Question 1

One of the differences between perfect competition and oligopoly is:

Accepted Answer

A) that an oligopolist rarely earns economic profit, whereas a perfectly competitive firm will always earn economic profit. 
B) that perfectly competitive firms often engage in non-price competition, whereas oligopolists don't. 
C) that while a perfectly competitive firm earns zero economic profit in the long run, the oligopolist can earn positive economic profit in the long run. 
D) that a perfectly competitive firm will advertise while an oligopolist will not advertise. 
A) that an oligopolist rarely earns economic profit, whereas a perfectly competitive firm will always earn economic profit. 
B) that perfectly competitive firms often engage in non-price competition, whereas oligopolists don't. 
C) that while a perfectly competitive firm earns zero economic profit in the long run, the oligopolist can earn positive economic profit in the long run. 
D) that a perfectly competitive firm will advertise while an oligopolist will not advertise.

Question 2

The oligopoly market structure does not have which of the following characteristics?

Accepted Answer

A) Few sellers. 
B) Homogeneous product. 
C) Differentiated product. 
D) Many small sellers. 
A) Few sellers. 
B) Homogeneous product. 
C) Differentiated product. 
D) Many small sellers.

Question 3

Exhibit 9-1 A monopolistic competitive firm
  
-As presented in Exhibit 9-1,in the short-run the monopolistically competitive firm will charge a price per unit of:

Accepted Answer

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

Question 4

Suppose an oligopoly has a dominant firm that sets the price for the entire industry.In this situation,the oligopoly has:

Accepted Answer

A) non-price competition. 
B) a kinked demand curve. 
C) price leadership. 
D) a cartel. 
E) a monopoly. 
A) non-price competition. 
B) a kinked demand curve. 
C) price leadership. 
D) a cartel. 
E) a monopoly.

Question 5

Under oligopoly,firms produce:

Accepted Answer

A) only a homogeneous product. 
B) only a differentiated product. 
C) a homogeneous product or a differentiated product. 
D) identical product. 
A) only a homogeneous product. 
B) only a differentiated product. 
C) a homogeneous product or a differentiated product. 
D) identical product.

Question 6

In monopolistic competition,profit:

Accepted Answer

A) is proof that advertising works. 
B) motivates existing firms to increase prices. 
C) signals for new firms to enter. 
D) provides a motive for existing firms to decrease prices. 
A) is proof that advertising works. 
B) motivates existing firms to increase prices. 
C) signals for new firms to enter. 
D) provides a motive for existing firms to decrease prices.

Question 7

Product differentiation:

Accepted Answer

A) refers to the attempt by firms to make their products look like those of the other firms in the industry. 
B) refers to the attempt by firms to make essentially substitutable products look different in the minds of the consumers. 
C) refers to the advantage big firms have in research and development. 
D) is a common characteristic of a perfectly competitive market structure. 
A) refers to the attempt by firms to make their products look like those of the other firms in the industry. 
B) refers to the attempt by firms to make essentially substitutable products look different in the minds of the consumers. 
C) refers to the advantage big firms have in research and development. 
D) is a common characteristic of a perfectly competitive market structure.

Question 8

Firms in a monopolistically competitive industry produce:

Accepted Answer

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

Question 9

A pay-off matrix used in game theory shows:

Accepted Answer

A) the concentration ratio in an industry. 
B) the profit firms can earn in a cartel. 
C) how much firms can earn or lose under different strategies in an oligopoly. 
D) the proportion of firms that sell a differentiated product to their customers. 
A) the concentration ratio in an industry. 
B) the profit firms can earn in a cartel. 
C) how much firms can earn or lose under different strategies in an oligopoly. 
D) the proportion of firms that sell a differentiated product to their customers.

Question 10

Extremely difficult entry to the market with unique product is a feature of:

Accepted Answer

A) monopolies. 
B) monopolistic competition. 
C) perfect competition. 
D) oligopolies. 
A) monopolies. 
B) monopolistic competition. 
C) perfect competition. 
D) oligopolies.

Question 11

A major characteristic of the theory of oligopoly is:

Accepted Answer

A) that there are no real-world examples. 
B) that the firms are interdependent in their decisions. 
C) that, in reality, few oligopolies survive more than 10 years. 
D) that the firms are independent in their decisions. 
A) that there are no real-world examples. 
B) that the firms are interdependent in their decisions. 
C) that, in reality, few oligopolies survive more than 10 years. 
D) that the firms are independent in their decisions.

Question 12

According to the kinked demand theory,when one firm raises its price,other firms will:

Accepted Answer

A) also raise their prices. 
B) refuse to follow. 
C) increase their advertising expenditures. 
D) exit the industry. 
A) also raise their prices. 
B) refuse to follow. 
C) increase their advertising expenditures. 
D) exit the industry.

Question 13

A kinked demand curve is perceived by the firm as being:

Accepted Answer

A) more elastic to the right of the kink. 
B) more inelastic to the right of the kink. 
C) more inelastic to the left of the kink. 
D) present when there is a monopoly. 
E) bowed-in or bowed-out. 
A) more elastic to the right of the kink. 
B) more inelastic to the right of the kink. 
C) more inelastic to the left of the kink. 
D) present when there is a monopoly. 
E) bowed-in or bowed-out.

Question 14

Exhibit 9-2 A monopolistically competitive firm
  
-As presented in Exhibit 9-2,the long-run profit-maximising output for the monopolistically competitive firm is:

Accepted Answer

A) zero units per week. 
B) 100 units per week. 
C) 200 units per week. 
D) 300 units per week. 
E) 400 units per week. 
A) zero units per week. 
B) 100 units per week. 
C) 200 units per week. 
D) 300 units per week. 
E) 400 units per week.

Question 15

A picture frame company operates in a monopolistically competitive market.Its short-run equilibrium price is $80 and its ATC is $65.It sells 100 picture frames a week.From this we can tell:

Accepted Answer

A) this firm is making a normal profit. 
B) other picture-frame companies will want to exit the market. 
C) there are no other picture-frame companies in the area. 
D) economic profits are $1500. 
E) total profits are being maximised. 
A) this firm is making a normal profit. 
B) other picture-frame companies will want to exit the market. 
C) there are no other picture-frame companies in the area. 
D) economic profits are $1500. 
E) total profits are being maximised.

Question 16

In the long run,marginal cost must equal marginal revenue for a monopolistically competitive firm,and the minimum point of the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 17

A cartel:

Accepted Answer

A) is a group of buyers formally agreeing to buy product at a certain price. 
B) is a group of firms formally agreeing to control their price and output that is legal in all countries. 
C) is a group of firms formally agreeing to control their price and quality of their product, which is illegal in many countries. 
D) is a group of firms formally agreeing to control their price and output, which is illegal in many countries. 
A) is a group of buyers formally agreeing to buy product at a certain price. 
B) is a group of firms formally agreeing to control their price and output that is legal in all countries. 
C) is a group of firms formally agreeing to control their price and quality of their product, which is illegal in many countries. 
D) is a group of firms formally agreeing to control their price and output, which is illegal in many countries.

Question 18

When the behaviour of other firms must be taken into account by another firm in the industry,economists often examine this using:

Accepted Answer

A) game theory. 
B) the monopolistically competitive model. 
C) the monopoly model. 
D) the perfectly competitive model. 
A) game theory. 
B) the monopolistically competitive model. 
C) the monopoly model. 
D) the perfectly competitive model.

Question 19

Critics of advertising argue that:

Accepted Answer

A) its main purpose is to explain the best characteristics of rival products. 
B) its main purpose is to provide consumers with much needed information. 
C) its main purpose is to persuade consumers into buying something they do not need. 
D) it saves consumers time and money. 
A) its main purpose is to explain the best characteristics of rival products. 
B) its main purpose is to provide consumers with much needed information. 
C) its main purpose is to persuade consumers into buying something they do not need. 
D) it saves consumers time and money.

Question 20

Exhibit 9-3 Kinked demand curves
  
-In Exhibit 9-3,in a kinked-demand oligopoly model,D₂ 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.

One of the differences between perfect competition and oligopoly is:

The oligopoly market structure does not have which of the following characteristics?

Exhibit 9-1 A monopolistic competitive firm -As presented in Exhibit 9-1,in the short-run the monopolistically competitive firm will charge a price per unit of:

Suppose an oligopoly has a dominant firm that sets the price for the entire industry.In this situation,the oligopoly has:

Under oligopoly,firms produce:

In monopolistic competition,profit:

Product differentiation:

Firms in a monopolistically competitive industry produce:

A pay-off matrix used in game theory shows:

Extremely difficult entry to the market with unique product is a feature of:

A major characteristic of the theory of oligopoly is:

According to the kinked demand theory,when one firm raises its price,other firms will:

A kinked demand curve is perceived by the firm as being:

Exhibit 9-2 A monopolistically competitive firm -As presented in Exhibit 9-2,the long-run profit-maximising output for the monopolistically competitive firm is:

A picture frame company operates in a monopolistically competitive market.Its short-run equilibrium price is $80 and its ATC is $65.It sells 100 picture frames a week.From this we can tell:

In the long run,marginal cost must equal marginal revenue for a monopolistically competitive firm,and the minimum point of the long-run average cost curve.

A cartel:

When the behaviour of other firms must be taken into account by another firm in the industry,economists often examine this using:

Critics of advertising argue that:

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,in a kinked-demand oligopoly model,D₂ represents the:

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

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Exam 9: Monopolistic competition and oligopoly

One of the differences between perfect competition and oligopoly is:

The oligopoly market structure does not have which of the following characteristics?

Exhibit 9-1 A monopolistic competitive firm -As presented in Exhibit 9-1,in the short-run the monopolistically competitive firm will charge a price per unit of:

Suppose an oligopoly has a dominant firm that sets the price for the entire industry.In this situation,the oligopoly has:

Under oligopoly,firms produce:

In monopolistic competition,profit:

Product differentiation:

Firms in a monopolistically competitive industry produce:

A pay-off matrix used in game theory shows:

Extremely difficult entry to the market with unique product is a feature of:

A major characteristic of the theory of oligopoly is:

According to the kinked demand theory,when one firm raises its price,other firms will:

A kinked demand curve is perceived by the firm as being:

Exhibit 9-2 A monopolistically competitive firm -As presented in Exhibit 9-2,the long-run profit-maximising output for the monopolistically competitive firm is:

A picture frame company operates in a monopolistically competitive market.Its short-run equilibrium price is $80 and its ATC is $65.It sells 100 picture frames a week.From this we can tell:

In the long run,marginal cost must equal marginal revenue for a monopolistically competitive firm,and the minimum point of the long-run average cost curve.

A cartel:

When the behaviour of other firms must be taken into account by another firm in the industry,economists often examine this using:

Critics of advertising argue that:

Exhibit 9-3 Kinked demand curves -In Exhibit 9-3,in a kinked-demand oligopoly model,D₂ represents the:

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