Question 1

In the long run, monopolistically competitive firms have:

Accepted Answer

A)  excess capacity. 
B)  positive profits. 
C)  minimal average costs. 
D)  homogeneous production. 
A)  excess capacity. 
B)  positive profits. 
C)  minimal average costs. 
D)  homogeneous production.

Question 2

Oligopolies have few sellers and difficult entry.

Accepted Answer

A) True 
 B)False

Question 3

A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.

Accepted Answer

A)  interdependence index 
B)  gini coefficient 
C)  herfindahl index 
D)  payoff matrix 
A)  interdependence index 
B)  gini coefficient 
C)  herfindahl index 
D)  payoff matrix

Question 4

The short-run equilibrium for a monopolistically competitive firm is at P = $28.47, ATC = $22.13, and MC = MR = $17.47. Which of the following is true ?

Accepted Answer

A)  Per-unit profit is $11. 
B)  Additional firms will be attracted into the industry. 
C)  The firm could raise price and increase profits. 
D)  The firm could lower price and increase profits. 
E)  Average cost must be rising. 
A)  Per-unit profit is $11. 
B)  Additional firms will be attracted into the industry. 
C)  The firm could raise price and increase profits. 
D)  The firm could lower price and increase profits. 
E)  Average cost must be rising.

Question 5

In the long run in a monopolistic competitive industry,

Accepted Answer

A)  economic profits will be positive. 
B)  price will be driven to zero. 
C)  the firm will not operate where MR = MC. 
D)  economic profit will be zero. 
E)  price will exceed average cost. 
A)  economic profits will be positive. 
B)  price will be driven to zero. 
C)  the firm will not operate where MR = MC. 
D)  economic profit will be zero. 
E)  price will exceed average cost.

Question 6

​ Which of the following is an outcome of advertising for a monopolistically competitive firm?

Accepted Answer

A)  ​Long-run average costs shift downward. 
B)  ​The firm's demand curve becomes flatter and shifts inward. 
C)  ​The firm's demand curve keeps the same slope and shifts inward. 
D)  ​Long-run average costs shift upward. 
A)  ​Long-run average costs shift downward. 
B)  ​The firm's demand curve becomes flatter and shifts inward. 
C)  ​The firm's demand curve keeps the same slope and shifts inward. 
D)  ​Long-run average costs shift upward.

Question 7

The two tendencies of a firm in a cartel are the incentive to:

Accepted Answer

A)  cheat to maximize joint profits and the incentive to raise prices. 
B)  cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. 
C)  increase output in order to minimize per-unit cost and the incentive to reduce price in order to maximize joint profit. 
D)  cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit. 
A)  cheat to maximize joint profits and the incentive to raise prices. 
B)  cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. 
C)  increase output in order to minimize per-unit cost and the incentive to reduce price in order to maximize joint profit. 
D)  cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit.

Question 8

The monopolistic competition market structure is characterized by a few large firms which account for a large percentage of industry sales.

Accepted Answer

A) True 
 B)False

Question 9

The entry of new firms into a monopolistic competitive industry will shift the:

Accepted Answer

A)  market demand curve to the right. 
B)  market demand curve to the left. 
C)  existing firm's demand curve to the right. 
D)  existing firm's demand curve to the left. 
E)  market supply curve to the left. 
A)  market demand curve to the right. 
B)  market demand curve to the left. 
C)  existing firm's demand curve to the right. 
D)  existing firm's demand curve to the left. 
E)  market supply curve to the left.

Question 10

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

Accepted Answer

A)  perfectly competitive firms but not by monopolistically competitive firms. 
B)  monopolistically competitive firms but not by perfectly competitive firms. 
C)  both monopolistically competitive firms and perfectly competitive firms. 
D)  neither perfectly competitive firms nor monopolistically competitive firms. 
A)  perfectly competitive firms but not by monopolistically competitive firms. 
B)  monopolistically competitive firms but not by perfectly competitive firms. 
C)  both monopolistically competitive firms and perfectly competitive firms. 
D)  neither perfectly competitive firms nor monopolistically competitive firms.

Question 11

The purpose of a cartel is to:

Accepted Answer

A)  promote product innovation. 
B)  increase market competition. 
C)  act like a monopoly. 
D)  diversify operations. 
E)  decrease market concentration. 
A)  promote product innovation. 
B)  increase market competition. 
C)  act like a monopoly. 
D)  diversify operations. 
E)  decrease market concentration.

Question 12

In the long run in monopolistic competition,

Accepted Answer

A)  economic profits are zero. 
B)  P = MC. 
C)  P = minimum ATC. 
D)  firms have an incentive to leave. 
E)  the demand curve is tangent to the MC curve. 
A)  economic profits are zero. 
B)  P = MC. 
C)  P = minimum ATC. 
D)  firms have an incentive to leave. 
E)  the demand curve is tangent to the MC curve.

