Question 1

What is a cartel? Describe some of the problems inherent in forming and maintaining a cartel.

Accepted Answer

A cartel is an organization of firms tha

Question 2

Concentration ratios are not perfect guides to industry concentration,because they

Accepted Answer

A)  do not take into account foreign competition and competition from substitute goods. 
B)  take into account foreign competition and competition from substitute goods. 
C)  do not take into account advertising expenditures. 
D)  do not take into account tax payments. 
A)  do not take into account foreign competition and competition from substitute goods. 
B)  take into account foreign competition and competition from substitute goods. 
C)  do not take into account advertising expenditures. 
D)  do not take into account tax payments.

Question 3

Compared to a monopolistic competitor,a monopolist produces a good with __________ substitutes and so has a __________ elastic demand curve.

Accepted Answer

A)  fewer; more 
B)  fewer; less 
C)  more; more 
D)  more; less 
A)  fewer; more 
B)  fewer; less 
C)  more; more 
D)  more; less

Question 4

In long run equilibrium,a monopolistic competitive firm's price will

Accepted Answer

A)  exceed ATC, but equal MC. 
B)  exceed both MC and ATC. 
C)  be less than both MC and ATC. 
D)  exceed MC, but equal ATC. 
A)  exceed ATC, but equal MC. 
B)  exceed both MC and ATC. 
C)  be less than both MC and ATC. 
D)  exceed MC, but equal ATC.

Question 5

A monopolistic competitive firm is a price taker,while an oligopolist is a price searcher.

Accepted Answer

A) True 
 B)False

Question 6

The monopolistic competitive firm will most likely earn a normal profit in the long run because of

Accepted Answer

A)  product differentiation. 
B)  many buyers and sellers. 
C)  easy entry and exit. 
D)  b and c 
A)  product differentiation. 
B)  many buyers and sellers. 
C)  easy entry and exit. 
D)  b and c

Question 7

A monopolist is a _______________ and a monopolistic competitor is ______________________.

Accepted Answer

A)  price searcher; also a price searcher 
B)  price taker; a price searcher 
C)  price taker; also a price taker 
D)  price searcher; a price taker 
A)  price searcher; also a price searcher 
B)  price taker; a price searcher 
C)  price taker; also a price taker 
D)  price searcher; a price taker

Question 8

In the prisoner's dilemma,each prisoner would be better off if neither one confesses.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 25-9
  
-If a contestable market does not satisfy all of the conditions of a perfectly competitive market,that contestable market _______________ achieve resource allocative efficiency.

Accepted Answer

A)  will not 
B)  will definitely 
C)  could possibly 
D)  This is a trick question since only monopolies achieve resource allocative efficiency. 
A)  will not 
B)  will definitely 
C)  could possibly 
D)  This is a trick question since only monopolies achieve resource allocative efficiency.

Question 10

Exhibit 25-10
   
Suppose that the letter grade earned on a test for each student in a class depends upon how well he/she does relative to other students in the class. This exhibit shows a prisoner's dilemma setting for two representative students in the class, George and Gina.
-Refer to Exhibit 25-10. If George and Gina are in a prisoner's dilemma setting,they are likely to end up in box ___________ in the diagram.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 11

If the top four firms account for $75 billion in sales and total industry sales are $300 billion,it follows that the four-firm concentration ratio is

Accepted Answer

A)  0.25. 
B)  0.75. 
C)  1.75. 
D)  1.25. 
A)  0.25. 
B)  0.75. 
C)  1.75. 
D)  1.25.

Question 12

Which of the following is not a condition of a contestable market?

Accepted Answer

A)  There is easy entry into the market. 
B)  There is costless exit from the market. 
C)  New firms entering the market can produce the product at lower cost than current firms. 
D)  Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
E)  None of the above; that is, all of the above are conditions of a contestable market. 
A)  There is easy entry into the market. 
B)  There is costless exit from the market. 
C)  New firms entering the market can produce the product at lower cost than current firms. 
D)  Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
E)  None of the above; that is, all of the above are conditions of a contestable market.

Question 13

Exhibit 25-7
  
-Refer to Exhibit 25-7.A monopolistic competitive firm earns a total profit of __________ when it produces and sells 20 units of its good.

Accepted Answer

A)  $40. 
B)  $10. 
C)  $200. 
D)  $80. 
E)  $50. 
A)  $40. 
B)  $10. 
C)  $200. 
D)  $80. 
E)  $50.

