Question 1

Which of the following is not a barrier to entry?

Accepted Answer

A) an inelastic demand curve 
B) economies of scale 
C) ownership of a key input 
D) a patent 
A) an inelastic demand curve 
B) economies of scale 
C) ownership of a key input 
D) a patent

Question 2

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Accepted Answer

A) game theory. 
B) oligopoly. 
C) competitive analysis. 
D) strategic analysis. 
A) game theory. 
B) oligopoly. 
C) competitive analysis. 
D) strategic analysis.

Question 3

Both monopolistically competitive firms and perfectly competitive firms maximize profits

Accepted Answer

A) by producing where price equals average total cost. 
B) by producing where marginal revenue equals average revenue. 
C) by producing where marginal revenue is equal to marginal cost. 
D) by producing where price equals average variable cost. 
A) by producing where price equals average total cost. 
B) by producing where marginal revenue equals average revenue. 
C) by producing where marginal revenue is equal to marginal cost. 
D) by producing where price equals average variable cost.

Question 4

If a store like hhgregg has higher costs than a comparable Best Buy store,the only way it can have higher profits is if

Accepted Answer

A) it has more locations than Best Buy. 
B) its marginal revenue is lower than Best Buy's. 
C) the demand for its goods is higher than Best Buy's. 
D) it sells the quantity associated with its minimum average total cost. 
A) it has more locations than Best Buy. 
B) its marginal revenue is lower than Best Buy's. 
C) the demand for its goods is higher than Best Buy's. 
D) it sells the quantity associated with its minimum average total cost.

Question 5

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 the marginal profit from producing and selling the 5th case?

Accepted Answer

A) $275 
B) $145 
C) $35 
D) $20 
A) $275 
B) $145 
C) $35 
D) $20

Question 6

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

Accepted Answer

In both perfectly competitive and monopo

Question 7

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Accepted Answer

A) The firm should raise its price. 
B) The firm should decrease its fixed costs. 
C) The firm should increase its implicit costs. 
D) The firm should lower its price. 
A) The firm should raise its price. 
B) The firm should decrease its fixed costs. 
C) The firm should increase its implicit costs. 
D) The firm should lower its price.

Question 8

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a
Perfectly competitive market in that in both markets,firms

Accepted Answer

A) produce at the minimum point of their average total cost curves. 
B) produce where price equals marginal cost. 
C) break even. 
D) produce where price equals marginal revenue. 
A) produce at the minimum point of their average total cost curves. 
B) produce where price equals marginal cost. 
C) break even. 
D) produce where price equals marginal revenue.

Question 9

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Accepted Answer

A) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C) It means that firms produce with inefficient combinations of resources. 
D) It means that firms build plants that are not large enough to achieve minimum efficient scale. 
A) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output. 
C) It means that firms produce with inefficient combinations of resources. 
D) It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question 10

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 variable cost of production?

Accepted Answer

A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) P₀abP₁ 
D) P₁bdP₃ 
A) 0P₀aQₐ 
B) 0P₁bQₐ 
C) P₀abP₁ 
D) P₁bdP₃

Question 11

Economists agree that a monopolistically competitive market structure

Accepted Answer

A) lowers consumer utility because consumers pay a price higher than the marginal cost of production. 
B) is detrimental to society because it leads to a waste of scarce resources. 
C) benefits consumers because firms produce products that appeal to a wide range of consumer tastes. 
D) can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products. 
A) lowers consumer utility because consumers pay a price higher than the marginal cost of production. 
B) is detrimental to society because it leads to a waste of scarce resources. 
C) benefits consumers because firms produce products that appeal to a wide range of consumer tastes. 
D) can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products.

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 Figure 11-2.The marginal revenue from selling the additional unit Qb instead of Q? equals

Accepted Answer

A) the area (G + H). 
B) the area (H - 
E) . 
C) the area (E + F)- (G + H). 
D) the area G. 
A) the area (G + H). 
B) the area (H - 
E) . 
C) the area (E + F)- (G + H). 
D) the area G.

Question 13

An oligopolistic industry is characterized by a few large firms acting independently.

Accepted Answer

A) True 
 B)False

Question 14

Assume that two interior design companies,Alistair and Baine,are competing for customers and if they both advertise,they would each earn $30 million in profits.If neither advertises,they each earn $50 million in profits.If one advertises and the other doesn't,the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
a.Present the information above in the form of a payoff matrix.Let Baine be the row player and Alistair the column player.
b.Does each firm have a dominant strategy and if so what is it?
c.What is the Nash equilibrium?