Question 13

Suppose Ford, GM, and Dodge make the majority of pick-up trucks sold in the United States If they all sell for approximately the same price, and Ford offers a $2,000 rebate on new truck sales, what can Ford expect to see?

Accepted Answer

A)  an unprecedented increase in truck sales 
B)  an immediate response by GM and Dodge 
C)  a visit from the antitrust authorities of the government 
D)  a revolution from Ford stockholders 
E)  announcements by GM and Dodge that plans are underway to produce a much cheaper pick-up truck in six years 
A)  an unprecedented increase in truck sales 
B)  an immediate response by GM and Dodge 
C)  a visit from the antitrust authorities of the government 
D)  a revolution from Ford stockholders 
E)  announcements by GM and Dodge that plans are underway to produce a much cheaper pick-up truck in six years

Question 14

A cartel:

Accepted Answer

A)  is a group of firms formally agreeing to control the price and the output of a product. 
B)  has as its primary goal to reap monopoly profits by replacing competition with cooperation. 
C)  is illegal in the United States, but not in other nations. 
D)  all of the above. 
A)  is a group of firms formally agreeing to control the price and the output of a product. 
B)  has as its primary goal to reap monopoly profits by replacing competition with cooperation. 
C)  is illegal in the United States, but not in other nations. 
D)  all of the above.

Question 15

A monopolistic competitive firm is inefficient because the firm:

Accepted Answer

A)  is not maximizing its profit. 
B)  is producing at an output where average total cost is not minimum. 
C)  earns positive economic profit in the long run. 
D)  none of the above. 
A)  is not maximizing its profit. 
B)  is producing at an output where average total cost is not minimum. 
C)  earns positive economic profit in the long run. 
D)  none of the above.

Question 16

How will the price and output of a monopolist compare with perfect competition?

Accepted Answer

A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too large and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The output of the monopolist will be too small and the price too low. 
A)  The output of the monopolist will be too large and the price too high. 
B)  The output of the monopolist will be too large and the price too low. 
C)  The output of the monopolist will be too small and the price too high. 
D)  The output of the monopolist will be too small and the price too low.

Question 17

Game theory is a model for describing oligopoly price decisions among firms that are:

Accepted Answer

A)  interdependent. 
B)  independent. 
C)  regulated 
D)  merging 
A)  interdependent. 
B)  independent. 
C)  regulated 
D)  merging

Question 18

Cartel agreements are difficult to maintain because individual members:

Accepted Answer

A)  can gain by raising their price above the price that is best for the cartel. 
B)  are often unable to police the price and output policies of other members. 
C)  can gain by secretly raising their price above the price that is best for the cartel. 
D)  can enforce price arrangements vigorously in court. 
A)  can gain by raising their price above the price that is best for the cartel. 
B)  are often unable to police the price and output policies of other members. 
C)  can gain by secretly raising their price above the price that is best for the cartel. 
D)  can enforce price arrangements vigorously in court.

Question 19

The monopolistic competition market structure is characterized by:

Accepted Answer

A)  few firms and similar products. 
B)  many firms and differentiated products. 
C)  many firms and a homogeneous product. 
D)  few firms and a homogeneous product. 
A)  few firms and similar products. 
B)  many firms and differentiated products. 
C)  many firms and a homogeneous product. 
D)  few firms and a homogeneous product.

Question 20

Firms in a monopolistically competitive industry produce:

Accepted Answer

A)  homogeneous goods and services. 
B)  differentiated products. 
C)  competitive goods only. 
D)  consumption goods only. 
A)  homogeneous goods and services. 
B)  differentiated products. 
C)  competitive goods only. 
D)  consumption goods only.

Exam 9: Monopolistic Competition and Oligopoly

In the long run, monopolistically competitive firms have:

Oligopolies have few sellers and difficult entry.

A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.

The short-run equilibrium for a monopolistically competitive firm is at P = $28.47, ATC = $22.13, and MC = MR = $17.47. Which of the following is true ?

In the long run in a monopolistic competitive industry,

​ Which of the following is an outcome of advertising for a monopolistically competitive firm?

The two tendencies of a firm in a cartel are the incentive to:

The monopolistic competition market structure is characterized by a few large firms which account for a large percentage of industry sales.

The entry of new firms into a monopolistic competitive industry will shift the:

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

The purpose of a cartel is to:

In the long run in monopolistic competition,

Suppose Ford, GM, and Dodge make the majority of pick-up trucks sold in the United States If they all sell for approximately the same price, and Ford offers a $2,000 rebate on new truck sales, what can Ford expect to see?

A cartel:

A monopolistic competitive firm is inefficient because the firm:

How will the price and output of a monopolist compare with perfect competition?

Game theory is a model for describing oligopoly price decisions among firms that are:

Cartel agreements are difficult to maintain because individual members:

The monopolistic competition market structure is characterized by:

Firms in a monopolistically competitive industry produce:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Which of the following is an outcome of advertising for a monopolistically competitive firm?