Question 1

Which of the following properly describes monopolistic competition?

Accepted Answer

A) All firms produce exactly the same product. 
B) There are only a few firms. 
C) The industry is highly regulated. 
D) Each firm faces a downward-sloping demand curve. 
E) The cost curves of the typical firm are horizontal. 
A) All firms produce exactly the same product. 
B) There are only a few firms. 
C) The industry is highly regulated. 
D) Each firm faces a downward-sloping demand curve. 
E) The cost curves of the typical firm are horizontal.

Question 2

Exhibit 11-4  
-Refer to Exhibit 11-4. If firm A prices at the monopoly price, firm B's best option is to price at the ____ price. If firm A prices at the competitive price, firm B's best option is to price at the ____ price.

Accepted Answer

A) monopoly; monopoly 
B) monopoly; competitive 
C) competitive; competitive 
D) competitive; monopoly 
E) oligopolistic; competitive 
A) monopoly; monopoly 
B) monopoly; competitive 
C) competitive; competitive 
D) competitive; monopoly 
E) oligopolistic; competitive

Question 3

Strategic behavior occurs in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of intraindustry trade?

Accepted Answer

A) The United States imports some vehicle models from Canada, while exports other vehicle models to Canada. 
B) Japan buys computers from both the United States and China. 
C) Chinese residents buy computers made in different factories across China. 
D) Mexico exports banana to the United States, while the United States exports corn to Mexico. 
E) Canada and Mexico import wheat from the United States, but not from each other. 
A) The United States imports some vehicle models from Canada, while exports other vehicle models to Canada. 
B) Japan buys computers from both the United States and China. 
C) Chinese residents buy computers made in different factories across China. 
D) Mexico exports banana to the United States, while the United States exports corn to Mexico. 
E) Canada and Mexico import wheat from the United States, but not from each other.

Question 5

A firm will work to differentiate its product up to the point that

Accepted Answer

A) it develops a product unlike anything else in the market. 
B) the increase in revenue equals the cost of development. 
C) revenue is maximized. 
D) all innovation is exhausted. 
E) the increase in product price as a result of research equals the price of the competition. 
A) it develops a product unlike anything else in the market. 
B) the increase in revenue equals the cost of development. 
C) revenue is maximized. 
D) all innovation is exhausted. 
E) the increase in product price as a result of research equals the price of the competition.

Question 6

Firms leave a monopolistically competitive industry when

Accepted Answer

A) other firms enter. 
B) average total cost is greater than marginal revenue. 
C) price is equal to marginal cost. 
D) marginal revenue exceeds marginal cost. 
E) average total cost is greater than price. 
A) other firms enter. 
B) average total cost is greater than marginal revenue. 
C) price is equal to marginal cost. 
D) marginal revenue exceeds marginal cost. 
E) average total cost is greater than price.

Question 7

When one country trades goods from one industry for goods from a different industry in another country, it is called

Accepted Answer

A) NAFTA. 
B) free trade. 
C) laissez faire. 
D) specialized trade. 
E) interindustry trade. 
A) NAFTA. 
B) free trade. 
C) laissez faire. 
D) specialized trade. 
E) interindustry trade.

Question 8

Bertrand competition occurs when oligopolistic firms compete with regard to both prices and quantities.

Accepted Answer

A) True 
 B)False

Question 9

Explain why collusion is likely in an industry in which it is difficult to get information about transactions and the market, the market operates on a continual basis, and there are a few sellers.

Accepted Answer

Difficulty in observing transactions and

Question 10

If a monopolistically competitive industry is in long-run equilibrium and the costs of resources increase suddenly, some firms will eventually leave the industry.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 11-6  
-Refer to Exhibit 11-6. If the firms cooperate, what will be their combined profit each period?

Accepted Answer

$20,000
Both coopera

Question 12

When Burger King says you can "Have it your way," it is differentiating itself from McDonald's by stressing

Accepted Answer

A) personal service. 
B) time savings. 
C) physical characteristics. 
D) safety. 
E) location. 
A) personal service. 
B) time savings. 
C) physical characteristics. 
D) safety. 
E) location.

Question 13

Compared with competition, long-run equilibrium in a monopolistically competitive industry results in

Accepted Answer

A) lower prices and greater output. 
B) higher prices and lower output. 
C) lower prices and lower output. 
D) higher prices and greater output. 
E) prices and output that can be higher or lower. 
A) lower prices and greater output. 
B) higher prices and lower output. 
C) lower prices and lower output. 
D) higher prices and greater output. 
E) prices and output that can be higher or lower.

Question 14

What does the prisoner's dilemma imply about firm behavior in oligopoly?

Accepted Answer

The noncooperative outcome in the prison

Question 15

The type of industry that is characterized by many firms selling differentiated products is called

Accepted Answer

A) competition. 
B) pure competition. 
C) monopoly. 
D) monopolistic competition. 
E) oligopoly. 
A) competition. 
B) pure competition. 
C) monopoly. 
D) monopolistic competition. 
E) oligopoly.

Question 16

Monopolistic competitors can always prevent entry and exit of other firms over time.

Accepted Answer

A) True 
 B)False

Question 17

Product differentiation is

Accepted Answer

A) the ability of consumers to determine differences in different units of the same product. 
B) the existence of varying degrees of differences among similar items. 
C) the spin-off of one product line from another. 
D) an attempt by salespeople to make the products they sell appear different from products others sell. 
E) the opposite of production. 
A) the ability of consumers to determine differences in different units of the same product. 
B) the existence of varying degrees of differences among similar items. 
C) the spin-off of one product line from another. 
D) an attempt by salespeople to make the products they sell appear different from products others sell. 
E) the opposite of production.

Question 18

Product differentiation is often the key to a successful business.

Accepted Answer

A) True 
 B)False

Question 19

Cournot competition occurs when oligopolistic firms compete with regard to prices.

Accepted Answer

A) True 
 B)False

Question 20

Product differentiation results in

Accepted Answer

A) interindustry trade. 
B) intraindustry trade. 
C) no trade. 
D) trade zones. 
E) trade tariffs. 
A) interindustry trade. 
B) intraindustry trade. 
C) no trade. 
D) trade zones. 
E) trade tariffs.

Exam 11: Product Differentiation, Monopolistic Competition, and Oligopoly

Which of the following properly describes monopolistic competition?

Exhibit 11-4 -Refer to Exhibit 11-4. If firm A prices at the monopoly price, firm B's best option is to price at the ____ price. If firm A prices at the competitive price, firm B's best option is to price at the ____ price.

Strategic behavior occurs in monopolistic competition.

Which of the following is an example of intraindustry trade?

A firm will work to differentiate its product up to the point that

Firms leave a monopolistically competitive industry when

When one country trades goods from one industry for goods from a different industry in another country, it is called

Bertrand competition occurs when oligopolistic firms compete with regard to both prices and quantities.

Explain why collusion is likely in an industry in which it is difficult to get information about transactions and the market, the market operates on a continual basis, and there are a few sellers.

If a monopolistically competitive industry is in long-run equilibrium and the costs of resources increase suddenly, some firms will eventually leave the industry.

Exhibit 11-6 -Refer to Exhibit 11-6. If the firms cooperate, what will be their combined profit each period?

When Burger King says you can "Have it your way," it is differentiating itself from McDonald's by stressing

Compared with competition, long-run equilibrium in a monopolistically competitive industry results in

What does the prisoner's dilemma imply about firm behavior in oligopoly?

The type of industry that is characterized by many firms selling differentiated products is called

Monopolistic competitors can always prevent entry and exit of other firms over time.

Product differentiation is

Product differentiation is often the key to a successful business.

Cournot competition occurs when oligopolistic firms compete with regard to prices.

Product differentiation results in

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters

Exhibit 11-4 -Refer to Exhibit 11-4. If firm A prices at the monopoly price, firm B's best option is to price at the price. If firm A prices at the competitive price, firm B's best option is to price at the price.