Question 1

The fact that a monopolistically competitive firm is not as efficient as a perfectly competitive firm may be outweighed by which of the following?

Accepted Answer

A) The price charged is still equal to marginal revenue. 
B) Goods in a monopolistically competitive market are usually cheaper. 
C) There are still many perfect substitutes. 
D) Consumers are given more choice. 
A) The price charged is still equal to marginal revenue. 
B) Goods in a monopolistically competitive market are usually cheaper. 
C) There are still many perfect substitutes. 
D) Consumers are given more choice.

Question 2

A characteristic of monopolistic competition is:

Accepted Answer

A) that there are substantial barriers to entry. 
B) that they produce a differentiated product. 
C) that there are few firms in the industry. 
D) that they face a perfectly elastic demand curve. 
A) that there are substantial barriers to entry. 
B) that they produce a differentiated product. 
C) that there are few firms in the industry. 
D) that they face a perfectly elastic demand curve.

Question 3

Compared to monopoly,the market results with monopolistic competition are usually expected to be:

Accepted Answer

A) worse because consumers get fewer choices. 
B) worse because consumers pay a higher price. 
C) the same. 
D) better because consumers get less output. 
E) better because consumers pay a lower price. 
A) worse because consumers get fewer choices. 
B) worse because consumers pay a higher price. 
C) the same. 
D) better because consumers get less output. 
E) better because consumers pay a lower price.

Question 4

Exhibit 9-3 Kinked demand curves
  
-In Exhibit 9-3,the exhibit represents a kinked-demand oligopoly model.Suppose the current price is $50.If one firm in the oligopoly now attempts to raise its price,all firms will:

Accepted Answer

A) follow along demand curve D1. 
B) follow along demand curve D2. 
C) ignore this price increase and cause the price-raising firm to move along D1. 
D) ignore this price increase and cause the price-raising firm to move along D2. 
E) lower their prices. 
A) follow along demand curve D1. 
B) follow along demand curve D2. 
C) ignore this price increase and cause the price-raising firm to move along D1. 
D) ignore this price increase and cause the price-raising firm to move along D2. 
E) lower their prices.

Question 5

The monopolistic competition market structure helps explain:

Accepted Answer

A) why a monopoly market structure is superior to other market structures. 
B) why firms do not advertise. 
C) why firms try to win customers through advertising. 
D) why firms cannot raise prices without losing all of their customers. 
A) why a monopoly market structure is superior to other market structures. 
B) why firms do not advertise. 
C) why firms try to win customers through advertising. 
D) why firms cannot raise prices without losing all of their customers.

Question 6

The cartel is a group of firms:

Accepted Answer

A) producing legally agreed output at prevailing price. 
B) known as a black market. 
C) legally supported by government to maximise the price and output. 
D) formally agreeing to control their price and output. 
A) producing legally agreed output at prevailing price. 
B) known as a black market. 
C) legally supported by government to maximise the price and output. 
D) formally agreeing to control their price and output.

Question 7

Monopolistic competition is inefficient because:

Accepted Answer

A) firms earn positive economic profits. 
B) the firms' marginal costs and marginal revenues are not equal. 
C) firms have excess capacity in the long run. 
D) entry is difficult. 
A) firms earn positive economic profits. 
B) the firms' marginal costs and marginal revenues are not equal. 
C) firms have excess capacity in the long run. 
D) entry is difficult.

Question 8

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 9

Product differentiation makes the demand for a monopolistically competitive firm's product:

Accepted Answer

A) perfectly elastic. 
B) more elastic than for a monopoly. 
C) more inelastic than for a monopoly. 
D) perfectly inelastic. 
A) perfectly elastic. 
B) more elastic than for a monopoly. 
C) more inelastic than for a monopoly. 
D) perfectly inelastic.

Question 10

Firms enter the monopolistically competitive industry if:

Accepted Answer

A) other firms exit the industry. 
B) there are profits. 
C) they have enough fixed inputs. 
D) there are scarce resources. 
A) other firms exit the industry. 
B) there are profits. 
C) they have enough fixed inputs. 
D) there are scarce resources.

Question 11

In monopolistic competition,a firm:

Accepted Answer

A) produces exactly the same product as its rival firms. 
B) cannot set the prices higher than those of rival firms without fear of losing all its customers. 
C) is not able to influence the market price. 
D) is not interested in advertising. 
E) has no incentives to differentiate its product. 
A) produces exactly the same product as its rival firms. 
B) cannot set the prices higher than those of rival firms without fear of losing all its customers. 
C) is not able to influence the market price. 
D) is not interested in advertising. 
E) has no incentives to differentiate its product.

Question 12

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Accepted Answer

A) Monopoly. 
B) Oligopoly. 
C) Perfect competition. 
D) Cartel. 
A) Monopoly. 
B) Oligopoly. 
C) Perfect competition. 
D) Cartel.

Question 13

Exhibit 9-3 Kinked demand curves
  
-In Exhibit 9-3,the exhibit represents a kinked-demand oligopoly model.Suppose the current price is $50.If one firm in the oligopoly now attempts to lower its price,all firms will:

Accepted Answer

A) follow along demand curve D1. 
B) follow along demand curve D2. 
C) ignore this price decrease and cause the price-reducing firm to move along D1. 
D) ignore this price decrease and cause the price-reducing firm to move along D2. 
E) raise their prices. 
A) follow along demand curve D1. 
B) follow along demand curve D2. 
C) ignore this price decrease and cause the price-reducing firm to move along D1. 
D) ignore this price decrease and cause the price-reducing firm to move along D2. 
E) raise their prices.

