Question 1

A cartel is:

Accepted Answer

A)  a joint venture of two companies. 
B)  a joining of firms for the purpose of fixing prices and controlling output. 
C)  a breaking up of a company into two or more parts. 
D)  the joining of industry with government to solve a specified problem. 
E)  the joining of two firms with unrelated products. 
A)  a joint venture of two companies. 
B)  a joining of firms for the purpose of fixing prices and controlling output. 
C)  a breaking up of a company into two or more parts. 
D)  the joining of industry with government to solve a specified problem. 
E)  the joining of two firms with unrelated products.

Question 2

Exhibit 10-6 Two-Firm Payoff Matrix  
-Suppose costs are identical for the two firms in Exhibit 10-6. 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)  Widget Co. charging the high price and Ajax Co. charging the low price. 
B)  Widget Co. charging the high price and Ajax Co. charging the high price. 
C)  Widget Co. charging the low price and Ajax Co. charging the low price. 
D)  Widget Co. charging the low price and Ajax Co. charging the high price. 
A)  Widget Co. charging the high price and Ajax Co. charging the low price. 
B)  Widget Co. charging the high price and Ajax Co. charging the high price. 
C)  Widget Co. charging the low price and Ajax Co. charging the low price. 
D)  Widget Co. charging the low price and Ajax Co. charging the high price.

Question 3

Cartels are legal in the United States.

Accepted Answer

A) True 
 B)False

Question 4

Monopolistic competition is inefficient because:

Accepted Answer

A)  firms earn positive economic profits. 
B)  the firms' marginal costs and marginal revenues are not equal. 
C)  firms have excess capacity in the long run. 
D)  entry is difficult. 
A)  firms earn positive economic profits. 
B)  the firms' marginal costs and marginal revenues are not equal. 
C)  firms have excess capacity in the long run. 
D)  entry is difficult.

Question 5

Suppose that R. J. Reynolds raises the price of cigarettes by 10 percent. Although they have no requirement or agreement to do so, the other cigarette firms decide to raise their prices accordingly. This situation is best described as:

Accepted Answer

A)  price leadership. 
B)  a cartel. 
C)  monopolistic competition. 
D)  a market with kinked demand. 
A)  price leadership. 
B)  a cartel. 
C)  monopolistic competition. 
D)  a market with kinked demand.

Question 6

Firms in a monopolistically competitive industry produce:

Accepted Answer

A)  homogeneous goods and services. 
B)  differentiated products. 
C)  competitive goods only. 
D)  consumption goods only. 
A)  homogeneous goods and services. 
B)  differentiated products. 
C)  competitive goods only. 
D)  consumption goods only.

Question 7

How will the price and output of a monopolist compare with perfect competition?

Accepted Answer

A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too large and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The output of the monopolist will be too small and the price too low. 
A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too large and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The output of the monopolist will be too small and the price too low.

Question 8

The automobile, steel, and oil markets are all examples of:

Accepted Answer

A)  perfectly competitive markets. 
B)  monopolies. 
C)  monopolistically competitive markets. 
D)  oligopolies. 
A)  perfectly competitive markets. 
B)  monopolies. 
C)  monopolistically competitive markets. 
D)  oligopolies.

Question 9

An oligopoly market structure is characterized by firms closely watching their rivals' pricing policies.

Accepted Answer

A) True 
 B)False

Question 10

Cartel agreements are difficult to maintain because individual members:

Accepted Answer

A)  can gain by raising their price above the price that is best for the cartel. 
B)  are often unable to police the price and output policies of other members. 
C)  can gain by secretly raising their price above the price that is best for the cartel. 
D)  can enforce price arrangements vigorously in court. 
A)  can gain by raising their price above the price that is best for the cartel. 
B)  are often unable to police the price and output policies of other members. 
C)  can gain by secretly raising their price above the price that is best for the cartel. 
D)  can enforce price arrangements vigorously in court.

Question 11

Which of the following is always a characteristic of the oligopoly market structure? ​

Accepted Answer

A)  ​Many sellers, each small in size relative to the overall market. 
B)  ​ Few sellers. 
C)  ​All sellers produce identical products. 
D)  ​Easy, low-cost entry and exit. 
A)  ​Many sellers, each small in size relative to the overall market. 
B)  ​ Few sellers. 
C)  ​All sellers produce identical products. 
D)  ​Easy, low-cost entry and exit.

Question 12

A cartel:

Accepted Answer

A)  is a group of firms formally agreeing to control the price and the output of a product. 
B)  has as its primary goal to reap monopoly profits by replacing competition with cooperation. 
C)  is illegal in the United States, but not in other nations. 
D)  all of these. 
A)  is a group of firms formally agreeing to control the price and the output of a product. 
B)  has as its primary goal to reap monopoly profits by replacing competition with cooperation. 
C)  is illegal in the United States, but not in other nations. 
D)  all of these.

Question 13

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Accepted Answer

A)  The product of all firms is homogeneous. 
B)  Firms will earn zero economic profits in the long run. 
C)  Short-run profits are maximized when marginal cost equals marginal revenue. 
D)  All of these. 
A)  The product of all firms is homogeneous. 
B)  Firms will earn zero economic profits in the long run. 
C)  Short-run profits are maximized when marginal cost equals marginal revenue. 
D)  All of these.

Question 14

Firms in a monopolistically competitive market structure maximize their profit by producing an output where:

Accepted Answer

A)  price equals average total cost. 
B)  marginal cost equals average total cost. 
C)  marginal cost equals price. 
D)  marginal revenue equals marginal cost. 
A)  price equals average total cost. 
B)  marginal cost equals average total cost. 
C)  marginal cost equals price. 
D)  marginal revenue equals marginal cost.

