Question 1

All firms in a monopolistically competitive industry face a ________ demand curve,so they have ________.

Accepted Answer

A)  flat; no market power 
B)  flat; market power 
C)  downward-sloping; no market power 
D)  downward-sloping; market power 
A)  flat; no market power 
B)  flat; market power 
C)  downward-sloping; no market power 
D)  downward-sloping; market power

Question 2

Scenario: There are two firms in an industry, Firm A and Firm B, and they consider entering into a colluding agreement. If the two firms collude, then they agree that they would both produce less than what they would if they were competing against each other in an oligopolistic market. Since Firm A expects Firm B to produce a small quantity of output in the colloding agreement, Firm A is facing a demand curve with the same slope but with a higher intercept. The following figure depicts demands that face Firm A in both the colluding agreement and the oligopolistic market.
  
-Refer to the scenario above.What is the profit of Firm A without collusion?

Accepted Answer

A)  $4 
B)  $6 
C)  $9 
D)  $21 
A)  $4 
B)  $6 
C)  $9 
D)  $21

Question 3

A monopolistically competitive firm shuts down in the short run if ________.

Accepted Answer

A)  marginal revenue equals marginal cost 
B)  total revenues do not cover variable costs 
C)  marginal revenue covers average fixed costs 
D)  average total cost exceeds price 
A)  marginal revenue equals marginal cost 
B)  total revenues do not cover variable costs 
C)  marginal revenue covers average fixed costs 
D)  average total cost exceeds price

Question 4

An oligopoly market with identical products is similar to a ________,but the key difference is ________.

Accepted Answer

A)  monopolistic competition market; oligopoly markets are more efficient 
B)  perfect competition market; oligopoly markets are more efficient 
C)  monopoly; the oligopolist must recognize the behavior of its competitors 
D)  monopolistic competition; the oligopolist is a price-taker 
A)  monopolistic competition market; oligopoly markets are more efficient 
B)  perfect competition market; oligopoly markets are more efficient 
C)  monopoly; the oligopolist must recognize the behavior of its competitors 
D)  monopolistic competition; the oligopolist is a price-taker

Question 5

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
-Refer to the scenario above.A firm producing Good Y will continue production in the short run if total revenue exceeds ________.

Accepted Answer

A)  $25,000 
B)  $60,000 
C)  $85,000 
D)  $35,000 
A)  $25,000 
B)  $60,000 
C)  $85,000 
D)  $35,000

Question 6

How is a duopoly model with homogeneous products similar to the prisoners' dilemma game?

Accepted Answer

The firms in a duopoly with homogeneous

Question 7

Markets in which the Herfindahl-Hirschman Index ________ are considered highly concentrated.

Accepted Answer

A)  is 1,000 
B)  is zero 
C)  is between 1,000 and 1,800 
D)  is above 1,800 
A)  is 1,000 
B)  is zero 
C)  is between 1,000 and 1,800 
D)  is above 1,800

Question 8

The cost of producing each bottle of a certain brand of shampoo is $0.25.If the market for shampoo is monopolistically competitive and the demand for shampoo is inelastic,a manufacturer who charges $0.35 for each bottle will ________.

Accepted Answer

A)  shut down production in the short run 
B)  exit the industry in the long run 
C)  earn an economic profit of $0.10 per bottle 
D)  earn a total revenue of $0.10 per bottle 
A)  shut down production in the short run 
B)  exit the industry in the long run 
C)  earn an economic profit of $0.10 per bottle 
D)  earn a total revenue of $0.10 per bottle

Question 9

In 1981,the DeBeers Diamond cartel member country Zaire broke free of the cartel's marketing arrangement,the Central Selling Organization,and began to market some of its country's industrial diamonds (called boart)outside the DeBeers cartel.Even though DeBeers was generally pursuing a practice of stockpiling diamonds to prop up world diamond prices,the cartel flooded the market with industrial diamonds,significantly lowering their price to levels at-or even below-marginal cost.Within 2 years,Zaire returned to the DeBeers marketing cartel and sold all the country's diamond production through the cartel.DeBeers' actions between 1981 and 1983 represent ________.

Accepted Answer

A)  a competitive strategy 
B)  a grim strategy 
C)  price-fixing 
D)  none of the above 
A)  a competitive strategy 
B)  a grim strategy 
C)  price-fixing 
D)  none of the above

Question 10

Which of the following will happen if some firms in a monopolistically competitive market incur losses in the short run and the market conditions are not expected to change?