Question 14

An oligopoly is a market structure in which:

Accepted Answer

A) one firm has 100 per cent of a market. 
B) there are many small firms. 
C) there are many small firms with no control over price. 
D) there are few firms selling either a homogeneous or differentiated product. 
E) there are many large firms with no control over price. 
A) one firm has 100 per cent of a market. 
B) there are many small firms. 
C) there are many small firms with no control over price. 
D) there are few firms selling either a homogeneous or differentiated product. 
E) there are many large firms with no control over price.

Question 15

Oligopolies are characterised by:

Accepted Answer

A) homogeneous products. 
B) differentiated products. 
C) independence. 
D) mutual interdependence. 
A) homogeneous products. 
B) differentiated products. 
C) independence. 
D) mutual interdependence.

Question 16

Because a monopolistically competitive firm is usually in competition with other firms producing similar goods,we generally say:

Accepted Answer

A) their demand curve is perfectly elastic. 
B) their demand curve is less elastic than that for a monopolist. 
C) their demand curve is more elastic than that for a monopolist. 
D) their demand curve is more elastic than that for a perfectly competitive firm. 
A) their demand curve is perfectly elastic. 
B) their demand curve is less elastic than that for a monopolist. 
C) their demand curve is more elastic than that for a monopolist. 
D) their demand curve is more elastic than that for a perfectly competitive firm.

Question 17

In the long run,profitability of the existing firms encourages:

Accepted Answer

A) the exit of existing firms and therefore the demand for existing firms will increase. 
B) the entry of new firms and therefore the demand for existing firms will decrease. 
C) the entry of new firms and therefore the demand for existing firms will increase. 
D) the entry of new firms and therefore the demand for existing firms will stay the same. 
A) the exit of existing firms and therefore the demand for existing firms will increase. 
B) the entry of new firms and therefore the demand for existing firms will decrease. 
C) the entry of new firms and therefore the demand for existing firms will increase. 
D) the entry of new firms and therefore the demand for existing firms will stay the same.

Question 18

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 $2000 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 19

As a result of a kinked demand curve,the price:

Accepted Answer

A) fluctuates. 
B) falls below the kink. 
C) rises above the kink. 
D) settles at the kink. 
E) is undetermined. 
A) fluctuates. 
B) falls below the kink. 
C) rises above the kink. 
D) settles at the kink. 
E) is undetermined.

Question 20

Game theory explains:

Accepted Answer

A) gambling problems. 
B) how the decisions are made in a game of soccer. 
C) strategic responses of firms. 
D) the effect of games on the economy. 
A) gambling problems. 
B) how the decisions are made in a game of soccer. 
C) strategic responses of firms. 
D) the effect of games on the economy.

The fact that a monopolistically competitive firm is not as efficient as a perfectly competitive firm may be outweighed by which of the following?

A characteristic of monopolistic competition is:

Compared to monopoly,the market results with monopolistic competition are usually expected to be:

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,the exhibit represents a kinked-demand oligopoly model.Suppose the current price is $50.If one firm in the oligopoly now attempts to raise its price,all firms will:

The monopolistic competition market structure helps explain:

The cartel is a group of firms:

Monopolistic competition is inefficient because:

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?

Product differentiation makes the demand for a monopolistically competitive firm's product:

Firms enter the monopolistically competitive industry if:

In monopolistic competition,a firm:

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,the exhibit represents a kinked-demand oligopoly model.Suppose the current price is $50.If one firm in the oligopoly now attempts to lower its price,all firms will:

An oligopoly is a market structure in which:

Oligopolies are characterised by:

Because a monopolistically competitive firm is usually in competition with other firms producing similar goods,we generally say:

In the long run,profitability of the existing firms encourages:

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 $2000 rebate on new truck sales,what can Ford expect to see?

As a result of a kinked demand curve,the price:

Game theory explains:

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 fact that a monopolistically competitive firm is not as efficient as a perfectly competitive firm may be outweighed by which of the following?

A characteristic of monopolistic competition is:

Compared to monopoly,the market results with monopolistic competition are usually expected to be:

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,the exhibit represents a kinked-demand oligopoly model.Suppose the current price is $50.If one firm in the oligopoly now attempts to raise its price,all firms will:

The monopolistic competition market structure helps explain:

The cartel is a group of firms:

Monopolistic competition is inefficient because:

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?

Product differentiation makes the demand for a monopolistically competitive firm's product:

Firms enter the monopolistically competitive industry if:

In monopolistic competition,a firm:

In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,the exhibit represents a kinked-demand oligopoly model.Suppose the current price is $50.If one firm in the oligopoly now attempts to lower its price,all firms will:

An oligopoly is a market structure in which:

Oligopolies are characterised by:

Because a monopolistically competitive firm is usually in competition with other firms producing similar goods,we generally say:

In the long run,profitability of the existing firms encourages:

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 $2000 rebate on new truck sales,what can Ford expect to see?

As a result of a kinked demand curve,the price:

Game theory explains:

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