Question 1

Which of the following attitudes will be held by a typical firm in a typical cartel?

Accepted Answer

A) If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
B) I can never do better for myself than by following agreed-upon cartel policies. 
C) If everyone cheats, I'm better off and so is everyone else in the cartel. 
D) If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. 
A) If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
B) I can never do better for myself than by following agreed-upon cartel policies. 
C) If everyone cheats, I'm better off and so is everyone else in the cartel. 
D) If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. A

Question 2

Why is oligopoly more difficult to model than competition or monopoly?

Accepted Answer

Oligopolistic firms make interdependent decisions based on what they think other firms will do.Many models of oligopoly exist depending on the choice of interdependence.Also, there is little guidance on which model is most precise for a particular situation.

Question 3

The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of

Accepted Answer

A) AC and the demand curve occurs along the negatively sloped part of AC. 
B) the demand curve and AC occurs at the minimum point of the AC curve. 
C) AC and the demand curve occurs along the positively sloped part of AC. 
D) MC and MR at the optimum output. 
A) AC and the demand curve occurs along the negatively sloped part of AC. 
B) the demand curve and AC occurs at the minimum point of the AC curve. 
C) AC and the demand curve occurs along the positively sloped part of AC. 
D) MC and MR at the optimum output. A

Question 4

Economists place cartels among the least-desirable forms of market organization.

Accepted Answer

A) True 
 B)False

Question 5

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

Accepted Answer

A) True 
 B)False

Question 6

Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are

Accepted Answer

A) perfect. 
B) contestable. 
C) close to each other. 
D) protected from entry. 
A) perfect. 
B) contestable. 
C) close to each other. 
D) protected from entry.

Question 7

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

Accepted Answer

A) each has many buyers and sellers. 
B) firms sell homogeneous products in both markets. 
C) in having perfect information. 
D) for freedom of exit and entry. 
A) each has many buyers and sellers. 
B) firms sell homogeneous products in both markets. 
C) in having perfect information. 
D) for freedom of exit and entry.

Question 8

If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is

Accepted Answer

A) game theory. 
B) perfect competition. 
C) monopoly. 
D) cartels. 
A) game theory. 
B) perfect competition. 
C) monopoly. 
D) cartels.

Question 9

The demand curve for a monopolistic competitor slopes downward because

Accepted Answer

A) demand drops to zero after a slight price increase. 
B) there are close but not perfect substitutes for the product. 
C) customers have no loyalty to the product. 
D) the product is undifferentiated. 
A) demand drops to zero after a slight price increase. 
B) there are close but not perfect substitutes for the product. 
C) customers have no loyalty to the product. 
D) the product is undifferentiated.

Question 10

Firms in a perfectly contestable market will earn higher profits than firms in markets that are not perfectly contestable.

Accepted Answer

A) True 
 B)False

Question 11

The theory of the kinked demand curve is that

Accepted Answer

A) although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm's behavior. 
B) freedom of entry will reduce profits to zero. 
C) a firm's competitors will follow it in a price decrease but not follow it in a price increase. 
D) firms are all seeking the position of joint profit maximization. 
A) although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm's behavior. 
B) freedom of entry will reduce profits to zero. 
C) a firm's competitors will follow it in a price decrease but not follow it in a price increase. 
D) firms are all seeking the position of joint profit maximization.

Question 12

According to the excess capacity theorem, if every firm under monopolistic competition expanded its output,

Accepted Answer

A) cost per unit of output would rise. 
B) social benefits would increase. 
C) cost per unit of output would decrease. 
D) MC and AC would remain unchanged. 
A) cost per unit of output would rise. 
B) social benefits would increase. 
C) cost per unit of output would decrease. 
D) MC and AC would remain unchanged.

Question 13

Oligopolists almost always cooperate in making price and output decisions.

Accepted Answer

A) True 
 B)False

Question 14

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

Accepted Answer

A) monopolistic competition and oligopoly. 
B) monopoly and oligopoly. 
C) monopolistic competition and monopoly. 
D) perfect competition and perfectly contestable. 
A) monopolistic competition and oligopoly. 
B) monopoly and oligopoly. 
C) monopolistic competition and monopoly. 
D) perfect competition and perfectly contestable.

Question 15

In oligopoly, one expects

Accepted Answer

A) frequent introduction of new or redesigned products. 
B) aggressive advertising campaigns. 
C) intense marketing research into the impact of price changes. 
D) All of the above are correct. 
A) frequent introduction of new or redesigned products. 
B) aggressive advertising campaigns. 
C) intense marketing research into the impact of price changes. 
D) All of the above are correct.

Question 16

Unlike a perfectly competitive firm, a monopolistically competitive firm

Accepted Answer

A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) does not have the same marginal revenue at every output level. 
A) faces a perfectly inelastic demand curve. 
B) can earn positive economic profit in the short run and in the long run. 
C) cannot earn positive economic profit even in the short run. 
D) does not have the same marginal revenue at every output level.

Question 17

Oligopoly occurs when

Accepted Answer

A) a few firms sell many different products. 
B) a few firms sell to a few large buyers. 
C) many firms dominate a single market. 
D) a few firms dominate a single market. 
A) a few firms sell many different products. 
B) a few firms sell to a few large buyers. 
C) many firms dominate a single market. 
D) a few firms dominate a single market.

Question 18

The game theory approach to the analysis of oligopoly assumes that oligopolists

Accepted Answer

A) ignore their interdependence. 
B) behave with little forethought. 
C) do not take their businesses seriously. 
D) act strategically. 
A) ignore their interdependence. 
B) behave with little forethought. 
C) do not take their businesses seriously. 
D) act strategically.

Question 19

The demand curve for a monopolistic competitor has a negative slope.

Accepted Answer

A) True 
 B)False

Question 20

An oligopoly is a market

Accepted Answer

A) with few buyers. 
B) with one buyer. 
C) dominated by a few sellers. 
D) under the control of a few politically powerful individuals. 
A) with few buyers. 
B) with one buyer. 
C) dominated by a few sellers. 
D) under the control of a few politically powerful individuals.

Exam 12: Between Competition and Monopoly

Which of the following attitudes will be held by a typical firm in a typical cartel?

Why is oligopoly more difficult to model than competition or monopoly?

The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of

Economists place cartels among the least-desirable forms of market organization.

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

Industries, where economies of scale dictate that only a few firms produce, will be efficient if the markets in which they sell are

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is

The demand curve for a monopolistic competitor slopes downward because

Firms in a perfectly contestable market will earn higher profits than firms in markets that are not perfectly contestable.

The theory of the kinked demand curve is that

According to the excess capacity theorem, if every firm under monopolistic competition expanded its output,

Oligopolists almost always cooperate in making price and output decisions.

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

In oligopoly, one expects

Unlike a perfectly competitive firm, a monopolistically competitive firm

Oligopoly occurs when

The game theory approach to the analysis of oligopoly assumes that oligopolists

The demand curve for a monopolistic competitor has a negative slope.

An oligopoly is a market

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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