Question 1

Sales maximization may be a goal of a firm if

Accepted Answer

A) firms are managed by irrational persons. 
B) the firm has no way to measure profitability. 
C) the firm is privately held, and there is no separation between ownership and control. 
D) managerial bonuses are based on sales revenue instead of profitability. 
A) firms are managed by irrational persons. 
B) the firm has no way to measure profitability. 
C) the firm is privately held, and there is no separation between ownership and control. 
D) managerial bonuses are based on sales revenue instead of profitability.

Question 2

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor's skill are worse than those from overestimating it.

Accepted Answer

A) True 
 B)False

Question 3

A monopolistic competitor can expect to earn an economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 4

In what way is monopolistic competition more like competition, and in what way is it more like monopoly?

Accepted Answer

Like competition, there are many firms i

Question 5

Game theory is based on the idea that each participant makes decisions based on how she believes the competition will react.

Accepted Answer

A) True 
 B)False

Question 6

Price leadership is a form of

Accepted Answer

A) tacit collusion. 
B) explicit collusion. 
C) monopolistic competition. 
D) a cartel policing mechanism. 
A) tacit collusion. 
B) explicit collusion. 
C) monopolistic competition. 
D) a cartel policing mechanism.

Question 7

The kinked demand curve model explains pricing in monopoly markets.

Accepted Answer

A) True 
 B)False

Question 8

Monopolistic competition is characterized by

Accepted Answer

A) one firm selling several products. 
B) many firms selling the same product. 
C) many firms selling slightly different products. 
D) one firm selling one product. 
A) one firm selling several products. 
B) many firms selling the same product. 
C) many firms selling slightly different products. 
D) one firm selling one product.

Question 9

An oligopolist's effective demand curve will be kinked if the firm

Accepted Answer

A) is acting as a price leader in the industry. 
B) expects other firms to match price cuts but not price increases. 
C) expects other firms to match all price changes. 
D) fears new entry into the industry. 
A) is acting as a price leader in the industry. 
B) expects other firms to match price cuts but not price increases. 
C) expects other firms to match all price changes. 
D) fears new entry into the industry.

Question 10

Here is an excerpt form an editorial praising capitalism in The Economist: "It is competition that delivers choice, holds prices down, encourages invention and service, and (through all these things) delivers economic growth." To what type of competition does the writer refer?
 Is it the sort of competition that economists study?
 Explain.

Accepted Answer

The competition here seems to be monopol

Question 11

How will price, output, and profit compare if firms maximize sales rather than profit?

Accepted Answer

A firm maximizing sales will operate whe

Question 12

Society definitely benefits by reducing the number of monopolistically competitive firms.

Accepted Answer

A) True 
 B)False

Question 13

In a perfectly contestable market in the long run, each firm

Accepted Answer

A) produces at the minimum point on its long-run average total cost curve. 
B) earns a profit below its opportunity cost of capital. 
C) avoids making capital expenditures. 
D) All of the above are correct. 
A) produces at the minimum point on its long-run average total cost curve. 
B) earns a profit below its opportunity cost of capital. 
C) avoids making capital expenditures. 
D) All of the above are correct.

Question 14

Which market is most likely to witness such actions and reactions as frequent new-product introductions, free samples, and aggressive advertising campaigns?

Accepted Answer

A) Oligopoly 
B) Perfect competition 
C) Monopoly 
D) Monopolistic competition 
A) Oligopoly 
B) Perfect competition 
C) Monopoly 
D) Monopolistic competition

Question 15

Firms have the option of maximizing sales revenue or maximizing profits.If a firm chooses to maximize sales, then it will produce

Accepted Answer

A) more output and charge a lower price. 
B) the same output and charge a lower price. 
C) less output and charge a higher price. 
D) less output and charge a lower price. 
A) more output and charge a lower price. 
B) the same output and charge a lower price. 
C) less output and charge a higher price. 
D) less output and charge a lower price.

Question 16

A firm in a monopolistically competitive market makes no economic profit in the long run because

Accepted Answer

A) long-run marginal cost will be too high to make any economic profit. 
B) long-run price will be equal to long run marginal cost. 
C) long-run marginal cost will be equal to long run marginal revenue. 
D) long-run price will be equal to long run average cost. 
A) long-run marginal cost will be too high to make any economic profit. 
B) long-run price will be equal to long run marginal cost. 
C) long-run marginal cost will be equal to long run marginal revenue. 
D) long-run price will be equal to long run average cost.

Question 17

Oligopolists

Accepted Answer

A) are price takers. 
B) rarely advertise. 
C) must take rivals' reactions into account. 
D) offer homogeneous products. 
A) are price takers. 
B) rarely advertise. 
C) must take rivals' reactions into account. 
D) offer homogeneous products.

Question 18

A cartel is

Accepted Answer

A) a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B) a government-approved organization for the exchange of technical information among firms. 
C) a form of competition among oligopolists. 
D) a regulated industry that is officially permitted to set the price of its product above long-run average total cost. 
A) a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B) a government-approved organization for the exchange of technical information among firms. 
C) a form of competition among oligopolists. 
D) a regulated industry that is officially permitted to set the price of its product above long-run average total cost.

Question 19

The Organization of Petroleum Exporting Countries is a

Accepted Answer

A) professional trade association for oil companies. 
B) cartel. 
C) consortium for joint ventures in oil exploration. 
D) loose collection of democracies that promote international pipelines. 
A) professional trade association for oil companies. 
B) cartel. 
C) consortium for joint ventures in oil exploration. 
D) loose collection of democracies that promote international pipelines.

Question 20

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

Accepted Answer

A) True 
 B)False

Exam 12: Between Competition and Monopoly

Sales maximization may be a goal of a firm if

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor's skill are worse than those from overestimating it.

A monopolistic competitor can expect to earn an economic profit in the long run.

In what way is monopolistic competition more like competition, and in what way is it more like monopoly?

Game theory is based on the idea that each participant makes decisions based on how she believes the competition will react.

Price leadership is a form of

The kinked demand curve model explains pricing in monopoly markets.

Monopolistic competition is characterized by

An oligopolist's effective demand curve will be kinked if the firm

How will price, output, and profit compare if firms maximize sales rather than profit?

Society definitely benefits by reducing the number of monopolistically competitive firms.

In a perfectly contestable market in the long run, each firm

Which market is most likely to witness such actions and reactions as frequent new-product introductions, free samples, and aggressive advertising campaigns?

Firms have the option of maximizing sales revenue or maximizing profits.If a firm chooses to maximize sales, then it will produce

A firm in a monopolistically competitive market makes no economic profit in the long run because

Oligopolists

A cartel is

The Organization of Petroleum Exporting Countries is a

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

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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