Question 1

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A) few sellers. 
B) sellers selling similar but differentiated products. 
C) high barriers to entry. 
D) sellers acting to maximize revenue. 
A) few sellers. 
B) sellers selling similar but differentiated products. 
C) high barriers to entry. 
D) sellers acting to maximize revenue.

Question 2

Most economists are concerned about entry barriers.Why is this so important to them?

Accepted Answer

Entry barriers enable a firm to earn lon

Question 3

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run

Accepted Answer

A) monopolistically competitive markets achieve productive efficiency. 
B) monopolistically competitive markets achieve allocative efficiency. 
C) monopolistically competitive firms earn economic profits. 
D) monopolistically competitive firms have excess capacity. 
A) monopolistically competitive markets achieve productive efficiency. 
B) monopolistically competitive markets achieve allocative efficiency. 
C) monopolistically competitive firms earn economic profits. 
D) monopolistically competitive firms have excess capacity.

Question 4

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example,lawyers and medical doctors),but the laws also result in

Accepted Answer

A) higher prices and restrictions on the number of people who can enter the professions affected by the laws. 
B) economies of scale. 
C) ownership of a key input. 
D) an increase in the amount of output required to achieve minimum efficient scale. 
A) higher prices and restrictions on the number of people who can enter the professions affected by the laws. 
B) economies of scale. 
C) ownership of a key input. 
D) an increase in the amount of output required to achieve minimum efficient scale.

Question 5

If price exceeds average variable cost but is less than average total cost,a firm

Accepted Answer

A) should further differentiate its product. 
B) should stay in business for a while longer until its fixed costs expire. 
C) is making some profit but less than maximum profit. 
D) should shut down. 
A) should further differentiate its product. 
B) should stay in business for a while longer until its fixed costs expire. 
C) is making some profit but less than maximum profit. 
D) should shut down.

Question 6

An oligopoly between two firms is called

Accepted Answer

A) a biopoly. 
B) an oligopoly; there are no special terms used for oligopolies with different numbers of firms. 
C) a dual-firm oligopoly. 
D) a duopoly. 
A) a biopoly. 
B) an oligopoly; there are no special terms used for oligopolies with different numbers of firms. 
C) a dual-firm oligopoly. 
D) a duopoly.

Question 7

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

Accepted Answer

A) what the concentration ratio for the oligopolist's industry is. 
B) what the minimum efficient scale in the oligopolist's industry is. 
C) the demand curve and the marginal revenue curve of the oligopolist. 
D) the type of barrier to entry that exists in the oligopolist's industry. 
A) what the concentration ratio for the oligopolist's industry is. 
B) what the minimum efficient scale in the oligopolist's industry is. 
C) the demand curve and the marginal revenue curve of the oligopolist. 
D) the type of barrier to entry that exists in the oligopolist's industry.

Question 8

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

Accepted Answer

A) "follow the leader" pricing. 
B) price leadership. 
C) retaliation pricing. 
D) "tit-for-tat" pricing. 
A) "follow the leader" pricing. 
B) price leadership. 
C) retaliation pricing. 
D) "tit-for-tat" pricing.

Question 9

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

Accepted Answer

A) New firms that sell Italian ice will enter the market and Tony's cost curves will shift to the left. 
B) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the left. 
C) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the right. 
D) New firms that sell Italian ice will enter the market and Tony's demand curve will become more inelastic. 
A) New firms that sell Italian ice will enter the market and Tony's cost curves will shift to the left. 
B) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the left. 
C) New firms that sell Italian ice will enter the market and Tony's demand curve will shift to the right. 
D) New firms that sell Italian ice will enter the market and Tony's demand curve will become more inelastic.

Question 10

A major difference between monopolistic competition and perfect competition is

Accepted Answer

A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardized in monopolistic competition unlike in perfect competition. 
D) the barriers to entry in the two markets. 
A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardized in monopolistic competition unlike in perfect competition. 
D) the barriers to entry in the two markets.

Question 11

When a monopolistically competitive firm lowers its price,one good thing happens to the firm.What is this "one good thing" called?

Accepted Answer

A) the output effect 
B) the price effect 
C) the income effect 
D) the substitution effect 
A) the output effect 
B) the price effect 
C) the income effect 
D) the substitution effect

Question 12

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55,then its total profit is

Accepted Answer

A) $1,188. 
B) $1,092.30. 
C) $95.70. 
D) $1.45. 
A) $1,188. 
B) $1,092.30. 
C) $95.70. 
D) $1.45.

Question 13

For the monopolistically competitive firm

Accepted Answer

A) Price (P)= Marginal Revenue (MR)= Average Revenue (AR). 
B) P = MR > AR. 
C) P = AR > MR. 
D) P > MR = AR. 
A) Price (P)= Marginal Revenue (MR)= Average Revenue (AR). 
B) P = MR > AR. 
C) P = AR > MR. 
D) P > MR = AR.

Question 14

Figure 11-14
   
Figure 11-14 illustrates a monopolistically competitive firm.
-Refer to Figure 11-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

Accepted Answer

A) The firm wants to maximize accounting profit rather than economic profit. 
B) The firm would suffer an economic loss at Q₁ while it would break even at Q₀. 
C) The firm's marginal revenue would be negative at Q₁. 
D) Demand is not sufficient for consumers to buy Q₁. 
A) The firm wants to maximize accounting profit rather than economic profit. 
B) The firm would suffer an economic loss at Q₁ while it would break even at Q₀. 
C) The firm's marginal revenue would be negative at Q₁. 
D) Demand is not sufficient for consumers to buy Q₁.

