Question 1

The model of monopolistic competition is:

Accepted Answer

A) a combination of monopoly and competition. 
B) the same as a model of monopoly. 
C) the same as a model of perfect competition. 
D) unlike other models. 
A) a combination of monopoly and competition. 
B) the same as a model of monopoly. 
C) the same as a model of perfect competition. 
D) unlike other models.

Question 2

In monopolistic competition,a firm:

Accepted Answer

A) enjoys its monopoly status. 
B) does not compete with other firms. 
C) can only compete on price. 
D) can use non-price competition. 
E) competes by charging high prices. 
A) enjoys its monopoly status. 
B) does not compete with other firms. 
C) can only compete on price. 
D) can use non-price competition. 
E) competes by charging high prices.

Question 3

Exhibit 9-2 A monopolistically competitive firm
  
-To maximise long-run profits,the monopolistically competitive firm shown in Exhibit 9-2 will charge a price per unit of:

Accepted Answer

A) $0. 
B) $5. 
C) $10. 
D) $15. 
E) $20. 
A) $0. 
B) $5. 
C) $10. 
D) $15. 
E) $20.

Question 4

A monopolistically competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 5

When Pepsi is considering a price hike,it needs to consider how Coke may react.This situation is called:

Accepted Answer

A) mutual interdependence. 
B) price leadership. 
C) collusion. 
D) monopolistic competition. 
A) mutual interdependence. 
B) price leadership. 
C) collusion. 
D) monopolistic competition.

Question 6

The monopolistic competition market structure is characterised by:

Accepted Answer

A) many small firms and an easy market entry and exit. 
B) many large firms and differentiated products. 
C) many small firms and a homogeneous product. 
D) few firms and a homogeneous product. 
A) many small firms and an easy market entry and exit. 
B) many large firms and differentiated products. 
C) many small firms and a homogeneous product. 
D) few firms and a homogeneous product.

Question 7

In general,oligopolies are considered resource misallocators because:

Accepted Answer

A) competition is often fierce in oligopolies. 
B) an oligopolist often earns economic profits. 
C) P < MC in oligopoly. 
D) P = MC in oligopoly. 
A) competition is often fierce in oligopolies. 
B) an oligopolist often earns economic profits. 
C) P < MC in oligopoly. 
D) P = MC in oligopoly.

Question 8

In the short run the monopolistic firm's profit maximising decision:

Accepted Answer

A) is hard to determine. 
B) is like that of the perfectly competitive firm. 
C) is based on the horizontal market price. 
D) is like that of the monopoly. 
A) is hard to determine. 
B) is like that of the perfectly competitive firm. 
C) is based on the horizontal market price. 
D) is like that of the monopoly.

Question 9

In the long run,a monopolistically competitive firm will operate:

Accepted Answer

A) at the level of output that allows the firm to earn zero economic profit. 
B) at the level of output that allows the firm to earn economic profit. 
C) at the level of output that allows the firm to earn negative economic profit. 
D) at any level of output. 
A) at the level of output that allows the firm to earn zero economic profit. 
B) at the level of output that allows the firm to earn economic profit. 
C) at the level of output that allows the firm to earn negative economic profit. 
D) at any level of output.

Question 10

Game theory includes which of the following rules?

Accepted Answer

A) It has to follow the rules of competitive market. 
B) It always has negative pay-offs. 
C) It does not have any strategies. 
D) It must have a clear cut objective for those trying to win the game. 
A) It has to follow the rules of competitive market. 
B) It always has negative pay-offs. 
C) It does not have any strategies. 
D) It must have a clear cut objective for those trying to win the game.

Question 11

In monopolistic competition,firms:

Accepted Answer

A) do not have market power. 
B) have a degree of market power. 
C) are price takers. 
D) do not compete with other firms. 
A) do not have market power. 
B) have a degree of market power. 
C) are price takers. 
D) do not compete with other firms.

Question 12

A cartel is a legal agreement among firms to innovate and advertise.

Accepted Answer

A) True 
 B)False

Question 13

Defenders of advertising argue that it:

Accepted Answer

A) informs potential buyers about the properties of the goods and services. 
B) leads to economic inefficiency. 
C) enables small firms to become monopolists. 
D) allows lower prices than in a perfectly competitive market. 
A) informs potential buyers about the properties of the goods and services. 
B) leads to economic inefficiency. 
C) enables small firms to become monopolists. 
D) allows lower prices than in a perfectly competitive market.

