Question 1

A monopolistically competitive firm

Accepted Answer

A) earns no long-run economic profit and is therefore allocatively efficient 
B) earns no long-run economic profit and therefore produces at the minimum point of its ATC curve 
C) earns no long-run economic profit and is allocatively efficient even though it is not producing at the minimum point of its ATC curve 
D) earns no long-run economic profit, is allocatively inefficient, and does not produce at the minimum point of its ATC curve 
E) has a chance of making a long-run economic profit and is therefore allocatively inefficient 
A) earns no long-run economic profit and is therefore allocatively efficient 
B) earns no long-run economic profit and therefore produces at the minimum point of its ATC curve 
C) earns no long-run economic profit and is allocatively efficient even though it is not producing at the minimum point of its ATC curve 
D) earns no long-run economic profit, is allocatively inefficient, and does not produce at the minimum point of its ATC curve 
E) has a chance of making a long-run economic profit and is therefore allocatively inefficient

Question 2

A cartel is

Accepted Answer

A) explicit collusion 
B) a conglomerate merger 
C) a horizontal merger 
D) legal in the United States 
E) implicit collusion 
A) explicit collusion 
B) a conglomerate merger 
C) a horizontal merger 
D) legal in the United States 
E) implicit collusion

Question 3

Exhibit 10-7   At the profit-maximizing output level, total cost for the firm in Exhibit 10-7 is approximately

Accepted Answer

A) $5, 700 
B) $5, 320 
C) $4, 750 
D) $4, 940 
E) $8, 100 
A) $5, 700 
B) $5, 320 
C) $4, 750 
D) $4, 940 
E) $8, 100

Question 4

A profit-maximizing firm in monopolistic competition should shut down in the short run

Accepted Answer

A) if marginal revenue is less than price 
B) if price is always less than average total cost 
C) if price is always less than average fixed cost 
D) if price is always less than average variable cost 
E) under no circumstances 
A) if marginal revenue is less than price 
B) if price is always less than average total cost 
C) if price is always less than average fixed cost 
D) if price is always less than average variable cost 
E) under no circumstances

Question 5

In which market structure(s)might firms produce an undifferentiated product?

Accepted Answer

A) perfect competition only 
B) perfect competition and oligopoly 
C) monopolistic competition only 
D) perfect competition and monopolistic competition 
E) monopoly only 
A) perfect competition only 
B) perfect competition and oligopoly 
C) monopolistic competition only 
D) perfect competition and monopolistic competition 
E) monopoly only

Question 6

In a cartel,

Accepted Answer

A) all firms produce the same amount of output and earn the same profit 
B) all firms produce the same amount of output but earn different amounts of profit because their costs differ 
C) firms produce different amounts of output but earn the same profit 
D) firms with higher average cost produce more so that all firms earn the same profit 
E) firms with lower average cost often earn higher profits 
A) all firms produce the same amount of output and earn the same profit 
B) all firms produce the same amount of output but earn different amounts of profit because their costs differ 
C) firms produce different amounts of output but earn the same profit 
D) firms with higher average cost produce more so that all firms earn the same profit 
E) firms with lower average cost often earn higher profits

Question 7

If marginal revenue is less than price for a firm, it must be true that the firm

Accepted Answer

A) is a monopoly 
B) is in perfect competition 
C) is in monopolistic competition 
D) faces a perfectly elastic demand curve 
E) faces a downward-sloping demand curve 
A) is a monopoly 
B) is in perfect competition 
C) is in monopolistic competition 
D) faces a perfectly elastic demand curve 
E) faces a downward-sloping demand curve

Question 8

Which of the following is most likely produced in a monopolistically competitive market?

Accepted Answer

A) restaurant meals 
B) computer chips 
C) firewood 
D) motorcycles 
E) soft drink 
A) restaurant meals 
B) computer chips 
C) firewood 
D) motorcycles 
E) soft drink

Question 9

Exhibit 10-5   In the short run, the firm in Exhibit 10-5 should

Accepted Answer

A) shut down 
B) produce 8 units at a price of $11 per unit 
C) produce 8 units at a price of $10 per unit 
D) produce 8 units at a price of $9 per unit 
E) produce 10 units at a price of $9 per unit 
A) shut down 
B) produce 8 units at a price of $11 per unit 
C) produce 8 units at a price of $10 per unit 
D) produce 8 units at a price of $9 per unit 
E) produce 10 units at a price of $9 per unit

Question 10

In the short run, a monopolistically competitive firm is

Accepted Answer

A) guaranteed to earn zero economic profit 
B) guaranteed to earn economic profit 
C) guaranteed to earn an economic loss 
D) guaranteed to earn either zero or positive economic profit 
E) not guaranteed any level of economic profit 
A) guaranteed to earn zero economic profit 
B) guaranteed to earn economic profit 
C) guaranteed to earn an economic loss 
D) guaranteed to earn either zero or positive economic profit 
E) not guaranteed any level of economic profit

Question 11

Exhibit 10-1   The monopolistic competitor in Exhibit 10-1 is in

Accepted Answer

A) long-run equilibrium because price equals average total cost 
B) long-run equilibrium because marginal cost equals marginal revenue 
C) long-run equilibrium because price exceeds marginal cost 
D) short-run equilibrium because it is earning a positive economic profit 
E) short-run equilibrium because price equals average total cost 
A) long-run equilibrium because price equals average total cost 
B) long-run equilibrium because marginal cost equals marginal revenue 
C) long-run equilibrium because price exceeds marginal cost 
D) short-run equilibrium because it is earning a positive economic profit 
E) short-run equilibrium because price equals average total cost

