Question 1

Exhibit 10-16   In Exhibit 10-16, the monopolistic competitor's profit-maximizing level of output is

Accepted Answer

A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units 
E) 5 units 
A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units 
E) 5 units

Question 2

Game theory is the study of which of the following?

Accepted Answer

A) The prisoner's dilemma 
B) The behavior of people engaged in recreational games 
C) The mutual interdependence of firms in oligopolistic industries 
D) The downward sloping demand curve faced by firms in an oligopoly 
E) The interaction between marginal and average revenue 
A) The prisoner's dilemma 
B) The behavior of people engaged in recreational games 
C) The mutual interdependence of firms in oligopolistic industries 
D) The downward sloping demand curve faced by firms in an oligopoly 
E) The interaction between marginal and average revenue

Question 3

Consensus becomes easier to achieve as the number of firms in a cartel grows

Accepted Answer

A) True 
 B)False

Question 4

Excess capacity typically occurs

Accepted Answer

A) in the short run in perfect competition 
B) in the short run in monopolistic competition 
C) in long-run equilibrium in perfect competition 
D) in long-run equilibrium in monopolistic competition 
E) usually in markets experiencing an increase in demand 
A) in the short run in perfect competition 
B) in the short run in monopolistic competition 
C) in long-run equilibrium in perfect competition 
D) in long-run equilibrium in monopolistic competition 
E) usually in markets experiencing an increase in demand

Question 5

The incentives for oligopolists to cheat on collusive agreements are strongest during periods of increasing industry sales.

Accepted Answer

A) True 
 B)False

Question 6

In both monopolistic competition and non-price-discriminating monopoly,

Accepted Answer

A) the marginal revenue curve lies above the average revenue curve 
B) the marginal revenue curve lies above the demand curve 
C) the marginal revenue curve lies below the demand curve 
D) marginal revenue is equal to average revenue 
E) marginal revenue is equal to price 
A) the marginal revenue curve lies above the average revenue curve 
B) the marginal revenue curve lies above the demand curve 
C) the marginal revenue curve lies below the demand curve 
D) marginal revenue is equal to average revenue 
E) marginal revenue is equal to price

Question 7

A rise in demand for restaurant meals is likely to cause which of the following in the long run?

Accepted Answer

A) economic losses for each restaurant 
B) a lower price for each restaurant meal 
C) fewer restaurants in the industry 
D) more restaurants in the industry 
E) economic profit for restaurants 
A) economic losses for each restaurant 
B) a lower price for each restaurant meal 
C) fewer restaurants in the industry 
D) more restaurants in the industry 
E) economic profit for restaurants

Question 8

Which oligopoly model was developed to explain price wars in an industry?

Accepted Answer

A) natural oligopolies 
B) cartels 
C) price leadership by a dominant firm 
D) game theory 
E) cost-plus theory 
A) natural oligopolies 
B) cartels 
C) price leadership by a dominant firm 
D) game theory 
E) cost-plus theory

Question 9

Cost-plus pricing

Accepted Answer

A) is used only in oligopolistic market structures 
B) simplifies pricing policy by adding a markup to average total cost 
C) in actual practice leads to markups which are greater for more elastic demand curves 
D) is likely to increase profits more than the use of marginal analysis 
E) requires the firm to project the amount which will be sold and then "mark-up" the price based on average variable cost 
A) is used only in oligopolistic market structures 
B) simplifies pricing policy by adding a markup to average total cost 
C) in actual practice leads to markups which are greater for more elastic demand curves 
D) is likely to increase profits more than the use of marginal analysis 
E) requires the firm to project the amount which will be sold and then "mark-up" the price based on average variable cost

Question 10

Cartels are inherently unstable.

Accepted Answer

A) True 
 B)False

Question 11

As a real estate agent, Krista Otavi prides herself on her good training, availability to clients, and hard work to make a sale.Which one of the basic ways of product differentiation does Krista emphasize?

