Question 1

To maximize cartel profit, the members must allocate output so that the marginal cost for the final unit produced by each firm is

Accepted Answer

A) identical 
B) unequal 
C) negative 
D) equal to the firm's average total cost 
E) maximized 
A) identical 
B) unequal 
C) negative 
D) equal to the firm's average total cost 
E) maximized

Question 2

Monopolistic competition is similar to

Accepted Answer

A) perfect competition, in that firms face downward-sloping demand curves and earn zero long-run economic profit 
B) pure monopoly, in that firms face downward-sloping demand curves and can earn economic profits both in the short run and in the long run 
C) perfect competition, in that firms face perfectly elastic demand curves and earn zero long-run economic profit 
D) pure monopoly, in that firms can earn economic profits both in the short run and in the long run, and similar to perfect competition, in that firms face perfectly elastic demand curves 
E) pure monopoly, in that firms face downward-sloping demand curves, and similar to perfect competition, in that long-run economic profit is zero 
A) perfect competition, in that firms face downward-sloping demand curves and earn zero long-run economic profit 
B) pure monopoly, in that firms face downward-sloping demand curves and can earn economic profits both in the short run and in the long run 
C) perfect competition, in that firms face perfectly elastic demand curves and earn zero long-run economic profit 
D) pure monopoly, in that firms can earn economic profits both in the short run and in the long run, and similar to perfect competition, in that firms face perfectly elastic demand curves 
E) pure monopoly, in that firms face downward-sloping demand curves, and similar to perfect competition, in that long-run economic profit is zero

Question 3

One common assumption in game theory is that firms

Accepted Answer

A) try to avoid the worst outcome 
B) try to achieve the best outcome 
C) minimize losses 
D) always cooperate 
E) always compete 
A) try to avoid the worst outcome 
B) try to achieve the best outcome 
C) minimize losses 
D) always cooperate 
E) always compete

Question 4

Monopolistically competitive firms do not achieve allocative efficiency in the long run because

Accepted Answer

A) marginal cost equals marginal revenue 
B) marginal cost is greater than marginal revenue 
C) marginal cost is less than marginal revenue 
D) price is less than marginal cost 
E) price is greater than marginal cost 
A) marginal cost equals marginal revenue 
B) marginal cost is greater than marginal revenue 
C) marginal cost is less than marginal revenue 
D) price is less than marginal cost 
E) price is greater than marginal cost

Question 5

In the long run, the economic profit of Hoot's Pump Chicken 'n' Ribs, a monopolistic competitor,

Accepted Answer

A) is not eliminated because competition is not perfect 
B) is not eliminated because the demand curve slopes downward 
C) is eliminated because of new firms entering the industry 
D) is eliminated because of firms leaving the industry 
E) is not eliminated because new firms cannot enter the industry 
A) is not eliminated because competition is not perfect 
B) is not eliminated because the demand curve slopes downward 
C) is eliminated because of new firms entering the industry 
D) is eliminated because of firms leaving the industry 
E) is not eliminated because new firms cannot enter the industry

Question 6

Which of the following characteristics does perfect competition share with monopolistic competition?

Accepted Answer

A) price-taking firms 
B) zero long-run economic profit 
C) homogeneous product 
D) some barriers to entry 
E) economies of scale in production 
A) price-taking firms 
B) zero long-run economic profit 
C) homogeneous product 
D) some barriers to entry 
E) economies of scale in production

Question 7

The payoff matrix refers to

Accepted Answer

A) the difference between total revenue and total cost at different price levels 
B) a listing of the rewards and penalties associated with pursuing various strategies 
C) the difference between average and marginal cost for the non-competitive firm 
D) the difference between average and marginal revenue in a non-competitive industry 
E) the difference between average variable and average total cost to the firm 
A) the difference between total revenue and total cost at different price levels 
B) a listing of the rewards and penalties associated with pursuing various strategies 
C) the difference between average and marginal cost for the non-competitive firm 
D) the difference between average and marginal revenue in a non-competitive industry 
E) the difference between average variable and average total cost to the firm

Question 8

If the firms in a monopolistically competitive industry are suffering short-run losses, which of the following will occur in the long run?

Accepted Answer

A) Some firms will enter the industry. 
B) Customers of firms that leave the industry will switch to remaining firms. 
C) Firms that remain in the industry will face reduced demand. 
D) Firms will continue to incur losses. 
E) There will be no excess capacity. 
A) Some firms will enter the industry. 
B) Customers of firms that leave the industry will switch to remaining firms. 
C) Firms that remain in the industry will face reduced demand. 
D) Firms will continue to incur losses. 
E) There will be no excess capacity.

Question 9

Exhibit 10-9   If the firm in Exhibit 10-9 produces 100 units of output, it will have

Accepted Answer

A) both d and e 
B) variable cost of slightly less than $800 
C) fixed cost of slightly more than $700 
D) total cost of $1, 500 
E) total revenue of $800 
A) both d and e 
B) variable cost of slightly less than $800 
C) fixed cost of slightly more than $700 
D) total cost of $1, 500 
E) total revenue of $800

Question 10

An intersection known as Four Corners lies 300 miles from the nearest town.At this intersection are three independently owned gas stations and one small pharmacy.Which of the following is true?

