Question 1

The behavior of the perfectly competitive firm:

Accepted Answer

A) ​theoretically leads to an inefficient allocation of resources. 
B) ​maximizes the benefits to consumers, given the resources available to the economy. 
C) ​reduces output in order to raise prices in the short-term. 
D) ​results in excess capacity and inefficiency. 
A) ​theoretically leads to an inefficient allocation of resources. 
B) ​maximizes the benefits to consumers, given the resources available to the economy. 
C) ​reduces output in order to raise prices in the short-term. 
D) ​results in excess capacity and inefficiency.

Question 2

A dominant strategy is one that is best for one player regardless of the strategy chosen by the other player.

Accepted Answer

A) True 
 B)False

Question 3

The models of perfect competition and monopoly are the most realistic.

Accepted Answer

A) True 
 B)False

Question 4

Most economic activity in the United States is carried out by monopolies.

Accepted Answer

A) True 
 B)False

Question 5

In the long run, zero economic profit exists in monopolistic competition and perfect competition.

Accepted Answer

A) True 
 B)False

Question 6

Monopolistic competition is a market structure characterized by many small firms selling a homogeneous product.

Accepted Answer

A) True 
 B)False

Question 7

The payoff matrix is a fundamental tool of

Accepted Answer

A) monopolistic competition. 
B) game theory. 
C) corporate finance theory. 
D) regulatory oversight. 
A) monopolistic competition. 
B) game theory. 
C) corporate finance theory. 
D) regulatory oversight.

Question 8

For collusion to make sense, the payoff matrix must be a

Accepted Answer

A) positive-sum game. 
B) zero-sum game. 
C) negative-sum game. 
D) negative-positive-sum game. 
A) positive-sum game. 
B) zero-sum game. 
C) negative-sum game. 
D) negative-positive-sum game.

Question 9

Monopolistic competition has at least one similarity to perfect competition: firms are free to enter and leave the industry.

Accepted Answer

A) True 
 B)False

Question 10

If an oligopolistic manufacturer believes that he faces a kinked demand curve for his product, he thinks his competitors will ____ if he lowers his price and ____ if he raises his price.

Accepted Answer

A) lower their prices; raise their prices. 
B) lower their prices; not raise their prices 
C) not lower their prices; raise their prices 
D) not lower their prices; not raise their prices 
A) lower their prices; raise their prices. 
B) lower their prices; not raise their prices 
C) not lower their prices; raise their prices 
D) not lower their prices; not raise their prices

Question 11

In the long run the prices charged by a firm in monopolistic competition will be

Accepted Answer

A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost, including the opportunity cost of capital. 
A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost, including the opportunity cost of capital.

Question 12

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry.The widget industry may therefore

Accepted Answer

A) be monopolistically competitive. 
B) have firms whose goal is sales maximization. 
C) have firms that act as price leaders. 
D) All of the above are correct. 
A) be monopolistically competitive. 
B) have firms whose goal is sales maximization. 
C) have firms that act as price leaders. 
D) All of the above are correct.

Question 13

Economists would describe cartels as

Accepted Answer

A) the opposite of ignoring interdependence. 
B) a collusive arrangement. 
C) an undesirable form of market organization that may charge a monopoly price. 
D) All of the above are correct. 
A) the opposite of ignoring interdependence. 
B) a collusive arrangement. 
C) an undesirable form of market organization that may charge a monopoly price. 
D) All of the above are correct.

Question 14

Cartels provide uniform management, but none of the advantages of economies of scale.

Accepted Answer

A) True 
 B)False

Question 15

Tacit collusion is

Accepted Answer

A) collusion which is carried out without any explicit agreement among firms. 
B) collusion about tacits, rather than strategy. 
C) agreements which are sponsored by government. 
D) similar to pure competition. 
A) collusion which is carried out without any explicit agreement among firms. 
B) collusion about tacits, rather than strategy. 
C) agreements which are sponsored by government. 
D) similar to pure competition.

Question 16

Price leadership is an example of explicit collusion by oligopolies.

Accepted Answer

A) True 
 B)False

Question 17

The maximin criterion can be defined as which of the following?

Accepted Answer

A) One seeks the maximum of the minimum payoffs to the various available strategies. 
B) One seeks the minimum of the maximum losses among the various available strategies. 
C) One seeks the maximum of the minimum losses to the various available strategies. 
D) One seeks the maximum of the maximum gains of the various available strategies. 
A) One seeks the maximum of the minimum payoffs to the various available strategies. 
B) One seeks the minimum of the maximum losses among the various available strategies. 
C) One seeks the maximum of the minimum losses to the various available strategies. 
D) One seeks the maximum of the maximum gains of the various available strategies.

Question 18

To maximize sales revenue, an oligopolist will expand output until the marginal revenue curve cuts the horizontal axis.

Accepted Answer

A) True 
 B)False

Question 19

Long-run equilibrium under monopolistic competition requires that

Accepted Answer

A) the demand curve intersect the average cost curve. 
B) the demand curve be tangent to the average cost curve. 
C) price be equal to marginal cost. 
D) quantity produced be at the point where average cost is at a minimum. 
A) the demand curve intersect the average cost curve. 
B) the demand curve be tangent to the average cost curve. 
C) price be equal to marginal cost. 
D) quantity produced be at the point where average cost is at a minimum.

Question 20

Monopolistic competitors and perfect competitors are alike in

Accepted Answer

A) having horizontal demand curves. 
B) zero economic profit in the short run. 
C) zero economic profit in the long run. 
D) relying on advertising to attract buyers to their products. 
A) having horizontal demand curves. 
B) zero economic profit in the short run. 
C) zero economic profit in the long run. 
D) relying on advertising to attract buyers to their products.

Exam 12: Between Competition and Monopoly

The behavior of the perfectly competitive firm:

A dominant strategy is one that is best for one player regardless of the strategy chosen by the other player.

The models of perfect competition and monopoly are the most realistic.

Most economic activity in the United States is carried out by monopolies.

In the long run, zero economic profit exists in monopolistic competition and perfect competition.

Monopolistic competition is a market structure characterized by many small firms selling a homogeneous product.

The payoff matrix is a fundamental tool of

For collusion to make sense, the payoff matrix must be a

Monopolistic competition has at least one similarity to perfect competition: firms are free to enter and leave the industry.

If an oligopolistic manufacturer believes that he faces a kinked demand curve for his product, he thinks his competitors will ____ if he lowers his price and ____ if he raises his price.

In the long run the prices charged by a firm in monopolistic competition will be

An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry.The widget industry may therefore

Economists would describe cartels as

Cartels provide uniform management, but none of the advantages of economies of scale.

Tacit collusion is

Price leadership is an example of explicit collusion by oligopolies.

The maximin criterion can be defined as which of the following?

To maximize sales revenue, an oligopolist will expand output until the marginal revenue curve cuts the horizontal axis.

Long-run equilibrium under monopolistic competition requires that

Monopolistic competitors and perfect competitors are alike in

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

If an oligopolistic manufacturer believes that he faces a kinked demand curve for his product, he thinks his competitors will if he lowers his price and if he raises his price.