Question 1

The merger of Johnson's Dairy Farm and Peterman's Milk Store would be an example of a(n)

Accepted Answer

A)  vertical merger 
B)  horizontal merger 
C)  conglomerate merger 
D)  integrative merger 
A)  vertical merger 
B)  horizontal merger 
C)  conglomerate merger 
D)  integrative merger

Question 2

Table 6.1 Hypothetical Profit Matrix for Boeing and Airbus
 (millions of dollars in profits for high-price and low-price strategies)
$\begin{array}{llcc}
&&& \text { Boeing  }&\
  \text {  } &   \text {  } &   \text {High price  } &   \text {} &\text { Low price }   \
 \text {  } &  \text { High price } &   \text { Airbus $ =\$ 500 $  } &   \text {  } &\text {Airbus $ =\$ 650 $  }  \
 \text {Airbus  } &  \text {  } &   \text {  Boeing $ =\$ 500 $ } &   \text {  } &\text { Boeing $ =\$ 400 $ }  \
 \text {  } &  \text {  } &   \text {  } &   \text {  } & \text {  } \
 \text {  } &  \text {Low price  } &   \text { Airbus $ =\$ 400 $ } &   \text {  } & \text {  Airbus $ =\$ 350 $} \ 
 \text {  } &  \text {  } &   \text { Boeing $ =\$ 650 $ } &   \text {  } &\text { Boeing $ =\$ 350 $ }  \
\end{array}$

-Refer to Table 6.1. Assume that Boeing adopts a low?price strategy and Airbus adopts a high?price strategy. Compared to what is realized when both firms adopt a high?price strategy,

Accepted Answer

A)  Boeing's profits will rise by $100 and Airbus' profits will fall by $150 
B)  Boeing's profits will fall by $100 and Airbus' profits will rise by $150 
C)  Boeing's profits will rise by $100 and Airbus' profits will rise by $150 
D)  Boeing's profits will fall by $100 and Airbus' profits will fall by $150 
A)  Boeing's profits will rise by $100 and Airbus' profits will fall by $150 
B)  Boeing's profits will fall by $100 and Airbus' profits will rise by $150 
C)  Boeing's profits will rise by $100 and Airbus' profits will rise by $150 
D)  Boeing's profits will fall by $100 and Airbus' profits will fall by $150

Question 3

By practicing successful price discrimination, Northwest Airlines will realize

Accepted Answer

A)  lower unit costs and thus increased profit 
B)  higher revenue and thus increased profit 
C)  a rightward shift in its demand curve and thus increased profit 
D)  a leftward shift in its demand curve and thus increased profit 
A)  lower unit costs and thus increased profit 
B)  higher revenue and thus increased profit 
C)  a rightward shift in its demand curve and thus increased profit 
D)  a leftward shift in its demand curve and thus increased profit

Question 4

An oligopolist may be reluctant to lower its price because

Accepted Answer

A)  its competitors may lower their prices, too 
B)  this will encourage the development of new technology 
C)  other firms will go out of business 
D)  it will keep other potential competitors from entering the market 
A)  its competitors may lower their prices, too 
B)  this will encourage the development of new technology 
C)  other firms will go out of business 
D)  it will keep other potential competitors from entering the market

Question 5

Which of the following industries is best described as an oligopoly?

Accepted Answer

A)  commercial fishing 
B)  grocery stores 
C)  automobiles 
D)  agriculture 
A)  commercial fishing 
B)  grocery stores 
C)  automobiles 
D)  agriculture

Question 6

According to the theory of contestable markets, a market can be dominated by a single firm without exhibiting the inefficiencies of monopoly.

Accepted Answer

A) True 
 B)False

Question 7

The two broad categories of imperfect competition are

Accepted Answer

A)  perfect competition and monopolistic competition 
B)  monopolistic competition and oligopoly 
C)  oligopoly and monopoly 
D)  perfect competition and monopoly 
A)  perfect competition and monopolistic competition 
B)  monopolistic competition and oligopoly 
C)  oligopoly and monopoly 
D)  perfect competition and monopoly

Question 8

Persuasive advertising tends to

Accepted Answer

A)  shift a firm's average total cost curve downward 
B)  shift a firm's total cost curve downward 
C)  make a firm's demand curve more elastic 
D)  make a firm's demand curve more inelastic 
A)  shift a firm's average total cost curve downward 
B)  shift a firm's total cost curve downward 
C)  make a firm's demand curve more elastic 
D)  make a firm's demand curve more inelastic

Question 9

Three of the following are types of mergers covered in the text. Which one is not a type of merger?

Accepted Answer

A)  horizontal 
B)  contestable 
C)  vertical 
D)  conglomerate 
A)  horizontal 
B)  contestable 
C)  vertical 
D)  conglomerate

Question 10

One major reason why airline profits are falling is because the airlines

Accepted Answer

A)  are engaging in price discrimination and the passengers are angry about it 
B)  charge vacation travelers higher prices than business travelers 
C)  are experiencing a decline in business travelers as electronic communication increases 
D)  are no longer allowed to practice price discrimination because it has been declared illegal 
A)  are engaging in price discrimination and the passengers are angry about it 
B)  charge vacation travelers higher prices than business travelers 
C)  are experiencing a decline in business travelers as electronic communication increases 
D)  are no longer allowed to practice price discrimination because it has been declared illegal

Question 11

The difference between the output corresponding to minimum average total cost and the output produced by a monopolistically competitive firm in the long run is called excess capacity.

Accepted Answer

A) True 
 B)False

Question 12

What is true of cooperative price-fixing agreements in the long run?

