Question 1

Oligopolies are difficult to analyze because

Accepted Answer

A) the firms are so large. 
B) demand and cost curves do not exist for these types of industries. 
C) how firms respond to a price change by a rival is uncertain. 
D) oligopolies are a recent development so economists have not had time to develop models. 
A) the firms are so large. 
B) demand and cost curves do not exist for these types of industries. 
C) how firms respond to a price change by a rival is uncertain. 
D) oligopolies are a recent development so economists have not had time to develop models.

Question 2

All of the following are examples of oligopolistic markets except

Accepted Answer

A) the broadcasting industry. 
B) aircraft manufacture. 
C) college bookstores. 
D) seafood restaurant chains. 
A) the broadcasting industry. 
B) aircraft manufacture. 
C) college bookstores. 
D) seafood restaurant chains.

Question 3

Figure 11-11
  
-Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing output?

Accepted Answer

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

Question 4

Which of the following is not a shortcoming of the concentration ratio as a measure of the extent of competition in an industry?

Accepted Answer

A) Concentration ratios do not include sales in the United States by foreign firms. 
B) Concentration ratios are calculated for the national market, even though the competition in some industries is mainly local. 
C) Concentration ratios assign weights to only the four largest firms in an industry. 
D) Concentration ratios do not address the fact that competition sometimes exists between firms in different industries. 
A) Concentration ratios do not include sales in the United States by foreign firms. 
B) Concentration ratios are calculated for the national market, even though the competition in some industries is mainly local. 
C) Concentration ratios assign weights to only the four largest firms in an industry. 
D) Concentration ratios do not address the fact that competition sometimes exists between firms in different industries.

Question 5

Table 11-11
 \(\begin{array}{c}
 \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad\text { Sturdy Homes (S) Strategies }\
\text { My Haven's (M)Strategies}
\begin{array}{|c|c|c|c|} 
\hline& \mathbf{\$ 8 , 0 0 0} & \mathbf{\$ 1 0 , 0 0 0} & \mathbf{\$ 1 2 , 0 0 0} \
\hline \$8, 000 & \text { S: } \$ 4 \text { million } & \text { S: } \$ 2 \text { million } & \text { \$: } \$ 1 \text { million } \
& \text { M: } \$ 4 \text { million } & \text { M: } \$ 6 \text { million } & \text { M: } \$ 7 \text { million } \
\hline {\mathbf{\$ 1 0 , 0 0 0}} & \text { S: } \$ 6 \text { million } & \text { S: } \$ 5 \text { million } & \text { S: } \$ 2 \text { million } \
& \text { M: } \$ 2 \text { million } & \text { M: } \$ 5 \text { million } & \text { M: } \$ 6 \text { million } \
\hline{\$ 12,000} & \text { S: } \$ 7 \text { million } & \text { S: } \$ 6 \text { million } & \text { S: } \$ 3 \text { million } \
& \text { M: } \$ 1 \text { million } & \text { M: } \$ 2 \text { million } & \text { M: } \$ 3 \text { million } \
\hline
\end{array}\end{array}\) 
There are two mobile home manufacturers in Nevada, Sturdy Homes (S)and My Haven (M). Sturdy Homes has been in the market for a long time and must now compete with newcomer, My Haven.Suppose that Sturdy Homes believes that My Haven will match any price it sets.Use Table 11-11 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
-Refer to Table 11-11.What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?

Accepted Answer

A) Price = $8,000; expected profit = $7 million 
B) Price = $8,000; expected profit = $4 million 
C) Price = $10,000; expected profit = $5 million 
D) Price = $12,000; expected profit = $3 million 
A) Price = $8,000; expected profit = $7 million 
B) Price = $8,000; expected profit = $4 million 
C) Price = $10,000; expected profit = $5 million 
D) Price = $12,000; expected profit = $3 million

Question 6

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A) There are many buyers and sellers. 
B) There are low barriers to entry. 
C) Average revenue is equal to price. 
D) The products sold by all firms are identical. 
A) There are many buyers and sellers. 
B) There are low barriers to entry. 
C) Average revenue is equal to price. 
D) The products sold by all firms are identical.

