Question 1

A monopolistically competitive firm is likely to produce less and charge more than a perfectly competitive firm because

Accepted Answer

A)  a monopolistically competitive firm faces a downward-sloping demand curve; therefore, price is greater than marginal revenue. 
B)  there is less demand for the monopolistically competitive firm's product. 
C)  both firms equate marginal cost with average cost. 
D)  a monopolistically competitive firm faces excessive competition. 
E)  a monopolistically competitive firm faces different cost conditions. 
A)  a monopolistically competitive firm faces a downward-sloping demand curve; therefore, price is greater than marginal revenue. 
B)  there is less demand for the monopolistically competitive firm's product. 
C)  both firms equate marginal cost with average cost. 
D)  a monopolistically competitive firm faces excessive competition. 
E)  a monopolistically competitive firm faces different cost conditions.

Question 2

The condition whereby firms aggressively undercut one another on price is known as

Accepted Answer

A)  collusion. 
B)  perfect competition. 
C)  price warring. 
D)  profit sharing. 
E)  price leadership. 
A)  collusion. 
B)  perfect competition. 
C)  price warring. 
D)  profit sharing. 
E)  price leadership.

Question 3

The notion advanced by the Supreme Court in the U.S.steel case that "the law does not make mere size an offense.It ...requires overt acts," exemplifies the application of the

Accepted Answer

A)  golden rule. 
B)  rule of behavior. 
C)  rule of law. 
D)  rule of thumb. 
E)  rule of reason. 
A)  golden rule. 
B)  rule of behavior. 
C)  rule of law. 
D)  rule of thumb. 
E)  rule of reason.

Question 4

An industry that contains a large number of firms selling goods that are similar but not identical and into which entry of new sellers is relatively easy would be an example of

Accepted Answer

A)  perfect competition. 
B)  pure monopoly. 
C)  regulated monopoly. 
D)  oligopoly. 
E)  monopolistic competition. 
A)  perfect competition. 
B)  pure monopoly. 
C)  regulated monopoly. 
D)  oligopoly. 
E)  monopolistic competition.

Question 5

Retail clothing stores provide a good example of monopolistic competition because

Accepted Answer

A)  there are few firms in the industry. 
B)  there are significant barriers to entry in the industry. 
C)  each firm possesses somewhat unique attributes in the form of location, service, and variety of merchandise. 
D)  profit margins are generally quite large for retail establishments. 
E)  firms in the industry face horizontal demand curves for their products. 
A)  there are few firms in the industry. 
B)  there are significant barriers to entry in the industry. 
C)  each firm possesses somewhat unique attributes in the form of location, service, and variety of merchandise. 
D)  profit margins are generally quite large for retail establishments. 
E)  firms in the industry face horizontal demand curves for their products.

Question 6

The presence of a price leader in an oligopolistic industry

Accepted Answer

A)  implies that one firm can consistently charge the highest price. 
B)  allows firms to coordinate their behavior short of outright collusion. 
C)  decreases the profits of all other firms. 
D)  is illegal according to the Sherman Antitrust Act. 
E)  leads naturally to cost-plus pricing by other firms in the industry. 
A)  implies that one firm can consistently charge the highest price. 
B)  allows firms to coordinate their behavior short of outright collusion. 
C)  decreases the profits of all other firms. 
D)  is illegal according to the Sherman Antitrust Act. 
E)  leads naturally to cost-plus pricing by other firms in the industry.

Question 7

A process by which oligopolists coordinate their behavior without resorting to outright collusion is called price

Accepted Answer

A)  discrimination. 
B)  escalation. 
C)  stabilization. 
D)  reform. 
E)  leadership. 
A)  discrimination. 
B)  escalation. 
C)  stabilization. 
D)  reform. 
E)  leadership.

Question 8

The two basic conditions for long-run equilibrium in monopolistically competitive markets are that

Accepted Answer

A)  all firms maximize profits and that economic profits are zero. 
B)  price exceeds average cost for all firms and that they have no additional production capacity. 
C)  firms constantly enter and leave the market because of the existence of economic profits. 
D)  all firms cover their average variable costs and that marginal revenue equals total revenue. 
E)  all firms maximize output while minimizing unit costs. 
A)  all firms maximize profits and that economic profits are zero. 
B)  price exceeds average cost for all firms and that they have no additional production capacity. 
C)  firms constantly enter and leave the market because of the existence of economic profits. 
D)  all firms cover their average variable costs and that marginal revenue equals total revenue. 
E)  all firms maximize output while minimizing unit costs.

