Question 1

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A) the beef market 
B) the pharmaceutical industry 
C) public education 
D) the beauty products industry 
A) the beef market 
B) the pharmaceutical industry 
C) public education 
D) the beauty products industry

Question 2

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

Accepted Answer

A) because each player had agreed before the game started to minimize the harm that he can inflict on the other players 
B) because each player is uncertain how other players will play the game 
C) because players must choose from a limited number of non-dominant strategies 
D) because each rational player has a dominant strategy to play a certain way regardless of what other players do 
A) because each player had agreed before the game started to minimize the harm that he can inflict on the other players 
B) because each player is uncertain how other players will play the game 
C) because players must choose from a limited number of non-dominant strategies 
D) because each rational player has a dominant strategy to play a certain way regardless of what other players do

Question 3

A monopolistically competitive firm chooses

Accepted Answer

A) both the quantity of output to produce and the price at which it will sell its output. 
B) the price of the product it sells but market forces determine the quantity it will be able to sell. 
C) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry. 
A) both the quantity of output to produce and the price at which it will sell its output. 
B) the price of the product it sells but market forces determine the quantity it will be able to sell. 
C) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.

Question 4

What is a prisoner's dilemma?

Accepted Answer

A) a game that involves no dominant strategies 
B) a game in which prisoners are stumped because they cannot communicate with each other 
C) a game in which players act in rational, self-interested ways that leave everyone worse off 
D) a game in which players collude to outfox authorities 
A) a game that involves no dominant strategies 
B) a game in which prisoners are stumped because they cannot communicate with each other 
C) a game in which players act in rational, self-interested ways that leave everyone worse off 
D) a game in which players collude to outfox authorities

Question 5

As a measure of competition in an industry,concentration ratios have several flaws.One of these flaws is that concentration ratios

Accepted Answer

A) assume that all industries have low barriers to entry. 
B) assume that a ratio less than 40 percent means an industry is perfectly competitive. 
C) assume there are only four firms in an industry. 
D) are calculated for the national market, even though competition in some industries is mainly local. 
A) assume that all industries have low barriers to entry. 
B) assume that a ratio less than 40 percent means an industry is perfectly competitive. 
C) assume there are only four firms in an industry. 
D) are calculated for the national market, even though competition in some industries is mainly local.

Question 6

Figure 11-13
  
-Refer to Figure 11-13.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

Accepted Answer

A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits. 
A) Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B) New firms will enter the market causing the demand to decrease for existing firms. 
C) Inefficient firms will exit the market and new cost-efficient firms will enter the market. 
D) Competition will be intensified as firms strive to make long-run profits.

Question 7

Monopolistically competitive firms face a perfectly elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 8

The marginal revenue of a monopolistically competitive firm

Accepted Answer

A) cannot be negative because the price the firm charges will always be greater than zero. 
B) can be negative if the firm charges a high price. 
C) can be negative if the firm charges a low price. 
D) will equal average revenue. 
A) cannot be negative because the price the firm charges will always be greater than zero. 
B) can be negative if the firm charges a high price. 
C) can be negative if the firm charges a low price. 
D) will equal average revenue.

Question 9

Collusion between two firms occurs when

Accepted Answer

A) the firms independently pursue strategies that could hurt each other. 
B) firms explicitly or implicitly agree to adopt a uniform business strategy. 
C) announce that each will match its rival's market price. 
D) firms act altruistically to bring about the economically efficient outcome. 
A) the firms independently pursue strategies that could hurt each other. 
B) firms explicitly or implicitly agree to adopt a uniform business strategy. 
C) announce that each will match its rival's market price. 
D) firms act altruistically to bring about the economically efficient outcome.

Question 10

When a firm faces a downward-sloping demand curve,marginal revenue

Accepted Answer

A) must exceed price because the price effect outweighs the output effect. 
B) is less than price because a firm must lower its price to sell more. 
C) equals price because the firm sells a standardized product. 
D) must exceed price because the output effect outweighs the price effect. 
A) must exceed price because the price effect outweighs the output effect. 
B) is less than price because a firm must lower its price to sell more. 
C) equals price because the firm sells a standardized product. 
D) must exceed price because the output effect outweighs the price effect.

