Question 1

A monopolistically competitive firm maximizes profit where

Accepted Answer

A) price = marginal revenue. 
B) price > marginal cost. 
C) marginal revenue > average revenue. 
D) total revenue > marginal cost. 
A) price = marginal revenue. 
B) price > marginal cost. 
C) marginal revenue > average revenue. 
D) total revenue > marginal cost.

Question 2

Consider two oligopolistic industries selling the same product in different locations.In the first industry,firms always match price changes by any other firm in the industry.In the second industry,firms always ignore price changes by any other firm.which of the following statements is true about these two industries,holding everything else constant?

Accepted Answer

A) Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
B) Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
C) Market prices are likely to be the same in both markets because they are both oligopolistic markets. 
D) No conclusions can be drawn about the pricing behavior under these very different firm behaviors. 
A) Market prices are likely to be higher in the first industry in which firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
B) Market prices are likely to be lower in the first industry where firms always match price changes by rival firms than in the second where firms ignore their rivals' price changes. 
C) Market prices are likely to be the same in both markets because they are both oligopolistic markets. 
D) No conclusions can be drawn about the pricing behavior under these very different firm behaviors.

Question 3

Figure 11-4
   
Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-4.What is the area that represents the loss made by the firm?

Accepted Answer

A) the area P₀adP₃ 
B) the area P₁bcP₂ 
C) the area P₀acP₂ 
D) the area P₂cdP₃ 
A) the area P₀adP₃ 
B) the area P₁bcP₂ 
C) the area P₀acP₂ 
D) the area P₂cdP₃

Question 4

Figure 11-4
   
Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-4.What is the area that represents the total revenue made by the firm?

Accepted Answer

A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) 0P₂cQₐ 
D) 0P₃dQₐ 
A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) 0P₂cQₐ 
D) 0P₃dQₐ

Question 5

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Accepted Answer

A) True 
 B)False

Question 6

Which government agency publishes four-firm concentration ratios?

Accepted Answer

A) the Economic Council 
B) the Federal Reserve System 
C) the U.S.Bureau of the Census 
D) the Treasury Department 
A) the Economic Council 
B) the Federal Reserve System 
C) the U.S.Bureau of the Census 
D) the Treasury Department

Question 7

Figure 11-3
  
-Refer to Figure 11-3.What is the marginal revenue of the sixth unit of output?

Accepted Answer

A) $4 
B) $5 
C) $9 
D) $54 
A) $4 
B) $5 
C) $9 
D) $54

Question 8

Table 11-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 7.50 & \$ 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$$
-Refer to Table 11-1.What is the marginal revenue of the 3rd unit?

Accepted Answer

A) $6.50 
B) $5.50 
C) $1.83 
D) $0.50 
A) $6.50 
B) $5.50 
C) $1.83 
D) $0.50

Question 9

Which of the following characteristics is common to monopolistic competition and perfect competition?

Accepted Answer

A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given. 
A) Firms produce identical products. 
B) Entry barriers into the industry are low. 
C) Each firm faces a downward-sloping demand curve. 
D) Firms take market prices as given.

Question 10

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

Accepted Answer

A) Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a monopolistic competitor. 
B) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a monopolistic competitor. 
C) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an oligopolist. 
D) They are all monopolistic competitors. 
A) Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a monopolistic competitor. 
B) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a monopolistic competitor. 
C) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an oligopolist. 
D) They are all monopolistic competitors.

Question 11

In the short run,a profit-maximizing firm's decision to produce should be guided by whether

Accepted Answer

A) it makes a profit. 
B) its marginal profit is maximized. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost. 
A) it makes a profit. 
B) its marginal profit is maximized. 
C) its total revenue exceeds its fixed cost. 
D) its total revenue covers its variable cost.

Question 12

Table 11-14
  
-Refer to Table 11-14.Saudi Arabia and Yemen must decide how much oil to produce.Since the demand for oil is inelastic,relatively low production rates drive up prices and profits.Saudi Arabia,the world's largest and lowest cost producer,is able to influence market price; it has an incentive to keep output low.Yemen,on the other hand,is a relatively high cost producer with much smaller reserves.Use the payoff matrix in Table 11-14 to answer the following questions.
a.What is the dominant strategy for Saudi Arabia?
b.What is the dominant strategy for Yemen?
c.What is the Nash equilibrium?

Accepted Answer

a. Saudi Arabia's dominant strategy is t

Question 13

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Accepted Answer

A) True 
 B)False

Question 14

Table 11-2
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (cases) }
\end{array} & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 75 & \$ 75 & \$ 60 \
\hline 2 & 70 & 140 & 85 \
\hline 3 & 65 & 195 & 105 \
\hline 4 & 60 & 240 & 115 \
\hline 5 & 55 & 275 & 130 \
\hline 6 & 50 & 300 & 155 \
\hline 7 & 45 & 315 & 190 \
\hline 8 & 40 & 320 & 230 \
\hline 9 & 35 & 315 & 280 \
\hline
\end{array}$$ 
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 11-2 shows the firm's demand and cost schedules.
-Refer to Table 11-2.What is Eco Energy's profit?

Accepted Answer

A) $125 
B) $140 
C) $145 
D) $150 
A) $125 
B) $140 
C) $145 
D) $150

Question 15

In monopolistic competition there is/are

Accepted Answer

A) many sellers who each face a downward-sloping demand curve. 
B) a few sellers who each face a downward-sloping demand curve. 
C) only one seller who faces a downward-sloping demand curve. 
D) many sellers who each face a perfectly elastic demand curve. 
A) many sellers who each face a downward-sloping demand curve. 
B) a few sellers who each face a downward-sloping demand curve. 
C) only one seller who faces a downward-sloping demand curve. 
D) many sellers who each face a perfectly elastic demand curve.

Question 16

A fundamental assumption in game theory is that players do not interact with each other.

Accepted Answer

A) True 
 B)False

Question 17

What is the profit-maximizing rule for a monopolistically competitive firm?

Accepted Answer

A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost 
A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost

Question 18

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Accepted Answer

A) True 
 B)False

Question 19

Patents,tariffs and quotas are all examples of

Accepted Answer

A) government-imposed barriers. 
B) economic regulations that increase efficiency. 
C) entry barriers that improve a country's standard of living. 
D) entry barriers that protect consumers. 
A) government-imposed barriers. 
B) economic regulations that increase efficiency. 
C) entry barriers that improve a country's standard of living. 
D) entry barriers that protect consumers.

Question 20

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

Accepted Answer

A) the firm would break even. 
B) the firm would shut down temporarily. 
C) the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D) the firm would earn an economic profit. 
A) the firm would break even. 
B) the firm would shut down temporarily. 
C) the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D) the firm would earn an economic profit.

A monopolistically competitive firm maximizes profit where

Figure 11-4 Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-4.What is the area that represents the loss made by the firm?

Figure 11-4 Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-4.What is the area that represents the total revenue made by the firm?

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Which government agency publishes four-firm concentration ratios?

Figure 11-3 -Refer to Figure 11-3.What is the marginal revenue of the sixth unit of output?

Table 11-1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11-1.What is the marginal revenue of the 3rd unit?

Which of the following characteristics is common to monopolistic competition and perfect competition?

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

In the short run,a profit-maximizing firm's decision to produce should be guided by whether

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

In monopolistic competition there is/are

A fundamental assumption in game theory is that players do not interact with each other.

What is the profit-maximizing rule for a monopolistically competitive firm?

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Patents,tariffs and quotas are all examples of

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

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

A monopolistically competitive firm maximizes profit where

Figure 11-4 Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-4.What is the area that represents the loss made by the firm?

Figure 11-4 Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-4.What is the area that represents the total revenue made by the firm?

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Which government agency publishes four-firm concentration ratios?

Figure 11-3 -Refer to Figure 11-3.What is the marginal revenue of the sixth unit of output?

Table 11-1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11-1.What is the marginal revenue of the 3rd unit?

Which of the following characteristics is common to monopolistic competition and perfect competition?

Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states.How would you characterize these stores?

In the short run,a profit-maximizing firm's decision to produce should be guided by whether

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

In monopolistic competition there is/are

A fundamental assumption in game theory is that players do not interact with each other.

What is the profit-maximizing rule for a monopolistically competitive firm?

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Patents,tariffs and quotas are all examples of

In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve then

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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