Question 1

Oligopolies with kinked demand curves change their prices quickly and frequently.

Accepted Answer

A) True 
 B)False

Question 2

Game theory is an especially useful model for analysis in the following types of markets:

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly.

Question 3

A monopolistically competitive market is characterized by:

Accepted Answer

A)  many small sellers selling a differentiated product. 
B)  a single seller of a product that has few suitable substitutes. 
C)  very strong barriers to entry. 
D)  mutual interdependence in pricing decisions. 
A)  many small sellers selling a differentiated product. 
B)  a single seller of a product that has few suitable substitutes. 
C)  very strong barriers to entry. 
D)  mutual interdependence in pricing decisions.

Question 4

A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.

Accepted Answer

A)  interdependence index 
B)  gini coefficient 
C)  herfindahl index 
D)  payoff matrix 
A)  interdependence index 
B)  gini coefficient 
C)  herfindahl index 
D)  payoff matrix

Question 5

When oligopolists take into account their competitors' behavior, this situation is called:

Accepted Answer

A)  mutual interdependence. 
B)  monopolistic competition. 
C)  independent. 
D)  price discrimination. 
E)  loss minimization. 
A)  mutual interdependence. 
B)  monopolistic competition. 
C)  independent. 
D)  price discrimination. 
E)  loss minimization.

Question 6

The demand curve in monopolistic competition slopes downward because of:

Accepted Answer

A)  strong barriers to entry. 
B)  product differentiation. 
C)  the small number of firms. 
D)  government regulation. 
E)  the similarities of the businesses. 
A)  strong barriers to entry. 
B)  product differentiation. 
C)  the small number of firms. 
D)  government regulation. 
E)  the similarities of the businesses.

Question 7

Cartel pricing refers to the output and price choice of a cartel. This choice most closely resembles that of a:

Accepted Answer

A)  b or d 
B)  godfather oligopoly. 
C)  duopoly. 
D)  monopoly. 
E)  more competitive industry. 
A)  b or d 
B)  godfather oligopoly. 
C)  duopoly. 
D)  monopoly. 
E)  more competitive industry.

Question 8

An oligopoly:

Accepted Answer

A)  and monopolistically competitive market produce less and charge higher prices than if their markets were perfectly competitive. 
B)  is characterized by mutual interdependence of pricing decisions. 
C)  may be characterized by a kinked demand curve. 
D)  all of these. 
A)  and monopolistically competitive market produce less and charge higher prices than if their markets were perfectly competitive. 
B)  is characterized by mutual interdependence of pricing decisions. 
C)  may be characterized by a kinked demand curve. 
D)  all of these.

Question 9

A "kinked" demand curve reflects a tendency on the part of an oligopolist to:

Accepted Answer

A)  follow price increases but not price reductions. 
B)  following price reductions but not price increases. 
C)  be unconcerned with rivals' behavior. 
D)  None of these. 
A)  follow price increases but not price reductions. 
B)  following price reductions but not price increases. 
C)  be unconcerned with rivals' behavior. 
D)  None of these.

Question 10

Exhibit 10-2 A monopolistic competitive firm  
-As represented in Exhibit 10-2, the maximum long-run economic profit earned by this monopolistic competitive firm is:

Accepted Answer

A)  zero. 
B)  $200 per week. 
C)  $1,000 per week. 
D)  $20,000 per week. 
A)  zero. 
B)  $200 per week. 
C)  $1,000 per week. 
D)  $20,000 per week.

Question 11

In an oligopoly, the outcome is uncertain because price and output decisions depend on the response of rivals.

Accepted Answer

A) True 
 B)False

Question 12

In monopolistic competition if there is profit, there is:

Accepted Answer

A)  a signal for new firms to enter. 
B)  a motive for existing firms to increase prices. 
C)  proof that advertising works. 
D)  a motive for existing firms to decrease prices. 
E)  product differentiation. 
A)  a signal for new firms to enter. 
B)  a motive for existing firms to increase prices. 
C)  proof that advertising works. 
D)  a motive for existing firms to decrease prices. 
E)  product differentiation.

Question 13

In the long run, marginal cost must equal marginal revenue for a monopolistic competitive firm, but not at the minimum point of the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 14

Video rental stores in cities are an illustration of:

Accepted Answer

A)  perfect competition. 
B)  monopoly. 
C)  monopolistic competition. 
D)  oligopoly. 
A)  perfect competition. 
B)  monopoly. 
C)  monopolistic competition. 
D)  oligopoly.

