Question 1

Each firm in a monopolistically competitive industry sells a slightly differentiated product. What does this tell us about each firm's demand curve?

Accepted Answer

A)  It will be perfectly elastic. 
B)  It will be perfectly inelastic. 
C)  It will be relatively elastic. 
D)  It will be relatively inelastic. 
A)  It will be perfectly elastic. 
B)  It will be perfectly inelastic. 
C)  It will be relatively elastic. 
D)  It will be relatively inelastic.

Question 2

When does a network externality exist?

Accepted Answer

A)  when advertising has an impact on the number of people purchasing a good. 
B)  when a change in the price of a good influences the quantity demanded. 
C)  when the number of people purchasing a good impacts the supply curve 
D)  when the number of people purchasing a good influences quantity demanded 
A)  when advertising has an impact on the number of people purchasing a good. 
B)  when a change in the price of a good influences the quantity demanded. 
C)  when the number of people purchasing a good impacts the supply curve 
D)  when the number of people purchasing a good influences quantity demanded

Question 3

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

Accepted Answer

A)  Both produce unique products. 
B)  Both produce at the socially optimal output level. 
C)  Neither of them face elastic demand curves. 
D)  Both produce at an output level that is less than the minimum average total cost. 
A)  Both produce unique products. 
B)  Both produce at the socially optimal output level. 
C)  Neither of them face elastic demand curves. 
D)  Both produce at an output level that is less than the minimum average total cost.

Question 4

When monopolistically competitive firms advertise, what are they attempting to do?

Accepted Answer

A)  increase demand and elasticity of demand 
B)  capture increasing returns to scale 
C)  increase demand and reduce elasticity of demand 
D)  create barriers to entry 
A)  increase demand and elasticity of demand 
B)  capture increasing returns to scale 
C)  increase demand and reduce elasticity of demand 
D)  create barriers to entry

Question 5

What is the optimal action that a player can take, regardless of their opponents actions, referred to as?

Accepted Answer

A)  a Nash strategy 
B)  a payoff strategy 
C)  a cooperative strategy 
D)  a dominant strategy 
A)  a Nash strategy 
B)  a payoff strategy 
C)  a cooperative strategy 
D)  a dominant strategy

Question 6

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

Accepted Answer

A)  Both expect zero economic profits in the long run. 
B)  Both experience increasing returns to scale for a significant range of output. 
C)  Both charge a price in excess of marginal cost. 
D)  Both have differentiated products. 
A)  Both expect zero economic profits in the long run. 
B)  Both experience increasing returns to scale for a significant range of output. 
C)  Both charge a price in excess of marginal cost. 
D)  Both have differentiated products.

Question 7

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 can be said about dominant strategies?

Accepted Answer

A)  Neither of the restaurants have a dominant strategy. 
B)  Only Restaurant B has a dominant strategy. 
C)  Both restaurants have a dominant strategy. 
D)  Only Restaurant A has a dominant strategy. 
A)  Neither of the restaurants have a dominant strategy. 
B)  Only Restaurant B has a dominant strategy. 
C)  Both restaurants have a dominant strategy. 
D)  Only Restaurant A has a dominant strategy.

Question 8

Monopolistically competitive firms achieve productive efficiency in the long run, but not necessarily in the short run.

Accepted Answer

A) True 
 B)False

Question 9

What is a tit-for-tat strategy?

Accepted Answer

A)  a strategy used in repeated games where one player follows the other players move in the previous round 
B)  a strategy in one-shot games where two players will collude to the detriment of other firms in the industry 
C)  a strategy in a one-shot game where self-interest prevents cooperative behaviour and leads to an inferior joint outcome 
D)  a strategy used in repeated games where players work together to plan what moves each will make in each round 
A)  a strategy used in repeated games where one player follows the other players move in the previous round 
B)  a strategy in one-shot games where two players will collude to the detriment of other firms in the industry 
C)  a strategy in a one-shot game where self-interest prevents cooperative behaviour and leads to an inferior joint outcome 
D)  a strategy used in repeated games where players work together to plan what moves each will make in each round

Question 10

Cooperative games involving collusion are legal in Canada under Canadian competition laws.

Accepted Answer

A) True 
 B)False

Question 11

What is a noncooperative game?

Accepted Answer

A)  when each firm sets its own price without consulting other firms 
B)  when all firms set output levels that drive up market prices 
C)  when two firms collude to improve their profit maximizations 
D)  when each firm differentiates its product in the market through strategic advertising 
A)  when each firm sets its own price without consulting other firms 
B)  when all firms set output levels that drive up market prices 
C)  when two firms collude to improve their profit maximizations 
D)  when each firm differentiates its product in the market through strategic advertising

Question 12

What is a difference between oligopoly and monopolistic competition?

Accepted Answer

A)  Oligopolists consider the actions and reactions of their competitors. 
B)  Oligopolists only compete with monopolists. 
C)  Monopolistic competitors act like monopolies and oligopolists don't. 
D)  Monopolistic competitors can make long-run profits. 
A)  Oligopolists consider the actions and reactions of their competitors. 
B)  Oligopolists only compete with monopolists. 
C)  Monopolistic competitors act like monopolies and oligopolists don't. 
D)  Monopolistic competitors can make long-run profits.

Question 13

What is game theory?

