Question 1

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

Accepted Answer

Monopolistic competitive firms face many

Question 2

Which of the following is not correct about contestable markets?

Accepted Answer

A)  There is easy entry into and costless exit from the market. 
B)  New firms entering the market can produce the product at the same cost as current firms. 
C)  Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
D)  Firms already in the market have technological advantages. 
E)  b and c 
A)  There is easy entry into and costless exit from the market. 
B)  New firms entering the market can produce the product at the same cost as current firms. 
C)  Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
D)  Firms already in the market have technological advantages. 
E)  b and c

Question 3

Exhibit 25-9
  
-Refer to Exhibit 25-9.The number of sellers in a perfectly competitive market is ___________ [blank (A)],the number of sellers in a monopolistic competitive market is ____________ [blank (B)],and the number of sellers in an oligopoly is _________ [blank (C)].

Accepted Answer

A)  many; many; few 
B)  many; few, few 
C)  few; many; many 
D)  few; few many 
A)  many; many; few 
B)  many; few, few 
C)  few; many; many 
D)  few; few many

Question 4

One of the main criticisms of the theory of contestable markets is that the assumption of extremely free entry into (and costless exit from)the industry is unlikely to hold in the real world.

Accepted Answer

A) True 
 B)False

Question 5

One of the ways in which monopolistic competitors differ from perfect competitors is that

Accepted Answer

A)  perfect competitors produce the quantity of output at which marginal revenue equals marginal cost and monopolistic competitors do not. 
B)  perfect competitors produce a homogeneous product and monopolistic competitors do not. 
C)  there is easy entry and exit for a perfect competitor, but not for a monopolistic competitor. 
D)  a and c 
E)  b and c 
A)  perfect competitors produce the quantity of output at which marginal revenue equals marginal cost and monopolistic competitors do not. 
B)  perfect competitors produce a homogeneous product and monopolistic competitors do not. 
C)  there is easy entry and exit for a perfect competitor, but not for a monopolistic competitor. 
D)  a and c 
E)  b and c

Question 6

The cigarette industry is a good example of the oligopoly market structure.

Accepted Answer

A) True 
 B)False

Question 7

In a monopolistic competitive industry,

Accepted Answer

A)  each firm in the industry produces a slightly differentiated product. 
B)  there are barriers to entry. 
C)  there are barriers to exit. 
D)  there are few sellers. 
A)  each firm in the industry produces a slightly differentiated product. 
B)  there are barriers to entry. 
C)  there are barriers to exit. 
D)  there are few sellers.

Question 8

Cartels often dissolve because

Accepted Answer

A)  their members often set a time limit as to how long the cartel should exist. 
B)  their members often cheat on the cartel agreements because they have incentive to. 
C)  their members often find that they do not earn as high profits from the cartel as they had hoped to. 
D)  firms in a cartel face different costs than firms outside a cartel. 
E)  none of the above 
A)  their members often set a time limit as to how long the cartel should exist. 
B)  their members often cheat on the cartel agreements because they have incentive to. 
C)  their members often find that they do not earn as high profits from the cartel as they had hoped to. 
D)  firms in a cartel face different costs than firms outside a cartel. 
E)  none of the above

Question 9

Concentration ratios are often used to determine the degree of oligopoly in an industry.

Accepted Answer

A) True 
 B)False

Question 10

The monopolistic competitor's demand curve is

Accepted Answer

A)  perfectly elastic because of the many buyers and sellers in the market. 
B)  downward sloping because of product differentiation. 
C)  perfectly elastic because of identical products. 
D)  downward sloping because of the few buyers and sellers in the market. 
E)  none of the above 
A)  perfectly elastic because of the many buyers and sellers in the market. 
B)  downward sloping because of product differentiation. 
C)  perfectly elastic because of identical products. 
D)  downward sloping because of the few buyers and sellers in the market. 
E)  none of the above

Question 11

Which of the following statements is false?

Accepted Answer

A)  The monopolistic competitor, like the perfectly competitive firm, is resource-allocative efficient. 
B)  The monopolistic competitor produces that quantity of output at which price equals marginal cost. 
C)  The monopolistic competitor produces the quantity of output with the lowest per-unit costs. 
D)  a, b, and c 
A)  The monopolistic competitor, like the perfectly competitive firm, is resource-allocative efficient. 
B)  The monopolistic competitor produces that quantity of output at which price equals marginal cost. 
C)  The monopolistic competitor produces the quantity of output with the lowest per-unit costs. 
D)  a, b, and c

Question 12

In an oligopolistic market,the product being produced can be either homogeneous or differentiated.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 25-6
  
-Refer to Exhibit 25-6.The monopolistic competitor in the exhibit is

Accepted Answer

A)  earning positive economic profits. 
B)  taking losses. 
C)  earning a normal profit. 
D)  exhibiting productive efficiency. 
E)  a and d 
A)  earning positive economic profits. 
B)  taking losses. 
C)  earning a normal profit. 
D)  exhibiting productive efficiency. 
E)  a and d

Question 14

Exhibit 25-7
  
-Refer to Exhibit 25-7.A monopolistic competitive firm that seeks to maximize profits (producing at the level of output where MR = MC)will sell __________ units and charge a price of __________ .

Accepted Answer

A)  10; $10 
B)  40; $7 
C)  20; $9 
D)  60; $5 
E)  70; $7 
A)  10; $10 
B)  40; $7 
C)  20; $9 
D)  60; $5 
E)  70; $7

Question 15

One of the necessary conditions for a contestable market is that new firms entering the market have a cost advantage over the existing firms.

Accepted Answer

A) True 
 B)False

Question 16

In long run equilibrium,the monopolistic competitor will most likely

Accepted Answer

A)  be earning zero economic profit. 
B)  be operating at the lowest point on its average total cost curve. 
C)  charge a price that is equal to marginal revenue. 
D)  charge a price that is equal to marginal cost. 
E)  c and d 
A)  be earning zero economic profit. 
B)  be operating at the lowest point on its average total cost curve. 
C)  charge a price that is equal to marginal revenue. 
D)  charge a price that is equal to marginal cost. 
E)  c and d

Question 17

Why can't an economist say for certain that a monopolistic competitive firm will always earn zero economic profits in the long run?

Accepted Answer

A)  Barriers to entry exist. 
B)  The very large number of buyers indicates that there will always be demand for the firm's product. 
C)  The firms in the industry do not produce identical products. 
D)  The firms practice price competition, so at least some firms will always be charging a lower price than other firms and will sell more as a result. 
E)  The firms face a horizontal demand curve. 
A)  Barriers to entry exist. 
B)  The very large number of buyers indicates that there will always be demand for the firm's product. 
C)  The firms in the industry do not produce identical products. 
D)  The firms practice price competition, so at least some firms will always be charging a lower price than other firms and will sell more as a result. 
E)  The firms face a horizontal demand curve.

Question 18

A monopolistic competitive firm differentiates its product (from similar products)in the minds of the buying public.As a result,the firm

Accepted Answer

A)  may earn positive economic profits, even with easy entry into the industry. 
B)  will definitely earn positive economic profits. 
C)  will be able to lower its costs below that of its competitors. 
D)  finds that its fixed costs are sunk costs. 
E)  a and c 
A)  may earn positive economic profits, even with easy entry into the industry. 
B)  will definitely earn positive economic profits. 
C)  will be able to lower its costs below that of its competitors. 
D)  finds that its fixed costs are sunk costs. 
E)  a and c

Question 19

The demand curve facing a monopolistic competitor will be more elastic than the demand curve facing a monopolist because

Accepted Answer

A)  there are barriers to exit for the monopolist, but not for the monopolistic competitor. 
B)  the monopolistic competitor attains resource-allocative efficiency, but the monopolist does not. 
C)  there are substitute goods for what the monopolistic competitor produces, but not for what the monopolist produces. 
D)  the monopolist is a price searcher, but the monopolistic competitor is not. 
A)  there are barriers to exit for the monopolist, but not for the monopolistic competitor. 
B)  the monopolistic competitor attains resource-allocative efficiency, but the monopolist does not. 
C)  there are substitute goods for what the monopolistic competitor produces, but not for what the monopolist produces. 
D)  the monopolist is a price searcher, but the monopolistic competitor is not.

Question 20

Exhibit 25-6
  
-Refer to Exhibit 25-6.Excess capacity refers to the distance between

Accepted Answer

A)  P2 and P1. 
B)  Q1 and point C. 
C)  Q2 and Q1. 
D)  P3 and P1. 
E)  P2 and point C. 
A)  P2 and P1. 
B)  Q1 and point C. 
C)  Q2 and Q1. 
D)  P3 and P1. 
E)  P2 and point C.

Exam 25: Monopolistic Competition, Oligopoly, and Game Theory

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

Which of the following is not correct about contestable markets?

Exhibit 25-9 -Refer to Exhibit 25-9.The number of sellers in a perfectly competitive market is ___________ [blank (A)],the number of sellers in a monopolistic competitive market is ____________ [blank (B)],and the number of sellers in an oligopoly is _________ [blank (C)].

One of the main criticisms of the theory of contestable markets is that the assumption of extremely free entry into (and costless exit from)the industry is unlikely to hold in the real world.

One of the ways in which monopolistic competitors differ from perfect competitors is that

The cigarette industry is a good example of the oligopoly market structure.

In a monopolistic competitive industry,

Cartels often dissolve because

Concentration ratios are often used to determine the degree of oligopoly in an industry.

The monopolistic competitor's demand curve is

Which of the following statements is false?

In an oligopolistic market,the product being produced can be either homogeneous or differentiated.

Exhibit 25-6 -Refer to Exhibit 25-6.The monopolistic competitor in the exhibit is

Exhibit 25-7 -Refer to Exhibit 25-7.A monopolistic competitive firm that seeks to maximize profits (producing at the level of output where MR = MC)will sell __________ units and charge a price of __________ .

One of the necessary conditions for a contestable market is that new firms entering the market have a cost advantage over the existing firms.

In long run equilibrium,the monopolistic competitor will most likely

Why can't an economist say for certain that a monopolistic competitive firm will always earn zero economic profits in the long run?

A monopolistic competitive firm differentiates its product (from similar products)in the minds of the buying public.As a result,the firm

The demand curve facing a monopolistic competitor will be more elastic than the demand curve facing a monopolist because

Exhibit 25-6 -Refer to Exhibit 25-6.Excess capacity refers to the distance between

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

Exhibit 25-9 -Refer to Exhibit 25-9.The number of sellers in a perfectly competitive market is ___ [blank (A)],the number of sellers in a monopolistic competitive market is [blank (B)],and the number of sellers in an oligopoly is _ [blank (C)].

Exhibit 25-7 -Refer to Exhibit 25-7.A monopolistic competitive firm that seeks to maximize profits (producing at the level of output where MR = MC)will sell units and charge a price of .