Question 1

A firm faces a small number of competitors. This firm is competing in

Accepted Answer

A) a monopoly. 
B) monopolistic competition. 
C) an oligopoly. 
D) perfect competition. 
E) a perfect multi-firm monopoly. 
A) a monopoly. 
B) monopolistic competition. 
C) an oligopoly. 
D) perfect competition. 
E) a perfect multi-firm monopoly.

Question 2

The equilibrium in the prisoners' dilemma i. minimizes the prisoners' combined jail time.
Ii. has one prisoner confessing and the other denying.
Iii. is a Nash equilibrium.

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) i and iii 
E) i, ii, and iii 
A) i only 
B) ii only 
C) iii only 
D) i and iii 
E) i, ii, and iii

Question 3

What is the conclusion in the prisoners' dilemma?

Accepted Answer

A) Firms should not enter a legal duopoly. 
B) Two prisoners acting in their own best interest harm their joint interest. 
C) There is no Nash equilibrium available to the prisoners. 
D) Prisoners do not act interdependently. 
E) Duopolies almost always reach their best outcome. 
A) Firms should not enter a legal duopoly. 
B) Two prisoners acting in their own best interest harm their joint interest. 
C) There is no Nash equilibrium available to the prisoners. 
D) Prisoners do not act interdependently. 
E) Duopolies almost always reach their best outcome.

Question 4

A Nash equilibrium occurs

Accepted Answer

A) when each player acts without considering the actions of the other player. 
B) when each player takes the best possible action given the action of the other player. 
C) only when players use the tit-for-tat strategy. 
D) only when the game is played in Nashville, TN. 
E) when each player takes the action that makes the combined payoff for all players as large as possible. 
A) when each player acts without considering the actions of the other player. 
B) when each player takes the best possible action given the action of the other player. 
C) only when players use the tit-for-tat strategy. 
D) only when the game is played in Nashville, TN. 
E) when each player takes the action that makes the combined payoff for all players as large as possible.

Question 5

When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they can achieve long-run economic profit similar to

Accepted Answer

A) perfect competition. 
B) monopoly. 
C) monopolistic competition. 
D) non-colluding oligopolies. 
E) the firms in regulated industries. 
A) perfect competition. 
B) monopoly. 
C) monopolistic competition. 
D) non-colluding oligopolies. 
E) the firms in regulated industries.

Question 6

The Herfindahl-Hirschman Index is used as a guideline to determine if a market is competitive or concentrated. Calculate the index value for each market described below.
a. 100 firms, each of which produces 1 per cent of market output
b. 50 firms, each of which produces 2 per cent of market output
c. 25 firms, each of which produces 4 per cent of market output
d. 20 firms, each of which produces 5 per cent of market output
e. 10 firms, each of which produces 10 per cent of market output
f. 5 firms, each of which produces 20 per cent of market output
g. 2 firms, each of which produces 50 per cent of market output

Accepted Answer

. 100 × 1 = 100
b. 50 × 4 = 20

Question 7

Firms in monopolistic competition

Accepted Answer

A) face a downward-sloping demand curve. 
B) cannot charge a markup because there are no dominant firms. 
C) definitely do not benefit from advertising. 
D) produce at the efficient scale in the long run. 
E) generally have low to nonexistent selling costs. 
A) face a downward-sloping demand curve. 
B) cannot charge a markup because there are no dominant firms. 
C) definitely do not benefit from advertising. 
D) produce at the efficient scale in the long run. 
E) generally have low to nonexistent selling costs.

Question 8

-If an oligopolistic game is repeatedly played, which of the following can occur?

Accepted Answer

A) Players can learn ways to cooperate and earn an economic profit. 
B) The competitive price and output consistently is the final result. 
C) Firms can learn how to cheat more effectively on the other player. 
D) One firm will be driven out of business. 
E) An implicit agreement is reached in which one firm constantly cheats on the cartel and the other firm complies with it. 
A) Players can learn ways to cooperate and earn an economic profit. 
B) The competitive price and output consistently is the final result. 
C) Firms can learn how to cheat more effectively on the other player. 
D) One firm will be driven out of business. 
E) An implicit agreement is reached in which one firm constantly cheats on the cartel and the other firm complies with it.

