Question 1

The number of firms in a monopolistically competitive market will be smaller if

Accepted Answer

A) the market demand curve shifts rightward. 
B) minimum efficient scale is lower. 
C) fixed costs are smaller. 
D) fixed costs are larger. 
A) the market demand curve shifts rightward. 
B) minimum efficient scale is lower. 
C) fixed costs are smaller. 
D) fixed costs are larger.

Question 2

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

Accepted Answer

A) the same as the Cournot equilibrium price. 
B) less than the Cournot equilibrium price. 
C) greater than the Cournot equilibrium price. 
D) equal to the monopoly price. 
A) the same as the Cournot equilibrium price. 
B) less than the Cournot equilibrium price. 
C) greater than the Cournot equilibrium price. 
D) equal to the monopoly price.

Question 3

In a Bertrand model with identical products,

Accepted Answer

A) price is the same as in a competitive market equilibrium. 
B) price and quantity are the same as in a monopoly. 
C) price and quantity are the same as in a duopoly. 
D) None of the above. 
A) price is the same as in a competitive market equilibrium. 
B) price and quantity are the same as in a monopoly. 
C) price and quantity are the same as in a duopoly. 
D) None of the above.

Question 4

In the simplest version of the Cournot model, we assume the firms

Accepted Answer

A) set quantities independently and simultaneously. 
B) set quantities independently and sequentially. 
C) set price independently and simultaneously. 
D) are not in a Nash equilibrium. 
A) set quantities independently and simultaneously. 
B) set quantities independently and sequentially. 
C) set price independently and simultaneously. 
D) are not in a Nash equilibrium.

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) Cartels only form among members of an oligopoly. 
B) A cartel might form if members believe they can increase profits by coordinating activity. 
C) Members of a cartel produce less output than that produced in a competitive market. 
D) Cartel members often have an incentive to cheat. 
A) Cartels only form among members of an oligopoly. 
B) A cartel might form if members believe they can increase profits by coordinating activity. 
C) Members of a cartel produce less output than that produced in a competitive market. 
D) Cartel members often have an incentive to cheat.

Question 6

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

Accepted Answer

A) oil monopoly. 
B) cartel. 
C) competitive arrangement. 
D) prisoner's dilemma. 
A) oil monopoly. 
B) cartel. 
C) competitive arrangement. 
D) prisoner's dilemma.

Question 7

If a cartel is unable to monitor its members and punish those firms that violate their agreement, then

Accepted Answer

A) the member firms will each act as price setters. 
B) the cartel will prosper in the long run. 
C) the market will become a monopoly. 
D) the cartel will fail. 
A) the member firms will each act as price setters. 
B) the cartel will prosper in the long run. 
C) the market will become a monopoly. 
D) the cartel will fail.

Question 8

Product differentiation

Accepted Answer

A) may allow firms to price above a competitive level. 
B) generates value as consumers value more choices. 
C) depends on perceived differences between products. 
D) All of the above. 
A) may allow firms to price above a competitive level. 
B) generates value as consumers value more choices. 
C) depends on perceived differences between products. 
D) All of the above.

Question 9

In the Cournot model, if the products are differentiated,

Accepted Answer

A) the firm can shift its demand curve to the right and make it less elastic. 
B) the firm's demand curve shifts to the left and becomes less elastic. 
C) the firm's demand curve shifts to the right and becomes more elastic. 
D) None of the above. 
A) the firm can shift its demand curve to the right and make it less elastic. 
B) the firm's demand curve shifts to the left and becomes less elastic. 
C) the firm's demand curve shifts to the right and becomes more elastic. 
D) None of the above.

Question 10

Mergers are closely scrutinized by the government because

Accepted Answer

A) they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B) they always result in a more efficient market. 
C) they always result in lower joint profits of the firms involved. 
D) all mergers are undesirable. 
A) they might allow the firms involved to dominate the market and act as a legalized cartel (monopoly). 
B) they always result in a more efficient market. 
C) they always result in lower joint profits of the firms involved. 
D) all mergers are undesirable.

Question 11

In a Bertrand model, market power is a function of

Accepted Answer

A) marginal cost. 
B) the number of firms. 
C) price elasticity of supply. 
D) product differentiation. 
A) marginal cost. 
B) the number of firms. 
C) price elasticity of supply. 
D) product differentiation.

