Question 1

In the long-run, surviving firms in monopolistic competition earn:

Accepted Answer

A)  higher pure economic profits. 
B)  zero pure economic profits. 
C)  below-normal profits. 
D)  substantial economic losses. 
A)  higher pure economic profits. 
B)  zero pure economic profits. 
C)  below-normal profits. 
D)  substantial economic losses.

Question 2

The kinked demand curve:

Accepted Answer

A)  applies when competitors match price decreases but not price increases. 
B)  could apply to market demand in any market structure. 
C)  applies when competitors match price increases but not price decreases. 
D)  applies to the price leadership model. 
E)  applies when competitors act independently. 
A)  applies when competitors match price decreases but not price increases. 
B)  could apply to market demand in any market structure. 
C)  applies when competitors match price increases but not price decreases. 
D)  applies to the price leadership model. 
E)  applies when competitors act independently.

Question 3

Which of the following is an outcome of advertising for a monopolistically competitive firm? ​

Accepted Answer

A)  ​Long-run average costs shift downward. 
B)  ​The firm's demand curve becomes flatter and shifts inward. 
C)  ​The firm's demand curve keeps the same slope and shifts inward. 
D)  ​ Long-run average costs shift upward. 
A)  ​Long-run average costs shift downward. 
B)  ​The firm's demand curve becomes flatter and shifts inward. 
C)  ​The firm's demand curve keeps the same slope and shifts inward. 
D)  ​ Long-run average costs shift upward.

Question 4

Which of the following is a distinction between perfectly competitive and monopolistic competition?

Accepted Answer

A)  Perfectly competitive firms must compete with rival sellers; monopolistically competitive firms do not confront rival sellers. 
B)  Monopolistically competitive firms can raise their price without losing sales; perfectly competitive firms must lower their price in order to sell more of their product. 
C)  Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve. 
D)  Perfectly competitive firms may make either economic profits or losses in the short run, but monopolistically competitive firms always earn an economic profit. 
A)  Perfectly competitive firms must compete with rival sellers; monopolistically competitive firms do not confront rival sellers. 
B)  Monopolistically competitive firms can raise their price without losing sales; perfectly competitive firms must lower their price in order to sell more of their product. 
C)  Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve. 
D)  Perfectly competitive firms may make either economic profits or losses in the short run, but monopolistically competitive firms always earn an economic profit.

Question 5

In an oligopoly industry, price:

Accepted Answer

A)  will be lower than the competitive price, due to cost savings. 
B)  will exceed the monopoly price, due to the destructiveness of competitive forces. 
C)  cannot be predicted exactly, because it is likely to lie between the competitive and monopoly prices. 
D)  none of these. 
A)  will be lower than the competitive price, due to cost savings. 
B)  will exceed the monopoly price, due to the destructiveness of competitive forces. 
C)  cannot be predicted exactly, because it is likely to lie between the competitive and monopoly prices. 
D)  none of these.

Question 6

The theory of oligopolistic interdependence means that the outcome is uncertain because price and output decisions depend on responses of rivals.

Accepted Answer

A) True 
 B)False

Question 7

The marginal revenue curve of a monopolistically competitive firm will always lie:

Accepted Answer

A)  below the firm's demand curve. 
B)  parallel to the firm's demand curve. 
C)  parallel to the firm's quantity axis. 
D)  above the firm's demand curve. 
A)  below the firm's demand curve. 
B)  parallel to the firm's demand curve. 
C)  parallel to the firm's quantity axis. 
D)  above the firm's demand curve.

Question 8

A picture frame company operates in a monopolistically competitive market. Its short-run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames a week. From this we can tell:

Accepted Answer

A)  this firm is making a normal profit. 
B)  other picture frame companies will want to exit the market. 
C)  there are no other picture frame companies in the area. 
D)  economic profits are $1,500. 
E)  total profits are being maximized. 
A)  this firm is making a normal profit. 
B)  other picture frame companies will want to exit the market. 
C)  there are no other picture frame companies in the area. 
D)  economic profits are $1,500. 
E)  total profits are being maximized.

Question 9

If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:

Accepted Answer

A)  a number of new firms will enter the industry. 
B)  some firms will leave the industry. 
C)  firms in the industry earn zero economic profits. 
D)  all firms will leave the industry. 
A)  a number of new firms will enter the industry. 
B)  some firms will leave the industry. 
C)  firms in the industry earn zero economic profits. 
D)  all firms will leave the industry.

Question 10

A cartel maximizes industry profit by:

Accepted Answer

A)  eliminating quotas. 
B)  producing at the kink in its demand curve. 
C)  producing where MR = MC. 
D)  giving secret price concessions. 
E)  producing more output than a monopoly would. 
A)  eliminating quotas. 
B)  producing at the kink in its demand curve. 
C)  producing where MR = MC. 
D)  giving secret price concessions. 
E)  producing more output than a monopoly would.

Question 11

Examples of nonprice competition include advertising and product differentiation.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?

Accepted Answer

A)  Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run. 
B)  Price will always equal average variable cost in the short run and either profits or losses may result in the long run. 
C)  Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. 
D)  Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero. 
A)  Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run. 
B)  Price will always equal average variable cost in the short run and either profits or losses may result in the long run. 
C)  Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. 
D)  Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero.

