Question 1

When a monopolistically competitive firm earns economic profits in the short run, other firms will enter, shifting the market supply curve to the right.

Accepted Answer

A) True 
 B)False  False

Question 2

What is monopolistic competition characterized by?

Accepted Answer

A)  too few firms, each producing too much 
B)  too many firms, each producing too much 
C)  too few firms, each producing too little 
D)  too many firms, each producing too little 
A)  too few firms, each producing too much 
B)  too many firms, each producing too much 
C)  too few firms, each producing too little 
D)  too many firms, each producing too little D

Question 3

What action must each game player take at Nash equilibrium?

Accepted Answer

A)  the best possible action given the action of the other player 
B)  the most unpredictable action that will surprise the other player 
C)  the most mutually beneficial action for both players 
D)  the best possible action regardless of the action of the other player 
A)  the best possible action given the action of the other player 
B)  the most unpredictable action that will surprise the other player 
C)  the most mutually beneficial action for both players 
D)  the best possible action regardless of the action of the other player A

Question 4

In the long run, why do firms in monopolistically competitive industries fail to achieve productive efficiency?

Accepted Answer

When firms in monopolistically competiti

Question 5

In what way is monopolistic competition like perfect competition?

Accepted Answer

A)  They both lack barriers to entry. 
B)  They both face downward-sloping demand curves. 
C)  They both face perfectly elastic demand curves. 
D)  They both have homogeneous products. 
A)  They both lack barriers to entry. 
B)  They both face downward-sloping demand curves. 
C)  They both face perfectly elastic demand curves. 
D)  They both have homogeneous products.

Question 6

A firm in a monopolistically competitive industry is currently producing where marginal revenue exceeds marginal cost. What does this information tell us about the firm?

Accepted Answer

A)  It is producing too much. 
B)  It is operating at a loss. 
C)  It is not maximizing profits. 
D)  It is not minimizing costs. 
A)  It is producing too much. 
B)  It is operating at a loss. 
C)  It is not maximizing profits. 
D)  It is not minimizing costs.

Question 7

What will be the result of a successful advertising campaign?

Accepted Answer

A)  There will be an increase in the elasticity of demand. 
B)  Quantity demanded will be less sensitive to changes in price. 
C)  There will be an increase in average costs and a reduction in profits. 
D)  There will be a decrease in the total fixed costs and in increase in profits. 
A)  There will be an increase in the elasticity of demand. 
B)  Quantity demanded will be less sensitive to changes in price. 
C)  There will be an increase in average costs and a reduction in profits. 
D)  There will be a decrease in the total fixed costs and in increase in profits.

Question 8

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to advertise or not. The potential monthly profits for these firms are shown below (in thousands of dollars).
FIGURE 10-5
  
-Referring to Figure 10-5, what is the cooperative outcome?

Accepted Answer

A)  Restaurant A should advertise and Restaurant B should advertise. 
B)  Restaurant A shouldn't advertise and Restaurant B should advertise. 
C)  Restaurant A shouldn't advertise and Restaurant B shouldn't advertise. 
D)  Restaurant A should advertise and Restaurant B shouldn't advertise. 
A)  Restaurant A should advertise and Restaurant B should advertise. 
B)  Restaurant A shouldn't advertise and Restaurant B should advertise. 
C)  Restaurant A shouldn't advertise and Restaurant B shouldn't advertise. 
D)  Restaurant A should advertise and Restaurant B shouldn't advertise.

Question 9

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

A)  many sellers 
B)  product differentiation 
C)  free entry 
D)  economies of scale 
A)  many sellers 
B)  product differentiation 
C)  free entry 
D)  economies of scale

Question 10

What is the bandwagon effect?

Accepted Answer

A)  a positive network externality where a consumer's demand for a product increases because no one else has it 
B)  a negative network externality where a consumer's demand for a product decreases because too many people own it 
C)  a negative network externality where a consumer's demand for a product decreases because of the "snob effect" 
D)  a positive network externality where a consumer's demand for a product increases because others own it 
A)  a positive network externality where a consumer's demand for a product increases because no one else has it 
B)  a negative network externality where a consumer's demand for a product decreases because too many people own it 
C)  a negative network externality where a consumer's demand for a product decreases because of the "snob effect" 
D)  a positive network externality where a consumer's demand for a product increases because others own it

Question 11

A tit-for-tat strategy is used in repeated games and leads to greater cooperation between firms.

Accepted Answer

A) True 
 B)False

Question 12

When is a tit-for-tat strategy used?

Accepted Answer

A)  in one-shot games 
B)  in dominant games 
C)  in collusive games 
D)  in repeated games 
A)  in one-shot games 
B)  in dominant games 
C)  in collusive games 
D)  in repeated games

Question 13

What is a tool that allows economists to analyze the strategic behaviour of firms in a market?

Accepted Answer

A)  network externalities 
B)  payoff strategies 
C)  monopolistic equilibrium 
D)  game theory 
A)  network externalities 
B)  payoff strategies 
C)  monopolistic equilibrium 
D)  game theory

Question 14

In what way is monopolistic competition like monopoly?

Accepted Answer

A)  They are both protected by a barrier to entry. 
B)  They are both comprised of many sellers. 
C)  They both have unique products. 
D)  They are both price searchers. 
A)  They are both protected by a barrier to entry. 
B)  They are both comprised of many sellers. 
C)  They both have unique products. 
D)  They are both price searchers.

Question 15

What is a dominant strategy?

Accepted Answer

A)  the strategy that results from collusion in an industry 
B)  the strategy that results in the best outcome for all firms in an industry 
C)  the optimal strategy that takes into account the actions of opponents 
D)  the strategy that is optimal regardless of the actions of other firms 
A)  the strategy that results from collusion in an industry 
B)  the strategy that results in the best outcome for all firms in an industry 
C)  the optimal strategy that takes into account the actions of opponents 
D)  the strategy that is optimal regardless of the actions of other firms

Question 16

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to charge a high price or a low price. The potential monthly profits for these firms are as shown below (in thousands of dollars).
   
a)	Do either of the restaurants have a dominant strategy?
b)	What is the Nash equilibrium?

Accepted Answer

a)Restaurant B has a dominant strategy s

Question 17

FIGURE 10-1
  
-The profit-maximizing firm illustrated in Figure 10-1 operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run?

Accepted Answer

A)  New firms enter the industry and the firm's marginal cost curve shifts up, which leads to a decrease in the firm's output. 
B)  New firms want to enter the market but cannot since there are barriers to entry in monopolistic competition. 
C)  The market supply curve shifts right, reducing the equilibrium market price. 
D)  New firms enter the industry and the firm's demand curve shifts left and becomes more elastic. 
A)  New firms enter the industry and the firm's marginal cost curve shifts up, which leads to a decrease in the firm's output. 
B)  New firms want to enter the market but cannot since there are barriers to entry in monopolistic competition. 
C)  The market supply curve shifts right, reducing the equilibrium market price. 
D)  New firms enter the industry and the firm's demand curve shifts left and becomes more elastic.

Question 18

A negative network externality occurs when a consumer's quantity demanded of a good decreases because few others are purchasing that good.

Accepted Answer

A) True 
 B)False

Question 19

FIGURE 10-3
  
-The profit-maximizing firm illustrated in Figure 10-3 operates in a monopolistically competitive industry. How much are total losses for this firm?

Accepted Answer

A)  OFBD 
B)  EGAC 
C)  0 
D)  FGAB 
A)  OFBD 
B)  EGAC 
C)  0 
D)  FGAB

Question 20

What would regulating monopolistically competitive firms to set price equal to marginal cost result in?

Accepted Answer

A)  firms shutting down since price would be less than AVC 
B)  firms exiting the industry since price would be less than the long run AC 
C)  an increase in MC as firms try to comply with the new regulations 
D)  few firms entering the industry since price would be greater than AC 
A)  firms shutting down since price would be less than AVC 
B)  firms exiting the industry since price would be less than the long run AC 
C)  an increase in MC as firms try to comply with the new regulations 
D)  few firms entering the industry since price would be greater than AC

When a monopolistically competitive firm earns economic profits in the short run, other firms will enter, shifting the market supply curve to the right.

What is monopolistic competition characterized by?

What action must each game player take at Nash equilibrium?

In the long run, why do firms in monopolistically competitive industries fail to achieve productive efficiency?

In what way is monopolistic competition like perfect competition?

A firm in a monopolistically competitive industry is currently producing where marginal revenue exceeds marginal cost. What does this information tell us about the firm?

What will be the result of a successful advertising campaign?

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to advertise or not. The potential monthly profits for these firms are shown below (in thousands of dollars). FIGURE 10-5 -Referring to Figure 10-5, what is the cooperative outcome?

Which of the following is NOT a characteristic of monopolistic competition?

What is the bandwagon effect?

A tit-for-tat strategy is used in repeated games and leads to greater cooperation between firms.

When is a tit-for-tat strategy used?

What is a tool that allows economists to analyze the strategic behaviour of firms in a market?

In what way is monopolistic competition like monopoly?

What is a dominant strategy?

FIGURE 10-1 -The profit-maximizing firm illustrated in Figure 10-1 operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run?

A negative network externality occurs when a consumer's quantity demanded of a good decreases because few others are purchasing that good.

FIGURE 10-3 -The profit-maximizing firm illustrated in Figure 10-3 operates in a monopolistically competitive industry. How much are total losses for this firm?

What would regulating monopolistically competitive firms to set price equal to marginal cost result in?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Production and Costs

Perfect Competition

Monopoly

Labour Markets and the Distribution of Income

The Environment

Filters

Exam 10: Monopolistic Competition and Oligopoly

When a monopolistically competitive firm earns economic profits in the short run, other firms will enter, shifting the market supply curve to the right.

What is monopolistic competition characterized by?

What action must each game player take at Nash equilibrium?

In the long run, why do firms in monopolistically competitive industries fail to achieve productive efficiency?

In what way is monopolistic competition like perfect competition?

A firm in a monopolistically competitive industry is currently producing where marginal revenue exceeds marginal cost. What does this information tell us about the firm?

What will be the result of a successful advertising campaign?

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to advertise or not. The potential monthly profits for these firms are shown below (in thousands of dollars). FIGURE 10-5 -Referring to Figure 10-5, what is the cooperative outcome?

Which of the following is NOT a characteristic of monopolistic competition?

What is the bandwagon effect?

A tit-for-tat strategy is used in repeated games and leads to greater cooperation between firms.

When is a tit-for-tat strategy used?

What is a tool that allows economists to analyze the strategic behaviour of firms in a market?

In what way is monopolistic competition like monopoly?

What is a dominant strategy?

FIGURE 10-1 -The profit-maximizing firm illustrated in Figure 10-1 operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run?

A negative network externality occurs when a consumer's quantity demanded of a good decreases because few others are purchasing that good.

FIGURE 10-3 -The profit-maximizing firm illustrated in Figure 10-3 operates in a monopolistically competitive industry. How much are total losses for this firm?

What would regulating monopolistically competitive firms to set price equal to marginal cost result in?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Production and Costs

Perfect Competition

Monopoly

Labour Markets and the Distribution of Income

The Environment

Filters