Question 15

Some economists argue that monopolistically competitive markets are inefficient because:

Accepted Answer

A)  the firms earn economic profits in the long run. 
B)  the firms' marginal costs and marginal revenues are not always equal. 
C)  firms do not produce the output rate that would minimize their average total cost. 
D)  barriers to entry are high. 
A)  the firms earn economic profits in the long run. 
B)  the firms' marginal costs and marginal revenues are not always equal. 
C)  firms do not produce the output rate that would minimize their average total cost. 
D)  barriers to entry are high.

Question 16

Which of the following most closely approximates the conditions of a monopolistically competitive market?

Accepted Answer

A)  The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product. 
B)  The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers. 
C)  Local cable television service, where a licensed supplier competes with firms offering satellite service. 
D)  The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm. 
A)  The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product. 
B)  The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers. 
C)  Local cable television service, where a licensed supplier competes with firms offering satellite service. 
D)  The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.

Question 17

Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the:

Accepted Answer

A)  fewness of firms. 
B)  brand loyalty of consumers. 
C)  powerful effect of advertising. 
D)  variability of concentration ratios. 
E)  mutual interdependence of firms. 
A)  fewness of firms. 
B)  brand loyalty of consumers. 
C)  powerful effect of advertising. 
D)  variability of concentration ratios. 
E)  mutual interdependence of firms.

Question 18

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

Accepted Answer

A)  perfectly competitive firms but not by monopolistically competitive firms. 
B)  monopolistically competitive firms but not by perfectly competitive firms. 
C)  both monopolistically competitive firms and perfectly competitive firms. 
D)  neither perfectly competitive firms nor monopolistically competitive firms. 
A)  perfectly competitive firms but not by monopolistically competitive firms. 
B)  monopolistically competitive firms but not by perfectly competitive firms. 
C)  both monopolistically competitive firms and perfectly competitive firms. 
D)  neither perfectly competitive firms nor monopolistically competitive firms.

Question 19

In the long run, monopolistically competitive firms have:

Accepted Answer

A)  excess capacity. 
B)  positive profits. 
C)  minimal average costs. 
D)  homogeneous production. 
A)  excess capacity. 
B)  positive profits. 
C)  minimal average costs. 
D)  homogeneous production.

Question 20

A monopolistically competitive firm, like a perfectly competitive firm, is a price taker.

Accepted Answer

A) True 
 B)False

Oligopolies with kinked demand curves change their prices quickly and frequently.

Game theory is an especially useful model for analysis in the following types of markets:

A monopolistically competitive market is characterized by:

A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.

When oligopolists take into account their competitors' behavior, this situation is called:

The demand curve in monopolistic competition slopes downward because of:

Cartel pricing refers to the output and price choice of a cartel. This choice most closely resembles that of a:

An oligopoly:

A "kinked" demand curve reflects a tendency on the part of an oligopolist to:

Exhibit 10-2 A monopolistic competitive firm -As represented in Exhibit 10-2, the maximum long-run economic profit earned by this monopolistic competitive firm is:

In an oligopoly, the outcome is uncertain because price and output decisions depend on the response of rivals.

In monopolistic competition if there is profit, there is:

In the long run, marginal cost must equal marginal revenue for a monopolistic competitive firm, but not at the minimum point of the long-run average cost curve.

Video rental stores in cities are an illustration of:

Some economists argue that monopolistically competitive markets are inefficient because:

Which of the following most closely approximates the conditions of a monopolistically competitive market?

Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the:

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

In the long run, monopolistically competitive firms have:

A monopolistically competitive firm, like a perfectly competitive firm, is a price taker.

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

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Exam 10: Monopolistic Competition and Oligopoly

Oligopolies with kinked demand curves change their prices quickly and frequently.

Game theory is an especially useful model for analysis in the following types of markets:

A monopolistically competitive market is characterized by:

A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.

When oligopolists take into account their competitors' behavior, this situation is called:

The demand curve in monopolistic competition slopes downward because of:

Cartel pricing refers to the output and price choice of a cartel. This choice most closely resembles that of a:

An oligopoly:

A "kinked" demand curve reflects a tendency on the part of an oligopolist to:

Exhibit 10-2 A monopolistic competitive firm -As represented in Exhibit 10-2, the maximum long-run economic profit earned by this monopolistic competitive firm is:

In an oligopoly, the outcome is uncertain because price and output decisions depend on the response of rivals.

In monopolistic competition if there is profit, there is:

In the long run, marginal cost must equal marginal revenue for a monopolistic competitive firm, but not at the minimum point of the long-run average cost curve.

Video rental stores in cities are an illustration of:

Some economists argue that monopolistically competitive markets are inefficient because:

Which of the following most closely approximates the conditions of a monopolistically competitive market?

Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the:

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

In the long run, monopolistically competitive firms have:

A monopolistically competitive firm, like a perfectly competitive firm, is a price taker.

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