Question 14

Concentration ratios are used to determine

Accepted Answer

A)  the number of firms in an industry. 
B)  the potential for entry into an industry. 
C)  the degree of product differentiation. 
D)  the extent (degree) of oligopoly. 
E)  none of the above 
A)  the number of firms in an industry. 
B)  the potential for entry into an industry. 
C)  the degree of product differentiation. 
D)  the extent (degree) of oligopoly. 
E)  none of the above

Question 15

In the real-world,which of these industries is most clearly an oligopoly?

Accepted Answer

A)  wheat 
B)  electricity generation 
C)  cereal breakfast foods 
D)  restaurants 
A)  wheat 
B)  electricity generation 
C)  cereal breakfast foods 
D)  restaurants

Question 16

A concentration ratio indicates the

Accepted Answer

A)  number of firms in an industry. 
B)  number of large firms in an industry compared to the number of large firms in another related industry. 
C)  percentage of total sales accounted for by the (for example) four largest firms. 
D)  percentage of sellers in an industry relative to the number of buyers. 
E)  percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter. 
A)  number of firms in an industry. 
B)  number of large firms in an industry compared to the number of large firms in another related industry. 
C)  percentage of total sales accounted for by the (for example) four largest firms. 
D)  percentage of sellers in an industry relative to the number of buyers. 
E)  percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter.

Question 17

If you were to rank the four market structures in terms of lowest concentration ratio to highest concentration ratio,which of the following rankings would be correct?

Accepted Answer

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

Question 18

What does the demand curve faced by a monopolistic competitive firm look like? Explain why it is sloped this way,and what this implies about the relationship that exists between price and marginal revenue under monopolistic competition.

Accepted Answer

The monopolistic competitor faces a down

Question 19

In recent years,which of the following industries has had high four- and eight-firm concentration ratios?

Accepted Answer

A)  tires 
B)  soap 
C)  retail clothing 
D)  a and b 
E)  all of the above 
A)  tires 
B)  soap 
C)  retail clothing 
D)  a and b 
E)  all of the above

Question 20

Which market structure allows the good being produced to be either homogeneous or differentiated?

Accepted Answer

A)  monopolistic competition 
B)  oligopoly 
C)  monopoly 
D)  perfect competition 
E)  none of the above 
A)  monopolistic competition 
B)  oligopoly 
C)  monopoly 
D)  perfect competition 
E)  none of the above

Exam 25: Monopolistic Competition, Oligopoly, and Game Theory

What is a cartel? Describe some of the problems inherent in forming and maintaining a cartel.

Concentration ratios are not perfect guides to industry concentration,because they

Compared to a monopolistic competitor,a monopolist produces a good with __________ substitutes and so has a __________ elastic demand curve.

In long run equilibrium,a monopolistic competitive firm's price will

A monopolistic competitive firm is a price taker,while an oligopolist is a price searcher.

The monopolistic competitive firm will most likely earn a normal profit in the long run because of

A monopolist is a _______________ and a monopolistic competitor is ______________________.

In the prisoner's dilemma,each prisoner would be better off if neither one confesses.

Exhibit 25-9 -If a contestable market does not satisfy all of the conditions of a perfectly competitive market,that contestable market _______________ achieve resource allocative efficiency.

If the top four firms account for $75 billion in sales and total industry sales are $300 billion,it follows that the four-firm concentration ratio is

Which of the following is not a condition of a contestable market?

Exhibit 25-7 -Refer to Exhibit 25-7.A monopolistic competitive firm earns a total profit of __________ when it produces and sells 20 units of its good.

Concentration ratios are used to determine

In the real-world,which of these industries is most clearly an oligopoly?

A concentration ratio indicates the

If you were to rank the four market structures in terms of lowest concentration ratio to highest concentration ratio,which of the following rankings would be correct?

What does the demand curve faced by a monopolistic competitive firm look like? Explain why it is sloped this way,and what this implies about the relationship that exists between price and marginal revenue under monopolistic competition.

In recent years,which of the following industries has had high four- and eight-firm concentration ratios?

Which market structure allows the good being produced to be either homogeneous or differentiated?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Compared to a monopolistic competitor,a monopolist produces a good with substitutes and so has a elastic demand curve.

A monopolist is a _ and a monopolistic competitor is ________.