Question 7

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 4th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A) output effect = $24.00; price effect = $19.50 
B) output effect = $6.50; price effect = $2.00 
C) output effect = -$0.50; price effect = $5.00 
D) output effect = $6.00; price effect = -$1.50 
A) output effect = $24.00; price effect = $19.50 
B) output effect = $6.50; price effect = $2.00 
C) output effect = -$0.50; price effect = $5.00 
D) output effect = $6.00; price effect = -$1.50

Question 8

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

Accepted Answer

A) the automobile cannot be improved upon in any way by new producers. 
B) new auto makers cannot obtain necessary inputs to produce new cars. 
C) governments restrict who can produce automobiles. 
D) new producers cannot match the economies of scale of existing auto makers. 
A) the automobile cannot be improved upon in any way by new producers. 
B) new auto makers cannot obtain necessary inputs to produce new cars. 
C) governments restrict who can produce automobiles. 
D) new producers cannot match the economies of scale of existing auto makers.

Question 9

One reason Starbucks experienced a decline in sales in the late 2000s is because

Accepted Answer

A) the product they offered was becoming less differentiated from their competitors' products. 
B) the coffeehouse market transitioned from being monopolistically competitive to perfectly competitive. 
C) barriers to entry became more restrictive in the coffeehouse market. 
D) the number of competitors in the market declined dramatically. 
A) the product they offered was becoming less differentiated from their competitors' products. 
B) the coffeehouse market transitioned from being monopolistically competitive to perfectly competitive. 
C) barriers to entry became more restrictive in the coffeehouse market. 
D) the number of competitors in the market declined dramatically.

Question 10

There is much evidence to suggest that airlines are more likely to match price cuts than price increases.Which of the following best explains this evidence?

Accepted Answer

A) The law of demand which states that an increase in price leads to a decrease in quantity demanded. 
B) No one airline wants to be the first to renege on a tacit collusive agreement in which all airlines implicitly agree to match price cuts but not price increases. 
C) An airline fears that if it does not match a price cut, its sales may fall considerably but if it does not match a price increase, it will be able to attract customers away from its rivals. 
D) Airlines have different costs of production and therefore it is more difficult to agree on a price increase than on a price decrease. 
A) The law of demand which states that an increase in price leads to a decrease in quantity demanded. 
B) No one airline wants to be the first to renege on a tacit collusive agreement in which all airlines implicitly agree to match price cuts but not price increases. 
C) An airline fears that if it does not match a price cut, its sales may fall considerably but if it does not match a price increase, it will be able to attract customers away from its rivals. 
D) Airlines have different costs of production and therefore it is more difficult to agree on a price increase than on a price decrease.

Question 11

Suppose Jason owns a small pastry shop.Jason wants to maximize his profit,and thinking back to the college microeconomics class he took in college,he decides he needs to produce a quantity of pastries which will minimize his average total cost.Will Jason's strategy necessarily maximize profits for his pastry shop?

Accepted Answer

A) Yes; Since jason's pastry shop is in a perfectly competitive market, the only way to maximize profit is to produce the quantity where average total cost is minimized. 
B) Not necessarily; This strategy will only maximize Jason's profit in the long run, but not in the short run. 
C) No; In order to maximize profit, Jason would never want to produce the quantity where average total cost is minimized. 
D) Not necessarily; Depending on demand, Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum. 
A) Yes; Since jason's pastry shop is in a perfectly competitive market, the only way to maximize profit is to produce the quantity where average total cost is minimized. 
B) Not necessarily; This strategy will only maximize Jason's profit in the long run, but not in the short run. 
C) No; In order to maximize profit, Jason would never want to produce the quantity where average total cost is minimized. 
D) Not necessarily; Depending on demand, Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum.

Question 12

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

Accepted Answer

A prisoners' dilemma is a game in which

Question 13

Table 11-10
 $\begin{array}{c}
\text { Ming }\
\text { Henri }
\begin{array}{|l|l|l|}
\hline & \begin{array}{l}
\text { offers free pickup } \
\text { and delivery }
\end{array} & \begin{array}{l}
\text { does not offer free pickup } \
\text { and delnvery }
\end{array} \
\hline \begin{array}{l}
\text { offers free pickup } \
\text { and delivery }
\end{array} & \begin{array}{l}
\text { Ming } \$ 20,000 \
\text { Henri: } \$ 50,000
\end{array} & \begin{array}{l}
\text { Ming } \$ 10,000 \
\text { Henri } \$ 25,000
\end{array} \
\hline \begin{array}{l}
\text { does not offer free pickup } \
\text { and delivery }
\end{array} & \begin{array}{l}
\text { Ming } \$ 30,000 \
\text { Henri: } \$ 40,000
\end{array} & \begin{array}{l}
\text { Ming } \$ 15,000 \
\text { Henri } \$ 45,000
\end{array} \
\hline
\end{array}\end{array}$ 
Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services. Table 11-10 shows the payoff matrix containing the expected quarterly profits for each firm.
-Refer to Table 11-10.Does Henri have a dominant strategy? If yes,what is it?

