Question 1

Probably the simplest approach to the problem of oligopolistic interdependence is to

Accepted Answer

A) conduct market experiments. 
B) assume that rivals will pursue a course most detrimental to the firm concerned. 
C) ignore the actions of rivals. 
D) increase the firm's advertising outlay considerably. 
A) conduct market experiments. 
B) assume that rivals will pursue a course most detrimental to the firm concerned. 
C) ignore the actions of rivals. 
D) increase the firm's advertising outlay considerably.

Question 2

Which of the following characteristics of perfect competition does not apply in monopolistic competition?

Accepted Answer

A) free entry and exit 
B) homogeneous products 
C) numerous participants 
D) perfect information 
A) free entry and exit 
B) homogeneous products 
C) numerous participants 
D) perfect information

Question 3

The theory of the kinked demand curve is used to explain

Accepted Answer

A) bizarre corporate behavior. 
B) sales maximization. 
C) the maximin criterion. 
D) sticky prices in oligopolies. 
A) bizarre corporate behavior. 
B) sales maximization. 
C) the maximin criterion. 
D) sticky prices in oligopolies.

Question 4

Where interdependence is especially pronounced, competition among oligopolists will

Accepted Answer

A) resemble military tactics and strategies. 
B) disappear. 
C) lead to large increases in product output. 
D) entice more firms to enter the market. 
A) resemble military tactics and strategies. 
B) disappear. 
C) lead to large increases in product output. 
D) entice more firms to enter the market.

Question 5

All players have dominant strategies.

Accepted Answer

A) True 
 B)False

Question 6

Is it likely that oligopolistic firms will be in both a kinked demand curve situation and also engage in price leadership?
 Why or why not?

Accepted Answer

No, it is not.The models are not compati

Question 7

An article in The Economist reported that prices of CDs in Britain was much higher than prices in the United States or other European countries.There were only a few major companies, and a report from a Parliament committee said there was no serious price competition.The best explanation for this is that

Accepted Answer

A) the industry was a contestable market. 
B) there were entry barriers in production and distribution of CDs. 
C) firms were avoiding profit opportunities. 
D) there were substantial differentiation of product. 
A) the industry was a contestable market. 
B) there were entry barriers in production and distribution of CDs. 
C) firms were avoiding profit opportunities. 
D) there were substantial differentiation of product.

Question 8

Oligopolistic firms that practice sales revenue maximization will produce

Accepted Answer

A) more and charge less than a profit maximizer. 
B) less and charge more than a profit maximizer. 
C) more and charge more than a profit maximizer. 
D) less and charge less than a profit maximizer. 
A) more and charge less than a profit maximizer. 
B) less and charge more than a profit maximizer. 
C) more and charge more than a profit maximizer. 
D) less and charge less than a profit maximizer.

Question 9

Deviations from the perfectly competitive market can lead to

Accepted Answer

A) inefficiently high production costs. 
B) higher prices and smaller outputs. 
C) less efficient resource allocation. 
D) All of the above are correct. 
A) inefficiently high production costs. 
B) higher prices and smaller outputs. 
C) less efficient resource allocation. 
D) All of the above are correct.

Question 10

A situation in which both players can adopt moves such that each player's move is its most profitable response to the move of the other is the

Accepted Answer

A) prisoner's dilemma. 
B) Nash equilibrium. 
C) maximin criterion. 
D) tacit collusion. 
A) prisoner's dilemma. 
B) Nash equilibrium. 
C) maximin criterion. 
D) tacit collusion.

Question 11

In an economist's view, a cartel usually offers to society

Accepted Answer

A) all the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
B) all the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly. 
C) none of the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
D) none of the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly. 
A) all the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
B) all the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly. 
C) none of the cost benefits of large-scale production and none of the allocative inefficiencies of monopoly. 
D) none of the cost benefits of large-scale production and all of the allocative inefficiencies of monopoly.

Question 12

The entry of new firms into a monopolistically competitive industry will cause the long-run equilibrium price to rise.

Accepted Answer

A) True 
 B)False

Question 13

Perfect competition and pure monopoly are concepts useful primarily for realistic application.

Accepted Answer

A) True 
 B)False

Question 14

Monopolistically competitive markets feature high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 15

Game theory applies to problems that arise in

Accepted Answer

A) perfect competition. 
B) monopolies. 
C) oligopolies. 
D) pure competition. 
A) perfect competition. 
B) monopolies. 
C) oligopolies. 
D) pure competition.

Question 16

Figure 12-3
  
-Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors retaliate with identical price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?

Accepted Answer

A) B 
B) C 
C) D 
D) E 
A) B 
B) C 
C) D 
D) E

Question 17

The cost-revenue diagrams for a monopolist and a monopolistic competitor are similar except that the demand curve for the monopolistic competitor is flatter.

Accepted Answer

A) True 
 B)False

Question 18

Game theory may be used to solve problems of interdependent decision making by large firms.

Accepted Answer

A) True 
 B)False

Question 19

Monopolistically competitive markets feature heterogeneous products.

Accepted Answer

A) True 
 B)False

Question 20

The demand curve for a monopolistic competitor is likely to be steeper than that of a monopolist.

Accepted Answer

A) True 
 B)False

Exam 12: Between Competition and Monopoly

Probably the simplest approach to the problem of oligopolistic interdependence is to

Which of the following characteristics of perfect competition does not apply in monopolistic competition?

The theory of the kinked demand curve is used to explain

Where interdependence is especially pronounced, competition among oligopolists will

All players have dominant strategies.

Is it likely that oligopolistic firms will be in both a kinked demand curve situation and also engage in price leadership? Why or why not?

Oligopolistic firms that practice sales revenue maximization will produce

Deviations from the perfectly competitive market can lead to

A situation in which both players can adopt moves such that each player's move is its most profitable response to the move of the other is the

In an economist's view, a cartel usually offers to society

The entry of new firms into a monopolistically competitive industry will cause the long-run equilibrium price to rise.

Perfect competition and pure monopoly are concepts useful primarily for realistic application.

Monopolistically competitive markets feature high barriers to entry.

Game theory applies to problems that arise in

Figure 12-3 -Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors retaliate with identical price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?

The cost-revenue diagrams for a monopolist and a monopolistic competitor are similar except that the demand curve for the monopolistic competitor is flatter.

Game theory may be used to solve problems of interdependent decision making by large firms.

Monopolistically competitive markets feature heterogeneous products.

The demand curve for a monopolistic competitor is likely to be steeper than that of a monopolist.

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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