Question 1

If firms in an oligopoly industry producing differentiated products collude,________.

Accepted Answer

A)  they collectively produce the monopoly output level and divide the monopoly profits 
B)  they produce the same output level as noncollusive oligopoly, but deter entry 
C)  they increase output and decrease price to deter entry 
D)  they collectively produce up until Price = Marginal cost 
A)  they collectively produce the monopoly output level and divide the monopoly profits 
B)  they produce the same output level as noncollusive oligopoly, but deter entry 
C)  they increase output and decrease price to deter entry 
D)  they collectively produce up until Price = Marginal cost

Question 2

The U.S.car manufacturing industry is an example of ________.

Accepted Answer

A)  oligopoly with homogeneous products 
B)  oligopoly with differentiated products 
C)  monopolistic competition 
D)  perfect competition 
A)  oligopoly with homogeneous products 
B)  oligopoly with differentiated products 
C)  monopolistic competition 
D)  perfect competition

Question 3

There are two major Internet service providers in Corinthia.One company has a market share of 60 percent,and the other firm has a market share of 40 percent.The Herfindahl-Hirschman Index for this industry is ________.

Accepted Answer

A)  100,000 
B)  1,200 
C)  5,200 
D)  100 
A)  100,000 
B)  1,200 
C)  5,200 
D)  100

Question 4

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 ________.

Accepted Answer

A)  earn economic profits if it charges a price of $120 
B)  incur losses if it charges a price of $200 
C)  earn zero economic profits if it charges a price of $170 
D)  shut down production if price falls below $200 
A)  earn economic profits if it charges a price of $120 
B)  incur losses if it charges a price of $200 
C)  earn zero economic profits if it charges a price of $170 
D)  shut down production if price falls below $200

Question 5

A fellow student claims that the federal government should block all mergers in monopolistically competitive industries that raise the Herfindahl-Hirschman Index above 1,800.Which of the following is the best response to this claim?

Accepted Answer

A)  Yes, because industries in which the Herfindahl-Hirschman Index is above 1,800 are concentrated. 
B)  Yes, because mergers never increase economic efficiency. 
C)  No, because the Herfindahl-Hirschman Index only addresses market structure, not the conduct or performance of market participants. 
D)  No, because the Herfindahl-Hirschman Index is meaningless. 
A)  Yes, because industries in which the Herfindahl-Hirschman Index is above 1,800 are concentrated. 
B)  Yes, because mergers never increase economic efficiency. 
C)  No, because the Herfindahl-Hirschman Index only addresses market structure, not the conduct or performance of market participants. 
D)  No, because the Herfindahl-Hirschman Index is meaningless.

Question 6

A duopoly in which each firm produces a homogeneous good is called a ________.

Accepted Answer

A)  Bertrand competition 
B)  Cournot competition 
C)  Stackelberg competition 
D)  Sweazy competition 
A)  Bertrand competition 
B)  Cournot competition 
C)  Stackelberg competition 
D)  Sweazy competition

Question 7

A monopolistic competitor incurs losses if ________.

Accepted Answer

A)  price is higher than average total cost 
B)  price is lower than marginal cost 
C)  price is equal to marginal cost 
D)  price is lower than average total cost 
A)  price is higher than average total cost 
B)  price is lower than marginal cost 
C)  price is equal to marginal cost 
D)  price is lower than average total cost

Question 8

The pie chart below shows the market shares of various desktop operating systems in 2013 (http://www.netmarketshare.com/).
 
Different operating systems have different look and feel and different features from one another.Based on this information,which of the following best describes the structure of desktop OS market?

Accepted Answer

A)  A monopoly 
B)  A monopolistic competition 
C)  An oligopoly with differentiated products 
D)  An oligopoly with homogeneous products 
A)  A monopoly 
B)  A monopolistic competition 
C)  An oligopoly with differentiated products 
D)  An oligopoly with homogeneous products

Question 9

When does a monopolistic competitor earn positive economic profits in the short run?

Accepted Answer

A monopolistic competitor earn

Question 10

What does the term "undercutting" refer to?

Accepted Answer

Undercutting refers to the pra

Question 11

In a long-run equilibrium in a monopolistically competitive market,do firms produce at the level of output that minimizes average total cost over all levels of output?

