Question 1

If a market is contestable,then

Accepted Answer

A)  a cartel will form in the industry. 
B)  economic profits are small or zero. 
C)  firms face a vertical demand curve. 
D)  there is a dominant firm in the market. 
E)  none of the above 
A)  a cartel will form in the industry. 
B)  economic profits are small or zero. 
C)  firms face a vertical demand curve. 
D)  there is a dominant firm in the market. 
E)  none of the above

Question 2

The monopolistic competitive firm faces a __________ demand curve and therefore is a price __________.

Accepted Answer

A)  downward-sloping; searcher. 
B)  horizontal; taker. 
C)  downward-sloping; taker. 
D)  horizontal; searcher. 
A)  downward-sloping; searcher. 
B)  horizontal; taker. 
C)  downward-sloping; taker. 
D)  horizontal; searcher.

Question 3

For a monopoly firm,price is __________ marginal revenue,and for a monopolistic competitive firm,price is __________ marginal revenue.

Accepted Answer

A)  less than; equal to 
B)  greater than; equal to 
C)  greater than; less than 
D)  greater than; greater than 
E)  equal to; less than 
A)  less than; equal to 
B)  greater than; equal to 
C)  greater than; less than 
D)  greater than; greater than 
E)  equal to; less than

Question 4

Compare and contrast the following market structures: perfect competition and monopolistic competition.

Accepted Answer

Both market structures share the followi

Question 5

A monopolistic competitor has a demand curve that is ___________ elastic than a perfectly competitive firm's demand curve and ______________ a monopolistic firm's demand curve.

Accepted Answer

A)  less; more elastic than 
B)  less; less elastic than 
C)  more; more elastic than 
D)  less: equally as elastic as 
A)  less; more elastic than 
B)  less; less elastic than 
C)  more; more elastic than 
D)  less: equally as elastic as

Question 6

The monopolistic competitor is a price

Accepted Answer

A)  taker, because of the many buyers and sellers in the market. 
B)  searcher, because of product differentiation. 
C)  taker, because of identical products. 
D)  searcher, because of the few buyers and sellers in the market. 
E)  searcher, because of the few buyers and sellers in the market and product differentiation. 
A)  taker, because of the many buyers and sellers in the market. 
B)  searcher, because of product differentiation. 
C)  taker, because of identical products. 
D)  searcher, because of the few buyers and sellers in the market. 
E)  searcher, because of the few buyers and sellers in the market and product differentiation.

Question 7

In the long run,new firms will enter a monopolistic competitive industry until

Accepted Answer

A)  minimum average total cost is achieved. 
B)  all firms are incurring losses. 
C)  economic profits in the industry are zero. 
D)  a and b 
A)  minimum average total cost is achieved. 
B)  all firms are incurring losses. 
C)  economic profits in the industry are zero. 
D)  a and b

Question 8

Exhibit 25-8
  
-Refer to Exhibit 25-8.The marginal cost of the last unit produced at the profit-maximizing output level equals

Accepted Answer

A)  $10. 
B)  $40. 
C)  $20. 
D)  $5. 
A)  $10. 
B)  $40. 
C)  $20. 
D)  $5.

Question 9

Exhibit 25-3
  
-Refer to Exhibit 25-3.Profits of this profit maximizing monopolistic competitor is represented by the area

Accepted Answer

A)  0P4DQ3. 
B)  P5P3CE. 
C)  P3P1AC. 
D)  0Q1 times P2P4. 
E)  0Q1 times P2P5. 
A)  0P4DQ3. 
B)  P5P3CE. 
C)  P3P1AC. 
D)  0Q1 times P2P4. 
E)  0Q1 times P2P5.

Question 10

Exhibit 25-3
  
-Refer to Exhibit 25-3.Total cost of this profit maximizing monopolistic competitor is represented by the area

Accepted Answer

A)  0P1AQ2. 
B)  0P3CQ2. 
C)  P3P1AC. 
D)  P4P1AD. 
A)  0P1AQ2. 
B)  0P3CQ2. 
C)  P3P1AC. 
D)  P4P1AD.

Question 11

The theory of oligopoly assumes

Accepted Answer

A)  a few sellers and many buyers. 
B)  a few buyers and many sellers. 
C)  significant barriers to entry. 
D)  a and c 
E)  b and c 
A)  a few sellers and many buyers. 
B)  a few buyers and many sellers. 
C)  significant barriers to entry. 
D)  a and c 
E)  b and c

Question 12

The monopolistic competitive firm produces the output at which

Accepted Answer

A)  price equals marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  there is resource allocative efficiency. 
D)  average total cost is at a minimum. 
A)  price equals marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  there is resource allocative efficiency. 
D)  average total cost is at a minimum.

