Question 1

Which of the following is likely to occur when a two-person game can be played repeatedly?

Accepted Answer

A) Collusion and cooperation among the players 
B) The prisoner's dilemma 
C) The industry demand curve will become perfectly elastic 
D) The industry demand curve will become perfectly inelastic 
E) There is no solution possible because of the indeterminate price quantity combinations 
A) Collusion and cooperation among the players 
B) The prisoner's dilemma 
C) The industry demand curve will become perfectly elastic 
D) The industry demand curve will become perfectly inelastic 
E) There is no solution possible because of the indeterminate price quantity combinations

Question 2

Which of the following helps to make a cartel successful?

Accepted Answer

A) stable demand and costs 
B) differentiated output 
C) highly variable cost conditions 
D) highly variable demand conditions 
E) rapidly changing technology 
A) stable demand and costs 
B) differentiated output 
C) highly variable cost conditions 
D) highly variable demand conditions 
E) rapidly changing technology

Question 3

Exhibit 10-18   Consider the situation depicted for the monopolistically competitive firm in Exhibit 10-18.What would you expect to happen in this market in the long-run?

Accepted Answer

A) exit of resources will occur and this firm's demand curve will shift out leading to a higher price 
B) exit of resources will occur and this firm's demand curve will shift out leading to a lower price 
C) nothing will happen the industry is in long-run equilibrium 
D) entry of new resources will occur and this firm's demand curve will shift in leading to a lower price 
E) entry of new resources will occur and this firm's demand curve will shift in leading to a higher price 
A) exit of resources will occur and this firm's demand curve will shift out leading to a higher price 
B) exit of resources will occur and this firm's demand curve will shift out leading to a lower price 
C) nothing will happen the industry is in long-run equilibrium 
D) entry of new resources will occur and this firm's demand curve will shift in leading to a lower price 
E) entry of new resources will occur and this firm's demand curve will shift in leading to a higher price

Question 4

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

Accepted Answer

A) soybeans 
B) autos 
C) fast food 
D) oil 
E) local phone service 
A) soybeans 
B) autos 
C) fast food 
D) oil 
E) local phone service

Question 5

Although both perfectly competitive and monopolistically competitive firms earn normal profits in the long run, monopolistically competitive firms will not

Accepted Answer

A) operate where price equals marginal cost 
B) charge a higher price than firms in perfect competition 
C) produce a smaller quantity than firms in perfect competition 
D) produce where price equals average total cost 
E) exit when demand falls below long-run average costs 
A) operate where price equals marginal cost 
B) charge a higher price than firms in perfect competition 
C) produce a smaller quantity than firms in perfect competition 
D) produce where price equals average total cost 
E) exit when demand falls below long-run average costs

Question 6

Firms in monopoly or monopolistically competitive market structures do not have traditional supply curves as firms in perfect competition do.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that firms in a monopolistically competitive industry are earning short-run economic profits.In the long run, the demand curve facing each individual firm can be expected to

Accepted Answer

A) shift to the left and become flatter 
B) shift to the left and become steeper 
C) shift to the right and become flatter 
D) shift to the right and become steeper 
E) remain constant 
A) shift to the left and become flatter 
B) shift to the left and become steeper 
C) shift to the right and become flatter 
D) shift to the right and become steeper 
E) remain constant

Question 8

In the long run in monopolistic competition, firms earn zero economic profit.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 10-3   At the profit-maximizing output, the firm in Exhibit 10-3 is earning

Accepted Answer

A) an economic profit of $38 
B) an economic profit, but the amount cannot be determined 
C) zero economic profit 
D) an economic profit of $32 
E) an economic loss 
A) an economic profit of $38 
B) an economic profit, but the amount cannot be determined 
C) zero economic profit 
D) an economic profit of $32 
E) an economic loss

Question 10

In a game that can be repeated, the optimal solution is

Accepted Answer

A) dependent upon each firm's decision in the first round of decision making 
B) independent of the decisions that competitive firms made on the first round 
C) to maximize profits regardless of what competitors do 
D) to minimize costs regardless of what competitors do 
E) to select the solution that minimizes the potential losses from a decision 
A) dependent upon each firm's decision in the first round of decision making 
B) independent of the decisions that competitive firms made on the first round 
C) to maximize profits regardless of what competitors do 
D) to minimize costs regardless of what competitors do 
E) to select the solution that minimizes the potential losses from a decision

Question 11

Game theory focuses on

Accepted Answer

A) strategic behavior among interdependent firms 
B) professional athletic events 
C) competition between the players in board games 
D) competition between those in the political arena and those in the market place 
E) the interaction between firms in a competitive industry and those in a non-competitive industry 
A) strategic behavior among interdependent firms 
B) professional athletic events 
C) competition between the players in board games 
D) competition between those in the political arena and those in the market place 
E) the interaction between firms in a competitive industry and those in a non-competitive industry

Question 12

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

Accepted Answer

A) $0 
B) $27 
C) $21 
D) $15 
E) impossible to determine because MR and MC are not known 
A) $0 
B) $27 
C) $21 
D) $15 
E) impossible to determine because MR and MC are not known

Question 13

Which of the following is unique to perfect competition?

Accepted Answer

A) The individual firm cannot earn economic profit in the long run. 
B) It is easy for new firms to enter the industry. 
C) The market demand curve slopes downward. 
D) The demand curve facing an individual firm is perfectly elastic. 
E) The firms in the industry produce a homogeneous product. 
A) The individual firm cannot earn economic profit in the long run. 
B) It is easy for new firms to enter the industry. 
C) The market demand curve slopes downward. 
D) The demand curve facing an individual firm is perfectly elastic. 
E) The firms in the industry produce a homogeneous product.

Question 14

The dominant-strategy solution implies that each firm

Accepted Answer

A) ignores the reactions of competitors 
B) colludes with competitors to maximize industry profits 
C) ignores the decisions of the other firms 
D) takes all potential bits of information into consideration before making a decision 
E) selects the optimal solution to a game 
A) ignores the reactions of competitors 
B) colludes with competitors to maximize industry profits 
C) ignores the decisions of the other firms 
D) takes all potential bits of information into consideration before making a decision 
E) selects the optimal solution to a game

Question 15

In a coordination game, a Nash equilibrium occurs when

Accepted Answer

A) each player ignores the strategy of the other player 
B) each player chooses no strategy, but maintains the status quo 
C) each player chooses the same strategy 
D) one player can improve the outcome by changing strategy 
E) None of the answers is correct. 
A) each player ignores the strategy of the other player 
B) each player chooses no strategy, but maintains the status quo 
C) each player chooses the same strategy 
D) one player can improve the outcome by changing strategy 
E) None of the answers is correct.

Question 16

Exhibit 10-18   In Exhibit 10-18, 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 17

If the leading canned soup company introduces dozens of new flavors in order to dominate shelf space, the company is most likely trying to create a barrier to entry by

Accepted Answer

A) increasing the total investment needed to reach the minimum efficient size 
B) spending more on advertising than potential competitors can afford 
C) exploiting economies of scale 
D) crowding out the competition 
E) establishing an undifferentiated oligopoly 
A) increasing the total investment needed to reach the minimum efficient size 
B) spending more on advertising than potential competitors can afford 
C) exploiting economies of scale 
D) crowding out the competition 
E) establishing an undifferentiated oligopoly

Question 18

Exhibit 10-17   In Exhibit 10-17, 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 19

Exhibit 10-17   In Exhibit 10-17, the monopolistic competitor's profit-maximizing price is

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $25 
E) $30 
A) $10 
B) $15 
C) $20 
D) $25 
E) $30

Question 20

Which of the following characteristics distinguishes oligopoly from other market structures?

Accepted Answer

A) a horizontal demand curve 
B) a downward-sloping demand curve 
C) production of homogeneous outputs 
D) production of differentiated outputs 
E) interdependence among firms in the industry 
A) a horizontal demand curve 
B) a downward-sloping demand curve 
C) production of homogeneous outputs 
D) production of differentiated outputs 
E) interdependence among firms in the industry

Exam 10: Monopolistic Competition and Oligopoly

Which of the following is likely to occur when a two-person game can be played repeatedly?

Which of the following helps to make a cartel successful?

Exhibit 10-18 Consider the situation depicted for the monopolistically competitive firm in Exhibit 10-18.What would you expect to happen in this market in the long-run?

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

Although both perfectly competitive and monopolistically competitive firms earn normal profits in the long run, monopolistically competitive firms will not

Firms in monopoly or monopolistically competitive market structures do not have traditional supply curves as firms in perfect competition do.

Suppose that firms in a monopolistically competitive industry are earning short-run economic profits.In the long run, the demand curve facing each individual firm can be expected to

In the long run in monopolistic competition, firms earn zero economic profit.

Exhibit 10-3 At the profit-maximizing output, the firm in Exhibit 10-3 is earning

In a game that can be repeated, the optimal solution is

Game theory focuses on

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

Which of the following is unique to perfect competition?

The dominant-strategy solution implies that each firm

In a coordination game, a Nash equilibrium occurs when

Exhibit 10-18 In Exhibit 10-18, the monopolistic competitor's profit-maximizing level of output is

If the leading canned soup company introduces dozens of new flavors in order to dominate shelf space, the company is most likely trying to create a barrier to entry by

Exhibit 10-17 In Exhibit 10-17, the monopolistic competitor's profit-maximizing level of output is

Exhibit 10-17 In Exhibit 10-17, the monopolistic competitor's profit-maximizing price is

Which of the following characteristics distinguishes oligopoly from other market structures?

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