Question 1

The first video rental outlets

Accepted Answer

A) earned short-run economic profits because they faced little competition 
B) suffered short-run economic losses until videos caught on and demand for them increased 
C) were able to earn long-run economic profits because of barriers to entry 
D) earned only normal profits because the industry is perfectly competitive 
E) provided a good example of an oligopoly 
A) earned short-run economic profits because they faced little competition 
B) suffered short-run economic losses until videos caught on and demand for them increased 
C) were able to earn long-run economic profits because of barriers to entry 
D) earned only normal profits because the industry is perfectly competitive 
E) provided a good example of an oligopoly

Question 2

As new monopolistically competitive firms enter the market, the demand facing each firm __________, causing the price charged by each firm to __________.In the long run, each firm will earn a __________ profit.

Accepted Answer

A) falls; rise; positive 
B) rises; fall; positive 
C) falls; rise; normal 
D) rises; fall; normal 
E) falls; fall; normal 
A) falls; rise; positive 
B) rises; fall; positive 
C) falls; rise; normal 
D) rises; fall; normal 
E) falls; fall; normal

Question 3

An oligopoly is characterized by

Accepted Answer

A) few firms, which have control over market price 
B) many firms and some barriers to entry 
C) a large number of firms and no barriers to entry 
D) a single firm and no barriers to entry 
E) a single firm and significant barriers to entry 
A) few firms, which have control over market price 
B) many firms and some barriers to entry 
C) a large number of firms and no barriers to entry 
D) a single firm and no barriers to entry 
E) a single firm and significant barriers to entry

Question 4

Which of the following is not a threat to bricks-and-mortar video rental stores?

Accepted Answer

A) on-demand movies delivered by broadband cable 
B) rental services that deliver DVDs by mail 
C) digital movies and TV shows available on Wal-Mart's Web site 
D) None of the answers is a threat. 
E) All of the answers are threats. 
A) on-demand movies delivered by broadband cable 
B) rental services that deliver DVDs by mail 
C) digital movies and TV shows available on Wal-Mart's Web site 
D) None of the answers is a threat. 
E) All of the answers are threats.

Question 5

Exhibit 10-6   In Exhibit 10-6, what is the maximum profit this monopolistic competitor can earn in the short run?

Accepted Answer

A) $40 
B) $4 
C) $48 
D) $8 
E) $0 
A) $40 
B) $4 
C) $48 
D) $8 
E) $0

Question 6

In the long run in monopolistic competition, a firm will not produce the output level that minimizes average cost because

Accepted Answer

A) that output level is less than the profit-maximizing one 
B) at that output level, MC is greater than MR 
C) at that output level, P is greater than MR 
D) demand is horizontal 
E) that would leave the firm with excess capacity 
A) that output level is less than the profit-maximizing one 
B) at that output level, MC is greater than MR 
C) at that output level, P is greater than MR 
D) demand is horizontal 
E) that would leave the firm with excess capacity

Question 7

Economic analysis of product differentiation leads to all of the following conclusions except one.Which is the exception?

Accepted Answer

A) Product differentiation makes it harder for firms to collude. 
B) Product differentiation makes price leadership harder to maintain. 
C) Product differentiation sometimes contributes to wasteful allocation of resources. 
D) Product differentiation must be based on real, substantive differences among products. 
E) There is a tradeoff between using resources efficiently and providing consumers with wide choices. 
A) Product differentiation makes it harder for firms to collude. 
B) Product differentiation makes price leadership harder to maintain. 
C) Product differentiation sometimes contributes to wasteful allocation of resources. 
D) Product differentiation must be based on real, substantive differences among products. 
E) There is a tradeoff between using resources efficiently and providing consumers with wide choices.

Question 8

Monopolistically competitive industries consist of

Accepted Answer

A) one firm selling several products 
B) one firm selling one product 
C) many firms, all selling identical products 
D) many firms, each selling a slightly different product 
E) many firms, each selling a completely different product 
A) one firm selling several products 
B) one firm selling one product 
C) many firms, all selling identical products 
D) many firms, each selling a slightly different product 
E) many firms, each selling a completely different product

Question 9

The historical trend in the video rental industry

Accepted Answer

A) has been one of increasing economic profits 
B) has been cyclical in the sense that profits decrease, then increase 
C) reflects the trend toward market concentration in all oligopolies 
D) has been one of increasing market concentration 
E) suggests the need for government regulation to eliminate price discrimination 
A) has been one of increasing economic profits 
B) has been cyclical in the sense that profits decrease, then increase 
C) reflects the trend toward market concentration in all oligopolies 
D) has been one of increasing market concentration 
E) suggests the need for government regulation to eliminate price discrimination

Question 10

During certain periods in the past few decades, if one of the three major breakfast cereal producers in the United States announced a price increase, the other two announced a similar price increase.This is a good example of

Accepted Answer

A) monopolistic competition 
B) a cartel 
C) a pure monopoly 
D) the kinked demand curve model of oligopoly 
E) the price leadership model of oligopoly 
A) monopolistic competition 
B) a cartel 
C) a pure monopoly 
D) the kinked demand curve model of oligopoly 
E) the price leadership model of oligopoly

Question 11

The principal advantage of the game theory approach is that it allows us to

Accepted Answer

A) take all possible information into consideration before developing a theory 
B) better understand why the firm in a competitive industry avoids games 
C) better understand how the government should regulate a natural monopoly 
D) better understand decision making when one person's choices affect another person's choices 
E) understand the relationship between the firm and the industry demand curves 
A) take all possible information into consideration before developing a theory 
B) better understand why the firm in a competitive industry avoids games 
C) better understand how the government should regulate a natural monopoly 
D) better understand decision making when one person's choices affect another person's choices 
E) understand the relationship between the firm and the industry demand curves

Question 12

A cartel is

Accepted Answer

A) a group of oligopolistic firms that engage in formal collusion 
B) a group of monopolistically competitive firms which charge the same price 
C) usually legal in the United States 
D) an agreement among rival firms to set prices independently 
E) illegal throughout the world 
A) a group of oligopolistic firms that engage in formal collusion 
B) a group of monopolistically competitive firms which charge the same price 
C) usually legal in the United States 
D) an agreement among rival firms to set prices independently 
E) illegal throughout the world

Question 13

A greater supply of video rental outlets along with the increased availability of substitutes like cable channels made rental rates

Accepted Answer

A) decrease slightly 
B) remain unchanged 
C) crash 
D) fluctuate wildly up and down 
E) increase 
A) decrease slightly 
B) remain unchanged 
C) crash 
D) fluctuate wildly up and down 
E) increase

Question 14

Which of the following describes the relationship among market price (P), average revenue (AR), and marginal revenue (MR)for a firm in monopolistic competition.

Accepted Answer

A) P = AR = MR B) P > AR = MR C) P = AR > MR D) P > AR > MR E) P = AR < MR A) P = AR = MR B) P > AR = MR C) P = AR > MR D) P > AR > MR E) P = AR < MR

Question 15

Monopolistic competition is similar to

Accepted Answer

A) perfect competition because the firms face downward-sloping demand curves and can earn only a normal profit in the long run 
B) pure monopoly because the firms face downward-sloping demand curves and can earn only a normal profit in the long run 
C) perfect competition because the firms face downward-sloping demand curves and similar to pure monopoly in that the firms can earn only a normal profit in the long run 
D) pure monopoly because the firms face downward-sloping demand curves and similar to perfect competition in that the firms can earn only a normal profit in the long run 
E) pure monopoly because the firms face downward-sloping demand curves and can earn an economic profit in the long run 
A) perfect competition because the firms face downward-sloping demand curves and can earn only a normal profit in the long run 
B) pure monopoly because the firms face downward-sloping demand curves and can earn only a normal profit in the long run 
C) perfect competition because the firms face downward-sloping demand curves and similar to pure monopoly in that the firms can earn only a normal profit in the long run 
D) pure monopoly because the firms face downward-sloping demand curves and similar to perfect competition in that the firms can earn only a normal profit in the long run 
E) pure monopoly because the firms face downward-sloping demand curves and can earn an economic profit in the long run

Question 16

In the long run, a monopolistically competitive firm will find

Accepted Answer

A) its demand curve shifting until price equals average total cost 
B) its cost curve shifting until price equals average total cost 
C) its demand curve shifting until marginal revenue equals marginal cost 
D) its cost curve shifting until marginal revenue equals marginal cost 
E) no changes in its demand or cost curves if it is earning an economic profit 
A) its demand curve shifting until price equals average total cost 
B) its cost curve shifting until price equals average total cost 
C) its demand curve shifting until marginal revenue equals marginal cost 
D) its cost curve shifting until marginal revenue equals marginal cost 
E) no changes in its demand or cost curves if it is earning an economic profit

Question 17

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

Accepted Answer

A) earning economic profit of $400 
B) earning economic profit of $200 
C) earning zero economic profit 
D) suffering a loss of $200 
E) suffering a loss of $400 
A) earning economic profit of $400 
B) earning economic profit of $200 
C) earning zero economic profit 
D) suffering a loss of $200 
E) suffering a loss of $400

Question 18

A firm could differentiate its product by all of the following means except one.Which is the exception?

Accepted Answer

A) making the product available at a number of different locations 
B) increasing the number of services that accompany the product 
C) making the product physically different from other products 
D) using packaging or advertising to create a special subjective image of the product in the consumer's mind 
E) emphasizing that the product provides the same benefits to consumers as the others on the market, even when it is really physically different 
A) making the product available at a number of different locations 
B) increasing the number of services that accompany the product 
C) making the product physically different from other products 
D) using packaging or advertising to create a special subjective image of the product in the consumer's mind 
E) emphasizing that the product provides the same benefits to consumers as the others on the market, even when it is really physically different

Question 19

If oligopolists engaged in some sort of collusion, industry output would be __________ and the price would be __________ than under perfect competition.

Accepted Answer

A) smaller, lower 
B) smaller, higher 
C) smaller, no different 
D) greater, lower 
E) greater, higher 
A) smaller, lower 
B) smaller, higher 
C) smaller, no different 
D) greater, lower 
E) greater, higher

Question 20

The automobile, breakfast cereal, and tobacco industries are examples of

Accepted Answer

A) monopolistic competition 
B) oligopoly 
C) perfect competition 
D) monopoly 
E) monopsony 
A) monopolistic competition 
B) oligopoly 
C) perfect competition 
D) monopoly 
E) monopsony

Exam 10: Monopolistic Competition and Oligopoly

The first video rental outlets

As new monopolistically competitive firms enter the market, the demand facing each firm __________, causing the price charged by each firm to __________.In the long run, each firm will earn a __________ profit.

An oligopoly is characterized by

Which of the following is not a threat to bricks-and-mortar video rental stores?

Exhibit 10-6 In Exhibit 10-6, what is the maximum profit this monopolistic competitor can earn in the short run?

In the long run in monopolistic competition, a firm will not produce the output level that minimizes average cost because

Economic analysis of product differentiation leads to all of the following conclusions except one.Which is the exception?

Monopolistically competitive industries consist of

The historical trend in the video rental industry

During certain periods in the past few decades, if one of the three major breakfast cereal producers in the United States announced a price increase, the other two announced a similar price increase.This is a good example of

The principal advantage of the game theory approach is that it allows us to

A cartel is

A greater supply of video rental outlets along with the increased availability of substitutes like cable channels made rental rates

Which of the following describes the relationship among market price (P), average revenue (AR), and marginal revenue (MR)for a firm in monopolistic competition.

Monopolistic competition is similar to

In the long run, a monopolistically competitive firm will find

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

A firm could differentiate its product by all of the following means except one.Which is the exception?

If oligopolists engaged in some sort of collusion, industry output would be __________ and the price would be __________ than under perfect competition.

The automobile, breakfast cereal, and tobacco industries are examples of

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

As new monopolistically competitive firms enter the market, the demand facing each firm , causing the price charged by each firm to .In the long run, each firm will earn a __ profit.

If oligopolists engaged in some sort of collusion, industry output would be and the price would be than under perfect competition.