Accepted Answer

A)  Firms try to maximize their profits by acting in ways to minimize damage from competitors. 
B)  Firms attempt to capture competitors markets by developing slightly differentiated products 
C)  Firms try to gain market shares through predatory pricing. 
D)  Firms attempt to maximize market share through strategic advertising and product placement. 
A)  Firms try to maximize their profits by acting in ways to minimize damage from competitors. 
B)  Firms attempt to capture competitors markets by developing slightly differentiated products 
C)  Firms try to gain market shares through predatory pricing. 
D)  Firms attempt to maximize market share through strategic advertising and product placement.

Question 14

What can we expect will result when a firm in a monopolistically competitive industry increases its price by a small amount?

Accepted Answer

A)  Their revenues will rise since differentiation makes demand inelastic. 
B)  Other firms in the industry are unlikely to react. 
C)  Their sales will fall dramatically since their demand curve is almost perfectly elastic. 
D)  Other firms in the industry will likely do the same thing. 
A)  Their revenues will rise since differentiation makes demand inelastic. 
B)  Other firms in the industry are unlikely to react. 
C)  Their sales will fall dramatically since their demand curve is almost perfectly elastic. 
D)  Other firms in the industry will likely do the same thing.

Question 15

In a one-shot Prisoner's Dilemma game, self-interest generally leads to an inferior joint outcome.

Accepted Answer

A) True 
 B)False

Question 16

A monopolistically competitive firm will maximize profits by producing at the point where MC = MR and charging a price higher than AVC.

Accepted Answer

A) True 
 B)False

Question 17

Burger King charbroils their burgers and Wendy's makes their burgers with square patties. The price of the two burgers is NOT the same. What is this an example of?

Accepted Answer

A)  price discrimination 
B)  product differentiation 
C)  barriers to entry 
D)  patent protection 
A)  price discrimination 
B)  product differentiation 
C)  barriers to entry 
D)  patent protection

Question 18

Location, prestige, and service are all sources of product differentiation.

Accepted Answer

A) True 
 B)False

Question 19

What do the concepts of interdependence and game theory illustrate about how firms that compete in oligopoly markets price their products?

Accepted Answer

A)  They set a price in the market and do not change it. 
B)  They consider the actions of their rivals before changing the price of their products. 
C)  They ignore the actions of their rivals when considering price changes. 
D)  They engage in frequent price changes. 
A)  They set a price in the market and do not change it. 
B)  They consider the actions of their rivals before changing the price of their products. 
C)  They ignore the actions of their rivals when considering price changes. 
D)  They engage in frequent price changes.

Question 20

What is the deadweight loss of monopolistic competition offset, in part, by?

Accepted Answer

A)  research and development spending 
B)  product differentiation 
C)  productive efficiency 
D)  allocative efficiency 
A)  research and development spending 
B)  product differentiation 
C)  productive efficiency 
D)  allocative efficiency

Each firm in a monopolistically competitive industry sells a slightly differentiated product. What does this tell us about each firm's demand curve?

When does a network externality exist?

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

When monopolistically competitive firms advertise, what are they attempting to do?

What is the optimal action that a player can take, regardless of their opponents actions, referred to as?

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

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 can be said about dominant strategies?

Monopolistically competitive firms achieve productive efficiency in the long run, but not necessarily in the short run.

What is a tit-for-tat strategy?

Cooperative games involving collusion are legal in Canada under Canadian competition laws.

What is a noncooperative game?

What is a difference between oligopoly and monopolistic competition?

What is game theory?

What can we expect will result when a firm in a monopolistically competitive industry increases its price by a small amount?

In a one-shot Prisoner's Dilemma game, self-interest generally leads to an inferior joint outcome.

A monopolistically competitive firm will maximize profits by producing at the point where MC = MR and charging a price higher than AVC.

Burger King charbroils their burgers and Wendy's makes their burgers with square patties. The price of the two burgers is NOT the same. What is this an example of?

Location, prestige, and service are all sources of product differentiation.

What do the concepts of interdependence and game theory illustrate about how firms that compete in oligopoly markets price their products?

What is the deadweight loss of monopolistic competition offset, in part, by?

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

Each firm in a monopolistically competitive industry sells a slightly differentiated product. What does this tell us about each firm's demand curve?

When does a network externality exist?

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

When monopolistically competitive firms advertise, what are they attempting to do?

What is the optimal action that a player can take, regardless of their opponents actions, referred to as?

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

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 can be said about dominant strategies?

Monopolistically competitive firms achieve productive efficiency in the long run, but not necessarily in the short run.

What is a tit-for-tat strategy?

Cooperative games involving collusion are legal in Canada under Canadian competition laws.

What is a noncooperative game?

What is a difference between oligopoly and monopolistic competition?

What is game theory?

What can we expect will result when a firm in a monopolistically competitive industry increases its price by a small amount?

In a one-shot Prisoner's Dilemma game, self-interest generally leads to an inferior joint outcome.

A monopolistically competitive firm will maximize profits by producing at the point where MC = MR and charging a price higher than AVC.

Burger King charbroils their burgers and Wendy's makes their burgers with square patties. The price of the two burgers is NOT the same. What is this an example of?

Location, prestige, and service are all sources of product differentiation.

What do the concepts of interdependence and game theory illustrate about how firms that compete in oligopoly markets price their products?

What is the deadweight loss of monopolistic competition offset, in part, by?

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