Accepted Answer

A)  they work well when the number of members is large 
B)  they only work in perfectly competitive markets 
C)  they get stronger over time and result in even higher profits for members 
D)  they tend to break down as members cheat 
A)  they work well when the number of members is large 
B)  they only work in perfectly competitive markets 
C)  they get stronger over time and result in even higher profits for members 
D)  they tend to break down as members cheat

Question 13

If the Liberty Movie Theater operates in a monopolistically competitive market, in the long run the firm will

Accepted Answer

A)  always operate at output levels associated with diseconomies of scale 
B)  always operate at output levels associated with economies of scale 
C)  realize an economic profit 
D)  realize a normal profit 
A)  always operate at output levels associated with diseconomies of scale 
B)  always operate at output levels associated with economies of scale 
C)  realize an economic profit 
D)  realize a normal profit

Question 14

Cartels tend to encounter difficulties when

Accepted Answer

A)  there is a relatively large number of sellers in the market 
B)  demand and cost conditions among sellers are similar 
C)  market demand is strong and profits are sizable 
D)  there are barriers that prevent potential competitors from entering the industry 
A)  there is a relatively large number of sellers in the market 
B)  demand and cost conditions among sellers are similar 
C)  market demand is strong and profits are sizable 
D)  there are barriers that prevent potential competitors from entering the industry

Question 15

There is a strong tendency for price-fixing agreements to break down because of

Accepted Answer

A)  cheating 
B)  poorly written agreements 
C)  advertising 
D)  patents 
A)  cheating 
B)  poorly written agreements 
C)  advertising 
D)  patents

Question 16

Game theory is a field of economics that relates to the behavior of individual firms operating in perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 17

If existing fast-food firms realize sizable economic profits in the short run, which of the following will take place in the long run?

Accepted Answer

A)  The demand curves of existing firms will decrease and become more elastic. 
B)  The demand curves of existing firms will decrease and become less elastic. 
C)  The demand curves of existing firms will increase and become more elastic. 
D)  The demand curves of existing firms will increase and become less elastic. 
A)  The demand curves of existing firms will decrease and become more elastic. 
B)  The demand curves of existing firms will decrease and become less elastic. 
C)  The demand curves of existing firms will increase and become more elastic. 
D)  The demand curves of existing firms will increase and become less elastic.

Question 18

When the four largest firms control less than 40 percent of industry output, the industry is generally regarded as oligopolistic.

Accepted Answer

A) True 
 B)False

Question 19

Cartels could be present in which type of market structure?

Accepted Answer

A)  monopoly 
B)  perfect competition 
C)  monopolistic competition 
D)  oligopoly 
A)  monopoly 
B)  perfect competition 
C)  monopolistic competition 
D)  oligopoly

Question 20

Barriers to entry for oligopolistic industries include all of the following except

Accepted Answer

A)  ownership of key resources 
B)  patents 
C)  product differentiation and advertising 
D)  economic downturn and cheating 
A)  ownership of key resources 
B)  patents 
C)  product differentiation and advertising 
D)  economic downturn and cheating

The merger of Johnson's Dairy Farm and Peterman's Milk Store would be an example of a(n)

By practicing successful price discrimination, Northwest Airlines will realize

An oligopolist may be reluctant to lower its price because

Which of the following industries is best described as an oligopoly?

According to the theory of contestable markets, a market can be dominated by a single firm without exhibiting the inefficiencies of monopoly.

The two broad categories of imperfect competition are

Persuasive advertising tends to

Three of the following are types of mergers covered in the text. Which one is not a type of merger?

One major reason why airline profits are falling is because the airlines

The difference between the output corresponding to minimum average total cost and the output produced by a monopolistically competitive firm in the long run is called excess capacity.

What is true of cooperative price-fixing agreements in the long run?

If the Liberty Movie Theater operates in a monopolistically competitive market, in the long run the firm will

Cartels tend to encounter difficulties when

There is a strong tendency for price-fixing agreements to break down because of

Game theory is a field of economics that relates to the behavior of individual firms operating in perfectly competitive markets.

If existing fast-food firms realize sizable economic profits in the short run, which of the following will take place in the long run?

When the four largest firms control less than 40 percent of industry output, the industry is generally regarded as oligopolistic.

Cartels could be present in which type of market structure?

Barriers to entry for oligopolistic industries include all of the following except

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Fiscal Policy and the Federal Budget

Money and the Banking System

The Federal Reserve and Monetary Policy

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters

Exam 6: Imperfect Competition

The merger of Johnson's Dairy Farm and Peterman's Milk Store would be an example of a(n)

By practicing successful price discrimination, Northwest Airlines will realize

An oligopolist may be reluctant to lower its price because

Which of the following industries is best described as an oligopoly?

According to the theory of contestable markets, a market can be dominated by a single firm without exhibiting the inefficiencies of monopoly.

The two broad categories of imperfect competition are

Persuasive advertising tends to

Three of the following are types of mergers covered in the text. Which one is not a type of merger?

One major reason why airline profits are falling is because the airlines

The difference between the output corresponding to minimum average total cost and the output produced by a monopolistically competitive firm in the long run is called excess capacity.

What is true of cooperative price-fixing agreements in the long run?

If the Liberty Movie Theater operates in a monopolistically competitive market, in the long run the firm will

Cartels tend to encounter difficulties when

There is a strong tendency for price-fixing agreements to break down because of

Game theory is a field of economics that relates to the behavior of individual firms operating in perfectly competitive markets.

If existing fast-food firms realize sizable economic profits in the short run, which of the following will take place in the long run?

When the four largest firms control less than 40 percent of industry output, the industry is generally regarded as oligopolistic.

Cartels could be present in which type of market structure?

Barriers to entry for oligopolistic industries include all of the following except

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Fiscal Policy and the Federal Budget

Money and the Banking System

The Federal Reserve and Monetary Policy

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters