Question 1

If the smartphone market has only two firms, this market would be a

Accepted Answer

A) monopoly industry. 
B) monopolistically competitive industry. 
C) perfectly competitive industry. 
D) duopoly industry. 
A) monopoly industry. 
B) monopolistically competitive industry. 
C) perfectly competitive industry. 
D) duopoly industry.

Question 2

A profit-maximizing, monopolistically competitive restaurant serves 60 burgers a day at a total cost of $180 and earns a total profit of $180. In the long run, everything else equal, the

Accepted Answer

A) restaurant will charge more than $6 per burger. 
B) restaurant's average total cost will rise and its total revenue will fall. 
C) restaurant will sell more burgers at a lower average profit per burger. 
D) All of the responses are correct. 
A) restaurant will charge more than $6 per burger. 
B) restaurant's average total cost will rise and its total revenue will fall. 
C) restaurant will sell more burgers at a lower average profit per burger. 
D) All of the responses are correct.

Question 3

The monopolistically competitive firm differs from monopoly in that its

Accepted Answer

A) demand curve is flatter. 
B) demand curve slopes downward. 
C) MR curve lies below its demand curve. 
D) profit is maximized where MR = MC. 
A) demand curve is flatter. 
B) demand curve slopes downward. 
C) MR curve lies below its demand curve. 
D) profit is maximized where MR = MC.

Question 4

Society benefits from monopolistic competition because the firms are allocatively efficient.

Accepted Answer

A) True 
 B)False

Question 5

The maximin criterion seeks to minimize the maximum payoffs in order to win.

Accepted Answer

A) True 
 B)False

Question 6

Heavy advertising expenditures usually indicate

Accepted Answer

A) oligopoly. 
B) pure competition or monopolistic competition. 
C) oligopoly or monopoly. 
D) differentiated pure competition or monopoly. 
A) oligopoly. 
B) pure competition or monopolistic competition. 
C) oligopoly or monopoly. 
D) differentiated pure competition or monopoly.

Question 7

Suppose that two drug manufacturers represent the only two producers in the industry and further suppose that the companies can spend a lot of money on research to develop new drug treatment. If only one develops a product, they make very high profits, but if they produce similar drugs, their profits are lower given the high research costs and they split the market for their products. But if they both sell their current products and spend little on research, they can still make good profits. This description sounds like a

Accepted Answer

A) credible threat. 
B) monopolistically competitive market. 
C) prisoner's dilemma. 
D) Nash equilibrium. 
A) credible threat. 
B) monopolistically competitive market. 
C) prisoner's dilemma. 
D) Nash equilibrium.

Question 8

In oligopoly, one expects

Accepted Answer

A) frequent introduction of new or redesigned products. 
B) aggressive advertising campaigns. 
C) intense marketing research into the impact of price changes. 
D) All of the responses are correct. 
A) frequent introduction of new or redesigned products. 
B) aggressive advertising campaigns. 
C) intense marketing research into the impact of price changes. 
D) All of the responses are correct.

Question 9

The excess capacity theorem states that society would clearly benefit from a reduction in the number of monopolistic competitors.

Accepted Answer

A) True 
 B)False

Question 10

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

Accepted Answer

A) True 
 B)False

Question 11

The Organization of Petroleum Exporting Countries is a

Accepted Answer

A) professional trade association for oil companies. 
B) cartel. 
C) consortium for joint ventures in oil exploration. 
D) loose collection of democracies that promote international pipelines. 
A) professional trade association for oil companies. 
B) cartel. 
C) consortium for joint ventures in oil exploration. 
D) loose collection of democracies that promote international pipelines.

Question 12

One market that fits the characteristics of monopolistic competition is

Accepted Answer

A) women's clothing. 
B) wheat farming. 
C) television networks. 
D) electric power generation. 
A) women's clothing. 
B) wheat farming. 
C) television networks. 
D) electric power generation.

Question 13

An oligopoly is a market

Accepted Answer

A) with few buyers. 
B) with one buyer. 
C) dominated by a few sellers. 
D) under the control of a few politically powerful individuals. 
A) with few buyers. 
B) with one buyer. 
C) dominated by a few sellers. 
D) under the control of a few politically powerful individuals.

Question 14

Under perfect competition and monopolistic competition, profits are zero in long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 15

Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.

Accepted Answer

Cartel cheating is more likely if there

Question 16

Contestable markets improve the performance of imperfect markets with

Accepted Answer

A) government regulations. 
B) the threat of entry. 
C) advertising. 
D) tacit collusion. 
A) government regulations. 
B) the threat of entry. 
C) advertising. 
D) tacit collusion.

Question 17

In the long run, the prices charged by a firm in monopolistic competition will be

Accepted Answer

A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost, including the opportunity cost of capital. 
A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost, including the opportunity cost of capital.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Firms in a perfectly contestable market will be forced to operate as efficiently as possible and to charge prices as low as long-run financial survival permits. Why?

Accepted Answer

The freedom of entry eliminates any exce

Question 20

The Organization of Petroleum Exporting Countries (OPEC)is an example of

Accepted Answer

A) a price leadership system. 
B) a generally unsuccessful cartel. 
C) an organization devoted to tacit collusion. 
D) a successful cartel. 
A) a price leadership system. 
B) a generally unsuccessful cartel. 
C) an organization devoted to tacit collusion. 
D) a successful cartel.

Exam 13: Between Competition and Monopoly

If the smartphone market has only two firms, this market would be a

A profit-maximizing, monopolistically competitive restaurant serves 60 burgers a day at a total cost of $180 and earns a total profit of $180. In the long run, everything else equal, the

The monopolistically competitive firm differs from monopoly in that its

Society benefits from monopolistic competition because the firms are allocatively efficient.

The maximin criterion seeks to minimize the maximum payoffs in order to win.

Heavy advertising expenditures usually indicate

In oligopoly, one expects

The excess capacity theorem states that society would clearly benefit from a reduction in the number of monopolistic competitors.

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

The Organization of Petroleum Exporting Countries is a

One market that fits the characteristics of monopolistic competition is

An oligopoly is a market

Under perfect competition and monopolistic competition, profits are zero in long-run equilibrium.

Explain how a large number of firms in the industry and product heterogeneity affect the likelihood of cartel success.

Contestable markets improve the performance of imperfect markets with

In the long run, the prices charged by a firm in monopolistic competition will be

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

Firms in a perfectly contestable market will be forced to operate as efficiently as possible and to charge prices as low as long-run financial survival permits. Why?

The Organization of Petroleum Exporting Countries (OPEC)is an example of

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

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