Question 1

Oligopolists use advertising as a way of differentiating their products.

Accepted Answer

A) True 
 B)False

Question 2

The demand curve for a monopolistic competitor is likely to be flatter than that of a monopolist.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Cartels are

Accepted Answer

A) difficult to organize. 
B) difficult to preserve. 
C) especially unlikely to succeed if the members sell many varied products. 
D) All of the responses are correct. 
A) difficult to organize. 
B) difficult to preserve. 
C) especially unlikely to succeed if the members sell many varied products. 
D) All of the responses are correct.

Question 5

When oligopolists join together in a cartel, they

Accepted Answer

A) have chosen to ignore interdependence. 
B) have admitted that their behavior is interdependent. 
C) are planning to violate the law of supply and demand. 
D) are trying to behave like perfect competitors. 
A) have chosen to ignore interdependence. 
B) have admitted that their behavior is interdependent. 
C) are planning to violate the law of supply and demand. 
D) are trying to behave like perfect competitors.

Question 6

The prisoner's dilemma has implications for the workings of oligopoly markets.The outcome in the prisoner's dilemma situation for oligopoly firms is

Accepted Answer

A) beneficial to society, in that the players cannot easily collude, so output is greater, and prices are lower. 
B) beneficial to the players, since they can maintain a cartel agreement easily. 
C) of little benefit to society, since the players produce the monopoly output. 
D) beneficial to no one. 
A) beneficial to society, in that the players cannot easily collude, so output is greater, and prices are lower. 
B) beneficial to the players, since they can maintain a cartel agreement easily. 
C) of little benefit to society, since the players produce the monopoly output. 
D) beneficial to no one.

Question 7

What is the long-run effect on the demand curve of a monopolistically competitive firm when more firms enter the market?

Accepted Answer

A) Demand curve shifts to left. 
B) Demand curve remains the same. 
C) Demand curve shifts to right. 
D) Demand curve become flatter. 
A) Demand curve shifts to left. 
B) Demand curve remains the same. 
C) Demand curve shifts to right. 
D) Demand curve become flatter.

Question 8

Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are

Accepted Answer

A) perfect. 
B) contestable. 
C) close to each other. 
D) protected from entry. 
A) perfect. 
B) contestable. 
C) close to each other. 
D) protected from entry.

Question 9

The demand curve for a monopolistic competitor has a negative slope.

Accepted Answer

A) True 
 B)False

Question 10

Monopolistic competition differs from perfect competition only in the number of firms participating in the market.

Accepted Answer

A) True 
 B)False

Question 11

Since firms in both monopolistic competition and perfect competition earn zero economic profit, price must be equal to average cost for both types of firms.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of tacit collusion?

Accepted Answer

A) OPEC 
B) Copper cartel 
C) Price leadership 
D) Government franchise granted to a utility 
A) OPEC 
B) Copper cartel 
C) Price leadership 
D) Government franchise granted to a utility

Question 13

When a monopolistically competitive firm's demand curve is tangent to it average cost curve,

Accepted Answer

A) the firm earns zero economic profit. 
B) new firms do not enter the market. 
C) the market is in long run equilibrium. 
D) All of these responses are correct. 
A) the firm earns zero economic profit. 
B) new firms do not enter the market. 
C) the market is in long run equilibrium. 
D) All of these responses are correct.

Question 14

According to the excess capacity theorem, if every firm under monopolistic competition expanded its output,

Accepted Answer

A) cost per unit of output would rise. 
B) social benefits would increase. 
C) cost per unit of output would decrease. 
D) MC and AC would remain unchanged. 
A) cost per unit of output would rise. 
B) social benefits would increase. 
C) cost per unit of output would decrease. 
D) MC and AC would remain unchanged.

Question 15

Society definitely benefits by reducing the number of monopolistically competitive firms.

Accepted Answer

A) True 
 B)False

Question 16

Monopolistic competition is common in

Accepted Answer

A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation. 
A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation.

Question 17

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Accepted Answer

A) True 
 B)False

Question 18

Figure 13-2
​  
-The force that leads to zero economic profits for monopolistically competitive firms in the long run is

Accepted Answer

A) excess capacity. 
B) price wars among firms. 
C) entry by new firms. 
D) excessive advertising. 
A) excess capacity. 
B) price wars among firms. 
C) entry by new firms. 
D) excessive advertising.

Question 19

An article in The Economist reported that prices of CDs in Britain were 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 was substantial differentiation of products. 
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 was substantial differentiation of products.

Question 20

An airline can easily move its aircraft from one route to another.One interpretation of this is that the airline industry is an example of a contestable market.

Accepted Answer

A) True 
 B)False

Exam 13: Between Competition and Monopoly

Oligopolists use advertising as a way of differentiating their products.

The demand curve for a monopolistic competitor is likely to be flatter than that of a monopolist.

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

Cartels are

When oligopolists join together in a cartel, they

The prisoner's dilemma has implications for the workings of oligopoly markets.The outcome in the prisoner's dilemma situation for oligopoly firms is

What is the long-run effect on the demand curve of a monopolistically competitive firm when more firms enter the market?

Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are

The demand curve for a monopolistic competitor has a negative slope.

Monopolistic competition differs from perfect competition only in the number of firms participating in the market.

Since firms in both monopolistic competition and perfect competition earn zero economic profit, price must be equal to average cost for both types of firms.

Which of the following is an example of tacit collusion?

When a monopolistically competitive firm's demand curve is tangent to it average cost curve,

According to the excess capacity theorem, if every firm under monopolistic competition expanded its output,

Society definitely benefits by reducing the number of monopolistically competitive firms.

Monopolistic competition is common in

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Figure 13-2 ​ -The force that leads to zero economic profits for monopolistically competitive firms in the long run is

An airline can easily move its aircraft from one route to another.One interpretation of this is that the airline industry is an example of a contestable market.

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

Figure 13-2 -The force that leads to zero economic profits for monopolistically competitive firms in the long run is