ECON 204 Final Exam Fall 2017 15. Which of the following market structures is ch
ID: 1130604 • Letter: E
Question
ECON 204 Final Exam Fall 2017 15. Which of the following market structures is characterized by interdependent pricing and output decisions? A. Monopoly B. Oligopoly C. Monopolistic competition. D. Perfect competition. Refer the graph below for Question 16 MC Pm Pc Dernand MR 16. Refer to the graph shown above. Areas B and D represent: A. the loss of surplus by consumers resulting from a monopoly. loss to society from a monopoly. C. consumer surplus redistributed to the monopolist. D. the loss of surplus by producers resulting from a monopoly. 17. A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of S50 per book. It follows that the marginal cost of textbooks is: A. equal to $50. B. less than $50. C. greater than S50. D. greater than the average total cost. 18. If the corn industry is perfectly competitive with a market price of $2 per bushel and a com farmer in the industry charges $4 per bushel, how many bushels would the farmer sell? A. some, but fewer than he would at a price of $2 B. more than he would at a price of $2 C. just as many as he would at a price of $2 D. none (or zero) 19. A reduction in the supply of labor will cause wages to: A. decrease and employment to decrease. B. increase and employment to decrease. C. increase and employment to increase. D. decrease and employment to increase.Explanation / Answer
15. B
Only in an oligopoly, some number of firms interact with each other to form quantity and price decisions. Monopoly involves single firm, monopolistic competition involves firm making differentiated products and hence no interaction, and perfect competition makes them price takers. Thus, only oligopoly is characterized by interdependent decisions.
16. B
They represent the deadweight losses, or the welfare losses to the economy because of a Monopoly, B coming from consumer's side and D from producer's . C represents the consumer surplus which gets transferred to monopoly profits.
17. B
A Monopoly is characterized by a single firm charging a price higher than the perfect competition equilibrium, ie charging higher than the Marginal cost. The markup dependent on the price elasticity of demand for the good.
18. D
He wouldn't be able to sell any bushels as the market is characterized by a large number of sellers who are price takers. Thus, sellers who are willing to sell at 2 will sell their output and those charging higher wouldn't be able to sell anything.
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