Question 11

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

Accepted Answer

A) Fixed costs in the airline industry are very large, but the marginal cost of flying one more passenger is very low. 
B) Airlines receive a subsidy from the government for each flight that is fully booked and departs on time. 
C) The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked.These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings. 
D) Cutting prices makes the airlines more popular with their customers, who may fly with the same airline in the future as the result of buying low-price tickets. 
A) Fixed costs in the airline industry are very large, but the marginal cost of flying one more passenger is very low. 
B) Airlines receive a subsidy from the government for each flight that is fully booked and departs on time. 
C) The Federal Aviation Administration ranks each airline based on the percentage of flights that are fully booked.These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings. 
D) Cutting prices makes the airlines more popular with their customers, who may fly with the same airline in the future as the result of buying low-price tickets.

Question 12

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

Accepted Answer

A) OPEC is a monopoly, but it is located outside of the boundaries of any one country.This is the definition of a cartel. 
B) this is the term used for an oligopoly that is controlled by national governments rather than private firms. 
C) it is a group of firms that collude to restrict output to increase prices and profits. 
D) this is the term economists use to describe an oligopoly that sells a standardized product, such as oil, rather than a differentiated product, such as automobiles. 
A) OPEC is a monopoly, but it is located outside of the boundaries of any one country.This is the definition of a cartel. 
B) this is the term used for an oligopoly that is controlled by national governments rather than private firms. 
C) it is a group of firms that collude to restrict output to increase prices and profits. 
D) this is the term economists use to describe an oligopoly that sells a standardized product, such as oil, rather than a differentiated product, such as automobiles.

Question 13

If firms in a monopolistically competitive industry are making profits in the short run

Accepted Answer

A) barriers to entry will be erected to keep out rivals. 
B) some firms will ultimately exit the industry. 
C) they will resort to advertising wars to help sustain these profits. 
D) new firms will enter the market. 
A) barriers to entry will be erected to keep out rivals. 
B) some firms will ultimately exit the industry. 
C) they will resort to advertising wars to help sustain these profits. 
D) new firms will enter the market.

Question 14

Which of the following characteristics is not common to monopolistic competition and perfect competition?

Accepted Answer

A) Firms act to maximize profit. 
B) Entry barriers into the industry are low. 
C) The market demand curve is downward-sloping. 
D) Firms take market prices as given. 
A) Firms act to maximize profit. 
B) Entry barriers into the industry are low. 
C) The market demand curve is downward-sloping. 
D) Firms take market prices as given.

Question 15

Of all barriers to entry,the most important are those that are due to

Accepted Answer

A) ownership of a key input. 
B) economies of scale. 
C) government-imposed barriers. 
D) the Herfindahl-Hirschman Index. 
A) ownership of a key input. 
B) economies of scale. 
C) government-imposed barriers. 
D) the Herfindahl-Hirschman Index.

Question 16

Figure 11-9
  
-Refer to Figure 11-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel B 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel A and Panel B

Question 17

If a significant number of smokers switch from smoking tobacco cigarettes to e-cigarettes,a company like NJOY will likely find its demand curve shifting to the ________ and its marginal revenue curve shifting to the ________ as more competitors enter the market.

Accepted Answer

A) right; right 
B) right; left 
C) left; right 
D) left; left 
A) right; right 
B) right; left 
C) left; right 
D) left; left

Question 18

Table 11-6
 \(\begin{array}{c}
 \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad\text { Godrickporter's (G) Choices }\
\text { Star Connections' (S) Choices }
\begin{array}{|c|c|c|}
\hline & {\begin{array}{c}
\text { Increase } \
\text { advertising } \
\text { budget }
\end{array}} & {\begin{array}{c}
\text { Leave } \
\text { advertising } \
\text { budget as is }
\end{array}} \
\hline \begin{array}{c}
\text { Increase advertising } \
\text { budget }
\end{array} & \begin{array}{c}
\mathrm{G}: \$ 16,000 \text { profit } \
\mathrm{S}: \$ 8,000 \text { profit }
\end{array} & \begin{array}{c}
\mathrm{G}: \$ 12,000 \text { profit } \
\mathrm{S}: \$ 15,000 \text { profit }
\end{array} \
\hline \begin{array}{c}
\text { Leave advertising } \
\text { budget as is }
\end{array} & \begin{array}{l}
\mathrm{G}: \$ 8,000 \text { profit } \
\mathrm{S}: \$ 10,000 \text { profit }
\end{array} & \begin{array}{l}
\mathrm{G}: \$ 6,000 \text { profit } \
\mathrm{S}: \$ 12,000 \text { profit }
\end{array} \
\hline
\end{array}\end{array}\) 
Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 11-6 shows the payoff matrix for this advertising game.
-Refer to Table 11-6.What is the Nash equilibrium in this game?

Accepted Answer

A) There is no Nash equilibrium. 
B) Godrickporter increases its advertising budget, but Star Connections does not. 
C) Star Connections increases its advertising budget, but Godrickporter does not. 
D) Both Godrickporter and Star Connections increase their advertising budgets. 
A) There is no Nash equilibrium. 
B) Godrickporter increases its advertising budget, but Star Connections does not. 
C) Star Connections increases its advertising budget, but Godrickporter does not. 
D) Both Godrickporter and Star Connections increase their advertising budgets.

Question 19

For productive efficiency to hold

Accepted Answer

A) price must equal the marginal cost of the last unit produced. 
B) price must equal marginal revenue of the last unit sold. 
C) average variable cost is minimized in production. 
D) average total cost is minimized in production. 
A) price must equal the marginal cost of the last unit produced. 
B) price must equal marginal revenue of the last unit sold. 
C) average variable cost is minimized in production. 
D) average total cost is minimized in production.

Question 20

Figure 11-5
  
-Refer to Figure 11-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not,what would you recommend to the firm?

Accepted Answer

A) Yes, it is maximizing its profit by charging the highest price possible. 
B) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can.It should sell Qd units at a price of Pd. 
C) No, it is not; it should lower its price to Pc and sell Qc units. 
D) No, it is not; it should lower its price to Pb and sell Qb units. 
A) Yes, it is maximizing its profit by charging the highest price possible. 
B) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can.It should sell Qd units at a price of Pd. 
C) No, it is not; it should lower its price to Pc and sell Qc units. 
D) No, it is not; it should lower its price to Pb and sell Qb units.

Which of the following is the best example of an oligopolistic industry?

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

A monopolistically competitive firm chooses

What is a prisoner's dilemma?

As a measure of competition in an industry,concentration ratios have several flaws.One of these flaws is that concentration ratios

Figure 11-13 -Refer to Figure 11-13.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

Monopolistically competitive firms face a perfectly elastic demand curve.

The marginal revenue of a monopolistically competitive firm

Collusion between two firms occurs when

When a firm faces a downward-sloping demand curve,marginal revenue

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

If firms in a monopolistically competitive industry are making profits in the short run

Which of the following characteristics is not common to monopolistic competition and perfect competition?

Of all barriers to entry,the most important are those that are due to

Figure 11-9 -Refer to Figure 11-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

If a significant number of smokers switch from smoking tobacco cigarettes to e-cigarettes,a company like NJOY will likely find its demand curve shifting to the and its marginal revenue curve shifting to the as more competitors enter the market.

For productive efficiency to hold

Figure 11-5 -Refer to Figure 11-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not,what would you recommend to the firm?

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

Which of the following is the best example of an oligopolistic industry?

Why does a prisoner's dilemma lead to a noncooperative equilibrium?

A monopolistically competitive firm chooses

What is a prisoner's dilemma?

As a measure of competition in an industry,concentration ratios have several flaws.One of these flaws is that concentration ratios

Figure 11-13 -Refer to Figure 11-13.If the diagram represents a typical firm in the market,what is likely to happen in the long run?

Monopolistically competitive firms face a perfectly elastic demand curve.

The marginal revenue of a monopolistically competitive firm

Collusion between two firms occurs when

When a firm faces a downward-sloping demand curve,marginal revenue

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

If firms in a monopolistically competitive industry are making profits in the short run

Which of the following characteristics is not common to monopolistic competition and perfect competition?

Of all barriers to entry,the most important are those that are due to

Figure 11-9 -Refer to Figure 11-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

If a significant number of smokers switch from smoking tobacco cigarettes to e-cigarettes,a company like NJOY will likely find its demand curve shifting to the ________ and its marginal revenue curve shifting to the ________ as more competitors enter the market.

For productive efficiency to hold

Figure 11-5 -Refer to Figure 11-5.The candy store represented in the diagram is currently selling Qₐ units of candy at a price of Pₐ.Is this candy store maximizing its profit and if it is not,what would you recommend to the firm?

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

If a significant number of smokers switch from smoking tobacco cigarettes to e-cigarettes,a company like NJOY will likely find its demand curve shifting to the and its marginal revenue curve shifting to the as more competitors enter the market.