Accepted Answer

A)  The existing firms will continue production in the long run. 
B)  The demand for the goods produced by the firms will decrease. 
C)  New firms will enter the industry in the long run. 
D)  Some firms will exit the industry in the long run. 
A)  The existing firms will continue production in the long run. 
B)  The demand for the goods produced by the firms will decrease. 
C)  New firms will enter the industry in the long run. 
D)  Some firms will exit the industry in the long run.

Question 11

Scenario: The market demand for soccer balls in a small town is 2,500 units, and there are two rival sports brands selling soccer balls in this town, Sporty and Go! The products of the two brands are identical.
  
-Refer to the scenario above.If Aqua Inc.charges a price of $20 for each unit of Good A and Blu Corp.charges a price of $60,Blu Corp.will ________.

Accepted Answer

A)  face the entire market demand 
B)  lose all its customers to Aqua Inc. 
C)  face a demand of 2,000 units 
D)  face a demand of 1,500 units 
A)  face the entire market demand 
B)  lose all its customers to Aqua Inc. 
C)  face a demand of 2,000 units 
D)  face a demand of 1,500 units

Question 12

There are several jewelry manufacturers in Petrovia.However,the jewelry produced by different manufacturers has different designs and the products are never identical.The jewelry market in Petrovia is an example of a ________.

Accepted Answer

A)  duopoly 
B)  monopoly 
C)  perfectly competitive market 
D)  monopolistically competitive market 
A)  duopoly 
B)  monopoly 
C)  perfectly competitive market 
D)  monopolistically competitive market

Question 13

The following figure depicts four different market situations.
  
-Refer to the figure above.Which of the four market situations depicts a monopolistically competitive market in which there is likely to be more firms entering in the long run?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 14

The following figure shows the cost curves of firm that operates in a monopolistic competition market, as well as the demand (D) facing this firm and its marginal revenue (MR).
  
-Refer to the figure above.How much profit does this firm make in the short run?

Accepted Answer

A)  $5 
B)  $8 
C)  $4.50 
D)  $0 
A)  $5 
B)  $8 
C)  $4.50 
D)  $0

Question 15

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
-Refer to the scenario above.If the equilibrium price charged by a firm producing Good Y in the short run is $170,the firm will earn ________.

Accepted Answer

A)  a profit of $10 per unit 
B)  a profit of $25 per unit 
C)  a profit of $0 per unit 
D)  a profit of $30 per unit 
A)  a profit of $10 per unit 
B)  a profit of $25 per unit 
C)  a profit of $0 per unit 
D)  a profit of $30 per unit

Question 16

The equilibrium output produced by a monopolistic competitor in the long run after the entry of new firms is ________.

Accepted Answer

A)  higher than the equilibrium output produced by the firm before the entry of new firms 
B)  lower than the equilibrium output produced by the firm before the entry of new firms 
C)  higher than the equilibrium output produced by a perfectly competitive firm in the long run 
D)  equal to the equilibrium output produced by the firm before the entry of new firms 
A)  higher than the equilibrium output produced by the firm before the entry of new firms 
B)  lower than the equilibrium output produced by the firm before the entry of new firms 
C)  higher than the equilibrium output produced by a perfectly competitive firm in the long run 
D)  equal to the equilibrium output produced by the firm before the entry of new firms

Question 17

Which of the following is true of monopolistic competition?

Accepted Answer

A)  There is only one seller in this market structure. 
B)  The product sold by each seller in this market structure is identical. 
C)  The firms in this market structure earn huge economic profits in the long run. 
D)  There are a large number of sellers, each selling a differentiated product. 
A)  There is only one seller in this market structure. 
B)  The product sold by each seller in this market structure is identical. 
C)  The firms in this market structure earn huge economic profits in the long run. 
D)  There are a large number of sellers, each selling a differentiated product.

Question 18

The following figure shows the cost curves (ATC, average total cost; MC, marginal cost) of a firm that operates in a monopolistic competition market, as well as the demand (D) facing this firm and its marginal revenue (MR).
  
-Refer to the figure above.What is the profit-maximizing price that this firm should charge in the short run?

Accepted Answer

A)  $3 
B)  $4.50 
C)  $6.50 
D)  $4 
A)  $3 
B)  $4.50 
C)  $6.50 
D)  $4

Question 19

The long-run equilibrium for a monopolistically competitive firm occurs ________.

Accepted Answer

A)  at the minimum point of its marginal cost curve 
B)  at the minimum point of its average cost curve 
C)  along the downward-sloping portion of its average total cost curve 
D)  along the upward-sloping portion of its average total cost curve 
A)  at the minimum point of its marginal cost curve 
B)  at the minimum point of its average cost curve 
C)  along the downward-sloping portion of its average total cost curve 
D)  along the upward-sloping portion of its average total cost curve

Question 20

The table below summarizes the information possessed by a firm in a monopolistically competitive market. Quantity demanded is in thousands of units.
  
-Refer to the table above.The optimal price charged by the monopolistic competitor is ________.

Accepted Answer

A)  $4.00 
B)  $3.60 
C)  $5.20 
D)  $2.80 
A)  $4.00 
B)  $3.60 
C)  $5.20 
D)  $2.80

All firms in a monopolistically competitive industry face a demand curve,so they have .

A monopolistically competitive firm shuts down in the short run if ________.

An oligopoly market with identical products is similar to a ,but the key difference is .

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. -Refer to the scenario above.A firm producing Good Y will continue production in the short run if total revenue exceeds ________.

How is a duopoly model with homogeneous products similar to the prisoners' dilemma game?

Markets in which the Herfindahl-Hirschman Index ________ are considered highly concentrated.

The cost of producing each bottle of a certain brand of shampoo is $0.25.If the market for shampoo is monopolistically competitive and the demand for shampoo is inelastic,a manufacturer who charges $0.35 for each bottle will ________.

Which of the following will happen if some firms in a monopolistically competitive market incur losses in the short run and the market conditions are not expected to change?

There are several jewelry manufacturers in Petrovia.However,the jewelry produced by different manufacturers has different designs and the products are never identical.The jewelry market in Petrovia is an example of a ________.

The following figure depicts four different market situations. -Refer to the figure above.Which of the four market situations depicts a monopolistically competitive market in which there is likely to be more firms entering in the long run?

The following figure shows the cost curves of firm that operates in a monopolistic competition market, as well as the demand (D) facing this firm and its marginal revenue (MR). -Refer to the figure above.How much profit does this firm make in the short run?

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. -Refer to the scenario above.If the equilibrium price charged by a firm producing Good Y in the short run is $170,the firm will earn ________.

The equilibrium output produced by a monopolistic competitor in the long run after the entry of new firms is ________.

Which of the following is true of monopolistic competition?

The long-run equilibrium for a monopolistically competitive firm occurs ________.

The table below summarizes the information possessed by a firm in a monopolistically competitive market. Quantity demanded is in thousands of units. -Refer to the table above.The optimal price charged by the monopolistic competitor is ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Exam 14: Oligopoly and Monopolistic Competition

All firms in a monopolistically competitive industry face a ________ demand curve,so they have ________.

A monopolistically competitive firm shuts down in the short run if ________.

An oligopoly market with identical products is similar to a ________,but the key difference is ________.

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. -Refer to the scenario above.A firm producing Good Y will continue production in the short run if total revenue exceeds ________.

How is a duopoly model with homogeneous products similar to the prisoners' dilemma game?

Markets in which the Herfindahl-Hirschman Index ________ are considered highly concentrated.

The cost of producing each bottle of a certain brand of shampoo is $0.25.If the market for shampoo is monopolistically competitive and the demand for shampoo is inelastic,a manufacturer who charges $0.35 for each bottle will ________.

Which of the following will happen if some firms in a monopolistically competitive market incur losses in the short run and the market conditions are not expected to change?

There are several jewelry manufacturers in Petrovia.However,the jewelry produced by different manufacturers has different designs and the products are never identical.The jewelry market in Petrovia is an example of a ________.

The following figure depicts four different market situations. -Refer to the figure above.Which of the four market situations depicts a monopolistically competitive market in which there is likely to be more firms entering in the long run?

The following figure shows the cost curves of firm that operates in a monopolistic competition market, as well as the demand (D) facing this firm and its marginal revenue (MR). -Refer to the figure above.How much profit does this firm make in the short run?

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. -Refer to the scenario above.If the equilibrium price charged by a firm producing Good Y in the short run is $170,the firm will earn ________.

The equilibrium output produced by a monopolistic competitor in the long run after the entry of new firms is ________.

Which of the following is true of monopolistic competition?

The long-run equilibrium for a monopolistically competitive firm occurs ________.

The table below summarizes the information possessed by a firm in a monopolistically competitive market. Quantity demanded is in thousands of units. -Refer to the table above.The optimal price charged by the monopolistic competitor is ________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

All firms in a monopolistically competitive industry face a demand curve,so they have .

An oligopoly market with identical products is similar to a ,but the key difference is .