Question 9

Which of the following markets best exemplifies pure oligopoly?

Accepted Answer

A)  automobiles 
B)  petroleum 
C)  machinery 
D)  air transportation 
E)  retail trade 
A)  automobiles 
B)  petroleum 
C)  machinery 
D)  air transportation 
E)  retail trade

Question 10

A key characteristic of oligopoly is

Accepted Answer

A)  a single firm producing a product with no close substitutes. 
B)  complete absence of entry barriers. 
C)  a demand curve much less elastic for price increases than for price decreases. 
D)  the tendency to spend less on product differentiation and advertising than a perfectly competitive firm. 
E)  actual and perceived interdependence among firms. 
A)  a single firm producing a product with no close substitutes. 
B)  complete absence of entry barriers. 
C)  a demand curve much less elastic for price increases than for price decreases. 
D)  the tendency to spend less on product differentiation and advertising than a perfectly competitive firm. 
E)  actual and perceived interdependence among firms.

Question 11

-This diagram is used to illustrate

Accepted Answer

A)  why an oligopoly firm is unwilling to raise its price above P₀ to P₁ or lower it from P₀ to P₂ 
B)  the "phases of the moon" pricing process used by the electrical industry. 
C)  the difference between dominant firm price leadership raising the price from P₀ to P₁ and barometric firm price leadership reducing the price from P₀3. to P₂. 
D)  long-run equilibrium in a perfectly competitive market. 
E)  the process by which a cartel sets prices and divides up the market among its members. 
A)  why an oligopoly firm is unwilling to raise its price above P₀ to P₁ or lower it from P₀ to P₂ 
B)  the "phases of the moon" pricing process used by the electrical industry. 
C)  the difference between dominant firm price leadership raising the price from P₀ to P₁ and barometric firm price leadership reducing the price from P₀3. to P₂. 
D)  long-run equilibrium in a perfectly competitive market. 
E)  the process by which a cartel sets prices and divides up the market among its members.

Question 12

The Federal Trade Commission Act declared that

Accepted Answer

A)  tying contracts substantially lessen competition. 
B)  contracts and combinations in restraint of trade are illegal. 
C)  the rule of reason is reasonable. 
D)  perfect competition results in optimal efficiency and an optimal distribution of income. 
E)  unfair methods of competition in commerce are unlawful. 
A)  tying contracts substantially lessen competition. 
B)  contracts and combinations in restraint of trade are illegal. 
C)  the rule of reason is reasonable. 
D)  perfect competition results in optimal efficiency and an optimal distribution of income. 
E)  unfair methods of competition in commerce are unlawful.

Question 13

A force that tends to weaken collusive agreements is found when

Accepted Answer

A)  the colluding firms number two or three rather than 10 or 12. 
B)  there are significant differences among the cost structures of the colluding firms. 
C)  the firms produce virtually identical products. 
D)  sales and profits in the industry are large and all the colluding firms experience high levels of capacity utilization. 
E)  there is a lack of government enforcement of antitrust laws. 
A)  the colluding firms number two or three rather than 10 or 12. 
B)  there are significant differences among the cost structures of the colluding firms. 
C)  the firms produce virtually identical products. 
D)  sales and profits in the industry are large and all the colluding firms experience high levels of capacity utilization. 
E)  there is a lack of government enforcement of antitrust laws.

Exam 8: Monopolistic Competition,oligopoly,and Antitrust Policy

A monopolistically competitive firm is likely to produce less and charge more than a perfectly competitive firm because

The condition whereby firms aggressively undercut one another on price is known as

The notion advanced by the Supreme Court in the U.S.steel case that "the law does not make mere size an offense.It ...requires overt acts," exemplifies the application of the

An industry that contains a large number of firms selling goods that are similar but not identical and into which entry of new sellers is relatively easy would be an example of

Retail clothing stores provide a good example of monopolistic competition because

The presence of a price leader in an oligopolistic industry

A process by which oligopolists coordinate their behavior without resorting to outright collusion is called price

The two basic conditions for long-run equilibrium in monopolistically competitive markets are that

Which of the following markets best exemplifies pure oligopoly?

A key characteristic of oligopoly is

-This diagram is used to illustrate

The Federal Trade Commission Act declared that

A force that tends to weaken collusive agreements is found when

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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