Accepted Answer

A) services 
B) product image 
C) location 
D) commission rate 
E) physical differences 
A) services 
B) product image 
C) location 
D) commission rate 
E) physical differences

Question 12

If all six suppliers of cement to Metropolis all agree to establishes a price of $45 per ton, this would be

Accepted Answer

A) a legal contract 
B) price discrimination 
C) cost-plus pricing 
D) a cartel 
E) beneficial to consumers 
A) a legal contract 
B) price discrimination 
C) cost-plus pricing 
D) a cartel 
E) beneficial to consumers

Question 13

Exhibit 10-3   The profit-maximizing output for the firm in Exhibit 10-3 is

Accepted Answer

A) 0 units 
B) 1 unit 
C) 3 units 
D) 5 units 
E) impossible to determine because MC and MR are not known 
A) 0 units 
B) 1 unit 
C) 3 units 
D) 5 units 
E) impossible to determine because MC and MR are not known

Question 14

If a firm must produce a significant share of market output before low average costs can be achieved, the structure of this industry will tend to be

Accepted Answer

A) monopolistic competition 
B) perfect competition 
C) oligopoly 
D) either monopolistic competition or oligopoly 
E) either perfect competition or monopolistic competition 
A) monopolistic competition 
B) perfect competition 
C) oligopoly 
D) either monopolistic competition or oligopoly 
E) either perfect competition or monopolistic competition

Question 15

Price wars occur more often in monopolistic competition than in other market structures.

Accepted Answer

A) True 
 B)False

Question 16

There are multiple models of pricing behavior in oligopolistic markets because

Accepted Answer

A) it is difficult to predict how rival firms will react to any pricing decision 
B) the demand curve slopes upward for these firms 
C) firms could earn profit in the long run unlike other markets 
D) price has a direct impact on profit for a firm in oligopoly 
E) the products are not identical in terms of quality, image, location 
A) it is difficult to predict how rival firms will react to any pricing decision 
B) the demand curve slopes upward for these firms 
C) firms could earn profit in the long run unlike other markets 
D) price has a direct impact on profit for a firm in oligopoly 
E) the products are not identical in terms of quality, image, location

Question 17

Collusion occurs when

Accepted Answer

A) a firm chooses a level of output to maximize its own profit 
B) firms get together to maximize joint profits 
C) firms refuse to follow their price leaders 
D) firms petition their U.S.senators for favors 
E) two firms' price and output decisions come into conflict 
A) a firm chooses a level of output to maximize its own profit 
B) firms get together to maximize joint profits 
C) firms refuse to follow their price leaders 
D) firms petition their U.S.senators for favors 
E) two firms' price and output decisions come into conflict

Question 18

Product differentiation helps determine the slope of the demand curve facing a firm in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 19

If a monopolistically competitive firm can earn a profit, it will adjust production until

Accepted Answer

A) MR > AVC 
B) MR = ATC 
C) MC > MR 
D) MR = AR 
E) MR = MC 
A) MR > AVC 
B) MR = ATC 
C) MC > MR 
D) MR = AR 
E) MR = MC

Question 20

Something is called a barrier to entry only if it makes entry into an industry absolutely impossible.

Accepted Answer

A) True 
 B)False

Exam 10: Monopolistic Competition and Oligopoly

Exhibit 10-16 In Exhibit 10-16, the monopolistic competitor's profit-maximizing level of output is

Game theory is the study of which of the following?

Consensus becomes easier to achieve as the number of firms in a cartel grows

Excess capacity typically occurs

The incentives for oligopolists to cheat on collusive agreements are strongest during periods of increasing industry sales.

In both monopolistic competition and non-price-discriminating monopoly,

A rise in demand for restaurant meals is likely to cause which of the following in the long run?

Which oligopoly model was developed to explain price wars in an industry?

Cost-plus pricing

Cartels are inherently unstable.

As a real estate agent, Krista Otavi prides herself on her good training, availability to clients, and hard work to make a sale.Which one of the basic ways of product differentiation does Krista emphasize?

If all six suppliers of cement to Metropolis all agree to establishes a price of $45 per ton, this would be

Exhibit 10-3 The profit-maximizing output for the firm in Exhibit 10-3 is

If a firm must produce a significant share of market output before low average costs can be achieved, the structure of this industry will tend to be

Price wars occur more often in monopolistic competition than in other market structures.

There are multiple models of pricing behavior in oligopolistic markets because

Collusion occurs when

Product differentiation helps determine the slope of the demand curve facing a firm in monopolistic competition.

If a monopolistically competitive firm can earn a profit, it will adjust production until

Something is called a barrier to entry only if it makes entry into an industry absolutely impossible.

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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