Question 9

When economies of scale limit the number of firms in an industry to 3, there is a

Accepted Answer

A) natural monopoly. 
B) natural oligopoly. 
C) legal oligopoly. 
D) legal cartel. 
E) natural monopolistic competition. 
A) natural monopoly. 
B) natural oligopoly. 
C) legal oligopoly. 
D) legal cartel. 
E) natural monopolistic competition.

Question 10

If the four-firm concentration ratio equals 0.1 percent for the Mexican tomato industry, then this industry is best characterized as

Accepted Answer

A) a monopoly. 
B) monopolistic competition. 
C) an oligopoly. 
D) perfect competition. 
E) either a monopoly or monopolistic competition. 
A) a monopoly. 
B) monopolistic competition. 
C) an oligopoly. 
D) perfect competition. 
E) either a monopoly or monopolistic competition.

Question 11

A firm in monopolistic competition is

Accepted Answer

A) efficient because in the long run it earns zero economic profit. 
B) efficient because it produces at the minimum average total cost. 
C) inefficient because price exceeds marginal cost. 
D) efficient because of the ease of entry. 
E) efficient because it produces where MR = MC. 
A) efficient because in the long run it earns zero economic profit. 
B) efficient because it produces at the minimum average total cost. 
C) inefficient because price exceeds marginal cost. 
D) efficient because of the ease of entry. 
E) efficient because it produces where MR = MC.

Question 12

"If firms in an oligopoly operate as a monopoly, the industry produces the most output and if they operate as perfect competitors, the industry produces the least output." Is the previous statement correct or incorrect?
 Why?

Accepted Answer

The statement is incorrect; it reverses

Question 13

If a duopoly has reached the monopoly outcome, a firm can increase its profit by if it and it alone ________ its price and ________ its production.

Accepted Answer

A) raises; increases 
B) raises; decreases 
C) lowers; increases 
D) lowers; decreases 
E) raises; does not change 
A) raises; increases 
B) raises; decreases 
C) lowers; increases 
D) lowers; decreases 
E) raises; does not change

Question 14

When a market has barriers to entry,

Accepted Answer

A) then in the long run it is possible for the firms to incur economic losses. 
B) then in the long run the only possible outcome for the firms is zero economic profit. 
C) then in the long run it might be possible for the firms to make economic profits. 
D) oligopolies cannot be created. 
E) the HHI almost always falls below 1,000. 
A) then in the long run it is possible for the firms to incur economic losses. 
B) then in the long run the only possible outcome for the firms is zero economic profit. 
C) then in the long run it might be possible for the firms to make economic profits. 
D) oligopolies cannot be created. 
E) the HHI almost always falls below 1,000.

Question 15

In both monopolistic competition and perfect competition,

Accepted Answer

A) firms sell identical products. 
B) there is easy entry and exit. 
C) firms are price takers. 
D) firms face horizontal demand curves. 
E) the marginal revenue curve and the demand curve are the same. 
A) firms sell identical products. 
B) there is easy entry and exit. 
C) firms are price takers. 
D) firms face horizontal demand curves. 
E) the marginal revenue curve and the demand curve are the same.

Question 16

The firm in the above figure has excess capacity of ________ meals per day.

Accepted Answer

A) 0 
B) between 1 and 10 
C) between 11 and 20 
D) more than 21 and 30 
E) more than 31 
A) 0 
B) between 1 and 10 
C) between 11 and 20 
D) more than 21 and 30 
E) more than 31

Question 17

When a city licenses only 3 taxi firms to serve the market, the city has created a

Accepted Answer

A) cartel. 
B) legal monopoly. 
C) monopolistically competitive market. 
D) legal oligopoly. 
E) natural oligopoly. 
A) cartel. 
B) legal monopoly. 
C) monopolistically competitive market. 
D) legal oligopoly. 
E) natural oligopoly.

Question 18

If firms in an oligopolistic industry successfully collude and form a cartel, what price and output will result?

