Question 1

An example of overt collusion is

Accepted Answer

A) a cartel. 
B) price leadership. 
C) tacit collusion. 
D) a perfectly contestable market. 
A) a cartel. 
B) price leadership. 
C) tacit collusion. 
D) a perfectly contestable market.

Question 2

Monopolistic competition differs from perfect competition only in the number of firms participating in the market.

Accepted Answer

A) True 
 B)False

Question 3

Given the characteristics: (1) many buyers and sellers, (2) free entry and exit, (3) perfect information, and (4) heterogeneity of products, monopolistic competition and perfect competition share

Accepted Answer

A) (1) and (4). 
B) (1), (2), and (3). 
C) (2) and (4). 
D) (2), (3), and (4). 
A) (1) and (4). 
B) (1), (2), and (3). 
C) (2) and (4). 
D) (2), (3), and (4).

Question 4

The difficulty in analyzing oligopolistic behavior arises from the

Accepted Answer

A) degree of government regulation of the market structure. 
B) interdependent nature of oligopolistic decisions. 
C) large number of firms in the industry. 
D) market power of consumers. 
A) degree of government regulation of the market structure. 
B) interdependent nature of oligopolistic decisions. 
C) large number of firms in the industry. 
D) market power of consumers.

Question 5

The reason firms often choose sales maximization as a goal is because

Accepted Answer

A) that is where profits are maximized. 
B) it is impossible to maximize profits. 
C) firms are managed and owned by different groups of people with different goals. 
D) owners believe setting price/output to maximize profits is unfair to consumers. 
A) that is where profits are maximized. 
B) it is impossible to maximize profits. 
C) firms are managed and owned by different groups of people with different goals. 
D) owners believe setting price/output to maximize profits is unfair to consumers.

Question 6

Everything else equal, the more rivals a firm has, the

Accepted Answer

A) less kinked is its demand curve. 
B) closer is its equilibrium price to its average variable costs. 
C) more differentiated is its product from rivals' products. 
D) more elastic is its demand curve. 
A) less kinked is its demand curve. 
B) closer is its equilibrium price to its average variable costs. 
C) more differentiated is its product from rivals' products. 
D) more elastic is its demand curve.

Question 7

According to the kinked demand curve model, an oligopolist may face

Accepted Answer

A) more elastic demand than a monopolistic competitor. 
B) less elastic demand than a monopolistic competitor. 
C) more elastic demand if she raises her price than if she lowers her price. 
D) less elastic demand if she raises her price than if she lowers her price. 
A) more elastic demand than a monopolistic competitor. 
B) less elastic demand than a monopolistic competitor. 
C) more elastic demand if she raises her price than if she lowers her price. 
D) less elastic demand if she raises her price than if she lowers her price.

Question 8

A market is contestable if

Accepted Answer

A) the number of firms is larger than oligopoly. 
B) firms spend a lot on advertising. 
C) there is free entry and exit. 
D) firms have kinked demand curves. 
A) the number of firms is larger than oligopoly. 
B) firms spend a lot on advertising. 
C) there is free entry and exit. 
D) firms have kinked demand curves.

Question 9

The airline dominating Charlotte, North Carolina, once contended that it could not overcharge for fear of potential competition, if not at Charlotte, then at Raleigh, a two-hour drive away.Do you find this argument compelling, given the theory of contestable markets?

Accepted Answer

The theory of contestable markets holds

Question 10

A firm now produces its sales-maximizing level of output.If the firm increased its output by one unit, its marginal revenue would become

Accepted Answer

A) negative. 
B) smaller but still positive. 
C) larger but still negative. 
D) larger but still positive. 
A) negative. 
B) smaller but still positive. 
C) larger but still negative. 
D) larger but still positive.

Question 11

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Accepted Answer

A) True 
 B)False

Question 12

An oligopoly firm with a differentiated product will generally earn the largest profits without advertising.

Accepted Answer

A) True 
 B)False

Question 13

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) has a negatively sloped demand curve. 
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) has a negatively sloped demand curve.

Question 14

The monopolistically competitive firm differs from monopoly in that its

Accepted Answer

A) demand curve is flatter. 
B) demand curve slopes downward. 
C) MR curve lies below its demand curve. 
D) profit is maximized where MR = MC. 
A) demand curve is flatter. 
B) demand curve slopes downward. 
C) MR curve lies below its demand curve. 
D) profit is maximized where MR = MC.

Question 15

An oligopoly is a market in which at least some firms are large enough to influence market price.

Accepted Answer

A) True 
 B)False

Question 16

A duopoly is a form of oligopoly with two firms.

Accepted Answer

A) True 
 B)False

Question 17

The excess capacity theorem implies that

Accepted Answer

A) consumers would be better off if some monopolistically competitive firms left their markets. 
B) consumers would be better off with more standardization of products. 
C) monopolistic competition benefits society by eliminating excess capacity in production. 
D) monopolistic competition wastes some of society's resources but the elimination of this waste does not necessarily benefit consumers. 
A) consumers would be better off if some monopolistically competitive firms left their markets. 
B) consumers would be better off with more standardization of products. 
C) monopolistic competition benefits society by eliminating excess capacity in production. 
D) monopolistic competition wastes some of society's resources but the elimination of this waste does not necessarily benefit consumers.

Question 18

What are the four types of industry structures?
 Compare and contrast them with the number of firms in the industry, whether firms produce homogeneous or heterogeneous products, whether there are economic profits in long-run equilibrium, and how frequently the model appears in the real world.

Accepted Answer

The four types are perfect competition (

Question 19

One indication that an industry might be oligopolistic is that prices change

Accepted Answer

A) infrequently. 
B) frequently. 
C) in rhythmic patterns. 
D) on a regular, periodic basis. 
A) infrequently. 
B) frequently. 
C) in rhythmic patterns. 
D) on a regular, periodic basis.

Question 20

An oligopoly will always use game theory to maximize sales rather than profits.

Accepted Answer

A) True 
 B)False

Exam 12: Between Competition and Monopoly

An example of overt collusion is

Monopolistic competition differs from perfect competition only in the number of firms participating in the market.

Given the characteristics: (1) many buyers and sellers, (2) free entry and exit, (3) perfect information, and (4) heterogeneity of products, monopolistic competition and perfect competition share

The difficulty in analyzing oligopolistic behavior arises from the

The reason firms often choose sales maximization as a goal is because

Everything else equal, the more rivals a firm has, the

According to the kinked demand curve model, an oligopolist may face

A market is contestable if

The airline dominating Charlotte, North Carolina, once contended that it could not overcharge for fear of potential competition, if not at Charlotte, then at Raleigh, a two-hour drive away.Do you find this argument compelling, given the theory of contestable markets?

A firm now produces its sales-maximizing level of output.If the firm increased its output by one unit, its marginal revenue would become

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

An oligopoly firm with a differentiated product will generally earn the largest profits without advertising.

Unlike a perfectly competitive firm, a monopolistically competitive firm

The monopolistically competitive firm differs from monopoly in that its

An oligopoly is a market in which at least some firms are large enough to influence market price.

A duopoly is a form of oligopoly with two firms.

The excess capacity theorem implies that

What are the four types of industry structures? Compare and contrast them with the number of firms in the industry, whether firms produce homogeneous or heterogeneous products, whether there are economic profits in long-run equilibrium, and how frequently the model appears in the real world.

One indication that an industry might be oligopolistic is that prices change

An oligopoly will always use game theory to maximize sales rather than profits.

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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