Question 1

The term monopolistic competition

Accepted Answer

A) is an alternate expression for monopoly 
B) is used to describe perfect competition with strong entry barriers 
C) denotes an industry with one seller of many differentiated products 
D) denotes an industry with many sellers of homogeneous products 
E) denotes an industry with many sellers of differentiated products 
A) is an alternate expression for monopoly 
B) is used to describe perfect competition with strong entry barriers 
C) denotes an industry with one seller of many differentiated products 
D) denotes an industry with many sellers of homogeneous products 
E) denotes an industry with many sellers of differentiated products

Question 2

In oligopoly, minimum efficient scale is large relative to the market.

Accepted Answer

A) True 
 B)False

Question 3

The solution of a game is dependent upon

Accepted Answer

A) predicted response of competitors 
B) the existence of a perfectly inelastic demand curve 
C) costs of production being constant 
D) economies of scale in production 
E) marginal revenue being equal to marginal cost 
A) predicted response of competitors 
B) the existence of a perfectly inelastic demand curve 
C) costs of production being constant 
D) economies of scale in production 
E) marginal revenue being equal to marginal cost

Question 4

Exhibit 10-12   The profit-maximizing (or loss-minimizing)price the firm would charge in Exhibit 10-12 is

Accepted Answer

A) nonexistent, since the firm should shut down 
B) $3.25 
C) $3.00 
D) $2.50 
E) between $2.50 and $3.00 
A) nonexistent, since the firm should shut down 
B) $3.25 
C) $3.00 
D) $2.50 
E) between $2.50 and $3.00

Question 5

Which of the following is an example of an actual cartel?

Accepted Answer

A) the three largest cereal producers in the United States 
B) General Motors, Ford, and Chrysler 
C) the Organization of Petroleum Exporting Countries (OPE
C)  
D) the three major U.S.cigarette manufacturers 
E) U.S.television networks -- ABC, NBC, CBS, and Fox 
A) the three largest cereal producers in the United States 
B) General Motors, Ford, and Chrysler 
C) the Organization of Petroleum Exporting Countries (OPE
C)  
D) the three major U.S.cigarette manufacturers 
E) U.S.television networks -- ABC, NBC, CBS, and Fox

Question 6

Oligopolistic industries consist of

Accepted Answer

A) a few independent firms 
B) a few interdependent firms 
C) many interdependent firms 
D) many independent firms 
E) a small monopoly 
A) a few independent firms 
B) a few interdependent firms 
C) many interdependent firms 
D) many independent firms 
E) a small monopoly

Question 7

Exhibit 10-2   Consider Exhibit 10-2.If the firm is charging price P* for output q*, then in order to minimize loss in the short run, the firm should

Accepted Answer

A) shut down because price is greater than average variable cost 
B) shut down because price is greater than marginal cost 
C) shut down because price is less than average variable cost 
D) continue to produce because price is greater than average variable cost 
E) continue to produce because price is greater than marginal cost 
A) shut down because price is greater than average variable cost 
B) shut down because price is greater than marginal cost 
C) shut down because price is less than average variable cost 
D) continue to produce because price is greater than average variable cost 
E) continue to produce because price is greater than marginal cost

Question 8

Exhibit 10-5   In the long run, the firm in Exhibit 10-5 can expect

Accepted Answer

A) to shut down 
B) entry into the industry which will reduce the demand for their product and lower their profit 
C) exit from the industry which will increase demand for their product and increase their profitability 
D) competitors to differentiate their products which will reduce the demand for their product and lower their profit 
E) no change in the industry 
A) to shut down 
B) entry into the industry which will reduce the demand for their product and lower their profit 
C) exit from the industry which will increase demand for their product and increase their profitability 
D) competitors to differentiate their products which will reduce the demand for their product and lower their profit 
E) no change in the industry

Question 9

A firm will only earn normal profit in the long run

Accepted Answer

A) if firms can freely enter or leave the market 
B) if firms do not try to maximize profit 
C) only if the industry is perfectly competitive 
D) whenever products are not differentiated 
E) if barriers to entry exist 
A) if firms can freely enter or leave the market 
B) if firms do not try to maximize profit 
C) only if the industry is perfectly competitive 
D) whenever products are not differentiated 
E) if barriers to entry exist

Question 10

The prisoner's dilemma provides an explanation for

Accepted Answer

A) the price wars that sometimes occur in oligopolies 
B) the ability of firms in an oligopoly to extract the entire consumer surplus 
C) the collusive behavior that sometimes occurs in an oligopoly 
D) the failure of firms in non-competitive industries to maximize profits 
E) an irrational behavior that occurs in competitive markets 
A) the price wars that sometimes occur in oligopolies 
B) the ability of firms in an oligopoly to extract the entire consumer surplus 
C) the collusive behavior that sometimes occurs in an oligopoly 
D) the failure of firms in non-competitive industries to maximize profits 
E) an irrational behavior that occurs in competitive markets

Question 11

Which of the following is not an example of an oligopolistic barrier to entry?

Accepted Answer

A) diseconomies of scale 
B) legal restrictions 
C) advertising and brand proliferation 
D) high start-up costs 
E) control over an essential resource 
A) diseconomies of scale 
B) legal restrictions 
C) advertising and brand proliferation 
D) high start-up costs 
E) control over an essential resource

Question 12

Exhibit 10-4   For the situation depicted in Exhibit 10-4, what will happen in the long-run?