Accepted Answer

A) Yes, Henri's dominant strategy is to not offer free pickup and delivery. 
B) Yes, Henri's dominant strategy is to offer free pickup and delivery. 
C) No, Henri does not have a dominant strategy - his best outcome depends on what Ming does. 
D) Yes, Henri's dominant strategy is to wait and see what Ming does first. 
A) Yes, Henri's dominant strategy is to not offer free pickup and delivery. 
B) Yes, Henri's dominant strategy is to offer free pickup and delivery. 
C) No, Henri does not have a dominant strategy - his best outcome depends on what Ming does. 
D) Yes, Henri's dominant strategy is to wait and see what Ming does first.

Question 14

Oligopoly differs from perfect competition and monopolistic competition in that

Accepted Answer

A) barriers to entry are lower in oligopoly industries than they are in perfectly competitive and monopolistically competitive industries. 
B) demand and marginal revenue curves are more useful for analyzing oligopoly than they are for analyzing perfect competition and monopolistic competition. 
C) because oligopoly firms often react when other firms in their industry change their prices, it is difficult to know what the oligopolist's demand curve looks like. 
D) the concentration ratios of oligopoly industries are lower than they are for perfectly competitive and monopolistically competitive firms. 
A) barriers to entry are lower in oligopoly industries than they are in perfectly competitive and monopolistically competitive industries. 
B) demand and marginal revenue curves are more useful for analyzing oligopoly than they are for analyzing perfect competition and monopolistic competition. 
C) because oligopoly firms often react when other firms in their industry change their prices, it is difficult to know what the oligopolist's demand curve looks like. 
D) the concentration ratios of oligopoly industries are lower than they are for perfectly competitive and monopolistically competitive firms.

Question 15

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

Accepted Answer

A) the U.S.Postal Service 
B) Microsoft 
C) a movie theater 
D) an automobile manufacturer 
A) the U.S.Postal Service 
B) Microsoft 
C) a movie theater 
D) an automobile manufacturer

Question 16

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Accepted Answer

A) True 
 B)False

Question 17

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Accepted Answer

A) True 
 B)False

Question 18

What is an oligopoly? Give two examples of oligopolistic industries in the United States.

Accepted Answer

Oligopoly is a market structur

Question 19

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

Accepted Answer

A) ownership of a key input 
B) a government-imposed barrier 
C) a patent on the manufacture of aluminum 
D) economies of scale 
A) ownership of a key input 
B) a government-imposed barrier 
C) a patent on the manufacture of aluminum 
D) economies of scale

Question 20

According to a Wall Street Journal article,hhgregg has differentiated itself from its competition,particularly from large chain stores such as Best Buy

Accepted Answer

A) by charging lower prices. 
B) by providing better customer service. 
C) by selling inferior products. 
D) by offering discounts for cash sales. 
A) by charging lower prices. 
B) by providing better customer service. 
C) by selling inferior products. 
D) by offering discounts for cash sales.

Oligopolies are difficult to analyze because

All of the following are examples of oligopolistic markets except

Figure 11-11 -Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing output?

Which of the following is not a shortcoming of the concentration ratio as a measure of the extent of competition in an industry?

Which of the following is not a characteristic of monopolistic competition?

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 4th unit is due to the output effect and what portion is due to the price effect?

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

One reason Starbucks experienced a decline in sales in the late 2000s is because

There is much evidence to suggest that airlines are more likely to match price cuts than price increases.Which of the following best explains this evidence?

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

Oligopoly differs from perfect competition and monopolistic competition in that

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

What is an oligopoly? Give two examples of oligopolistic industries in the United States.

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

According to a Wall Street Journal article,hhgregg has differentiated itself from its competition,particularly from large chain stores such as Best Buy

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

Oligopolies are difficult to analyze because

All of the following are examples of oligopolistic markets except

Figure 11-11 -Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing output?

Which of the following is not a shortcoming of the concentration ratio as a measure of the extent of competition in an industry?

Which of the following is not a characteristic of monopolistic competition?

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 4th unit is due to the output effect and what portion is due to the price effect?

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

One reason Starbucks experienced a decline in sales in the late 2000s is because

There is much evidence to suggest that airlines are more likely to match price cuts than price increases.Which of the following best explains this evidence?

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

Oligopoly differs from perfect competition and monopolistic competition in that

Which of the following is the best example of a firm that competes in a monopolistically competitive market?

If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

What is an oligopoly? Give two examples of oligopolistic industries in the United States.

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

According to a Wall Street Journal article,hhgregg has differentiated itself from its competition,particularly from large chain stores such as Best Buy

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