Question 12

Firms in monopolistic competition and perfect competition typically

Accepted Answer

A) are price takers 
B) produce identical products 
C) earn zero economic profit in the long run 
D) face a downward-sloping demand curve 
E) face an upward-sloping total revenue curve at all rates of output 
A) are price takers 
B) produce identical products 
C) earn zero economic profit in the long run 
D) face a downward-sloping demand curve 
E) face an upward-sloping total revenue curve at all rates of output

Question 13

As a result of the economic profit earned by the first video rental outlets,

Accepted Answer

A) existing firms were able to successfully lobby the government for patent protection 
B) competitors were attracted to the industry, and their entry reduced economic profit 
C) demand dried up 
D) Blockbuster saw an opportunity to take over the industry 
E) competitors were discouraged from entering the industry 
A) existing firms were able to successfully lobby the government for patent protection 
B) competitors were attracted to the industry, and their entry reduced economic profit 
C) demand dried up 
D) Blockbuster saw an opportunity to take over the industry 
E) competitors were discouraged from entering the industry

Question 14

Monopolistic competitors are protected by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 10-12   At the profit-maximizing (or loss-minimizing)output and price, the firm in Exhibit 10-12 would

Accepted Answer

A) be earning zero economic profit (i.e., breaking even) 
B) be earning an economic profit 
C) be earning an economic loss 
D) be better off to shut down since total revenue does not cover fixed costs 
E) have to expand to stay in business in the long run 
A) be earning zero economic profit (i.e., breaking even) 
B) be earning an economic profit 
C) be earning an economic loss 
D) be better off to shut down since total revenue does not cover fixed costs 
E) have to expand to stay in business in the long run

Question 16

Exhibit 10-15   Exhibit 10-15 depicts the payoff matrix facing Eagle Tobacco and Dan'l Boone Tobacco with respect to their decisions to advertise or not.What strategies will most likely result?

Accepted Answer

A) Eagle advertise and Dan'l Boone doesn't 
B) both advertise 
C) Eagle doesn't advertise and Dan'l Boone does 
D) neither advertises 
E) can't tell 
A) Eagle advertise and Dan'l Boone doesn't 
B) both advertise 
C) Eagle doesn't advertise and Dan'l Boone does 
D) neither advertises 
E) can't tell

Question 17

An oligopolist that cheats on a collusive agreement by reducing price will quickly be forced out of the industry by its competitors.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is inconsistent with the model of perfect competition?

Accepted Answer

A) ease of entry into an industry 
B) ease of exit from an industry 
C) many buyers and sellers in the industry 
D) advertising of product differences in the industry 
E) a horizontal demand curve facing each firm in the industry 
A) ease of entry into an industry 
B) ease of exit from an industry 
C) many buyers and sellers in the industry 
D) advertising of product differences in the industry 
E) a horizontal demand curve facing each firm in the industry

Question 19

Exhibit 10-11   At the profit-maximizing output level, total cost for the firm in Exhibit 10-11 is

Accepted Answer

A) $5, 200 
B) $4, 000 
C) $3, 600 
D) $5, 600 
E) impossible to determine 
A) $5, 200 
B) $4, 000 
C) $3, 600 
D) $5, 600 
E) impossible to determine

Question 20

A formal agreement among the firms in an industry to coordinate their production and pricing decisions in order to earn monopoly profits is known as

Accepted Answer

A) price discrimination 
B) the kinked demand curve 
C) monopolistic competition 
D) a cartel 
E) joint competition 
A) price discrimination 
B) the kinked demand curve 
C) monopolistic competition 
D) a cartel 
E) joint competition

Exam 10: Monopolistic Competition and Oligopoly

A monopolistically competitive firm

A cartel is

Exhibit 10-7 At the profit-maximizing output level, total cost for the firm in Exhibit 10-7 is approximately

A profit-maximizing firm in monopolistic competition should shut down in the short run

In which market structure(s)might firms produce an undifferentiated product?

In a cartel,

If marginal revenue is less than price for a firm, it must be true that the firm

Which of the following is most likely produced in a monopolistically competitive market?

Exhibit 10-5 In the short run, the firm in Exhibit 10-5 should

In the short run, a monopolistically competitive firm is

Exhibit 10-1 The monopolistic competitor in Exhibit 10-1 is in

Firms in monopolistic competition and perfect competition typically

As a result of the economic profit earned by the first video rental outlets,

Monopolistic competitors are protected by barriers to entry.

Exhibit 10-12 At the profit-maximizing (or loss-minimizing)output and price, the firm in Exhibit 10-12 would

Exhibit 10-15 Exhibit 10-15 depicts the payoff matrix facing Eagle Tobacco and Dan'l Boone Tobacco with respect to their decisions to advertise or not.What strategies will most likely result?

An oligopolist that cheats on a collusive agreement by reducing price will quickly be forced out of the industry by its competitors.

Which of the following is inconsistent with the model of perfect competition?

Exhibit 10-11 At the profit-maximizing output level, total cost for the firm in Exhibit 10-11 is

A formal agreement among the firms in an industry to coordinate their production and pricing decisions in order to earn monopoly profits is known as

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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