Accepted Answer

A) New technology will lower average total costs and increase profits for the firm. 
B) Firms will exit this market causing economic profit to increase. 
C) Product differentiation will lead to an increase in profitablility. 
D) New firms will enter the market driving economic profit to zero. 
E) Nothing, the situation will remain the same. 
A) New technology will lower average total costs and increase profits for the firm. 
B) Firms will exit this market causing economic profit to increase. 
C) Product differentiation will lead to an increase in profitablility. 
D) New firms will enter the market driving economic profit to zero. 
E) Nothing, the situation will remain the same.

Question 13

The prisoner's dilemma is applicable only when considering the illegal behavior that firms in a non-competitive market may pursue

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 10-16   In Exhibit 10-16, the monopolistic competitor's profit-maximizing price is

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $25 
E) $30 
A) $10 
B) $15 
C) $20 
D) $25 
E) $30

Question 15

Which of the following is true of firms in both monopolistic competition and perfect competition?

Accepted Answer

A) Firms face a horizontal demand curve. 
B) Price exceeds marginal revenue. 
C) Firms can enter and leave the industry with relative ease. 
D) Price exceeds marginal cost. 
E) Products are differentiated. 
A) Firms face a horizontal demand curve. 
B) Price exceeds marginal revenue. 
C) Firms can enter and leave the industry with relative ease. 
D) Price exceeds marginal cost. 
E) Products are differentiated.

Question 16

Exhibit 10-16   Consider the situation depicted for the monopolistically competitive firm in Exhibit 10-16.What would you expect to happen in this market in the long-run?

Accepted Answer

A) exit of resources will occur and this firm's demand curve will shift out leading to a higher price 
B) exit of resources will occur and this firm's demand curve will shift out leading to a lower price 
C) nothing will happen the industry is in long-run equilibrium 
D) entry of new resources will occur and this firm's demand curve will shift in leading to a lower price 
E) entry of new resources will occur and this firm's demand curve will shift in leading to a higher price 
A) exit of resources will occur and this firm's demand curve will shift out leading to a higher price 
B) exit of resources will occur and this firm's demand curve will shift out leading to a lower price 
C) nothing will happen the industry is in long-run equilibrium 
D) entry of new resources will occur and this firm's demand curve will shift in leading to a lower price 
E) entry of new resources will occur and this firm's demand curve will shift in leading to a higher price

Question 17

The demand curve facing Imelda's Shoe Boutique, a monopolistically competitive firm,

Accepted Answer

A) is horizontal because Imelda's is small relative to the market as a whole 
B) is horizontal because Imelda's is large relative to the market as a whole 
C) slopes downward because Imelda's is small relative to the market as a whole 
D) slopes downward because Imelda's sells a differentiated product 
E) slopes downward because Imelda's firm is the entire industry 
A) is horizontal because Imelda's is small relative to the market as a whole 
B) is horizontal because Imelda's is large relative to the market as a whole 
C) slopes downward because Imelda's is small relative to the market as a whole 
D) slopes downward because Imelda's sells a differentiated product 
E) slopes downward because Imelda's firm is the entire industry

Question 18

A prisoner's dilemma is a situation in which

Accepted Answer

A) a change in marginal cost may not lead to a change in price 
B) a firm's competitors follow a price increase but ignore a price decrease 
C) oligopolists behave irrationally 
D) oligopolists attempt to maximize sales rather than profits 
E) an oligopolists demand curve may become perfectly inelastic 
A) a change in marginal cost may not lead to a change in price 
B) a firm's competitors follow a price increase but ignore a price decrease 
C) oligopolists behave irrationally 
D) oligopolists attempt to maximize sales rather than profits 
E) an oligopolists demand curve may become perfectly inelastic

Question 19

A payoff matrix is a table listing the expected economic profit resulting from different possible strategies.

Accepted Answer

A) True 
 B)False

Question 20

In the long run in monopolistic competition, the demand curve facing the typical firm

Accepted Answer

A) is perfectly elastic 
B) slopes upward 
C) is tangent to the firm's average total cost curve 
D) lies above the firm's average total cost curve 
E) is the same as the portion of the firm's marginal cost curve above average variable cost 
A) is perfectly elastic 
B) slopes upward 
C) is tangent to the firm's average total cost curve 
D) lies above the firm's average total cost curve 
E) is the same as the portion of the firm's marginal cost curve above average variable cost

Exam 10: Monopolistic Competition and Oligopoly

The term monopolistic competition

In oligopoly, minimum efficient scale is large relative to the market.

The solution of a game is dependent upon

Exhibit 10-12 The profit-maximizing (or loss-minimizing)price the firm would charge in Exhibit 10-12 is

Which of the following is an example of an actual cartel?

Oligopolistic industries consist of

Exhibit 10-2 Consider Exhibit 10-2.If the firm is charging price P* for output q*, then in order to minimize loss in the short run, the firm should

Exhibit 10-5 In the long run, the firm in Exhibit 10-5 can expect

A firm will only earn normal profit in the long run

The prisoner's dilemma provides an explanation for

Which of the following is not an example of an oligopolistic barrier to entry?

Exhibit 10-4 For the situation depicted in Exhibit 10-4, what will happen in the long-run?

The prisoner's dilemma is applicable only when considering the illegal behavior that firms in a non-competitive market may pursue

Exhibit 10-16 In Exhibit 10-16, the monopolistic competitor's profit-maximizing price is

Which of the following is true of firms in both monopolistic competition and perfect competition?

Exhibit 10-16 Consider the situation depicted for the monopolistically competitive firm in Exhibit 10-16.What would you expect to happen in this market in the long-run?

The demand curve facing Imelda's Shoe Boutique, a monopolistically competitive firm,

A prisoner's dilemma is a situation in which

A payoff matrix is a table listing the expected economic profit resulting from different possible strategies.

In the long run in monopolistic competition, the demand curve facing the typical firm

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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