Question 14

A major cartel advantage is that member firms do not have incentives to cheat by attempting to steal customers from one another.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 9-3 Kinked demand curves
  
-In Exhibit 9-3,in a kinked-demand oligopoly model,D₁ represents the:

Accepted Answer

A) demand curve applicable to any price increase above $50. 
B) demand curve applicable to any price decrease below $50. 
C) demand curve facing firms when a cartel is formed. 
D) market demand curve . 
E) demand curve facing the price leader. 
A) demand curve applicable to any price increase above $50. 
B) demand curve applicable to any price decrease below $50. 
C) demand curve facing firms when a cartel is formed. 
D) market demand curve . 
E) demand curve facing the price leader.

Question 16

Because monopolistically competitive firms each produce a differentiated product,they will:

Accepted Answer

A) never need advertising. 
B) be unable to create any degree of product loyalty. 
C) face a perfectly elastic demand curve. 
D) face a downward-sloping demand curve. 
A) never need advertising. 
B) be unable to create any degree of product loyalty. 
C) face a perfectly elastic demand curve. 
D) face a downward-sloping demand curve.

Question 17

A monopolistically competitive firm is inefficient because the firm:

Accepted Answer

A) earns positive economic profit in the long run. 
B) is producing at an output where marginal cost equals price. 
C) is not maximising its profit. 
D) produces an output where average total cost is at minimum. 
E) does none of the above. 
A) earns positive economic profit in the long run. 
B) is producing at an output where marginal cost equals price. 
C) is not maximising its profit. 
D) produces an output where average total cost is at minimum. 
E) does none of the above.

Question 18

Cartel pricing refers to the output and price choice of a cartel.This choice most closely resembles:

Accepted Answer

A) a more competitive industry. 
B) a godfather oligopoly. 
C) a duopoly. 
D) a monopoly. 
A) a more competitive industry. 
B) a godfather oligopoly. 
C) a duopoly. 
D) a monopoly.

Question 19

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 20

Which of the following is true for a firm operating under perfect competition,monopolistic competition and monopoly?

Accepted Answer

A) Firms earn positive economic profits in the long run. 
B) Firms earn zero economic profits in the long run. 
C) Profits are maximised when marginal cost equals marginal revenue. 
D) Price equals marginal cost. 
E) Firms have to advertise. 
A) Firms earn positive economic profits in the long run. 
B) Firms earn zero economic profits in the long run. 
C) Profits are maximised when marginal cost equals marginal revenue. 
D) Price equals marginal cost. 
E) Firms have to advertise.

The model of monopolistic competition is:

In monopolistic competition,a firm:

Exhibit 9-2 A monopolistically competitive firm -To maximise long-run profits,the monopolistically competitive firm shown in Exhibit 9-2 will charge a price per unit of:

A monopolistically competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.

When Pepsi is considering a price hike,it needs to consider how Coke may react.This situation is called:

The monopolistic competition market structure is characterised by:

In general,oligopolies are considered resource misallocators because:

In the short run the monopolistic firm's profit maximising decision:

In the long run,a monopolistically competitive firm will operate:

Game theory includes which of the following rules?

In monopolistic competition,firms:

A cartel is a legal agreement among firms to innovate and advertise.

Defenders of advertising argue that it:

A major cartel advantage is that member firms do not have incentives to cheat by attempting to steal customers from one another.

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,in a kinked-demand oligopoly model,D₁ represents the:

Because monopolistically competitive firms each produce a differentiated product,they will:

A monopolistically competitive firm is inefficient because the firm:

Cartel pricing refers to the output and price choice of a cartel.This choice most closely resembles:

The purpose of a cartel is to:

Which of the following is true for a firm operating under perfect competition,monopolistic competition and monopoly?

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters

Exam 9: Monopolistic competition and oligopoly

The model of monopolistic competition is:

In monopolistic competition,a firm:

Exhibit 9-2 A monopolistically competitive firm -To maximise long-run profits,the monopolistically competitive firm shown in Exhibit 9-2 will charge a price per unit of:

A monopolistically competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.

When Pepsi is considering a price hike,it needs to consider how Coke may react.This situation is called:

The monopolistic competition market structure is characterised by:

In general,oligopolies are considered resource misallocators because:

In the short run the monopolistic firm's profit maximising decision:

In the long run,a monopolistically competitive firm will operate:

Game theory includes which of the following rules?

In monopolistic competition,firms:

A cartel is a legal agreement among firms to innovate and advertise.

Defenders of advertising argue that it:

A major cartel advantage is that member firms do not have incentives to cheat by attempting to steal customers from one another.

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,in a kinked-demand oligopoly model,D₁ represents the:

Because monopolistically competitive firms each produce a differentiated product,they will:

A monopolistically competitive firm is inefficient because the firm:

Cartel pricing refers to the output and price choice of a cartel.This choice most closely resembles:

The purpose of a cartel is to:

Which of the following is true for a firm operating under perfect competition,monopolistic competition and monopoly?

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters