Question 1

Contestable markets improve the performance of imperfect markets with

Accepted Answer

A)  government regulations. 
B)  the threat of entry. 
C)  advertising. 
D)  tacit collusion. 
A)  government regulations. 
B)  the threat of entry. 
C)  advertising. 
D)  tacit collusion.

Question 2

Which market is most likely to witness such actions and reactions as frequent new-product introductions, free samples, and aggressive advertising campaigns?

Accepted Answer

A)  Oligopoly 
B)  Perfect competition 
C)  Monopoly 
D)  Monopolistic competition 
A)  Oligopoly 
B)  Perfect competition 
C)  Monopoly 
D)  Monopolistic competition

Question 3

A monopolistic competitor can expect to earn an economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 4

The Organization of Petroleum Exporting Countries is a

Accepted Answer

A)  professional trade association for oil companies. 
B)  cartel. 
C)  consortium for joint ventures in oil exploration. 
D)  loose collection of democracies that promote international pipelines. 
A)  professional trade association for oil companies. 
B)  cartel. 
C)  consortium for joint ventures in oil exploration. 
D)  loose collection of democracies that promote international pipelines.

Question 5

An article in The Economist reported that prices of CDs in Britain was much higher than prices in the United States or other European countries.There were only a few major companies, and a report from a Parliament committee said there was no serious price competition.The best explanation for this is that

Accepted Answer

A)  the industry was a contestable market. 
B)  there were entry barriers in production and distribution of CDs. 
C)  firms were avoiding profit opportunities. 
D)  there were substantial differentiation of product. 
A)  the industry was a contestable market. 
B)  there were entry barriers in production and distribution of CDs. 
C)  firms were avoiding profit opportunities. 
D)  there were substantial differentiation of product.

Question 6

If firms meet together to decide on prices and outputs there is

Accepted Answer

A)  overt collusion. 
B)  tacit collusion. 
C)  price leadership. 
D)  None of the above are correct. 
A)  overt collusion. 
B)  tacit collusion. 
C)  price leadership. 
D)  None of the above are correct.

Question 7

An oligopoly can be characterized by production of either identical goods or different goods.

Accepted Answer

A) True 
 B)False

Question 8

Most economic activity in the United States is carried out by monopolies.

Accepted Answer

A) True 
 B)False

Question 9

An oligopoly is a market in which at least some firms are large enough to influence market price.

Accepted Answer

A) True 
 B)False

Question 10

An example of overt collusion is

Accepted Answer

A)  a cartel. 
B)  price leadership. 
C)  tacit collusion. 
D)  a perfectly contestable market. 
A)  a cartel. 
B)  price leadership. 
C)  tacit collusion. 
D)  a perfectly contestable market.

Question 11

In the long run the prices charged by a firm in monopolistic competition will be

Accepted Answer

A)  high enough to provide profits to the firm. 
B)  so low that many firms will drop out of the industry. 
C)  equal to marginal cost. 
D)  equal to average cost, including the opportunity cost of capital. 
A)  high enough to provide profits to the firm. 
B)  so low that many firms will drop out of the industry. 
C)  equal to marginal cost. 
D)  equal to average cost, including the opportunity cost of capital.

Question 12

All four market forms discussed in the text maximize profit where

Accepted Answer

A)  P = MC. 
B)  AR = AC. 
C)  MR = MC. 
D)  MC = AR. 
A)  P = MC. 
B)  AR = AC. 
C)  MR = MC. 
D)  MC = AR.

Question 13

A cartel is

Accepted Answer

A)  a group of firms promoting competition. 
B)  most common in monopolistic competition. 
C)  a collusive group of firms. 
D)  no longer possible in our global economy. 
A)  a group of firms promoting competition. 
B)  most common in monopolistic competition. 
C)  a collusive group of firms. 
D)  no longer possible in our global economy.

Question 14

An oligopoly firm with a differentiated product will generally earn the largest profits without advertising.

Accepted Answer

A) True 
 B)False

Question 15

Excess capacity and inefficiency result under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 16

A monopolistic competitor faces a horizontal demand curve.

Accepted Answer

A) True 
 B)False

Question 17

Monopolistic competition tends to lead firms to have wasted capacity.Why?

Accepted Answer

Under monopolistic competition in the lo

Question 18

Deviations from the perfectly competitive market can lead to

Accepted Answer

A)  inefficiently high production costs. 
B)  higher prices and smaller outputs. 
C)  less efficient resource allocation. 
D)  All of the above are correct. 
A)  inefficiently high production costs. 
B)  higher prices and smaller outputs. 
C)  less efficient resource allocation. 
D)  All of the above are correct.

Question 19

Oligopolists use advertising as a way of differentiating their products.

Accepted Answer

A) True 
 B)False

Question 20

The difficulty in analyzing oligopolistic behavior arises from the

Accepted Answer

A)  degree of government regulation of the market structure. 
B)  interdependent nature of oligopolistic decisions. 
C)  large number of firms in the industry. 
D)  market power of consumers. 
A)  degree of government regulation of the market structure. 
B)  interdependent nature of oligopolistic decisions. 
C)  large number of firms in the industry. 
D)  market power of consumers.

Exam 12: Between Competition and Monopoly

Contestable markets improve the performance of imperfect markets with

Which market is most likely to witness such actions and reactions as frequent new-product introductions, free samples, and aggressive advertising campaigns?

A monopolistic competitor can expect to earn an economic profit in the long run.

The Organization of Petroleum Exporting Countries is a

If firms meet together to decide on prices and outputs there is

An oligopoly can be characterized by production of either identical goods or different goods.

Most economic activity in the United States is carried out by monopolies.

An oligopoly is a market in which at least some firms are large enough to influence market price.

An example of overt collusion is

In the long run the prices charged by a firm in monopolistic competition will be

All four market forms discussed in the text maximize profit where

A cartel is

An oligopoly firm with a differentiated product will generally earn the largest profits without advertising.

Excess capacity and inefficiency result under monopolistic competition.

A monopolistic competitor faces a horizontal demand curve.

Monopolistic competition tends to lead firms to have wasted capacity.Why?

Deviations from the perfectly competitive market can lead to

Oligopolists use advertising as a way of differentiating their products.

The difficulty in analyzing oligopolistic behavior arises from the

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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