Question 1

In the long run,monopolistically competitive firms earn zero economic profits because

Accepted Answer

A) each firm produces a small share of total market output 
B) each firm produces a standardized product 
C) firms do not equate marginal cost and marginal revenue in the long run 
D) there is only one seller in the market 
E) entry of new firms eliminate profits 
A) each firm produces a small share of total market output 
B) each firm produces a standardized product 
C) firms do not equate marginal cost and marginal revenue in the long run 
D) there is only one seller in the market 
E) entry of new firms eliminate profits

Question 2

Since advertising increases a firm's average total cost,consumers ultimately pay for the cost of advertising in the form of a higher price in the long run.It is not possible for a firm to end up with a lower profit-maximizing price as the result of advertising.

Accepted Answer

A) True 
 B)False

Question 3

The outcomes of different combinations of strategies by two players in a game are indicated in the

Accepted Answer

A) strategy box 
B) payoff matrix 
C) competition matrix 
D) outcome dilemma 
E) collusion matrix 
A) strategy box 
B) payoff matrix 
C) competition matrix 
D) outcome dilemma 
E) collusion matrix

Question 4

In the long run,equilibrium for a monopolistically competitive firm resembles equilibrium for a monopoly in the sense that

Accepted Answer

A) both types of firms are able to earn economic profits 
B) marginal cost exceeds marginal revenue 
C) price equals marginal cost 
D) price exceeds marginal cost 
E) average revenue exceeds price 
A) both types of firms are able to earn economic profits 
B) marginal cost exceeds marginal revenue 
C) price equals marginal cost 
D) price exceeds marginal cost 
E) average revenue exceeds price

Question 5

What characteristic is common to perfect competition,monopolistic competition,and monopoly?

Accepted Answer

A) free entry and exit 
B) zero economic profit in the long run 
C) firms treat the market price as given 
D) firms maximize profits by producing where MR = MC 
E) small number of buyers relative to the number of sellers 
A) free entry and exit 
B) zero economic profit in the long run 
C) firms treat the market price as given 
D) firms maximize profits by producing where MR = MC 
E) small number of buyers relative to the number of sellers

Question 6

The U.S.market for locomotives is divided between two producers;General Electric has 70 percent of the market and General Motors has 30 percent.This market is an example of

Accepted Answer

A) a bilateral monopoly 
B) monopolistic competition 
C) a collusive monopoly 
D) a duopoly 
E) a cartel 
A) a bilateral monopoly 
B) monopolistic competition 
C) a collusive monopoly 
D) a duopoly 
E) a cartel

Question 7

Oligopolies feature

Accepted Answer

A) the absence of barriers to entry 
B) extensive competition 
C) the goal of profit maximization 
D) strategic interaction of firms 
E) product differentiation 
A) the absence of barriers to entry 
B) extensive competition 
C) the goal of profit maximization 
D) strategic interaction of firms 
E) product differentiation

Question 8

-Brian and Matt own the only two bicycle repair shops in town.Each must choose between a low price for repair work and a high price.The yearly economic profits from each strategy are indicated in Figure 11-12.The upper right side of each rectangle shows Brian's profits;the lower left side shows Matt's profits.Which of the following statements is correct for a one-trial game?

Accepted Answer

A) The market equilibrium price is the high price. 
B) A market equilibrium price cannot be established unless Brian and Matt collude. 
C) A market equilibrium price cannot be established unless Brian or Matt engages in tit-for-tat strategy. 
D) A market equilibrium price cannot be established without repeated trials. 
E) The market equilibrium price is the low price. 
A) The market equilibrium price is the high price. 
B) A market equilibrium price cannot be established unless Brian and Matt collude. 
C) A market equilibrium price cannot be established unless Brian or Matt engages in tit-for-tat strategy. 
D) A market equilibrium price cannot be established without repeated trials. 
E) The market equilibrium price is the low price.

Question 9

Figure 11-16
  
-Figure 11-16 illustrates the market for bananas.If the market consisted of two competitors and they formed a cartel,the market price and quantity would be

Accepted Answer

A) $.50 and 100 lbs of bananas 
B) $.50 and 130 lbs.of bananas 
C) $.75 and 100 lbs.of bananas 
D) $.75 and 130 lbs.of bananas 
E) indeterminate 
A) $.50 and 100 lbs of bananas 
B) $.50 and 130 lbs.of bananas 
C) $.75 and 100 lbs.of bananas 
D) $.75 and 130 lbs.of bananas 
E) indeterminate

Question 10

All of the following,except one,are sources of product differentiation.Which is the exception?

Accepted Answer

A) product quality 
B) location 
C) price 
D) consumer tastes 
E) buyers' perceptions 
A) product quality 
B) location 
C) price 
D) consumer tastes 
E) buyers' perceptions

Question 11

A natural oligopoly occurs when

Accepted Answer

A) few firms can afford to compete in the industry 
B) the minimum efficient scale is a large fraction of the market 
C) there are a large number of buyers and sellers of a standardized product 
D) minimum efficient scale is greater than total market demand at the price equal to minimum long run average total cost 
E) competitive pricing drives firms from the market 
A) few firms can afford to compete in the industry 
B) the minimum efficient scale is a large fraction of the market 
C) there are a large number of buyers and sellers of a standardized product 
D) minimum efficient scale is greater than total market demand at the price equal to minimum long run average total cost 
E) competitive pricing drives firms from the market

Question 12

Each of the following,except one,is a characteristic of a monopolistically competitive market.Which is the exception?

Accepted Answer

A) differentiated products 
B) no significant barriers to entry 
C) many buyers 
D) a standardized product 
E) many sellers 
A) differentiated products 
B) no significant barriers to entry 
C) many buyers 
D) a standardized product 
E) many sellers

Question 13

-The total fixed cost in Figure 11-2 is

Accepted Answer

A) increasing as more is produced 
B) decreasing as more is produced 
C) larger than variable costs 
D) less than $1,000 
E) more than $1,000 
A) increasing as more is produced 
B) decreasing as more is produced 
C) larger than variable costs 
D) less than $1,000 
E) more than $1,000

Question 14

If the minimum efficient scale of production is small relative to the size of a market,then

Accepted Answer

A) the industry will tend to be highly concentrated 
B) there will be much strategic interdependence among the sellers in the industry 
C) the industry is unlikely to be an oligopoly 
D) it is more likely that sellers in the industry will successfully collude 
E) there will be much merger activity in the industry 
A) the industry will tend to be highly concentrated 
B) there will be much strategic interdependence among the sellers in the industry 
C) the industry is unlikely to be an oligopoly 
D) it is more likely that sellers in the industry will successfully collude 
E) there will be much merger activity in the industry

Question 15

It is difficult to explain how firms behave in an oligopoly because

Accepted Answer

A) they produce differentiated products 
B) there are many suppliers and few buyers 
C) they do not attempt to maximize profits 
D) each takes into account the behavior of other firms when making pricing decisions 
E) there are no barriers to entry or exit 
A) they produce differentiated products 
B) there are many suppliers and few buyers 
C) they do not attempt to maximize profits 
D) each takes into account the behavior of other firms when making pricing decisions 
E) there are no barriers to entry or exit

Question 16

Which of the following best describes the idea of excess capacity in monopolistic competition?

Accepted Answer

A) Firms produce more output than is socially desirable. 
B) The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C) Due to product differentiation,firms choose output levels at which P > ATC. 
D) Firms keep some surplus output on hand in case there is a shift in demand for their product. 
E) The collective output of all firms in the market typically exceeds the quantity demanded. 
A) Firms produce more output than is socially desirable. 
B) The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C) Due to product differentiation,firms choose output levels at which P > ATC. 
D) Firms keep some surplus output on hand in case there is a shift in demand for their product. 
E) The collective output of all firms in the market typically exceeds the quantity demanded.

Question 17

A dominant strategy is one that

Accepted Answer

A) makes every player better off 
B) makes at least one player better off without hurting the competitiveness of any other player 
C) increases the total payoff for one player 
D) is best for a player,regardless of what strategy other players follow 
E) leads to quicker convergence to market equilibrium 
A) makes every player better off 
B) makes at least one player better off without hurting the competitiveness of any other player 
C) increases the total payoff for one player 
D) is best for a player,regardless of what strategy other players follow 
E) leads to quicker convergence to market equilibrium

Question 18

Which of the following would likely be traded in a monopolistically competitive market?

Accepted Answer

A) Electricity 
B) Airline Tickets 
C) Pizza 
D) Wheat 
E) Water 
A) Electricity 
B) Airline Tickets 
C) Pizza 
D) Wheat 
E) Water

Question 19

-Figure 11-10 illustrates the long-run market demand curve and a typical firm's costs.How many firms are likely to exist in the long run in this industry?

