post merger HHI < 1000D) unchallenged, there are still 11 other firms keeping the industry competitive Which of the following is true about antitrust law? A) The “Rule of Reason” strengthened the Sherman ActB) Antitrust legislation is generally aimed at making markets more concentrated with a smallernumber of firmsC) Antitrust legislation doesn’t have as many important applications today, and this is emphasized bythe fact that the Clayton Act was passed more than 100 years agoD) All actions that reduce competition are deemed illegal according to antitrust law 11/18/2016 8:37 PM Assessment 7 of 7 https://cms.psu.edu/Section/Assessment/Delivery/AssessmentAll.aspx?e… E) The Clayton act makes specific rules about economic actions being illegal if they result in a greatlyreduced amount of competition34. The ________ is the share of industry output in sales or employment accounted for by the top firms in anindustry.A) concentration ratioB) contestability ratioC) competitive indexD) collusive levelE) HHI35. The major distinguishing characteristic of oligopoly is thatA) firms produce differentiated products.B) firms can influence the price of their product.C) entry into the industry easy.D) firms are interdependent. 36. The four largest firms account for approximately 90% of U.S. beer sales. The U.S. beer industry would bebest classified as a(n)A) perfectly competitive industry.B) monopolistically competitive industry.C) oligopoly.D) monopoly.37. Of the following, ________ is the best example of an oligopolistic industry.A) grocery storesB) automobiles productionC) electric powerD) soybean farming 38. Oligopolists must ________ to their strategy in order to determine their optimal strategy.A) anticipate the reaction of their customersB) anticipate the reaction of their rivalsC) both A and B are correct.D) none of the above 11/18/2016 8:37 PM