Question 12

The use of "most-favored-customer" clauses is an example of

Accepted Answer

A) incenting members to maintain the cartel, because if they lower the price for one customer, they have to lower it for previous customers as well. 
B) incenting members to maintain the cartel, because if they raise the price for one customer, they have to raise it for previous customers as well. 
C) giving customers special perks for purchasing goods from members of the cartel. 
D) selling higher quality goods and services to favorite customers. 
A) incenting members to maintain the cartel, because if they lower the price for one customer, they have to lower it for previous customers as well. 
B) incenting members to maintain the cartel, because if they raise the price for one customer, they have to raise it for previous customers as well. 
C) giving customers special perks for purchasing goods from members of the cartel. 
D) selling higher quality goods and services to favorite customers.

Question 13

Monopolistically competitive firms

Accepted Answer

A) have market power because they face downward sloping demand curves. 
B) have no market power because they earn zero economic profit. 
C) have no market power because of free entry. 
D) have no market power because price equals marginal cost. 
A) have market power because they face downward sloping demand curves. 
B) have no market power because they earn zero economic profit. 
C) have no market power because of free entry. 
D) have no market power because price equals marginal cost.

Question 14

In a Bertrand model with differentiated products,

Accepted Answer

A) firms can set price above marginal cost. 
B) firms set price at marginal cost. 
C) price is independent of marginal cost. 
D) firms set price independently of one another. 
A) firms can set price above marginal cost. 
B) firms set price at marginal cost. 
C) price is independent of marginal cost. 
D) firms set price independently of one another.

Question 15

In monopolistically competitive markets

Accepted Answer

A) price is greater than it would be in perfect competition. 
B) price is less than it would be in perfect monopoly. 
C) quantity is greater than it would be in perfect monopoly. 
D) All of the above. 
A) price is greater than it would be in perfect competition. 
B) price is less than it would be in perfect monopoly. 
C) quantity is greater than it would be in perfect monopoly. 
D) All of the above.

Question 16

Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain.

Accepted Answer

As strange as it sounds, yes. The firm e

Question 17

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Accepted Answer

A) True 
 B)False

Question 18

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry. Which of the following statements is correct?

Accepted Answer

A) The industry would produce more output and charge a lower price after the change. 
B) The industry would produce at decreasing returns to scale. 
C) Elasticity of demand for the firm's product would remain the same after this change occurred. 
D) This industry would produce the same level of output at lower prices in the long run than before the change. 
A) The industry would produce more output and charge a lower price after the change. 
B) The industry would produce at decreasing returns to scale. 
C) Elasticity of demand for the firm's product would remain the same after this change occurred. 
D) This industry would produce the same level of output at lower prices in the long run than before the change.

Question 19

Which of the following does NOT influence the type of oligopoly that forms?

Accepted Answer

A) Whether firms act sequentially or simultaneously. 
B) Whether firms set price or quantity. 
C) The type of demand curve the firms face. 
D) The time horizon over which firms will be in competition. 
A) Whether firms act sequentially or simultaneously. 
B) Whether firms set price or quantity. 
C) The type of demand curve the firms face. 
D) The time horizon over which firms will be in competition.

Question 20

Compared to a cartel, firms in a Cournot Oligopoly

Accepted Answer

A) make more joint profit. 
B) sell less output. 
C) make less joint profit. 
D) act independently. 
A) make more joint profit. 
B) sell less output. 
C) make less joint profit. 
D) act independently.

The number of firms in a monopolistically competitive market will be smaller if

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

In a Bertrand model with identical products,

In the simplest version of the Cournot model, we assume the firms

Which of the following statements is FALSE?

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

If a cartel is unable to monitor its members and punish those firms that violate their agreement, then

Product differentiation

In the Cournot model, if the products are differentiated,

Mergers are closely scrutinized by the government because

In a Bertrand model, market power is a function of

The use of "most-favored-customer" clauses is an example of

Monopolistically competitive firms

In a Bertrand model with differentiated products,

In monopolistically competitive markets

Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain.

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry. Which of the following statements is correct?

Which of the following does NOT influence the type of oligopoly that forms?

Compared to a cartel, firms in a Cournot Oligopoly

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 11: Oligopoly and Monopolistic Competition

The number of firms in a monopolistically competitive market will be smaller if

Assuming a homogeneous product, the Bertrand duopoly equilibrium price is

In a Bertrand model with identical products,

In the simplest version of the Cournot model, we assume the firms

Which of the following statements is FALSE?

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

If a cartel is unable to monitor its members and punish those firms that violate their agreement, then

Product differentiation

In the Cournot model, if the products are differentiated,

Mergers are closely scrutinized by the government because

In a Bertrand model, market power is a function of

The use of "most-favored-customer" clauses is an example of

Monopolistically competitive firms

In a Bertrand model with differentiated products,

In monopolistically competitive markets

Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain.

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry. Which of the following statements is correct?

Which of the following does NOT influence the type of oligopoly that forms?

Compared to a cartel, firms in a Cournot Oligopoly

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters