Question 1

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 2

An oligopoly can be characterized by production of either identical goods or differentiated goods.

Accepted Answer

A) True 
 B)False

Question 3

If two firms form a successful cartel, then the output that the two produce in total will

Accepted Answer

A) be equal to the output in perfect competition. 
B) be equal to the output of a monopoly market. 
C) be greater than the output without the cartel. 
D) be the same as if the market had many firms. 
A) be equal to the output in perfect competition. 
B) be equal to the output of a monopoly market. 
C) be greater than the output without the cartel. 
D) be the same as if the market had many firms.

Question 4

Monopolistically competitive firms can earn large profits in the long run.

Accepted Answer

A) True 
 B)False

Question 5

In an oligopoly market, the firms would earn the highest profit if they

Accepted Answer

A) chose to produce an output equal to the perfectly competitive output level. 
B) chose to produce the output equal to the monopoly output level. 
C) chose to ignore the implications of game theory. 
D) chose to ignore the actions of rival firms. 
A) chose to produce an output equal to the perfectly competitive output level. 
B) chose to produce the output equal to the monopoly output level. 
C) chose to ignore the implications of game theory. 
D) chose to ignore the actions of rival firms.

Question 6

A Nash equilibrium is

Accepted Answer

A) the same as a dominant strategy. 
B) is the outcome where a player has selected her best strategy, given the choices of the other players. 
C) occurs in a game when a cartel solution is reached. 
D) occurs when one player can change her strategy and be better off. 
A) the same as a dominant strategy. 
B) is the outcome where a player has selected her best strategy, given the choices of the other players. 
C) occurs in a game when a cartel solution is reached. 
D) occurs when one player can change her strategy and be better off.

Question 7

Everything else equal, the more rivals a firm has, the

Accepted Answer

A) less kinked is its demand curve. 
B) closer is its equilibrium price to its average variable costs. 
C) more differentiated is its product from rivals' products. 
D) more elastic is its demand curve. 
A) less kinked is its demand curve. 
B) closer is its equilibrium price to its average variable costs. 
C) more differentiated is its product from rivals' products. 
D) more elastic is its demand curve.

Question 8

To understand most of today's economic activity in the U.S. economy, we should look at which of the following models?

Accepted Answer

A) Perfect competition and pure monopoly 
B) Perfect competition and oligopoly 
C) Oligopoly and monopolistic competition 
D) Monopolistic competition and monopoly 
A) Perfect competition and pure monopoly 
B) Perfect competition and oligopoly 
C) Oligopoly and monopolistic competition 
D) Monopolistic competition and monopoly

Question 9

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 10

Monopolistic competitors and perfect competitors are alike in

Accepted Answer

A) having horizontal demand curves. 
B) zero economic profit in the short run. 
C) zero economic profit in the long run. 
D) relying on advertising to attract buyers to their products. 
A) having horizontal demand curves. 
B) zero economic profit in the short run. 
C) zero economic profit in the long run. 
D) relying on advertising to attract buyers to their products.

Question 11

The kinked demand curve model explains pricing in monopoly markets.

Accepted Answer

A) True 
 B)False

Question 12

The behavior of the perfectly competitive firm

Accepted Answer

A) theoretically leads to an inefficient allocation of resources. 
B) maximizes the benefits to consumers, given the resources available to the economy. 
C) reduces output in order to raise prices in the short term. 
D) results in excess capacity and inefficiency. 
A) theoretically leads to an inefficient allocation of resources. 
B) maximizes the benefits to consumers, given the resources available to the economy. 
C) reduces output in order to raise prices in the short term. 
D) results in excess capacity and inefficiency.

Question 13

Suppose that we learn that hotels in Los Angeles generally operate with an average vacancy rate of 15 percent (in other words, 85 percent of the hotel rooms are filled with guests). Given this information about excess capacity, we would judge this market to be

Accepted Answer

A) an oligopoly. 
B) a perfectly competitive market. 
C) a monopolistically competitive market. 
D) a monopoly. 
A) an oligopoly. 
B) a perfectly competitive market. 
C) a monopolistically competitive market. 
D) a monopoly.

Question 14

Figure 13-4 
  
   
​ 
    
The above matrix (Figure 13-4)displays the possible profit results of two firms, A and B, from following two different possible strategies: charging a high price and charging a low price. In each cell, the first number is the profit of firm A, and the second number is the profit of firm B. 
a. Assume that collusion is not possible. Determine the optimal strategy for each firm. Explain why it is the best strategy to follow. 
b. Based on your answer to a., explain why firms collude. What are the pitfalls of collusion?

Accepted Answer

a. The optimal strategy for each is to c

Question 15

Monopolistically competitive markets feature heterogeneous products.

Accepted Answer

A) True 
 B)False

Question 16

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 17

A duopoly is a form of oligopoly with two firms.

Accepted Answer

A) True 
 B)False

Question 18

OPEC became a successful cartel in the 1970s by deciding to restrict oil production.

Accepted Answer

A) True 
 B)False

Question 19

In a monopoly market, no dominant strategies are possible.

Accepted Answer

A) True 
 B)False

Question 20

In Figure 13-2, which of the graphs represents a firm that is a sales revenue maximizer?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Exam 13: Between Competition and Monopoly

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

An oligopoly can be characterized by production of either identical goods or differentiated goods.

If two firms form a successful cartel, then the output that the two produce in total will

Monopolistically competitive firms can earn large profits in the long run.

In an oligopoly market, the firms would earn the highest profit if they

A Nash equilibrium is

Everything else equal, the more rivals a firm has, the

To understand most of today's economic activity in the U.S. economy, we should look at which of the following models?

Cartels are

Monopolistic competitors and perfect competitors are alike in

The kinked demand curve model explains pricing in monopoly markets.

The behavior of the perfectly competitive firm

Suppose that we learn that hotels in Los Angeles generally operate with an average vacancy rate of 15 percent (in other words, 85 percent of the hotel rooms are filled with guests). Given this information about excess capacity, we would judge this market to be

Monopolistically competitive markets feature heterogeneous products.

A cartel is

A duopoly is a form of oligopoly with two firms.

OPEC became a successful cartel in the 1970s by deciding to restrict oil production.

In a monopoly market, no dominant strategies are possible.

In Figure 13-2, which of the graphs represents a firm that is a sales revenue maximizer?

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

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