Question 13

In a monopolistically competitive market like retail trade, firms can easily enter and exit the market.

Accepted Answer

A) True 
 B)False

Question 14

The assumption(s) made to construct a kinked-demand oligopoly model is (are) that:

Accepted Answer

A)  all firms in the industry will ignore the price changes made by any one firm. 
B)  any price decrease will be ignored, but price increases will be followed. 
C)  all firms will follow a price decrease but will ignore any price increase. 
D)  all price changes made by any firm will be followed by all of the other firms. 
E)  price can go up, but it cannot go down. 
A)  all firms in the industry will ignore the price changes made by any one firm. 
B)  any price decrease will be ignored, but price increases will be followed. 
C)  all firms will follow a price decrease but will ignore any price increase. 
D)  all price changes made by any firm will be followed by all of the other firms. 
E)  price can go up, but it cannot go down.

Question 15

Game theory is a model for describing oligopoly price decisions among firms that are:

Accepted Answer

A)  interdependent. 
B)  independent. 
C)  regulated 
D)  merging 
A)  interdependent. 
B)  independent. 
C)  regulated 
D)  merging

Question 16

In a monopolistic competitive industry, short-run economic profit encourages entry of new firms until there are no economic profits in the long-run.

Accepted Answer

A) True 
 B)False

Question 17

When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,

Accepted Answer

A)  no firms will want to enter or exit. 
B)  some firms will want to leave. 
C)  some firms will want to enter. 
D)  market demand shifts to the left. 
E)  the price of the output will rise in the long run. 
A)  no firms will want to enter or exit. 
B)  some firms will want to leave. 
C)  some firms will want to enter. 
D)  market demand shifts to the left. 
E)  the price of the output will rise in the long run.

Question 18

The short-run equilibrium for a monopolistically competitive firm is at P = $28.47, ATC = $22.13, and MC = MR = $17.47. Which of the following is true?

Accepted Answer

A)  Per-unit profit is $11. 
B)  Additional firms will be attracted into the industry. 
C)  The firm could raise price and increase profits. 
D)  The firm could lower price and increase profits. 
E)  Average cost must be rising. 
A)  Per-unit profit is $11. 
B)  Additional firms will be attracted into the industry. 
C)  The firm could raise price and increase profits. 
D)  The firm could lower price and increase profits. 
E)  Average cost must be rising.

Question 19

Oligopolies have few sellers and difficult entry.

Accepted Answer

A) True 
 B)False

Question 20

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Accepted Answer

A)  Monopoly. 
B)  Oligopoly. 
C)  Perfect competition. 
D)  Cartel. 
A)  Monopoly. 
B)  Oligopoly. 
C)  Perfect competition. 
D)  Cartel.

In the long-run, surviving firms in monopolistic competition earn:

The kinked demand curve:

Which of the following is an outcome of advertising for a monopolistically competitive firm?

Which of the following is a distinction between perfectly competitive and monopolistic competition?

In an oligopoly industry, price:

The theory of oligopolistic interdependence means that the outcome is uncertain because price and output decisions depend on responses of rivals.

The marginal revenue curve of a monopolistically competitive firm will always lie:

A picture frame company operates in a monopolistically competitive market. Its short-run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames a week. From this we can tell:

If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:

A cartel maximizes industry profit by:

Examples of nonprice competition include advertising and product differentiation.

Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?

In a monopolistically competitive market like retail trade, firms can easily enter and exit the market.

The assumption(s) made to construct a kinked-demand oligopoly model is (are) that:

Game theory is a model for describing oligopoly price decisions among firms that are:

In a monopolistic competitive industry, short-run economic profit encourages entry of new firms until there are no economic profits in the long-run.

When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,

The short-run equilibrium for a monopolistically competitive firm is at P = $28.47, ATC = $22.13, and MC = MR = $17.47. Which of the following is true?

Oligopolies have few sellers and difficult entry.

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 10: Monopolistic Competition and Oligopoly

In the long-run, surviving firms in monopolistic competition earn:

The kinked demand curve:

Which of the following is an outcome of advertising for a monopolistically competitive firm? ​

Which of the following is a distinction between perfectly competitive and monopolistic competition?

In an oligopoly industry, price:

The theory of oligopolistic interdependence means that the outcome is uncertain because price and output decisions depend on responses of rivals.

The marginal revenue curve of a monopolistically competitive firm will always lie:

A picture frame company operates in a monopolistically competitive market. Its short-run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames a week. From this we can tell:

If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:

A cartel maximizes industry profit by:

Examples of nonprice competition include advertising and product differentiation.

Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?

In a monopolistically competitive market like retail trade, firms can easily enter and exit the market.

The assumption(s) made to construct a kinked-demand oligopoly model is (are) that:

Game theory is a model for describing oligopoly price decisions among firms that are:

In a monopolistic competitive industry, short-run economic profit encourages entry of new firms until there are no economic profits in the long-run.

When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,

The short-run equilibrium for a monopolistically competitive firm is at P = $28.47, ATC = $22.13, and MC = MR = $17.47. Which of the following is true?

Oligopolies have few sellers and difficult entry.

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Which of the following is an outcome of advertising for a monopolistically competitive firm?