Question 1

Your local corner store charges more for a four-litre jug of milk than the local Walmart. What is this an example of?

Accepted Answer

A)  price discrimination 
B)  predatory pricing 
C)  decreasing returns to scale 
D)  location differentiation 
A)  price discrimination 
B)  predatory pricing 
C)  decreasing returns to scale 
D)  location differentiation

Question 2

How is the prisoner's dilemma similar to the problem faced by firms in an oligopoly in Canada?

Accepted Answer

A)  Although they are interdependent, firms cannot legally communicate on pricing decisions because collusion is illegal in Canada 
B)  Firms are dependant and can communicate their pricing decisions with one another because collusion is legal in Canada 
C)  Firms are independent so cooperation in pricing is standard in Canada. 
D)  Firms are interdependent so failure to cooperate always leads to better outcomes than cooperation in Canada 
A)  Although they are interdependent, firms cannot legally communicate on pricing decisions because collusion is illegal in Canada 
B)  Firms are dependant and can communicate their pricing decisions with one another because collusion is legal in Canada 
C)  Firms are independent so cooperation in pricing is standard in Canada. 
D)  Firms are interdependent so failure to cooperate always leads to better outcomes than cooperation in Canada

Question 3

What is Nash equilibrium?

Accepted Answer

A)  the outcome that results when each player chooses the best strategy given the strategies of the other player 
B)  the outcome that results when each player chooses their dominant strategy regardless of the strategies of the other player 
C)  the outcome that results when players use tit-for-tat- strategies 
D)  the outcome that results when players collude on strategies 
A)  the outcome that results when each player chooses the best strategy given the strategies of the other player 
B)  the outcome that results when each player chooses their dominant strategy regardless of the strategies of the other player 
C)  the outcome that results when players use tit-for-tat- strategies 
D)  the outcome that results when players collude on strategies

Question 4

Economies of scale can act as a barrier to entry for both monopolists and oligopolists.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements best describes firms that successfully convince consumers that their products are somehow different?

Accepted Answer

A)  They have the ability to set price decreases because demand becomes more elastic. 
B)  They have the ability to set price increases because demand becomes less elastic. 
C)  They are able to practice price discrimination. 
D)  They are able to maintain profits into the long run due to barriers to entry. 
A)  They have the ability to set price decreases because demand becomes more elastic. 
B)  They have the ability to set price increases because demand becomes less elastic. 
C)  They are able to practice price discrimination. 
D)  They are able to maintain profits into the long run due to barriers to entry.

Question 6

Under what circumstance might advertising lead to a reduction in the average cost of production?

Accepted Answer

A)  If there are significant increasing returns to scale in production. 
B)  If demand was fairly elastic before the advertising. 
C)  If marginal cost falls as a result of decreased production. 
D)  If demand increases and there are constant returns to scale. 
A)  If there are significant increasing returns to scale in production. 
B)  If demand was fairly elastic before the advertising. 
C)  If marginal cost falls as a result of decreased production. 
D)  If demand increases and there are constant returns to scale.

Question 7

What is the term for a market structure where many producers of somewhat different products compete with each other?

Accepted Answer

A)  monopolistic competition 
B)  monopoly 
C)  oligopoly 
D)  perfect competition 
A)  monopolistic competition 
B)  monopoly 
C)  oligopoly 
D)  perfect competition

Question 8

What type of costs are involved when a consumer or firm must spend money in order to change from one product to another brand or change suppliers?

Accepted Answer

A)  exchange costs 
B)  external costs 
C)  substitution costs 
D)  switching costs 
A)  exchange costs 
B)  external costs 
C)  substitution costs 
D)  switching costs

Question 9

Under what circumstances will a profit-maximizing firm in a monopolistically competitive industry shutdown in the short run?

Accepted Answer

A)  if total revenue is less than total variable cost 
B)  if average revenue is less than average total cost 
C)  if average revenue is less than average variable cost 
D)  if marginal revenue is less than average variable cost 
A)  if total revenue is less than total variable cost 
B)  if average revenue is less than average total cost 
C)  if average revenue is less than average variable cost 
D)  if marginal revenue is less than average variable cost

Question 10

When a consumer wants to own a unique good because "no one else has it," what is this an example of?

Accepted Answer

A)  switching costs, which are negative externalities 
B)  the snob effect, which is a negative externality 
C)  network benefits, which are positive externalities 
D)  the bandwagon effect, which is a positive externality 
A)  switching costs, which are negative externalities 
B)  the snob effect, which is a negative externality 
C)  network benefits, which are positive externalities 
D)  the bandwagon effect, which is a positive externality

Question 11

FIGURE 10-2
  
-The profit-maximizing firm illustrated in Figure 10-2 operates in a monopolistically competitive industry. What is this firm's total cost equal to?

Accepted Answer

A)  OECD 
B)  OGAD 
C)  EGAC 
D)  FGAB 
A)  OECD 
B)  OGAD 
C)  EGAC 
D)  FGAB

Question 12

What is a similarity between oligopolists and monopolists?

Accepted Answer

A)  Both set price equal to marginal cost. 
B)  Both produce a unique product. 
C)  Economies of scale provide a barrier to entry for both. 
D)  Allocative efficiency is achieved by both. 
A)  Both set price equal to marginal cost. 
B)  Both produce a unique product. 
C)  Economies of scale provide a barrier to entry for both. 
D)  Allocative efficiency is achieved by both.

Question 13

When people buy a certain brand of clothing because it is very fashionable and lots of other people are buying it. What is this an example of?

Accepted Answer

A)  a bandwagon effect 
B)  a beneficial externality 
C)  a tit-for-tat strategy 
D)  a switching cost 
A)  a bandwagon effect 
B)  a beneficial externality 
C)  a tit-for-tat strategy 
D)  a switching cost

Question 14

What is the biggest difference between perfect competition and monopolistic competition?

Accepted Answer

A)  Perfect competitors can differentiate their products. 
B)  Monopolistic competitors have some influence over price. 
C)  Accounting costs and economic costs are the same for perfect competitors. 
D)  Monopolistic competitors are protected by barriers to entry. 
A)  Perfect competitors can differentiate their products. 
B)  Monopolistic competitors have some influence over price. 
C)  Accounting costs and economic costs are the same for perfect competitors. 
D)  Monopolistic competitors are protected by barriers to entry.

Question 15

Under what circumstances will advertising lead to a decrease in average total costs?

Accepted Answer

Successful advertising will shift the AT

Question 16

At Nash equilibrium, firms choose their ideal strategy without taking the possible strategies of their competitors into consideration.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a similarity between monopolistic competition and monopoly?

Accepted Answer

A)  Both can expect positive long-run economic profits. 
B)  Both have perfectly elastic demand curves. 
C)  Both charge a price in excess of marginal cost. 
D)  Both are protected by a barrier to entry. 
A)  Both can expect positive long-run economic profits. 
B)  Both have perfectly elastic demand curves. 
C)  Both charge a price in excess of marginal cost. 
D)  Both are protected by a barrier to entry.

Question 18

FIGURE 10-3
  
-The profit-maximizing firm illustrated Figure 10-3 operates in a monopolistically competitive industry. What is this firm's total revenue equal to?

Accepted Answer

A)  OGAD 
B)  0 
C)  OFBD 
D)  OECD 
A)  OGAD 
B)  0 
C)  OFBD 
D)  OECD

Question 19

A payoff matrix illustrates the profits that firms can achieve in a market based on their own output decisions and the output decisions of their rivals.

Accepted Answer

A) True 
 B)False

Question 20

What does a payoff matrix illustrate?

Accepted Answer

A)  A tit-for-tat strategy in repeated games. 
B)  The possible outcomes of various strategies in game theory. 
C)  The most efficient production level in noncooperative games. 
D)  The optimal profit maximization strategy in Nash equilibrium. 
A)  A tit-for-tat strategy in repeated games. 
B)  The possible outcomes of various strategies in game theory. 
C)  The most efficient production level in noncooperative games. 
D)  The optimal profit maximization strategy in Nash equilibrium.

Your local corner store charges more for a four-litre jug of milk than the local Walmart. What is this an example of?

How is the prisoner's dilemma similar to the problem faced by firms in an oligopoly in Canada?

What is Nash equilibrium?

Economies of scale can act as a barrier to entry for both monopolists and oligopolists.

Which of the following statements best describes firms that successfully convince consumers that their products are somehow different?

Under what circumstance might advertising lead to a reduction in the average cost of production?

What is the term for a market structure where many producers of somewhat different products compete with each other?

What type of costs are involved when a consumer or firm must spend money in order to change from one product to another brand or change suppliers?

Under what circumstances will a profit-maximizing firm in a monopolistically competitive industry shutdown in the short run?

When a consumer wants to own a unique good because "no one else has it," what is this an example of?

FIGURE 10-2 -The profit-maximizing firm illustrated in Figure 10-2 operates in a monopolistically competitive industry. What is this firm's total cost equal to?

What is a similarity between oligopolists and monopolists?

When people buy a certain brand of clothing because it is very fashionable and lots of other people are buying it. What is this an example of?

What is the biggest difference between perfect competition and monopolistic competition?

Under what circumstances will advertising lead to a decrease in average total costs?

At Nash equilibrium, firms choose their ideal strategy without taking the possible strategies of their competitors into consideration.

Which of the following is a similarity between monopolistic competition and monopoly?

FIGURE 10-3 -The profit-maximizing firm illustrated Figure 10-3 operates in a monopolistically competitive industry. What is this firm's total revenue equal to?

A payoff matrix illustrates the profits that firms can achieve in a market based on their own output decisions and the output decisions of their rivals.

What does a payoff matrix illustrate?

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

Your local corner store charges more for a four-litre jug of milk than the local Walmart. What is this an example of?

How is the prisoner's dilemma similar to the problem faced by firms in an oligopoly in Canada?

What is Nash equilibrium?

Economies of scale can act as a barrier to entry for both monopolists and oligopolists.

Which of the following statements best describes firms that successfully convince consumers that their products are somehow different?

Under what circumstance might advertising lead to a reduction in the average cost of production?

What is the term for a market structure where many producers of somewhat different products compete with each other?

What type of costs are involved when a consumer or firm must spend money in order to change from one product to another brand or change suppliers?

Under what circumstances will a profit-maximizing firm in a monopolistically competitive industry shutdown in the short run?

When a consumer wants to own a unique good because "no one else has it," what is this an example of?

FIGURE 10-2 -The profit-maximizing firm illustrated in Figure 10-2 operates in a monopolistically competitive industry. What is this firm's total cost equal to?

What is a similarity between oligopolists and monopolists?

When people buy a certain brand of clothing because it is very fashionable and lots of other people are buying it. What is this an example of?

What is the biggest difference between perfect competition and monopolistic competition?

Under what circumstances will advertising lead to a decrease in average total costs?

At Nash equilibrium, firms choose their ideal strategy without taking the possible strategies of their competitors into consideration.

Which of the following is a similarity between monopolistic competition and monopoly?

FIGURE 10-3 -The profit-maximizing firm illustrated Figure 10-3 operates in a monopolistically competitive industry. What is this firm's total revenue equal to?

A payoff matrix illustrates the profits that firms can achieve in a market based on their own output decisions and the output decisions of their rivals.

What does a payoff matrix illustrate?

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