Accepted Answer

A) none 
B) 1 
C) 2 
D) 3 
E) 4 
A) none 
B) 1 
C) 2 
D) 3 
E) 4

Question 20

Paul the Pizza Man used a new method to streamline pizza assembly that allowed him to make more pizzas and thus make greater revenue.Paul began to earn positive economic profits.In the long run,Paul will

Accepted Answer

A) continue to earn economic profits 
B) earn zero economic profits because other pizza places will begin to use his system 
C) continue to earn economic profits because Paul will get a patent on his new method 
D) earn negative economic profits because innovators always loose money 
E) earn zero economic profits because the government does not allow monopolistically competitive firms to earn economic profits 
A) continue to earn economic profits 
B) earn zero economic profits because other pizza places will begin to use his system 
C) continue to earn economic profits because Paul will get a patent on his new method 
D) earn negative economic profits because innovators always loose money 
E) earn zero economic profits because the government does not allow monopolistically competitive firms to earn economic profits

In the long run,monopolistically competitive firms earn zero economic profits because

Since advertising increases a firm's average total cost,consumers ultimately pay for the cost of advertising in the form of a higher price in the long run.It is not possible for a firm to end up with a lower profit-maximizing price as the result of advertising.

The outcomes of different combinations of strategies by two players in a game are indicated in the

In the long run,equilibrium for a monopolistically competitive firm resembles equilibrium for a monopoly in the sense that

What characteristic is common to perfect competition,monopolistic competition,and monopoly?

The U.S.market for locomotives is divided between two producers;General Electric has 70 percent of the market and General Motors has 30 percent.This market is an example of

Oligopolies feature

Figure 11-16 -Figure 11-16 illustrates the market for bananas.If the market consisted of two competitors and they formed a cartel,the market price and quantity would be

All of the following,except one,are sources of product differentiation.Which is the exception?

A natural oligopoly occurs when

Each of the following,except one,is a characteristic of a monopolistically competitive market.Which is the exception?

-The total fixed cost in Figure 11-2 is

If the minimum efficient scale of production is small relative to the size of a market,then

It is difficult to explain how firms behave in an oligopoly because

Which of the following best describes the idea of excess capacity in monopolistic competition?

A dominant strategy is one that

Which of the following would likely be traded in a monopolistically competitive market?

-Figure 11-10 illustrates the long-run market demand curve and a typical firm's costs.How many firms are likely to exist in the long run in this industry?

Paul the Pizza Man used a new method to streamline pizza assembly that allowed him to make more pizzas and thus make greater revenue.Paul began to earn positive economic profits.In the long run,Paul will

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 11: Monopolistic Competition and Oligopoly

In the long run,monopolistically competitive firms earn zero economic profits because

Since advertising increases a firm's average total cost,consumers ultimately pay for the cost of advertising in the form of a higher price in the long run.It is not possible for a firm to end up with a lower profit-maximizing price as the result of advertising.

The outcomes of different combinations of strategies by two players in a game are indicated in the

In the long run,equilibrium for a monopolistically competitive firm resembles equilibrium for a monopoly in the sense that

What characteristic is common to perfect competition,monopolistic competition,and monopoly?

The U.S.market for locomotives is divided between two producers;General Electric has 70 percent of the market and General Motors has 30 percent.This market is an example of

Oligopolies feature

Figure 11-16 -Figure 11-16 illustrates the market for bananas.If the market consisted of two competitors and they formed a cartel,the market price and quantity would be

All of the following,except one,are sources of product differentiation.Which is the exception?

A natural oligopoly occurs when

Each of the following,except one,is a characteristic of a monopolistically competitive market.Which is the exception?

-The total fixed cost in Figure 11-2 is

If the minimum efficient scale of production is small relative to the size of a market,then

It is difficult to explain how firms behave in an oligopoly because

Which of the following best describes the idea of excess capacity in monopolistic competition?

A dominant strategy is one that

Which of the following would likely be traded in a monopolistically competitive market?

-Figure 11-10 illustrates the long-run market demand curve and a typical firm's costs.How many firms are likely to exist in the long run in this industry?

Paul the Pizza Man used a new method to streamline pizza assembly that allowed him to make more pizzas and thus make greater revenue.Paul began to earn positive economic profits.In the long run,Paul will

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

Perfect Competition

B:Perfect Competition

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters