Question 1

In the short run, firms in monopolistically competitive markets

Accepted Answer

A) produce the output level where marginal revenue equals marginal cost. 
B) can earn economic profits. 
C) face a downward-sloping demand curve. 
D) All of these responses are correct. 
A) produce the output level where marginal revenue equals marginal cost. 
B) can earn economic profits. 
C) face a downward-sloping demand curve. 
D) All of these responses are correct.

Question 2

A good example of a market that resembles a contestable market would be

Accepted Answer

A) electric power production. 
B) trucking companies. 
C) auto manufacturing. 
D) urgent-care clinics. 
A) electric power production. 
B) trucking companies. 
C) auto manufacturing. 
D) urgent-care clinics.

Question 3

A market in which firms can enter if they choose and exit without losing money invested is

Accepted Answer

A) pure monopoly. 
B) duopoly. 
C) contestable. 
D) a market where there are kinked demand curves. 
A) pure monopoly. 
B) duopoly. 
C) contestable. 
D) a market where there are kinked demand curves.

Question 4

The maximin criterion can be defined as which of the following?

Accepted Answer

A) One seeks the maximum of the minimum payoffs to the various available strategies. 
B) One seeks the minimum of the maximum losses among the various available strategies. 
C) One seeks the maximum of the minimum losses to the various available strategies. 
D) One seeks the maximum of the maximum gains of the various available strategies. 
A) One seeks the maximum of the minimum payoffs to the various available strategies. 
B) One seeks the minimum of the maximum losses among the various available strategies. 
C) One seeks the maximum of the minimum losses to the various available strategies. 
D) One seeks the maximum of the maximum gains of the various available strategies.

Question 5

The airline dominating Charlotte, North Carolina, once contended that it could not overcharge for fear of potential competition, if not at Charlotte, then at Raleigh, a two-hour drive away.Do you find this argument compelling, given the theory of contestable markets?

Accepted Answer

The theory of contestable markets holds

Question 6

To maximize its profit, a monopolistically competitive firm produces at the output level at which

Accepted Answer

A) its price elasticity of demand equals one. 
B) MR = MC. 
C) its D curve is tangent to its ATC curve. 
D) MR = AVC. 
A) its price elasticity of demand equals one. 
B) MR = MC. 
C) its D curve is tangent to its ATC curve. 
D) MR = AVC.

Question 7

According to the kinked demand curve model, an oligopolist may face

Accepted Answer

A) more elastic demand than a monopolistic competitor. 
B) less elastic demand than a monopolistic competitor. 
C) more elastic demand if she raises her price than if she lowers her price. 
D) less elastic demand if she raises her price than if she lowers her price. 
A) more elastic demand than a monopolistic competitor. 
B) less elastic demand than a monopolistic competitor. 
C) more elastic demand if she raises her price than if she lowers her price. 
D) less elastic demand if she raises her price than if she lowers her price.

Question 8

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 9

The entry of new firms into a monopolistically competitive industry will cause the long-run equilibrium price to rise.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) a price leadership system. 
B) a generally unsuccessful cartel. 
C) an organization devoted to tacit collusion. 
D) a successful cartel. 
A) a price leadership system. 
B) a generally unsuccessful cartel. 
C) an organization devoted to tacit collusion. 
D) a successful cartel.

Question 11

The existence of interdependence among firms in an oligopoly market

Accepted Answer

A) allows the analysis of the market through standard approaches. 
B) results in a monopoly outcome under virtually all circumstances. 
C) increases entry into the market. 
D) results in a great deal of difficulty in analyzing the behavior of firms. 
A) allows the analysis of the market through standard approaches. 
B) results in a monopoly outcome under virtually all circumstances. 
C) increases entry into the market. 
D) results in a great deal of difficulty in analyzing the behavior of firms.

Question 12

Unlike a perfectly competitive firm, a monopolistically competitive firm

Accepted Answer

A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) has a negatively sloped demand curve. 
A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) has a negatively sloped demand curve.

Question 13

Given the characteristics: (1) many buyers and sellers, (2) free entry and exit, (3) perfect information, and (4) heterogeneity of products, monopolistic competition and perfect competition share

Accepted Answer

A) (1) and (4). 
B) (1), (2), and (3). 
C) (2) and (4). 
D) (2), (3), and (4). 
A) (1) and (4). 
B) (1), (2), and (3). 
C) (2) and (4). 
D) (2), (3), and (4).

Question 14

The kinked demand curve is an explanation of sticky prices.

Accepted Answer

A) True 
 B)False

Question 15

After its early success in the 1970s, OPEC experienced a drop in world oil prices and a corresponding drop in oil revenues for its members, due to

Accepted Answer

A) the fall of the elasticity of demand for oil. 
B) the growth in the number of oil buyers. 
C) OPEC members failing to produce the output that was agreed upon. 
D) a sharp rise in the demand for oil. 
A) the fall of the elasticity of demand for oil. 
B) the growth in the number of oil buyers. 
C) OPEC members failing to produce the output that was agreed upon. 
D) a sharp rise in the demand for oil.

Question 16

A successful cartel may end up charging the ____ price and obtaining ____ profits.

Accepted Answer

A) monopolistic competition; zero economic 
B) oligopoly; monopoly 
C) monopoly; zero economic 
D) monopoly; monopoly 
A) monopolistic competition; zero economic 
B) oligopoly; monopoly 
C) monopoly; zero economic 
D) monopoly; monopoly

Question 17

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry.The widget industry may therefore

Accepted Answer

A) be monopolistically competitive. 
B) have firms whose goal is sales maximization. 
C) have firms that act as price leaders. 
D) All of the responses are correct. 
A) be monopolistically competitive. 
B) have firms whose goal is sales maximization. 
C) have firms that act as price leaders. 
D) All of the responses are correct.

Question 18

Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.

Accepted Answer

Cartel cheating is more likely if there

Question 19

A monopolistic competitor faces a horizontal demand curve.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 13: Between Competition and Monopoly

In the short run, firms in monopolistically competitive markets

A good example of a market that resembles a contestable market would be

A market in which firms can enter if they choose and exit without losing money invested is

The maximin criterion can be defined as which of the following?

The airline dominating Charlotte, North Carolina, once contended that it could not overcharge for fear of potential competition, if not at Charlotte, then at Raleigh, a two-hour drive away.Do you find this argument compelling, given the theory of contestable markets?

To maximize its profit, a monopolistically competitive firm produces at the output level at which

According to the kinked demand curve model, an oligopolist may face

A cartel is

The entry of new firms into a monopolistically competitive industry will cause the long-run equilibrium price to rise.

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

The existence of interdependence among firms in an oligopoly market

Unlike a perfectly competitive firm, a monopolistically competitive firm

Given the characteristics: (1) many buyers and sellers, (2) free entry and exit, (3) perfect information, and (4) heterogeneity of products, monopolistic competition and perfect competition share

The kinked demand curve is an explanation of sticky prices.

After its early success in the 1970s, OPEC experienced a drop in world oil prices and a corresponding drop in oil revenues for its members, due to

A successful cartel may end up charging the ____ price and obtaining ____ profits.

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry.The widget industry may therefore

Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.

A monopolistic competitor faces a horizontal demand curve.

The Organization of Petroleum Exporting Countries is a

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

A successful cartel may end up charging the price and obtaining profits.