Question 13

A monopolistic competitive firm maximizes profits by producing at the point where

Accepted Answer

A)  total revenue is at a maximum. 
B)  marginal revenue equals average cost. 
C)  marginal revenue equals marginal cost. 
D)  price equals marginal revenue. 
E)  b and d 
A)  total revenue is at a maximum. 
B)  marginal revenue equals average cost. 
C)  marginal revenue equals marginal cost. 
D)  price equals marginal revenue. 
E)  b and d

Question 14

The theory of contestable markets concludes that

Accepted Answer

A)  a small number of firms in an industry is strong evidence that they will perform in a noncompetitive way. 
B)  even if the number of sellers in an industry is small, profits can be zero in the industry. 
C)  inefficient producers can survive in a contestable market. 
D)  a firm in a contestable market will sell at a price above marginal cost. 
E)  all of the above 
A)  a small number of firms in an industry is strong evidence that they will perform in a noncompetitive way. 
B)  even if the number of sellers in an industry is small, profits can be zero in the industry. 
C)  inefficient producers can survive in a contestable market. 
D)  a firm in a contestable market will sell at a price above marginal cost. 
E)  all of the above

Question 15

In monopolistic competition,firms can compete in terms of

Accepted Answer

A)  price. 
B)  quality of product. 
C)  service. 
D)  location. 
E)  all of the above 
A)  price. 
B)  quality of product. 
C)  service. 
D)  location. 
E)  all of the above

Question 16

Suppose an industry is made up of four firms,all with equal sales.The four-firm concentration ratio of that industry is

Accepted Answer

A)  0.125. 
B)  0.50. 
C)  1.00. 
D)  This cannot be determined without more information. 
A)  0.125. 
B)  0.50. 
C)  1.00. 
D)  This cannot be determined without more information.

Question 17

The demand curve facing a firm in monopolistic competition is downward sloping,because the firm

Accepted Answer

A)  sells a differentiated product. 
B)  is the entire industry by itself. 
C)  is small relative to the market. 
D)  b and c 
E)  none of the above 
A)  sells a differentiated product. 
B)  is the entire industry by itself. 
C)  is small relative to the market. 
D)  b and c 
E)  none of the above

Question 18

Which of the following statements is false?

Accepted Answer

A)  On occasion, governments have helped to create and maintain cartels. 
B)  Once a cartel agreement has been made, cartel members have an incentive to cheat on the agreement. 
C)  A single cartel member may be better off with a cartel agreement that all members abide by (including itself) than with no cartel agreement at all. 
D)  Cartels are easy to form and to maintain. 
A)  On occasion, governments have helped to create and maintain cartels. 
B)  Once a cartel agreement has been made, cartel members have an incentive to cheat on the agreement. 
C)  A single cartel member may be better off with a cartel agreement that all members abide by (including itself) than with no cartel agreement at all. 
D)  Cartels are easy to form and to maintain.

Question 19

Why is an oligopolist more likely to be able to earn a profit in the long run compared to a monopolistic competitive firm?

Accepted Answer

There are significant barriers to entry

Question 20

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face the same demand and cost curves,then the competitive firm will produce a

Accepted Answer

A)  greater output and charge a lower price than the monopolistic competitor. 
B)  greater output, but charge the same price as the monopolistic competitor. 
C)  greater output and charge a higher price than the monopolistic competitor. 
D)  smaller output and charge a lower price than the monopolistic competitor. 
E)  smaller output and charge a higher price than the monopolistic competitor. 
A)  greater output and charge a lower price than the monopolistic competitor. 
B)  greater output, but charge the same price as the monopolistic competitor. 
C)  greater output and charge a higher price than the monopolistic competitor. 
D)  smaller output and charge a lower price than the monopolistic competitor. 
E)  smaller output and charge a higher price than the monopolistic competitor.

Exam 25: Monopolistic Competition, Oligopoly, and Game Theory

If a market is contestable,then

The monopolistic competitive firm faces a __________ demand curve and therefore is a price __________.

For a monopoly firm,price is __________ marginal revenue,and for a monopolistic competitive firm,price is __________ marginal revenue.

Compare and contrast the following market structures: perfect competition and monopolistic competition.

A monopolistic competitor has a demand curve that is ___________ elastic than a perfectly competitive firm's demand curve and ______________ a monopolistic firm's demand curve.

The monopolistic competitor is a price

In the long run,new firms will enter a monopolistic competitive industry until

Exhibit 25-8 -Refer to Exhibit 25-8.The marginal cost of the last unit produced at the profit-maximizing output level equals

Exhibit 25-3 -Refer to Exhibit 25-3.Profits of this profit maximizing monopolistic competitor is represented by the area

Exhibit 25-3 -Refer to Exhibit 25-3.Total cost of this profit maximizing monopolistic competitor is represented by the area

The theory of oligopoly assumes

The monopolistic competitive firm produces the output at which

A monopolistic competitive firm maximizes profits by producing at the point where

The theory of contestable markets concludes that

In monopolistic competition,firms can compete in terms of

Suppose an industry is made up of four firms,all with equal sales.The four-firm concentration ratio of that industry is

The demand curve facing a firm in monopolistic competition is downward sloping,because the firm

Which of the following statements is false?

Why is an oligopolist more likely to be able to earn a profit in the long run compared to a monopolistic competitive firm?

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face the same demand and cost curves,then the competitive firm will produce a

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Filters

The monopolistic competitive firm faces a demand curve and therefore is a price .

For a monopoly firm,price is marginal revenue,and for a monopolistic competitive firm,price is marginal revenue.

A monopolistic competitor has a demand curve that is _ elastic than a perfectly competitive firm's demand curve and ____ a monopolistic firm's demand curve.