Accepted Answer

A) the monopoly price and output 
B) the competitive price and output 
C) the monopolistically competitive price and output 
D) a price higher than the monopoly price and, because there is more than one firm in the industry, more output than the monopoly amount 
E) a price lower than the competitive price and, because there are only a few firms in the industry, less output than the competitive amount 
A) the monopoly price and output 
B) the competitive price and output 
C) the monopolistically competitive price and output 
D) a price higher than the monopoly price and, because there is more than one firm in the industry, more output than the monopoly amount 
E) a price lower than the competitive price and, because there are only a few firms in the industry, less output than the competitive amount

Question 19

For a duopoly, the maximum total profit is reached when the duopoly produces

Accepted Answer

A) the same amount of output as the competitive outcome. 
B) the same amount of output as the monopoly outcome. 
C) an amount of output that lies between the competitive outcome and the monopoly outcome. 
D) more output than the competitive outcome. 
E) less output than the monopoly outcome. 
A) the same amount of output as the competitive outcome. 
B) the same amount of output as the monopoly outcome. 
C) an amount of output that lies between the competitive outcome and the monopoly outcome. 
D) more output than the competitive outcome. 
E) less output than the monopoly outcome.

Question 20

In the long run, a firm in monopolistic competition will produce

Accepted Answer

A) where average total cost is minimized. 
B) where price equals average total cost but average total cost is not at its minimum. 
C) zero output. 
D) any possible amount of output. 
E) where price equals marginal cost. 
A) where average total cost is minimized. 
B) where price equals average total cost but average total cost is not at its minimum. 
C) zero output. 
D) any possible amount of output. 
E) where price equals marginal cost.

A firm faces a small number of competitors. This firm is competing in

The equilibrium in the prisoners' dilemma i. minimizes the prisoners' combined jail time. Ii. has one prisoner confessing and the other denying. Iii. is a Nash equilibrium.

What is the conclusion in the prisoners' dilemma?

A Nash equilibrium occurs

When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they can achieve long-run economic profit similar to

Firms in monopolistic competition

-If an oligopolistic game is repeatedly played, which of the following can occur?

When economies of scale limit the number of firms in an industry to 3, there is a

If the four-firm concentration ratio equals 0.1 percent for the Mexican tomato industry, then this industry is best characterized as

A firm in monopolistic competition is

"If firms in an oligopoly operate as a monopoly, the industry produces the most output and if they operate as perfect competitors, the industry produces the least output." Is the previous statement correct or incorrect? Why?

If a duopoly has reached the monopoly outcome, a firm can increase its profit by if it and it alone its price and its production.

When a market has barriers to entry,

In both monopolistic competition and perfect competition,

The firm in the above figure has excess capacity of ________ meals per day.

When a city licenses only 3 taxi firms to serve the market, the city has created a

If firms in an oligopolistic industry successfully collude and form a cartel, what price and output will result?

For a duopoly, the maximum total profit is reached when the duopoly produces

In the long run, a firm in monopolistic competition will produce

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 13: Monopolistic Competition and Oligopoly

A firm faces a small number of competitors. This firm is competing in

The equilibrium in the prisoners' dilemma i. minimizes the prisoners' combined jail time. Ii. has one prisoner confessing and the other denying. Iii. is a Nash equilibrium.

What is the conclusion in the prisoners' dilemma?

A Nash equilibrium occurs

When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they can achieve long-run economic profit similar to

Firms in monopolistic competition

-If an oligopolistic game is repeatedly played, which of the following can occur?

When economies of scale limit the number of firms in an industry to 3, there is a

If the four-firm concentration ratio equals 0.1 percent for the Mexican tomato industry, then this industry is best characterized as

A firm in monopolistic competition is

"If firms in an oligopoly operate as a monopoly, the industry produces the most output and if they operate as perfect competitors, the industry produces the least output." Is the previous statement correct or incorrect? Why?

If a duopoly has reached the monopoly outcome, a firm can increase its profit by if it and it alone ________ its price and ________ its production.

When a market has barriers to entry,

In both monopolistic competition and perfect competition,

The firm in the above figure has excess capacity of ________ meals per day.

When a city licenses only 3 taxi firms to serve the market, the city has created a

If firms in an oligopolistic industry successfully collude and form a cartel, what price and output will result?

For a duopoly, the maximum total profit is reached when the duopoly produces

In the long run, a firm in monopolistic competition will produce

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

If a duopoly has reached the monopoly outcome, a firm can increase its profit by if it and it alone its price and its production.