Accepted Answer

a. See the table below.
 @#IMG-DLM& 
b. No,there i

Question 15

A set of actions that a firm takes to achieve a goal,such as maximizing profits,is called

Accepted Answer

A) a business strategy. 
B) a payoff matrix. 
C) the Porter's Competitive Forces plan. 
D) game theory. 
A) a business strategy. 
B) a payoff matrix. 
C) the Porter's Competitive Forces plan. 
D) game theory.

Question 16

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

Accepted Answer

A) Tony's business earns a short-run economic profit. 
B) Tony should shut down his business temporarily. 
C) Tony's profit fell after selling his 1,000th three-ring binder. 
D) Tony's profit would be greater if he sold an additional three-ring binder. 
A) Tony's business earns a short-run economic profit. 
B) Tony should shut down his business temporarily. 
C) Tony's profit fell after selling his 1,000th three-ring binder. 
D) Tony's profit would be greater if he sold an additional three-ring binder.

Question 17

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of well-being?

Accepted Answer

A) Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. 
B) Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C) Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. 
D) Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets. 
A) Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost. 
B) Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes. 
C) Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost. 
D) Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets.

Question 18

A game in which pursuing dominant strategies results in noncooperation that leaves all parties worse off is a

Accepted Answer

A) prisoner's dilemma. 
B) cooperative equilibrium. 
C) first-price auction. 
D) zero-sum game. 
A) prisoner's dilemma. 
B) cooperative equilibrium. 
C) first-price auction. 
D) zero-sum game.

Question 19

Every firm that has the ability to affect the price of the good or service it sells will

Accepted Answer

A) have a perfectly elastic demand curve. 
B) have a marginal revenue curve that lies below its demand curve. 
C) earn a short-run profit but break even in the long run. 
D) shut down in the short run. 
A) have a perfectly elastic demand curve. 
B) have a marginal revenue curve that lies below its demand curve. 
C) earn a short-run profit but break even in the long run. 
D) shut down in the short run.

Question 20

In contrast with perfect competition,excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

Accepted Answer

A) Monopolistically competitive firms produce at the minimum point on their average total cost curves. 
B) Monopolistically competitive firms face downward-sloping demand curves.In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves. 
C) Monopolistically competitive firms produce where marginal revenue is equal to marginal cost. 
D) Monopolistically competitive markets have low barriers to entry. 
A) Monopolistically competitive firms produce at the minimum point on their average total cost curves. 
B) Monopolistically competitive firms face downward-sloping demand curves.In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves. 
C) Monopolistically competitive firms produce where marginal revenue is equal to marginal cost. 
D) Monopolistically competitive markets have low barriers to entry.

Which of the following is not a barrier to entry?

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Both monopolistically competitive firms and perfectly competitive firms maximize profits

If a store like hhgregg has higher costs than a comparable Best Buy store,the only way it can have higher profits is if

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a Perfectly competitive market in that in both markets,firms

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

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 variable cost of production?

Economists agree that a monopolistically competitive market structure

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 Figure 11-2.The marginal revenue from selling the additional unit Qb instead of Q? equals

An oligopolistic industry is characterized by a few large firms acting independently.

A set of actions that a firm takes to achieve a goal,such as maximizing profits,is called

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

A game in which pursuing dominant strategies results in noncooperation that leaves all parties worse off is a

Every firm that has the ability to affect the price of the good or service it sells will

In contrast with perfect competition,excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

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 not a barrier to entry?

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called

Both monopolistically competitive firms and perfectly competitive firms maximize profits

If a store like hhgregg has higher costs than a comparable Best Buy store,the only way it can have higher profits is if

What are the most important differences between perfectly competitive markets and monopolistically competitive markets?

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a Perfectly competitive market in that in both markets,firms

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

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 variable cost of production?

Economists agree that a monopolistically competitive market structure

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 Figure 11-2.The marginal revenue from selling the additional unit Qb instead of Q? equals

An oligopolistic industry is characterized by a few large firms acting independently.

A set of actions that a firm takes to achieve a goal,such as maximizing profits,is called

After selling 1,000 three-ring binders Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that

A game in which pursuing dominant strategies results in noncooperation that leaves all parties worse off is a

Every firm that has the ability to affect the price of the good or service it sells will

In contrast with perfect competition,excess capacity characterizes monopolistic competition.Excess capacity is due to which of the following?

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