Accepted Answer

A)  Yes, since firms produce at Price = Average total cost 
B)  Yes, because average total cost exceeds marginal cost 
C)  No, because firms are not producing at the minimum of average total cost 
D)  Yes, because firms are producing at the point where Marginal revenue = Marginal cost 
A)  Yes, since firms produce at Price = Average total cost 
B)  Yes, because average total cost exceeds marginal cost 
C)  No, because firms are not producing at the minimum of average total cost 
D)  Yes, because firms are producing at the point where Marginal revenue = Marginal cost

Question 12

Answer: The market for candy bars has excess capacity. This is because firms in a monopolistically competitive market do not produce at the minimum point on their average total cost curve, unlike firms in a perfectly competitive market. The monopolistically competitive firms produce at a level below the efficient scale of production, as can be seen in the following figure.
   
The firm in the figure above does not increase production up to the level associated with the minimum point on the ATC curve, QMᵢn, because it would then need to cut the price it charges for its goods, resulting in lower profits. Firms in a perfectly competitive market charge a price equal to the marginal cost of production and produce at the minimum point on the average total cost curve, as shown in the figure below.
  
-Refer to the figure above.If the government efficiently regulates the price for this monopolistically competitive firm,the firm will ________.

Accepted Answer

A)  make a positive profit 
B)  make zero profit 
C)  decrease its marginal cost 
D)  make a negative profit 
A)  make a positive profit 
B)  make zero profit 
C)  decrease its marginal cost 
D)  make a negative profit

Question 13

The price charged by a monopolistic competitor for each unit of a good is $7.If it produces 5,000 units of the good at a total cost of $25,000,what is its profit?

Accepted Answer

A)  $8,000 
B)  $10,000 
C)  $7,000 
D)  $35,000 
A)  $8,000 
B)  $10,000 
C)  $7,000 
D)  $35,000

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.In the long run,________.

Accepted Answer

A)  the D and MR curves shift right, but MC and ATC curves will remain the same 
B)  the D curve shifts right, but MR, MC and ATC curves will remain the same 
C)  the D and MR curves shift right, but MC and ATC curves shift up 
D)  the MC and ATC curves shift down, but D and MR remain the same 
A)  the D and MR curves shift right, but MC and ATC curves will remain the same 
B)  the D curve shifts right, but MR, MC and ATC curves will remain the same 
C)  the D and MR curves shift right, but MC and ATC curves shift up 
D)  the MC and ATC curves shift down, but D and MR remain the same

Question 15

A duopolist faces the entire market demand for its product if ________.

Accepted Answer

A)  it charges a lower price than its rival 
B)  it charges a higher price than its rival 
C)  it charges the same price as its rival 
D)  it charges a price higher than its cost of production 
A)  it charges a lower price than its rival 
B)  it charges a higher price than its rival 
C)  it charges the same price as its rival 
D)  it charges a price higher than its cost of production

Question 16

Scenario: Two firms, Firm 1 and Firm 2, make differentiated products and compete in a duopoly market. The firms do not have a fixed cost. Firm 1's cost is $30 per unit, while Firm 2's cost is $25 per unit. (So they are the marginal cost and the average total cost). There are 1,000 consumers in this market. The demand is divided between the two firm in the following way:
• If Firm 1's price is less than twice Firm 2's price, then everyone buys from Firm 1.
• If Firm 1's price is more than twice Firm 2's price, then everyone buys from Firm 2.
• If Firm 1's price is equal to twice Firm 2's price, then half of the consumers buy from Firm 1 and the other half buy from Firm 2.
-Refer to the scenario above.Suppose Firm 1 sets the price at $50.What price should Firm 2 set in response?

Accepted Answer

A)  At $25 or above 
B)  Below $25 
C)  Below $50 
D)  At $30 
A)  At $25 or above 
B)  Below $25 
C)  Below $50 
D)  At $30

Question 17

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.If this market were perfectly competitive,the long-run equilibrium price would be ________.

Accepted Answer

A)  $2.00 higher 
B)  $1.45 higher 
C)  $1.10 lower 
D)  $1.30 lower 
A)  $2.00 higher 
B)  $1.45 higher 
C)  $1.10 lower 
D)  $1.30 lower

Question 18

Dufwenberg and Gneezy conducted economic experiments that tested the theory of Bertrand competition (oligopoly with homogeneous goods)in the case of duopoly.Theory predicts the stable market equilibrium is for each duopolist to price at marginal cost.The experimental tests of the duopoly model in Bertrand competition found ________.

Accepted Answer

A)  that the experimental duopolists usually charged a price equal to marginal cost 
B)  that the experimental duopolists usually charged a price slightly above marginal cost 
C)  that the experimental duopolists usually charged a price significantly above marginal cost 
D)  none of the above 
A)  that the experimental duopolists usually charged a price equal to marginal cost 
B)  that the experimental duopolists usually charged a price slightly above marginal cost 
C)  that the experimental duopolists usually charged a price significantly above marginal cost 
D)  none of the above

Question 19

Under Bertrand competition,________.

Accepted Answer

A)  each firm produces until Price = Marginal cost 
B)  each firm produces until Price = Average variable cost 
C)  each firm produces until Marginal revenue = Marginal cost and then reads price off of the demand curve 
D)  none of the above 
A)  each firm produces until Price = Marginal cost 
B)  each firm produces until Price = Average variable cost 
C)  each firm produces until Marginal revenue = Marginal cost and then reads price off of the demand curve 
D)  none of the above

Question 20

The quantity demanded for a duopolist's product is zero if ________.

Accepted Answer

A)  it charges a lower price than its rival 
B)  it charges a higher price than its rival 
C)  it charges the same price as its rival 
D)  it can produce the product at a low cost 
A)  it charges a lower price than its rival 
B)  it charges a higher price than its rival 
C)  it charges the same price as its rival 
D)  it can produce the product at a low cost

If firms in an oligopoly industry producing differentiated products collude,________.

The U.S.car manufacturing industry is an example of ________.

There are two major Internet service providers in Corinthia.One company has a market share of 60 percent,and the other firm has a market share of 40 percent.The Herfindahl-Hirschman Index for this industry 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 ________.

A fellow student claims that the federal government should block all mergers in monopolistically competitive industries that raise the Herfindahl-Hirschman Index above 1,800.Which of the following is the best response to this claim?

A duopoly in which each firm produces a homogeneous good is called a ________.

A monopolistic competitor incurs losses if ________.

When does a monopolistic competitor earn positive economic profits in the short run?

What does the term "undercutting" refer to?

In a long-run equilibrium in a monopolistically competitive market,do firms produce at the level of output that minimizes average total cost over all levels of output?

The price charged by a monopolistic competitor for each unit of a good is $7.If it produces 5,000 units of the good at a total cost of $25,000,what is its profit?

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.In the long run,________.

A duopolist faces the entire market demand for its product if ________.

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.If this market were perfectly competitive,the long-run equilibrium price would be ________.

Under Bertrand competition,________.

The quantity demanded for a duopolist's product is zero if ________.

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

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Exam 14: Oligopoly and Monopolistic Competition

If firms in an oligopoly industry producing differentiated products collude,________.

The U.S.car manufacturing industry is an example of ________.

There are two major Internet service providers in Corinthia.One company has a market share of 60 percent,and the other firm has a market share of 40 percent.The Herfindahl-Hirschman Index for this industry 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 ________.

A fellow student claims that the federal government should block all mergers in monopolistically competitive industries that raise the Herfindahl-Hirschman Index above 1,800.Which of the following is the best response to this claim?

A duopoly in which each firm produces a homogeneous good is called a ________.

A monopolistic competitor incurs losses if ________.

When does a monopolistic competitor earn positive economic profits in the short run?

What does the term "undercutting" refer to?

In a long-run equilibrium in a monopolistically competitive market,do firms produce at the level of output that minimizes average total cost over all levels of output?

The price charged by a monopolistic competitor for each unit of a good is $7.If it produces 5,000 units of the good at a total cost of $25,000,what is its profit?

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.In the long run,________.

A duopolist faces the entire market demand for its product if ________.

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.If this market were perfectly competitive,the long-run equilibrium price would be ________.

Under Bertrand competition,________.

The quantity demanded for a duopolist's product is zero if ________.

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