Question 1

If zinc suppliers are successful in forming an international zinc cartel, they will experience

Accepted Answer

A) lower output and higher prices, which discourage the entry of new firms into the industry 
B) lower output, higher prices, and the need to organize an effort to prevent the entry of new firms into the industry 
C) higher output and higher prices, which discourage the entry of new firms into the industry 
D) higher output, higher prices, and the need to organize an effort to prevent the entry of new firms into the industry 
E) none of the above 
A) lower output and higher prices, which discourage the entry of new firms into the industry 
B) lower output, higher prices, and the need to organize an effort to prevent the entry of new firms into the industry 
C) higher output and higher prices, which discourage the entry of new firms into the industry 
D) higher output, higher prices, and the need to organize an effort to prevent the entry of new firms into the industry 
E) none of the above

Question 2

The advantage of game theory is that it allows us to focus on the

Accepted Answer

A) individual firm's incentives to cooperate or not 
B) relationship between the market and firm level demand curve 
C) costs and benefits 
D) government regulators and the firms in an industry 
E) models where there are no barriers to entry 
A) individual firm's incentives to cooperate or not 
B) relationship between the market and firm level demand curve 
C) costs and benefits 
D) government regulators and the firms in an industry 
E) models where there are no barriers to entry

Question 3

Exhibit 10-13   All of the following statements regarding Exhibit 10-13 are true except one.Which is the exception?

Accepted Answer

A) The firm represented in the exhibit will likely be a perfect competitor. 
B) There are economies of scale in this industry. 
C) The minimum efficient quantity is 1, 000 units. 
D) At 500 units there is excess capacity. 
E) A firm too small to produce at least 1, 000 units will have difficulty surviving in this industry. 
A) The firm represented in the exhibit will likely be a perfect competitor. 
B) There are economies of scale in this industry. 
C) The minimum efficient quantity is 1, 000 units. 
D) At 500 units there is excess capacity. 
E) A firm too small to produce at least 1, 000 units will have difficulty surviving in this industry.

Question 4

Exhibit 10-4   In the short run, which of the following should the firm in Exhibit 10-4 do?

Accepted Answer

A) Produce 10 units at a price of $36 per unit. 
B) Produce 10 units at a price of $24 per unit. 
C) Produce 10 units at a price of $40 per unit. 
D) Produce 15 units at a price of $32 per unit. 
E) We cannot determine what the firm should do without knowing its average variable cost. 
A) Produce 10 units at a price of $36 per unit. 
B) Produce 10 units at a price of $24 per unit. 
C) Produce 10 units at a price of $40 per unit. 
D) Produce 15 units at a price of $32 per unit. 
E) We cannot determine what the firm should do without knowing its average variable cost.

Question 5

In an oligopoly, the demand curve facing an individual firm depends upon

Accepted Answer

A) the behavior of competing firms 
B) the shape of the firm's average total cost curve 
C) the shape of the firm's marginal cost curve 
D) the firm's supply curve 
E) the shape of the firm's average variable cost curve 
A) the behavior of competing firms 
B) the shape of the firm's average total cost curve 
C) the shape of the firm's marginal cost curve 
D) the firm's supply curve 
E) the shape of the firm's average variable cost curve

Question 6

Excess capacity is defined as the difference between a firm's maximum possible output and its actual output.

Accepted Answer

A) True 
 B)False

Question 7

In the prisoner's dilemma game, the sentence that each player receives depends on

Accepted Answer

A) neither strategy chosen 
B) only the strategy the player chooses 
C) only the strategy the other player chooses 
D) the strategy the player chooses and on the strategy the other player chooses 
E) None of the answers is correct. 
A) neither strategy chosen 
B) only the strategy the player chooses 
C) only the strategy the other player chooses 
D) the strategy the player chooses and on the strategy the other player chooses 
E) None of the answers is correct.

Question 8

Monopolistic competition is different from perfect competition because monopolistic competitors produce

Accepted Answer

A) a homogeneous product 
B) a homogeneous but unique product 
C) identical products 
D) differentiated products 
E) products similar to those produced by a monopoly 
A) a homogeneous product 
B) a homogeneous but unique product 
C) identical products 
D) differentiated products 
E) products similar to those produced by a monopoly

Question 9

At the profit-maximizing output, price is greater than marginal cost

Accepted Answer

A) for a monopolistically competitive firm only in the short run 
B) for a monopolistically competitive firm only in the long run 
C) for a monopolistically competitive firm in both the short run and the long run 
D) for a perfectly competitive firm only in the short run 
E) for a perfectly competitive firm only in the long run 
A) for a monopolistically competitive firm only in the short run 
B) for a monopolistically competitive firm only in the long run 
C) for a monopolistically competitive firm in both the short run and the long run 
D) for a perfectly competitive firm only in the short run 
E) for a perfectly competitive firm only in the long run

Question 10

If a monopolistically competitive firm raises its price, it

Accepted Answer

A) loses all of its customers (sales drop to zero) 
B) loses some, but not all, of its customers 
C) loses very few customers 
D) loses no customers at all 
E) gains customers (sales increase) 
A) loses all of its customers (sales drop to zero) 
B) loses some, but not all, of its customers 
C) loses very few customers 
D) loses no customers at all 
E) gains customers (sales increase)

Question 11

Oligopolists are more sensitive to the pricing and output policies of their rivals when

Accepted Answer

A) all firms produce identical products 
B) their products are highly differentiated 
C) there is freedom of entry and exit 
D) there are barriers to entry 
E) there are many firms in the industry 
A) all firms produce identical products 
B) their products are highly differentiated 
C) there is freedom of entry and exit 
D) there are barriers to entry 
E) there are many firms in the industry

Question 12

Tacit collusion occurs in industries that

Accepted Answer

A) are monopolistically competitive 
B) contain price leaders 
C) experience rapid technological change 
D) are regulated 
E) produce very differentiated products 
A) are monopolistically competitive 
B) contain price leaders 
C) experience rapid technological change 
D) are regulated 
E) produce very differentiated products

Question 13

Monopolistically competitive firms ignore the effect of their decisions upon other firms in the industry because

Accepted Answer

A) each firm is large relative to the market 
B) each firm is small relative to the market 
C) there are few sellers in the market 
D) there is only one seller in the market 
E) all firms follow the same known pricing rules 
A) each firm is large relative to the market 
B) each firm is small relative to the market 
C) there are few sellers in the market 
D) there is only one seller in the market 
E) all firms follow the same known pricing rules

Question 14

A cartel's profit-maximizing price is

Accepted Answer

A) on the demand curve at the quantity where marginal cost equals marginal revenue 
B) on the demand curve where it intersects its marginal cost curve 
C) the highest price possible 
D) determined by using the cost-plus pricing model 
E) where the kink in the demand curve occurs 
A) on the demand curve at the quantity where marginal cost equals marginal revenue 
B) on the demand curve where it intersects its marginal cost curve 
C) the highest price possible 
D) determined by using the cost-plus pricing model 
E) where the kink in the demand curve occurs

Question 15

In long-run equilibrium, a monopolistically competitive firm will produce

Accepted Answer

A) at the minimum average cost 
B) at full capacity 
C) along the downward-sloping portion of its ATC curve 
D) along the upward-sloping portion of its ATC curve 
E) at the minimum of marginal cost 
A) at the minimum average cost 
B) at full capacity 
C) along the downward-sloping portion of its ATC curve 
D) along the upward-sloping portion of its ATC curve 
E) at the minimum of marginal cost

Question 16

Exhibit 10-1   In Exhibit 10-1, the price that the monopolistic competitor will charge at the profit-maximizing level of output is

Accepted Answer

A) $2 
B) $4 
C) $8 
D) $9 
E) $10 
A) $2 
B) $4 
C) $8 
D) $9 
E) $10

Question 17

A monopolistically competitive firm can raise price somewhat due to

Accepted Answer

A) product differentiation 
B) barriers to entry 
C) product similarity 
D) its homogeneous product 
E) high tariffs 
A) product differentiation 
B) barriers to entry 
C) product similarity 
D) its homogeneous product 
E) high tariffs

Question 18

The solution in the prisoner's dilemma is called the

Accepted Answer

A) loss minimizing solution 
B) profit maximizing equilibrium 
C) dominant-strategy equilibrium 
D) revenue maximizing equilibrium 
E) marginal revenue solution 
A) loss minimizing solution 
B) profit maximizing equilibrium 
C) dominant-strategy equilibrium 
D) revenue maximizing equilibrium 
E) marginal revenue solution

Question 19

In the long run, Bubba's Baby Boutique, a monopolistically competitive firm,

Accepted Answer

A) earns zero normal profit but positive economic profit 
B) earns normal profit but zero economic profit 
C) earns normal and economic profit 
D) earns zero normal and economic profit 
E) might earn any level of economic profit; no level is guaranteed 
A) earns zero normal profit but positive economic profit 
B) earns normal profit but zero economic profit 
C) earns normal and economic profit 
D) earns zero normal and economic profit 
E) might earn any level of economic profit; no level is guaranteed

Question 20

Exhibit 10-17   Consider the situation depicted for the monopolistically competitive firm in Exhibit 10-17.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

Exam 10: Monopolistic Competition and Oligopoly

If zinc suppliers are successful in forming an international zinc cartel, they will experience

The advantage of game theory is that it allows us to focus on the

Exhibit 10-13 All of the following statements regarding Exhibit 10-13 are true except one.Which is the exception?

Exhibit 10-4 In the short run, which of the following should the firm in Exhibit 10-4 do?

In an oligopoly, the demand curve facing an individual firm depends upon

Excess capacity is defined as the difference between a firm's maximum possible output and its actual output.

In the prisoner's dilemma game, the sentence that each player receives depends on

Monopolistic competition is different from perfect competition because monopolistic competitors produce

At the profit-maximizing output, price is greater than marginal cost

If a monopolistically competitive firm raises its price, it

Oligopolists are more sensitive to the pricing and output policies of their rivals when

Tacit collusion occurs in industries that

Monopolistically competitive firms ignore the effect of their decisions upon other firms in the industry because

A cartel's profit-maximizing price is

In long-run equilibrium, a monopolistically competitive firm will produce

Exhibit 10-1 In Exhibit 10-1, the price that the monopolistic competitor will charge at the profit-maximizing level of output is

A monopolistically competitive firm can raise price somewhat due to

The solution in the prisoner's dilemma is called the

In the long run, Bubba's Baby Boutique, a monopolistically competitive firm,

Exhibit 10-17 Consider the situation depicted for the monopolistically competitive firm in Exhibit 10-17.What would you expect to happen in this market in the long-run?

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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