Question 1

Oligopolists use advertising as a way of differentiating their products.

Accepted Answer

A) True 
 B)False

Question 2

Explain the prisoner's dilemma case in game theory and its relevance to the maximin criterion.

Accepted Answer

The scenario is of two burglary suspects

Question 3

A firm in perfect competition and one in monopolistic competition are very similar in that MR = P for firms in both markets.

Accepted Answer

A) True 
 B)False

Question 4

An example of overt collusion is

Accepted Answer

A) a cartel. 
B) price leadership. 
C) tacit collusion. 
D) a perfectly contestable market. 
A) a cartel. 
B) price leadership. 
C) tacit collusion. 
D) a perfectly contestable market.

Question 5

An airline can easily move its aircraft from one route to another. One interpretation of this is that the airline industry is an example of a contestable market.

Accepted Answer

A) True 
 B)False

Question 6

International trade can be correctly considered as an example of a zero-sum game.

Accepted Answer

A) True 
 B)False

Question 7

To maximize its profit, a monopolistically competitive firm produces at the output level at which

Accepted Answer

A) its price elasticity of demand equals one. 
B) MR = MC. 
C) its D curve is tangent to its ATC curve. 
D) MR = AVC. 
A) its price elasticity of demand equals one. 
B) MR = MC. 
C) its D curve is tangent to its ATC curve. 
D) MR = AVC.

Question 8

The kinked demand curve model is based on the assumption that rival firms will match a price cut but ignore a price increase.

Accepted Answer

A) True 
 B)False

Question 9

The prisoner's dilemma has implications for the workings of oligopoly markets. The outcome in the prisoner's dilemma situation for oligopoly firms is

Accepted Answer

A) beneficial to society, in that the players cannot easily collude, so output is greater, and prices are lower. 
B) beneficial to the players, since they can maintain a cartel agreement easily. 
C) of little benefit to society, since the players produce the monopoly output. 
D) beneficial to no one. 
A) beneficial to society, in that the players cannot easily collude, so output is greater, and prices are lower. 
B) beneficial to the players, since they can maintain a cartel agreement easily. 
C) of little benefit to society, since the players produce the monopoly output. 
D) beneficial to no one.

Question 10

Unlike a perfectly competitive firm, a monopolistically competitive firm

Accepted Answer

A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) does not have the same marginal revenue at every output level. 
A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) does not have the same marginal revenue at every output level.

Question 11

Suppose that a firm in monopolistically competitive market is producing 30 units of output. At this level of production, the firm charges $50 per unit. Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit. Given this information, in the long run you would expect

Accepted Answer

A) firms to exit the market. 
B) price to increase. 
C) firms to enter the market. 
D) firms to maintain their current output and price. 
A) firms to exit the market. 
B) price to increase. 
C) firms to enter the market. 
D) firms to maintain their current output and price.

Question 12

Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are

Accepted Answer

A) perfect. 
B) contestable. 
C) close to each other. 
D) protected from entry. 
A) perfect. 
B) contestable. 
C) close to each other. 
D) protected from entry.

Question 13

Monopolistic competition tends to lead firms to have wasted capacity. Why?

Accepted Answer

Under monopolistic competition in the lo

Question 14

In an economist's view, a cartel usually offers to society

Accepted Answer

A) all the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
B) all the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly. 
C) none of the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
D) none of the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly. 
A) all the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
B) all the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly. 
C) none of the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
D) none of the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly.

Question 15

The key difference between oligopoly and other market structures is the interdependence among producers.

Accepted Answer

A) True 
 B)False

Question 16

Oligopoly occurs when

Accepted Answer

A) a few firms sell many different products. 
B) a few firms sell to a few large buyers. 
C) many firms dominate a single market. 
D) a few firms dominate a single market. 
A) a few firms sell many different products. 
B) a few firms sell to a few large buyers. 
C) many firms dominate a single market. 
D) a few firms dominate a single market.

Question 17

A duopoly is

Accepted Answer

A) a cartel in which all members try to cheat on the cartel. 
B) an industry with only two sellers. 
C) an industry with only two buyers. 
D) a cartel with only two members. 
A) a cartel in which all members try to cheat on the cartel. 
B) an industry with only two sellers. 
C) an industry with only two buyers. 
D) a cartel with only two members.

Question 18

If a market situation is an example of a prisoners' dilemma, society can benefit by preventing the firms in the market from cooperating with each other.

Accepted Answer

A) True 
 B)False

Question 19

The kinked demand curve is an explanation of sticky prices.

Accepted Answer

A) True 
 B)False

Question 20

Advertising never makes sense for an oligopolistic firm.

Accepted Answer

A) True 
 B)False

Exam 13: Between Competition and Monopoly

Oligopolists use advertising as a way of differentiating their products.

Explain the prisoner's dilemma case in game theory and its relevance to the maximin criterion.

A firm in perfect competition and one in monopolistic competition are very similar in that MR = P for firms in both markets.

An example of overt collusion is

An airline can easily move its aircraft from one route to another. One interpretation of this is that the airline industry is an example of a contestable market.

International trade can be correctly considered as an example of a zero-sum game.

To maximize its profit, a monopolistically competitive firm produces at the output level at which

The kinked demand curve model is based on the assumption that rival firms will match a price cut but ignore a price increase.

The prisoner's dilemma has implications for the workings of oligopoly markets. The outcome in the prisoner's dilemma situation for oligopoly firms is

Unlike a perfectly competitive firm, a monopolistically competitive firm

Suppose that a firm in monopolistically competitive market is producing 30 units of output. At this level of production, the firm charges $50 per unit. Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit. Given this information, in the long run you would expect

Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are

Monopolistic competition tends to lead firms to have wasted capacity. Why?

In an economist's view, a cartel usually offers to society

The key difference between oligopoly and other market structures is the interdependence among producers.

Oligopoly occurs when

A duopoly is

If a market situation is an example of a prisoners' dilemma, society can benefit by preventing the firms in the market from cooperating with each other.

The kinked demand curve is an explanation of sticky prices.

Advertising never makes sense for an oligopolistic firm.

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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