Question 1

In the long run, a monopolistically competitive firm will set price:

Accepted Answer

A)  at the intersection of the marginal cost and demand curves. 
B)  at the intersection of the average total cost and demand curves. 
C)  higher than the competitive level, but lower than the monopoly price. 
D)  higher than the marginal cost, but lower than average total cost. 
A)  at the intersection of the marginal cost and demand curves. 
B)  at the intersection of the average total cost and demand curves. 
C)  higher than the competitive level, but lower than the monopoly price. 
D)  higher than the marginal cost, but lower than average total cost.

Question 2

If a firm has substantial market power, it must be operating in an industry that would be classified as:

Accepted Answer

A)  a monopoly or oligopoly. 
B)  perfectly competitive. 
C)  monopolistically competitive. 
D)  perfectly competitive or monopolistically competitive. 
E)  perfectly competitive or a monopoly. 
A)  a monopoly or oligopoly. 
B)  perfectly competitive. 
C)  monopolistically competitive. 
D)  perfectly competitive or monopolistically competitive. 
E)  perfectly competitive or a monopoly.

Question 3

We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':

Accepted Answer

A)  demand curves downward. 
B)  demand curves upward. 
C)  demand curves more inelastic. 
D)  cost curves upward. 
E)  cost curves downward. 
A)  demand curves downward. 
B)  demand curves upward. 
C)  demand curves more inelastic. 
D)  cost curves upward. 
E)  cost curves downward.

Question 4

Which of the following is true in long-run equilibrium for both perfect competition and monopolistic competition?

Accepted Answer

A)  Accounting profit is zero. 
B)  Marginal cost equals price. 
C)  Long-run average cost is at a minimum. 
D)  Economic profit is zero. 
A)  Accounting profit is zero. 
B)  Marginal cost equals price. 
C)  Long-run average cost is at a minimum. 
D)  Economic profit is zero.

Question 5

The "kinked" oligopoly demand curve is a result of the assumption by an oligopolist that:

Accepted Answer

A)  price increases will be matched, but price reductions will not. 
B)  price increases will not be matched, but price reductions will. 
C)  both price increases and price reductions will be matched. 
D)  neither price increases, nor price reductions will be matched. 
A)  price increases will be matched, but price reductions will not. 
B)  price increases will not be matched, but price reductions will. 
C)  both price increases and price reductions will be matched. 
D)  neither price increases, nor price reductions will be matched.

Question 6

The entry of new firms into a monopolistic competitive industry will shift the:

Accepted Answer

A)  market demand curve to the right. 
B)  market demand curve to the left. 
C)  existing firm's demand curve to the right. 
D)  existing firm's demand curve to the left. 
E)  market supply curve to the left. 
A)  market demand curve to the right. 
B)  market demand curve to the left. 
C)  existing firm's demand curve to the right. 
D)  existing firm's demand curve to the left. 
E)  market supply curve to the left.

Question 7

If OPEC is an effective cartel,

Accepted Answer

A)  price changes are dictated by changes in demand. 
B)  output changes are dictated by changes in demand. 
C)  members agree on output quotas. 
D)  all of these. 
A)  price changes are dictated by changes in demand. 
B)  output changes are dictated by changes in demand. 
C)  members agree on output quotas. 
D)  all of these.

Question 8

In order from the most to the least competitive market structure is the perfectly competitive, monopolistically competitive, monopolist and then the oligopolistic market structure.

Accepted Answer

A) True 
 B)False

Question 9

In the long run in monopolistic competition,

Accepted Answer

A)  economic profits are zero. 
B)  P = MC. 
C)  P = minimum ATC. 
D)  firms have an incentive to leave. 
E)  the demand curve is tangent to the MC curve. 
A)  economic profits are zero. 
B)  P = MC. 
C)  P = minimum ATC. 
D)  firms have an incentive to leave. 
E)  the demand curve is tangent to the MC curve.

Question 10

A kink in the demand curve facing an oligopolist is caused by:

Accepted Answer

A)  rapidly rising marginal revenues. 
B)  excessive advertising. 
C)  the belief that competitors will follow price increases but not match price decreases. 
D)  the tendency of competitors to follow price reductions but not price increases. 
A)  rapidly rising marginal revenues. 
B)  excessive advertising. 
C)  the belief that competitors will follow price increases but not match price decreases. 
D)  the tendency of competitors to follow price reductions but not price increases.

Question 11

An oligopolist operating with a kinked demand curve would expect rivals to match both its price increases and price decreases.

Accepted Answer

A) True 
 B)False

Question 12

In the long run, a monopolistic competitive firm will operate at a price which:

Accepted Answer

A)  is higher than minimum long-run average cost. 
B)  equals minimum long-run average cost. 
C)  equals marginal cost. 
D)  none of these. 
A)  is higher than minimum long-run average cost. 
B)  equals minimum long-run average cost. 
C)  equals marginal cost. 
D)  none of these.

Question 13

Mutual interdependence among firms in an oligopoly means that:

Accepted Answer

A)  firms never practice price leadership. 
B)  firms never form a cartel. 
C)  it is difficult to know how firms will react to decisions of rivals. 
D)  no formal agreement is possible among firms. 
A)  firms never practice price leadership. 
B)  firms never form a cartel. 
C)  it is difficult to know how firms will react to decisions of rivals. 
D)  no formal agreement is possible among firms.

Question 14

Which of the following is true about the demand curve for a monopolistically competitive firm?​

Accepted Answer

A)  ​It is less elastic (steeper) than for monopoly, but more elastic (flatter) than for a perfectly competitive firm. 
B)  ​It is less elastic (steeper) than the demand curve for either a monopoly firm or a perfectly competitive firm. 
C)  ​It is more elastic (flatter) than the demand curves for either a monopoly firm or a perfectly competitive firm. 
D)  ​It is less elastic (steeper) than for a perfectly competitive firm, but more elastic (flatter) than for a monopoly firm. 
A)  ​It is less elastic (steeper) than for monopoly, but more elastic (flatter) than for a perfectly competitive firm. 
B)  ​It is less elastic (steeper) than the demand curve for either a monopoly firm or a perfectly competitive firm. 
C)  ​It is more elastic (flatter) than the demand curves for either a monopoly firm or a perfectly competitive firm. 
D)  ​It is less elastic (steeper) than for a perfectly competitive firm, but more elastic (flatter) than for a monopoly firm.

Question 15

Nonprice competition, price leadership, and cartels are models in the ____ market structure(s).

Accepted Answer

A)  perfectly competitive 
B)  monopolistically competitive 
C)  oligopoly 
D)  monopoly 
E)  perfectly competitive and monopolistically competitive 
A)  perfectly competitive 
B)  monopolistically competitive 
C)  oligopoly 
D)  monopoly 
E)  perfectly competitive and monopolistically competitive

Question 16

As a result of a kinked demand curve, the price:

Accepted Answer

A)  fluctuates. 
B)  falls below the kink. 
C)  settles at the kink. 
D)  rises above the kink. 
A)  fluctuates. 
B)  falls below the kink. 
C)  settles at the kink. 
D)  rises above the kink.

Question 17

Mutual interdependence applies to actions of:

Accepted Answer

A)  monopolistic competitors. 
B)  oligopolists. 
C)  perfect competitors. 
D)  monopolists. 
E)  firms operating in different industries. 
A)  monopolistic competitors. 
B)  oligopolists. 
C)  perfect competitors. 
D)  monopolists. 
E)  firms operating in different industries.

Question 18

Costume jewelry is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that:

Accepted Answer

A)  the producer is charging a price of $3. 
B)  economic profit is $2,100. 
C)  the producer charges a price greater than $3. 
D)  new firms will want to enter. 
E)  this producer should produce more than 700 necklaces. 
A)  the producer is charging a price of $3. 
B)  economic profit is $2,100. 
C)  the producer charges a price greater than $3. 
D)  new firms will want to enter. 
E)  this producer should produce more than 700 necklaces.

Question 19

Which of the following is a characteristic of an oligopoly?

Accepted Answer

A)  Mutual interdependence in pricing decisions. 
B)  Independent pricing decisions. 
C)  Lack of control over prices. 
D)  All of these are true. 
A)  Mutual interdependence in pricing decisions. 
B)  Independent pricing decisions. 
C)  Lack of control over prices. 
D)  All of these are true.

Question 20

Exhibit 10-7 Two-Firm Payoff Matrix  
-Suppose costs are identical for the two firms in Exhibit 10-7. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by:

Accepted Answer

A)  Camel charging the high price and Marlboro charging the high price. 
B)  Camel charging the high price and Marlboro charging the low price. 
C)  Camel charging the low price and Marlboro charging the low price. 
D)  Camel charging the low price and Marlboro charging the high price. 
A)  Camel charging the high price and Marlboro charging the high price. 
B)  Camel charging the high price and Marlboro charging the low price. 
C)  Camel charging the low price and Marlboro charging the low price. 
D)  Camel charging the low price and Marlboro charging the high price.

In the long run, a monopolistically competitive firm will set price:

If a firm has substantial market power, it must be operating in an industry that would be classified as:

We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':

Which of the following is true in long-run equilibrium for both perfect competition and monopolistic competition?

The "kinked" oligopoly demand curve is a result of the assumption by an oligopolist that:

The entry of new firms into a monopolistic competitive industry will shift the:

If OPEC is an effective cartel,

In order from the most to the least competitive market structure is the perfectly competitive, monopolistically competitive, monopolist and then the oligopolistic market structure.

In the long run in monopolistic competition,

A kink in the demand curve facing an oligopolist is caused by:

An oligopolist operating with a kinked demand curve would expect rivals to match both its price increases and price decreases.

In the long run, a monopolistic competitive firm will operate at a price which:

Mutual interdependence among firms in an oligopoly means that:

Which of the following is true about the demand curve for a monopolistically competitive firm?

Nonprice competition, price leadership, and cartels are models in the ____ market structure(s).

As a result of a kinked demand curve, the price:

Mutual interdependence applies to actions of:

Costume jewelry is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that:

Which of the following is a characteristic of an oligopoly?

Exhibit 10-7 Two-Firm Payoff Matrix -Suppose costs are identical for the two firms in Exhibit 10-7. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by:

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, a monopolistically competitive firm will set price:

If a firm has substantial market power, it must be operating in an industry that would be classified as:

We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':

Which of the following is true in long-run equilibrium for both perfect competition and monopolistic competition?

The "kinked" oligopoly demand curve is a result of the assumption by an oligopolist that:

The entry of new firms into a monopolistic competitive industry will shift the:

If OPEC is an effective cartel,

In order from the most to the least competitive market structure is the perfectly competitive, monopolistically competitive, monopolist and then the oligopolistic market structure.

In the long run in monopolistic competition,

A kink in the demand curve facing an oligopolist is caused by:

An oligopolist operating with a kinked demand curve would expect rivals to match both its price increases and price decreases.

In the long run, a monopolistic competitive firm will operate at a price which:

Mutual interdependence among firms in an oligopoly means that:

Which of the following is true about the demand curve for a monopolistically competitive firm?​

Nonprice competition, price leadership, and cartels are models in the ____ market structure(s).

As a result of a kinked demand curve, the price:

Mutual interdependence applies to actions of:

Costume jewelry is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that:

Which of the following is a characteristic of an oligopoly?

Exhibit 10-7 Two-Firm Payoff Matrix -Suppose costs are identical for the two firms in Exhibit 10-7. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by:

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 true about the demand curve for a monopolistically competitive firm?