Question 15

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Accepted Answer

A) True 
 B)False

Question 16

Figure 11-11
  
-Refer to Figure 11-11.The firm represented in the diagram

Accepted Answer

A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale. 
A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale.

Question 17

Table 11-8
 $\begin{array}{c}
\text { Saudi Arabia's (S) Choices }\
\text { Nigeria's (N) Choices }
\begin{array}{|c|c|c|}
\hline &{\text { Low Output }} & \text { High Output } \
\hline \text { Low Output } & \begin{array}{l}
\text { S: } \$ 100 \text { million profit } \
\text { N: } \$ 20 \text { million profit }
\end{array} & \begin{array}{l}
\text { S: } \$ 75 \text { million profit } \
\text { N: } \$ 12 \text { million profit }
\end{array} \
\hline \text { High Output } & \begin{array}{l}
\text { S: } \$ 80 \text { million profit } \
\text { N: } \$ 30 \text { million profit }
\end{array} & \begin{array}{l}
\text { S: } \$ 60 \text { million profit } \
\text { N: } \$ 20 \text { million profit }
\end{array} \
\hline
\end{array}\end{array}$ 
Suppose OPEC has only two producers, Saudi Arabia and Nigeria.Saudi Arabia has far more oil reserves and is the lower cost producer compared to Nigeria.The payoff matrix in Table 11-8 shows the profits earned per day by each country."Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 11-8.Is there a dominant strategy for Nigeria and,if so,what is it?

Accepted Answer

A) Yes, it has a dominant strategy depending on what Saudi Arabia does. 
B) No, there is no dominant strategy. 
C) Yes, the dominant strategy is to produce a low output. 
D) Yes, the dominant strategy is to produce a high output. 
A) Yes, it has a dominant strategy depending on what Saudi Arabia does. 
B) No, there is no dominant strategy. 
C) Yes, the dominant strategy is to produce a low output. 
D) Yes, the dominant strategy is to produce a high output.

Question 18

Arturo runs a Taco Bell franchise.He is selling 250 Gordita Supremes per week at a price of $2.75.If he lowers the price to $2.70,he will sell 251 Gordita Supremes.What is the marginal revenue of the 251st Gordita Supreme? If selling the extra Gordita Supreme adds $0.20 to Arturo's costs,what will be the effect on his profit from selling 251 Gordita Supremes instead of 250?

Accepted Answer

The marginal revenue of the 251st Gordit

Question 19

Figure 11-11
  
-Refer to Figure 11-11.The diagram depicts a firm

Accepted Answer

A) in a constant cost industry. 
B) in an increasing cost industry. 
C) in long run equilibrium. 
D) that is making short run losses. 
A) in a constant cost industry. 
B) in an increasing cost industry. 
C) in long run equilibrium. 
D) that is making short run losses.

Question 20

Is a monopolistically competitive firm allocatively efficient?

Accepted Answer

A) No, because it does not produce at minimum average total cost. 
B) Yes, because it produces where marginal cost equals marginal revenue. 
C) No, because price is greater than marginal cost. 
D) Yes, because price equals average total cost. 
A) No, because it does not produce at minimum average total cost. 
B) Yes, because it produces where marginal cost equals marginal revenue. 
C) No, because price is greater than marginal cost. 
D) Yes, because price equals average total cost.

The key characteristics of a monopolistically competitive market structure include

Most economists are concerned about entry barriers.Why is this so important to them?

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example,lawyers and medical doctors),but the laws also result in

If price exceeds average variable cost but is less than average total cost,a firm

An oligopoly between two firms is called

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

A major difference between monopolistic competition and perfect competition is

When a monopolistically competitive firm lowers its price,one good thing happens to the firm.What is this "one good thing" called?

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55,then its total profit is

For the monopolistically competitive firm

Figure 11-14 Figure 11-14 illustrates a monopolistically competitive firm. -Refer to Figure 11-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Figure 11-11 -Refer to Figure 11-11.The firm represented in the diagram

Figure 11-11 -Refer to Figure 11-11.The diagram depicts a firm

Is a monopolistically competitive firm allocatively efficient?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 11: Monopolistic Competition and Oligopoly

The key characteristics of a monopolistically competitive market structure include

Most economists are concerned about entry barriers.Why is this so important to them?

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run

The justification for occupational licensing laws is that they protect the public from incompetent practitioners (for example,lawyers and medical doctors),but the laws also result in

If price exceeds average variable cost but is less than average total cost,a firm

An oligopoly between two firms is called

The profit-maximizing level of output and the profit-maximizing price for an oligopolist cannot be calculated when we don't know

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

Tony's Italian Ice is a monopolistically competitive firm.If Tony's earns a profit in the short run,which of the following is most likely to occur?

A major difference between monopolistic competition and perfect competition is

When a monopolistically competitive firm lowers its price,one good thing happens to the firm.What is this "one good thing" called?

Suppose a monopolistically competitive firm's output where marginal revenue equals marginal cost is 66 units and the price corresponding to this quantity is $18.If the average total cost at this output is $16.55,then its total profit is

For the monopolistically competitive firm

Figure 11-14 Figure 11-14 illustrates a monopolistically competitive firm. -Refer to Figure 11-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Figure 11-11 -Refer to Figure 11-11.The firm represented in the diagram

Figure 11-11 -Refer to Figure 11-11.The diagram depicts a firm

Is a monopolistically competitive firm allocatively efficient?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters