Question 1

Firms in monopolistic competition compete by selling similar,but not identical products.

Accepted Answer

A) True 
 B)False

Question 2

A dominant strategy

Accepted Answer

A) is one that is the best for a firm, no matter what strategies other firms use. 
B) is one that a firm is forced into following by government policy. 
C) involves colluding with rivals to maximize joint profits. 
D) involves deciding what to do after all rivals have chosen their own strategies. 
A) is one that is the best for a firm, no matter what strategies other firms use. 
B) is one that a firm is forced into following by government policy. 
C) involves colluding with rivals to maximize joint profits. 
D) involves deciding what to do after all rivals have chosen their own strategies.

Question 3

A monopolistically competitive firm will

Accepted Answer

A) charge the same price as its competitors do. 
B) always produce at the minimum efficient scale of production. 
C) have some control over its price because its product is differentiated. 
D) produce an output level that is productively and allocatively efficient. 
A) charge the same price as its competitors do. 
B) always produce at the minimum efficient scale of production. 
C) have some control over its price because its product is differentiated. 
D) produce an output level that is productively and allocatively efficient.

Question 4

Starbucks started out small in 1971,but by 1993 Starbucks was a national chain and had coffeehouses in 38 countries.A key to the company's success was the realization by executives that

Accepted Answer

A) there was a demand for coffeehouses where consumers could sit and drink high-quality coffee. 
B) coffee prices would have to be cut in order for Starbucks to compete with other stores that sold coffee. 
C) they had to keep their stores open longer hours to attract a large number of customers. 
D) their stores should be located close to other stores that sold similar products. 
A) there was a demand for coffeehouses where consumers could sit and drink high-quality coffee. 
B) coffee prices would have to be cut in order for Starbucks to compete with other stores that sold coffee. 
C) they had to keep their stores open longer hours to attract a large number of customers. 
D) their stores should be located close to other stores that sold similar products.

Question 5

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

Accepted Answer

A) the original firm is driven into bankruptcy. 
B) the firm's demand curve is perfectly elastic. 
C) the firm's demand curve is tangent to its average total cost curve. 
D) the firm exits the market. 
A) the original firm is driven into bankruptcy. 
B) the firm's demand curve is perfectly elastic. 
C) the firm's demand curve is tangent to its average total cost curve. 
D) the firm exits the market.

Question 6

What is the difference between explicit collusion and implicit collusion?

Accepted Answer

Explicit collusion involves ma

Question 7

In a Nash equilibrium,all players select non-dominant strategies.

Accepted Answer

A) True 
 B)False

Question 8

One reason why the coffeehouse market is competitive is that

Accepted Answer

A) demand for specialty coffee is very high. 
B) it is trendy and therefore is likely to have a customer following. 
C) barriers to entry are low. 
D) consumption takes place in public. 
A) demand for specialty coffee is very high. 
B) it is trendy and therefore is likely to have a customer following. 
C) barriers to entry are low. 
D) consumption takes place in public.

Question 9

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 Saudi Arabia and,if so,what is it?

Accepted Answer

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

Question 10

Figure 11-11
  
-Refer to Figure 11-11.What is the amount of excess capacity?

Accepted Answer

A) Q₄ - Q₃ units 
B) Q₄ - Q₂ units 
C) Q₃ - Q₂ units 
D) Q₃ - Q₁ units 
A) Q₄ - Q₃ units 
B) Q₄ - Q₂ units 
C) Q₃ - Q₂ units 
D) Q₃ - Q₁ units

Question 11

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

Accepted Answer

A) The firm could exit the industry in the long run. 
B) If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C) If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D) If the firm remains in the industry in the long run it will break even. 
A) The firm could exit the industry in the long run. 
B) If the firm does not exit the industry in the long run its demand curve will shift to the left. 
C) If the firm does not exit the industry in the long run its demand curve will shift to the right. 
D) If the firm remains in the industry in the long run it will break even.

Question 12

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 portion of the marginal revenue of the 5th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A) output effect = $3.00; price effect = $0.50 
B) output effect = $1.50; price effect = $2.00 
C) output effect = $5.50; price effect = -$2.00 
D) output effect = $4.00; price effect = -$0.50 
A) output effect = $3.00; price effect = $0.50 
B) output effect = $1.50; price effect = $2.00 
C) output effect = $5.50; price effect = -$2.00 
D) output effect = $4.00; price effect = -$0.50

Question 13

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.If the firm represented in the diagram is currently producing and selling Qₐ units,what is the price charged?

Accepted Answer

A) P₀ 
B) P₁ 
C) P₂ 
D) P₃ 
A) P₀ 
B) P₁ 
C) P₂ 
D) P₃

Question 14

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

Accepted Answer

A) firms produce at the minimum point of their average cost curves. 
B) price equals marginal cost. 
C) firms earn normal profits. 
D) price equals marginal revenue. 
A) firms produce at the minimum point of their average cost curves. 
B) price equals marginal cost. 
C) firms earn normal profits. 
D) price equals marginal revenue.

Question 15

A four-firm concentration ratio measures

Accepted Answer

A) the fraction of an industry's sales accounted for by the four largest firms. 
B) the production of any four firms in an industry. 
C) how the four largest firms became so concentrated. 
D) the fraction of employment of the four largest firms in an industry. 
A) the fraction of an industry's sales accounted for by the four largest firms. 
B) the production of any four firms in an industry. 
C) how the four largest firms became so concentrated. 
D) the fraction of employment of the four largest firms in an industry.

Question 16

Figure 11-10
   
Figure 11-10 shows cost and demand curves for a monopolistically competitive producer of iced-tea.
-Refer to Figure 11-10.to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.At the profit-maximizing output level,how much profit will be realized?
d.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit-maximizing output

Question 17

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

Accepted Answer

A) interdependence. 
B) collusion. 
C) cutthroat competition. 
D) price fixing. 
A) interdependence. 
B) collusion. 
C) cutthroat competition. 
D) price fixing.

Question 18

Figure 11-3
  
-Refer to Figure 11-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Accepted Answer

A) X represents the gain (price effect)and Y the loss (output effect). 
B) X + Z represents the loss (output effect)and Y the gain (price effect). 
C) Y represents the gain (output effect)and X the loss (price effect). 
D) X represents the loss (price effect)and Y + Z the gain (output effect). 
A) X represents the gain (price effect)and Y the loss (output effect). 
B) X + Z represents the loss (output effect)and Y the gain (price effect). 
C) Y represents the gain (output effect)and X the loss (price effect). 
D) X represents the loss (price effect)and Y + Z the gain (output effect).

Question 19

Consumers benefit from monopolistic competition by

Accepted Answer

A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices. 
A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices.

Question 20

If a monopolistically competitive firm has excess capacity

Accepted Answer

A) it has exhausted all economies of scale. 
B) it is producing beyond the minimum efficient scale. 
C) it is experiences diseconomies of scale. 
D) it produces an output rate that places it on the negatively sloped portion of its average total cost curve. 
A) it has exhausted all economies of scale. 
B) it is producing beyond the minimum efficient scale. 
C) it is experiences diseconomies of scale. 
D) it produces an output rate that places it on the negatively sloped portion of its average total cost curve.

Firms in monopolistic competition compete by selling similar,but not identical products.

A dominant strategy

A monopolistically competitive firm will

Starbucks started out small in 1971,but by 1993 Starbucks was a national chain and had coffeehouses in 38 countries.A key to the company's success was the realization by executives that

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

What is the difference between explicit collusion and implicit collusion?

In a Nash equilibrium,all players select non-dominant strategies.

One reason why the coffeehouse market is competitive is that

Figure 11-11 -Refer to Figure 11-11.What is the amount of excess capacity?

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

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 portion of the marginal revenue of the 5th unit is due to the output effect and what portion is due to the price effect?

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.If the firm represented in the diagram is currently producing and selling Qₐ units,what is the price charged?

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

A four-firm concentration ratio measures

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

Figure 11-3 -Refer to Figure 11-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Consumers benefit from monopolistic competition by

If a monopolistically competitive firm has excess capacity

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

Exam 11: Monopolistic Competition and Oligopoly

Firms in monopolistic competition compete by selling similar,but not identical products.

A dominant strategy

A monopolistically competitive firm will

Starbucks started out small in 1971,but by 1993 Starbucks was a national chain and had coffeehouses in 38 countries.A key to the company's success was the realization by executives that

A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

What is the difference between explicit collusion and implicit collusion?

In a Nash equilibrium,all players select non-dominant strategies.

One reason why the coffeehouse market is competitive is that

Figure 11-11 -Refer to Figure 11-11.What is the amount of excess capacity?

Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?

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 portion of the marginal revenue of the 5th unit is due to the output effect and what portion is due to the price effect?

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.If the firm represented in the diagram is currently producing and selling Qₐ units,what is the price charged?

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

A four-firm concentration ratio measures

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

Figure 11-3 -Refer to Figure 11-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Consumers benefit from monopolistic competition by

If a monopolistically competitive firm has excess capacity

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