Question 1

In the long run, a monopolistically competitive firm will

Accepted Answer

A) produce a greater variety of goods than do firms in other market structures 
B) produce a greater output level than would a perfectly competitive firm 
C) produce where price equals average total cost 
D) earn an economic profit 
E) suffer a loss because of its advertising budget 
A) produce a greater variety of goods than do firms in other market structures 
B) produce a greater output level than would a perfectly competitive firm 
C) produce where price equals average total cost 
D) earn an economic profit 
E) suffer a loss because of its advertising budget

Question 2

The various models of oligopoly explain observed behavior in different industries, but none is satisfactory as a general theory of oligopoly.

Accepted Answer

A) True 
 B)False

Question 3

The defining characteristic of oligopoly is product differentiation.

Accepted Answer

A) True 
 B)False

Question 4

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.Eagle Tobacco and Dan'l Boone Tobacco have the same dominant strategy.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 10-17   In Exhibit 10-17, the monopolistic competitor will

Accepted Answer

A) lose $10 
B) lose $15 
C) break even 
D) earn $25 profit 
E) earn $30 profit 
A) lose $10 
B) lose $15 
C) break even 
D) earn $25 profit 
E) earn $30 profit

Question 6

Monopolistic competitors are

Accepted Answer

A) price takers 
B) price searchers 
C) price maximizers 
D) price ignorers 
E) collusive price fixers 
A) price takers 
B) price searchers 
C) price maximizers 
D) price ignorers 
E) collusive price fixers

Question 7

If Family Travel Agency, a monopolistic competitor, offers services that are differentiated from the services of other producers in the industry, it

Accepted Answer

A) faces a perfectly elastic demand curve 
B) is a price taker 
C) has some power to control the price it charges 
D) faces a perfectly inelastic demand curve 
E) produces a product with no close substitutes 
A) faces a perfectly elastic demand curve 
B) is a price taker 
C) has some power to control the price it charges 
D) faces a perfectly inelastic demand curve 
E) produces a product with no close substitutes

Question 8

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 maximizes profit at an output level of 25 units. 
B) This firm maximizes profit at an output level of 35 units. 
C) This firm maximizes profit at an output level less than 25 units. 
D) This firm maximizes profit at an output level greater than 35 units. 
E) There is not enough information to find the firm's profit-maximizing level of output. 
A) This firm maximizes profit at an output level of 25 units. 
B) This firm maximizes profit at an output level of 35 units. 
C) This firm maximizes profit at an output level less than 25 units. 
D) This firm maximizes profit at an output level greater than 35 units. 
E) There is not enough information to find the firm's profit-maximizing level of output.

Question 9

A prisoner's dilemma can be described as a situation in which

Accepted Answer

A) a decision maker is uncertain about the potential punishment for something done in the past 
B) an individual decision maker finds it in his best interest to pursue a course of action that can lead to a less than desirable outcome for the group 
C) producers act so as to avoid maximizing profits because of government retaliation 
D) individual firms seeks to maximize their own profits with no regard for the group 
E) the summation of individual demand curves creates an inelastic demand curve facing the industry 
A) a decision maker is uncertain about the potential punishment for something done in the past 
B) an individual decision maker finds it in his best interest to pursue a course of action that can lead to a less than desirable outcome for the group 
C) producers act so as to avoid maximizing profits because of government retaliation 
D) individual firms seeks to maximize their own profits with no regard for the group 
E) the summation of individual demand curves creates an inelastic demand curve facing the industry

Question 10

Which of the following is unique to oligopoly among all the market structures?

Accepted Answer

A) product differentiation 
B) profit maximization 
C) mutual interdependence 
D) advertising 
E) long-run economic profits 
A) product differentiation 
B) profit maximization 
C) mutual interdependence 
D) advertising 
E) long-run economic profits

Question 11

Exhibit 10-12   The profit-maximizing (or loss-minimizing)output for the firm in Exhibit 10-12 is

Accepted Answer

A) zero (i.e., a shut down case) 
B) 700 units 
C) 1, 000 units 
D) more than 700 and less than 1, 000 units 
E) more than 1, 000 units 
A) zero (i.e., a shut down case) 
B) 700 units 
C) 1, 000 units 
D) more than 700 and less than 1, 000 units 
E) more than 1, 000 units

Question 12

Compared to regular grocery stores, convenience stores have

Accepted Answer

A) higher prices and a more limited selection of goods 
B) higher prices and a greater selection of goods 
C) lower prices and a more limited selection of goods 
D) lower prices and a greater selection of goods 
E) equal prices and an equal selection of goods 
A) higher prices and a more limited selection of goods 
B) higher prices and a greater selection of goods 
C) lower prices and a more limited selection of goods 
D) lower prices and a greater selection of goods 
E) equal prices and an equal selection of goods

Question 13

Exhibit 10-8   Assume the firm in Exhibit 10-8 is currently charging price P and producing output level Q.In order to maximize profit (or minimize loss), the firm should

Accepted Answer

A) charge more and sell less 
B) charge less and sell more 
C) charge less and sell less 
D) charge more and sell more 
E) continue to charge P and sell Q 
A) charge more and sell less 
B) charge less and sell more 
C) charge less and sell less 
D) charge more and sell more 
E) continue to charge P and sell Q

Question 14

The forces that determine the cost of production are largely independent of the forces that shape demand.

Accepted Answer

A) True 
 B)False

Question 15

In the long run in monopolistic competition, all economies of scale are exhausted.

Accepted Answer

A) True 
 B)False

Question 16

The automobile industry is

Accepted Answer

A) in monopolistic competition because brand names are important 
B) in monopolistic competition because it has economies of scale 
C) in monopolistic competition for legal reasons 
D) an oligopoly because each firm must produce a large amount of output before it can achieve low average costs 
E) an oligopoly for legal reasons 
A) in monopolistic competition because brand names are important 
B) in monopolistic competition because it has economies of scale 
C) in monopolistic competition for legal reasons 
D) an oligopoly because each firm must produce a large amount of output before it can achieve low average costs 
E) an oligopoly for legal reasons

Question 17

Exhibit 10-6   In Exhibit 10-6, what is the profit-maximizing price for this monopolistic competitor in the short run?

Accepted Answer

A) $7 
B) $6 
C) $5 
D) $4 
E) $3 
A) $7 
B) $6 
C) $5 
D) $4 
E) $3

Question 18

A player's strategy is a game plan when decisions are interdependent

Accepted Answer

A) True 
 B)False

Question 19

Monopolistically competitive firms do not achieve productive efficiency because

Accepted Answer

A) entry of firms raises production costs in the long run 
B) barriers to entry allow profit to be earned in the long run 
C) price is greater than marginal cost at the profit maximizing output level 
D) profit is maximized at a quantity where average total cost is not minimized 
E) there is no threat of entry in the long run 
A) entry of firms raises production costs in the long run 
B) barriers to entry allow profit to be earned in the long run 
C) price is greater than marginal cost at the profit maximizing output level 
D) profit is maximized at a quantity where average total cost is not minimized 
E) there is no threat of entry in the long run

Question 20

Two heavy equipment manufacturers might collude in an effort to do all of the following except one.Which is the exception?

Accepted Answer

A) determine a more advantageous price and quantity 
B) prevent new entry into the market 
C) take advantage of the legal benefits that U.S.cartels receive 
D) increase their combined profits 
E) predict the behavior of other competitors in the heavy equipment market with greater certainty 
A) determine a more advantageous price and quantity 
B) prevent new entry into the market 
C) take advantage of the legal benefits that U.S.cartels receive 
D) increase their combined profits 
E) predict the behavior of other competitors in the heavy equipment market with greater certainty

Exam 10: Monopolistic Competition and Oligopoly

In the long run, a monopolistically competitive firm will

The various models of oligopoly explain observed behavior in different industries, but none is satisfactory as a general theory of oligopoly.

The defining characteristic of oligopoly is product differentiation.

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.Eagle Tobacco and Dan'l Boone Tobacco have the same dominant strategy.

Exhibit 10-17 In Exhibit 10-17, the monopolistic competitor will

Monopolistic competitors are

If Family Travel Agency, a monopolistic competitor, offers services that are differentiated from the services of other producers in the industry, it

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?

A prisoner's dilemma can be described as a situation in which

Which of the following is unique to oligopoly among all the market structures?

Exhibit 10-12 The profit-maximizing (or loss-minimizing)output for the firm in Exhibit 10-12 is

Compared to regular grocery stores, convenience stores have

Exhibit 10-8 Assume the firm in Exhibit 10-8 is currently charging price P and producing output level Q.In order to maximize profit (or minimize loss), the firm should

The forces that determine the cost of production are largely independent of the forces that shape demand.

In the long run in monopolistic competition, all economies of scale are exhausted.

The automobile industry is

Exhibit 10-6 In Exhibit 10-6, what is the profit-maximizing price for this monopolistic competitor in the short run?

A player's strategy is a game plan when decisions are interdependent

Monopolistically competitive firms do not achieve productive efficiency because

Two heavy equipment manufacturers might collude in an effort to do all of the following except one.Which is the exception?

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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