Question : 11) The above figure shows the market demand curve for : 1238890

11) The above figure shows the market demand curve for long-distance land-based telephone calls. Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry. If the firms in the industry operate as perfect competitors, the price of a call is ________ per minute and if the firms in the industry operate as a monopoly, the price of a call is ________ per minute.

A) 2 cents; more than 3 cents and less than 4 cents

B) more than 3 cents and less than 4 cents; more than 3 cents and less than 4 cents

C) 1 cent; 2 cents

D) 2 cents; either equal to or more than 4 cents

E) either equal to or more than 4 cents; 2 cents

12) The figure above shows a market that a cartel controls. If the firms in the cartel produce ________ units, they will ________.

A) 5; maximize joint profits

B) 5; minimize joint costs

C) 10; create a deadweight loss

D) 10; maximize joint profits

E) between 5 and 10; generate an efficient outcome

13) Which of the following statements is correct?

A) A firm in oligopoly will charge a price that is lower than the price charged in perfect competition.

B) If firms in oligopoly look only at their own self-interest in deciding the output they should produce, the total market output will exceed that of a monopoly.

C) If one oligopolist reduces the price of its product, its demand curve shifts leftward.

D) Because many producers join to form a cartel, the market becomes monopolistic competition.

E) It is in the self-interest of each firm in an oligopoly to take the actions that maximize all the firms’ joint profit.

14) The major dilemma facing Boeing and Airbus is the

A) fact that neither will respond to the behavior of the other.

B) certainty surrounding the reaction of each firm to the behavior of the other firm.

C) fact that if each firm separately tries to maximize its profit, it might wind up with less profit that otherwise.

D) competition from other firms that drives their economic profit to zero.

E) fact that when they collude to maximize their profit, the other firm’s profit might be larger than its profit.

15) Imagine a duopoly in which two firms, A and B, produce the monopoly profit-maximizing output and equally share the economic profit. If firm A increases output,

A) both firms’ profits increase.

B) firm A’s profits increase and firm B’s profits decrease.

C) firm B’s profits increase and firm A’s profits decrease.

D) both firms’ profits decrease.

E) firm A’s profits increase and firm B’s profits do not change.

16) Imagine a duopoly in which two firms, A and B, produce the monopoly profit-maximizing output and equally share the economic profit. If firm A increases its output, the market price ________ and total economic profit of the two firms combined ________.

A) falls; decreases

B) falls; increases

C) rises; decreases

D) rises; increases

E) falls; does not change

17) If one firm in a duopoly increases its production by one unit beyond the monopoly output, that firm’s profit ________, the other firm’s profit ________, and the total profit of the duopoly ________.

A) increases; increases; increases

B) does not change; does not change; does not change

C) increases; decreases; does not change

D) increases; does not change; increases

E) increases; decreases; decreases

18) Which of the following is true? In the above figure, if the market is

A) a monopoly, output will be Q1 and price will be P3.

B) a monopoly, output will be Q3 and price will be P3.

C) perfect competition, output will be Q2 and price will be P2.

D) perfect competition, output will be Q1 and price will be P1.

E) perfect competition, output will be Q3 and price will be P3.

19) In the above figure, the output of an oligopoly will range between

A) 0 and Q1.

B) Q1 and Q2.

C) Q1 and Q3.

D) Q2 and Q3.

E) 0 and Q2.

20) Boeing and Airbus have entered into a cartel agreement that will enable them to boost their profits. What occurs if Boeing decides to cheat on the agreement?

i.Boeing lowers the price of its airplanes.

ii.The total industry output increases.

iii.The total profits in the airplane industry will decrease.

A) i only

B) ii only

C) iii only

D) i and ii

E) i, ii, and iii