Question 15

Exhibit 10-5 Two-Firm Payoff Matrix  
-Suppose costs are identical for the two firms in Exhibit 10-5. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:

Accepted Answer

A)  Beta Co. charging $1,000 and Alpha Co. charging $1,000. 
B)  Beta Co. charging $1,000 and Alpha Co. charging $500. 
C)  Beta Co. charging $500 and Alpha Co. charging $500. 
D)  Beta Co. charging $500 and Alpha Co. charging $1,000. 
A)  Beta Co. charging $1,000 and Alpha Co. charging $1,000. 
B)  Beta Co. charging $1,000 and Alpha Co. charging $500. 
C)  Beta Co. charging $500 and Alpha Co. charging $500. 
D)  Beta Co. charging $500 and Alpha Co. charging $1,000.

Question 16

The industry that most closely approximates the conditions of the oligopoly model is:

Accepted Answer

A)  Restaurant. 
B)  Retail clothing. 
C)  Home construction. 
D)  Airlines. 
A)  Restaurant. 
B)  Retail clothing. 
C)  Home construction. 
D)  Airlines.

Question 17

One key characteristic that is distinctive of an oligopoly market is that:

Accepted Answer

A)  the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. 
B)  the decisions of one seller often influences the price of products, the output, and the profits of rival firms. 
C)  there is only one firm that produces a product for which there are no good substitutes. 
D)  there are many sellers in the market and each is small relative to the total market. 
A)  the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. 
B)  the decisions of one seller often influences the price of products, the output, and the profits of rival firms. 
C)  there is only one firm that produces a product for which there are no good substitutes. 
D)  there are many sellers in the market and each is small relative to the total market.

Question 18

For a kinked demand curve, the marginal revenue curve is:

Accepted Answer

A)  positively sloped. 
B)  a horizontal line. 
C)  a vertical line. 
D)  discontinuous. 
E)  above the demand curve. 
A)  positively sloped. 
B)  a horizontal line. 
C)  a vertical line. 
D)  discontinuous. 
E)  above the demand curve.

Question 19

The monopolistic competition market structure is characterized by:

Accepted Answer

A)  few firms and similar products. 
B)  many firms and differentiated products. 
C)  many firms and a homogeneous product. 
D)  few firms and a homogeneous product. 
A)  few firms and similar products. 
B)  many firms and differentiated products. 
C)  many firms and a homogeneous product. 
D)  few firms and a homogeneous product.

Question 20

An organization of sellers designed to coordinate their supply decisions to maximize joint profits is called a:

Accepted Answer

A)  consumer cooperative. 
B)  marketing association. 
C)  regulatory agency. 
D)  cartel. 
A)  consumer cooperative. 
B)  marketing association. 
C)  regulatory agency. 
D)  cartel.

A cartel is:

Exhibit 10-6 Two-Firm Payoff Matrix -Suppose costs are identical for the two firms in Exhibit 10-6. 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:

Cartels are legal in the United States.

Monopolistic competition is inefficient because:

Suppose that R. J. Reynolds raises the price of cigarettes by 10 percent. Although they have no requirement or agreement to do so, the other cigarette firms decide to raise their prices accordingly. This situation is best described as:

Firms in a monopolistically competitive industry produce:

How will the price and output of a monopolist compare with perfect competition?

The automobile, steel, and oil markets are all examples of:

An oligopoly market structure is characterized by firms closely watching their rivals' pricing policies.

Cartel agreements are difficult to maintain because individual members:

Which of the following is always a characteristic of the oligopoly market structure?

A cartel:

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Firms in a monopolistically competitive market structure maximize their profit by producing an output where:

Exhibit 10-5 Two-Firm Payoff Matrix -Suppose costs are identical for the two firms in Exhibit 10-5. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:

The industry that most closely approximates the conditions of the oligopoly model is:

One key characteristic that is distinctive of an oligopoly market is that:

For a kinked demand curve, the marginal revenue curve is:

The monopolistic competition market structure is characterized by:

An organization of sellers designed to coordinate their supply decisions to maximize joint profits is called a:

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

A cartel is:

Exhibit 10-6 Two-Firm Payoff Matrix -Suppose costs are identical for the two firms in Exhibit 10-6. 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:

Cartels are legal in the United States.

Monopolistic competition is inefficient because:

Suppose that R. J. Reynolds raises the price of cigarettes by 10 percent. Although they have no requirement or agreement to do so, the other cigarette firms decide to raise their prices accordingly. This situation is best described as:

Firms in a monopolistically competitive industry produce:

How will the price and output of a monopolist compare with perfect competition?

The automobile, steel, and oil markets are all examples of:

An oligopoly market structure is characterized by firms closely watching their rivals' pricing policies.

Cartel agreements are difficult to maintain because individual members:

Which of the following is always a characteristic of the oligopoly market structure? ​

A cartel:

Which of the following is true for perfect competition, monopolistic competition, and monopoly?

Firms in a monopolistically competitive market structure maximize their profit by producing an output where:

Exhibit 10-5 Two-Firm Payoff Matrix -Suppose costs are identical for the two firms in Exhibit 10-5. If both firms assume the other will compete and charge a lower price, equilibrium will be established by:

The industry that most closely approximates the conditions of the oligopoly model is:

One key characteristic that is distinctive of an oligopoly market is that:

For a kinked demand curve, the marginal revenue curve is:

The monopolistic competition market structure is characterized by:

An organization of sellers designed to coordinate their supply decisions to maximize joint profits is called a:

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 always a characteristic of the oligopoly market structure?