Accepted Answer

A) The firms are all perfectly competitive because of their size. 
B) It would be easier for all four firms to form a cartel than for only the gas stations to do so. 
C) The gas stations are monopolistically competitive because there are so few of them that they are almost monopolists. 
D) The gas stations are perfectly competitive; the pharmacy is not. 
E) The gas stations are oligopolists; the pharmacy is a monopolist. 
A) The firms are all perfectly competitive because of their size. 
B) It would be easier for all four firms to form a cartel than for only the gas stations to do so. 
C) The gas stations are monopolistically competitive because there are so few of them that they are almost monopolists. 
D) The gas stations are perfectly competitive; the pharmacy is not. 
E) The gas stations are oligopolists; the pharmacy is a monopolist.

Question 11

Exhibit 10-7   Assume that the firm in Exhibit 10-7 is maximizing profit.Its total revenue is

Accepted Answer

A) $5, 320 
B) $5, 700 
C) $4, 750 
D) $8, 120 
E) $8, 100 
A) $5, 320 
B) $5, 700 
C) $4, 750 
D) $8, 120 
E) $8, 100

Question 12

Compared to a firm in perfect competition, the monopolistically competitive firm tends to

Accepted Answer

A) produce less and charge a higher price 
B) produce less and charge a lower price 
C) produce more and charge a lower price 
D) produce more and charge a higher price 
E) produce the same quantity 
A) produce less and charge a higher price 
B) produce less and charge a lower price 
C) produce more and charge a lower price 
D) produce more and charge a higher price 
E) produce the same quantity

Question 13

Suppose that a monopolistically competitive firm is in long-run equilibrium.The firm's demand curve is tangent to its average cost curve at Q = 25.Average cost is minimized at Q = 35, where average cost is $50.Which of the following is true?

Accepted Answer

A) This firm charges $50 for the good. 
B) This firm charges more than $50 for the good. 
C) This firm charges less than $50 for the good. 
D) The firm has excess capacity at all output levels greater than 35 units. 
E) Average cost is $50 at the profit-maximizing output level. 
A) This firm charges $50 for the good. 
B) This firm charges more than $50 for the good. 
C) This firm charges less than $50 for the good. 
D) The firm has excess capacity at all output levels greater than 35 units. 
E) Average cost is $50 at the profit-maximizing output level.

To maximize cartel profit, the members must allocate output so that the marginal cost for the final unit produced by each firm is

Monopolistic competition is similar to

One common assumption in game theory is that firms

Monopolistically competitive firms do not achieve allocative efficiency in the long run because

In the long run, the economic profit of Hoot's Pump Chicken 'n' Ribs, a monopolistic competitor,

Which of the following characteristics does perfect competition share with monopolistic competition?

The payoff matrix refers to

If the firms in a monopolistically competitive industry are suffering short-run losses, which of the following will occur in the long run?

Exhibit 10-9 If the firm in Exhibit 10-9 produces 100 units of output, it will have

An intersection known as Four Corners lies 300 miles from the nearest town.At this intersection are three independently owned gas stations and one small pharmacy.Which of the following is true?

Exhibit 10-7 Assume that the firm in Exhibit 10-7 is maximizing profit.Its total revenue is

Compared to a firm in perfect competition, the monopolistically competitive firm tends to

Suppose that a monopolistically competitive firm is in long-run equilibrium.The firm's demand curve is tangent to its average cost curve at Q = 25.Average cost is minimized at Q = 35, where average cost is $50.Which of the following is true?

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

Filters

Exam 10: Monopolistic Competition and Oligopoly

To maximize cartel profit, the members must allocate output so that the marginal cost for the final unit produced by each firm is

Monopolistic competition is similar to

One common assumption in game theory is that firms

Monopolistically competitive firms do not achieve allocative efficiency in the long run because

In the long run, the economic profit of Hoot's Pump Chicken 'n' Ribs, a monopolistic competitor,

Which of the following characteristics does perfect competition share with monopolistic competition?

The payoff matrix refers to

If the firms in a monopolistically competitive industry are suffering short-run losses, which of the following will occur in the long run?

Exhibit 10-9 If the firm in Exhibit 10-9 produces 100 units of output, it will have

An intersection known as Four Corners lies 300 miles from the nearest town.At this intersection are three independently owned gas stations and one small pharmacy.Which of the following is true?

Exhibit 10-7 Assume that the firm in Exhibit 10-7 is maximizing profit.Its total revenue is

Compared to a firm in perfect competition, the monopolistically competitive firm tends to

Suppose that a monopolistically competitive firm is in long-run equilibrium.The firm's demand curve is tangent to its average cost curve at Q = 25.Average cost is minimized at Q = 35, where average cost is $50.Which of the following is true?

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

Filters