Question 1

Cartels are

Accepted Answer

A) difficult to organize. 
B) difficult to preserve. 
C) especially unlikely to succeed if the members sell many varied products. 
D) All of the above are correct. 
A) difficult to organize. 
B) difficult to preserve. 
C) especially unlikely to succeed if the members sell many varied products. 
D) All of the above are correct.

Question 2

There is statistical evidence that managers' salaries are tied most closely to

Accepted Answer

A) profits at the profit-maximizing output. 
B) sales volume. 
C) cost per unit at minimum-cost output. 
D) the closeness of output to the point where MR = MC. 
A) profits at the profit-maximizing output. 
B) sales volume. 
C) cost per unit at minimum-cost output. 
D) the closeness of output to the point where MR = MC.

Question 3

An oligopoly can be characterized by production of either identical goods or different goods.

Accepted Answer

A) True 
 B)False

Question 4

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

Accepted Answer

A) True 
 B)False

Question 5

A successful cartel may end up charging the ____ price and obtaining ____ profits.

Accepted Answer

A) monopolistic competition; zero economic 
B) oligopoly; monopoly 
C) monopoly; zero economic 
D) monopoly; monopoly 
A) monopolistic competition; zero economic 
B) oligopoly; monopoly 
C) monopoly; zero economic 
D) monopoly; monopoly

Question 6

A monopolistically competitive firm in the long run will

Accepted Answer

A) have a demand curve tangent to its AC. 
B) have a demand curve below its AC. 
C) have a demand curve above its AC. 
D) operate where excessive profit can be achieved. 
A) have a demand curve tangent to its AC. 
B) have a demand curve below its AC. 
C) have a demand curve above its AC. 
D) operate where excessive profit can be achieved.

Question 7

All four market forms discussed in the text maximize profit where

Accepted Answer

A) P = MC. 
B) AR = AC. 
C) MR = MC. 
D) MC = AR. 
A) P = MC. 
B) AR = AC. 
C) MR = MC. 
D) MC = AR.

Question 8

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

Accepted Answer

A) excess capacity. 
B) price wars among firms. 
C) entry by new firms. 
D) excessive advertising. 
A) excess capacity. 
B) price wars among firms. 
C) entry by new firms. 
D) excessive advertising.

Question 9

At any given airport, the airlines hold long-term leases for passenger loading gates.New gates cannot be added without approval of the airlines.Frequent flier programs are also common in the industry.It is, therefore, more difficult for a new airline to enter a given airport (market).Such factors:(i)are called barriers to entry.(ii)tend to decrease the contestability of the air travel market.

Accepted Answer

A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii 
A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii

Question 10

In the long run, a monopolistically competitive firm's demand curve must be tangent to its average cost curve.

Accepted Answer

A) True 
 B)False

Question 11

Monopolistic competition is common in

Accepted Answer

A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation. 
A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation.

Question 12

A sales-maximizing firm produces the output level at which

Accepted Answer

A) MR = P. 
B) MR = MC. 
C) MR = AC. 
D) MR = 0. 
A) MR = P. 
B) MR = MC. 
C) MR = AC. 
D) MR = 0.

Question 13

When oligopolists join together in a cartel, they

Accepted Answer

A) have chosen to ignore interdependence. 
B) have admitted that their behavior is interdependent. 
C) are planning to violate the law of supply and demand. 
D) are trying to behave like perfect competitors. 
A) have chosen to ignore interdependence. 
B) have admitted that their behavior is interdependent. 
C) are planning to violate the law of supply and demand. 
D) are trying to behave like perfect competitors.

Question 14

Explain how short-run and long-run equilibrium in monopolistic competition differ.Use graphs to illustrate your answer.Be sure that your graphs are completely and correctly labeled.

Accepted Answer

Figures 12-1 and 12-2 in the text are th

Question 15

Contestable markets improve the performance of imperfect markets with

Accepted Answer

A) government regulations. 
B) the threat of entry. 
C) advertising. 
D) tacit collusion. 
A) government regulations. 
B) the threat of entry. 
C) advertising. 
D) tacit collusion.

Question 16

The maximin criterion seeks to minimize the maximum payoffs in order to win.

Accepted Answer

A) True 
 B)False

Question 17

What is the long-run effect on the demand curve of a monopolistically competitive firm when more firms enter the market?

Accepted Answer

A) Demand curve shifts to left. 
B) Demand curve remains the same. 
C) Demand curve shifts to right. 
D) Demand curve become flatter. 
A) Demand curve shifts to left. 
B) Demand curve remains the same. 
C) Demand curve shifts to right. 
D) Demand curve become flatter.

Question 18

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Accepted Answer

A) number of sellers 
B) freedom of entry and exit 
C) perfect information 
D) homogeneity of the product 
A) number of sellers 
B) freedom of entry and exit 
C) perfect information 
D) homogeneity of the product

Question 19

The market structure that is associated with big business in developed economies is

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) monopoly. 
D) oligopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) monopoly. 
D) oligopoly.

Question 20

Which oligopoly model leads to price rigidity?
 Graphically show why.

Accepted Answer

The kinked demand curve model leads to p

Exam 12: Between Competition and Monopoly

Cartels are

There is statistical evidence that managers' salaries are tied most closely to

An oligopoly can be characterized by production of either identical goods or different goods.

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

A successful cartel may end up charging the ____ price and obtaining ____ profits.

A monopolistically competitive firm in the long run will

All four market forms discussed in the text maximize profit where

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

In the long run, a monopolistically competitive firm's demand curve must be tangent to its average cost curve.

Monopolistic competition is common in

A sales-maximizing firm produces the output level at which

When oligopolists join together in a cartel, they

Explain how short-run and long-run equilibrium in monopolistic competition differ.Use graphs to illustrate your answer.Be sure that your graphs are completely and correctly labeled.

Contestable markets improve the performance of imperfect markets with

The maximin criterion seeks to minimize the maximum payoffs in order to win.

What is the long-run effect on the demand curve of a monopolistically competitive firm when more firms enter the market?

Which of the following conditions distinguishes monopolistic competition from perfect competition?

The market structure that is associated with big business in developed economies is

Which oligopoly model leads to price rigidity? Graphically show why.

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

Filters

A successful cartel may end up charging the price and obtaining profits.