Question 1

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Accepted Answer

A four-firm concentration ratio is the p

Question 2

Even though monopolistic competition results in inefficiency, it does have which of the following benefits for society?

Accepted Answer

A) Firms earn zero economic profit in the long run. 
B) Firms can earn an economic profit in the short run. 
C) Product variety benefits consumers. 
D) Marginal cost equals price in the long run. 
E) The premise of the question is incorrect because nothing in monopolistic competition justifies any economic inefficiency. 
A) Firms earn zero economic profit in the long run. 
B) Firms can earn an economic profit in the short run. 
C) Product variety benefits consumers. 
D) Marginal cost equals price in the long run. 
E) The premise of the question is incorrect because nothing in monopolistic competition justifies any economic inefficiency.

Question 3

An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent. What is the Herfindahl-Hirschman Index?

Accepted Answer

The Herfin

Question 4

The possible alternatives for an oligopoly range from the monopoly case with ________ to the perfectly competitive case with ________.

Accepted Answer

A) high output; low output 
B) low prices; high prices 
C) low profits; high profits 
D) low output; high output 
E) no cooperation among the firms; much cooperation among the firms 
A) high output; low output 
B) low prices; high prices 
C) low profits; high profits 
D) low output; high output 
E) no cooperation among the firms; much cooperation among the firms

Question 5

Which of the following is NOT similar between monopolistic competition and perfect competition?

Accepted Answer

A) Many firms compete in the market. 
B) It's easy to enter the market. 
C) The firms have downward sloping demand curves. 
D) The firms might incur economic losses in the short run. 
E) In the long run, the firms earn zero economic profit. 
A) Many firms compete in the market. 
B) It's easy to enter the market. 
C) The firms have downward sloping demand curves. 
D) The firms might incur economic losses in the short run. 
E) In the long run, the firms earn zero economic profit.

Question 6

For a firm in monopolistic competition, selling costs

Accepted Answer

A) increase costs and reduce profits. 
B) always increase demand. 
C) can change the quantity produced and lower the average total cost. 
D) can lower total cost. 
E) has no effect on the quantity sold. 
A) increase costs and reduce profits. 
B) always increase demand. 
C) can change the quantity produced and lower the average total cost. 
D) can lower total cost. 
E) has no effect on the quantity sold.

Question 7

-Intel and AMD are a duopoly that produce CPU chips. Intel and AMD can conduct R&D or they can not conduct R&D. The table above shows the payoff matrix for the two firms. The numbers are millions of dollars of profit. The Nash equilibrium is for Intel to ________ and for AMD to ________ .

Accepted Answer

A) conduct R&D; conduct R&D 
B) conduct R&D; not conduct R&D 
C) not conduct R&D; conduct R&D 
D) not conduct R&D; not conduct R&D 
E) conduct R&D; either conduct R&D or not conduct R&D, the equilibrium could be either choice for AMD 
A) conduct R&D; conduct R&D 
B) conduct R&D; not conduct R&D 
C) not conduct R&D; conduct R&D 
D) not conduct R&D; not conduct R&D 
E) conduct R&D; either conduct R&D or not conduct R&D, the equilibrium could be either choice for AMD

Question 8

A Nash equilibrium is defined as

Accepted Answer

A) earning zero economic profit in the long run. 
B) forming a cartel with strong penalties for cheaters. 
C) relying on other game players to realize the benefit of cooperation. 
D) each player taking the best possible action given the action of the other player. 
E) each player taking the action that is best for all the players. 
A) earning zero economic profit in the long run. 
B) forming a cartel with strong penalties for cheaters. 
C) relying on other game players to realize the benefit of cooperation. 
D) each player taking the best possible action given the action of the other player. 
E) each player taking the action that is best for all the players.

Question 9

Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?

Accepted Answer

A) The firm earns zero economic profit. 
B) Price is equal to average total cost. 
C) Production occurs at minimum average total cost. 
D) Marginal revenue is equal to marginal cost. 
E) Price exceeds marginal revenue. 
A) The firm earns zero economic profit. 
B) Price is equal to average total cost. 
C) Production occurs at minimum average total cost. 
D) Marginal revenue is equal to marginal cost. 
E) Price exceeds marginal revenue.

Question 10

The players in a game theory situation often do not act in their joint interest because of which of the following?

Accepted Answer

A) They do not realize the benefit of cooperation. 
B) Players strive to minimize their opponents' profits. 
C) Players do not understand the game and its payoffs. 
D) It is not in each player's self-interest to cooperate. 
E) Players understand the game but they do not know which action(s)will benefit their joint interest. 
A) They do not realize the benefit of cooperation. 
B) Players strive to minimize their opponents' profits. 
C) Players do not understand the game and its payoffs. 
D) It is not in each player's self-interest to cooperate. 
E) Players understand the game but they do not know which action(s)will benefit their joint interest.

Question 11

What does monopolistic competition have in common with perfect competition?

Accepted Answer

A) a large number of firms and freedom of entry and exit 
B) a standardized product 
C) product differentiation 
D) the ability to earn an economic profit in the long run 
E) barriers to exit but no barriers to entry 
A) a large number of firms and freedom of entry and exit 
B) a standardized product 
C) product differentiation 
D) the ability to earn an economic profit in the long run 
E) barriers to exit but no barriers to entry

Question 12

Oligopoly is

Accepted Answer

A) always efficient. 
B) efficient only if the firms cooperate. 
C) efficient only if the firms play non-repeated games. 
D) generally not efficient. 
E) efficient only if the firms innovate. 
A) always efficient. 
B) efficient only if the firms cooperate. 
C) efficient only if the firms play non-repeated games. 
D) generally not efficient. 
E) efficient only if the firms innovate.

Question 13

-The above figure shows the market demand curve for long-distance telephone calls. Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry. If the firms in the industry operate as perfect competitors, there are ________ minutes of calls made per hour.

Accepted Answer

A) between 0 and 3 million 
B) more than 3 million and less than or equal to 5 million 
C) more than 5 million and less than or equal to 7 million 
D) more than 7 million and less than or equal to 9 million 
E) more than 9 million 
A) between 0 and 3 million 
B) more than 3 million and less than or equal to 5 million 
C) more than 5 million and less than or equal to 7 million 
D) more than 7 million and less than or equal to 9 million 
E) more than 9 million

Question 14

$$\begin{array}{l}
\text { Total revenue }\
\begin{array} { c c } 
\text { Firm } & \text { (millions of dollars) } \
\hline \text { A } & 12 \
\text { B } & 10 \
\text { C } & 5 \
\text { D } & 3
\end{array}
\end{array}$$
-An industry's total revenue is $100 million. The above table shows the total revenue of the four largest firms in an industry.
a. Calculate this industry's four-firm concentration ratio.
b. Is this industry competitive?
c. What market type does it most likely represent?

Accepted Answer

a. The four-firm concentration rate is 3

Question 15

In monopolistic competition, each firm supplies a small part of the market. This occurs because

Accepted Answer

A) there are barriers to entry. 
B) there are no barriers to exit. 
C) there is a large number of firms. 
D) firms produce differentiated products. 
E) there s a large number of buyers. 
A) there are barriers to entry. 
B) there are no barriers to exit. 
C) there is a large number of firms. 
D) firms produce differentiated products. 
E) there s a large number of buyers.

Question 16

If firms in monopolistic competition are earning economic profits, then

Accepted Answer

A) they can expect to earn the profits indefinitely. 
B) new rivals enter the industry, and the demand for any seller's good decreases. 
C) the market demand becomes more inelastic. 
D) the industry is in long-run equilibrium. 
E) new rivals enter the industry, and the demand for any seller's good increases. 
A) they can expect to earn the profits indefinitely. 
B) new rivals enter the industry, and the demand for any seller's good decreases. 
C) the market demand becomes more inelastic. 
D) the industry is in long-run equilibrium. 
E) new rivals enter the industry, and the demand for any seller's good increases.

Question 17

When a monopolistically competitive firm's demand curve shifts leftward, what happens to its marginal revenue curve?

Accepted Answer

A) Nothing, the marginal revenue curve is unchanged. 
B) It disappears. 
C) It shifts rightward. 
D) It shifts leftward. 
E)  None of the above is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic. 
A) Nothing, the marginal revenue curve is unchanged. 
B) It disappears. 
C) It shifts rightward. 
D) It shifts leftward. 
E)  None of the above is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic.

Question 18

How does a firm in monopolistic competition determine its price and quantity?
 What type of profit can it earn in the short run and the long run?

Accepted Answer

The firm produces where its marginal cos

Question 19

Which of the following is TRUE about a firm in monopolistic competition in the long run?

Accepted Answer

A) P = MC 
B) P = MR 
C) ATC = MC 
D) P = ATC 
E) MC = ATC 
A) P = MC 
B) P = MR 
C) ATC = MC 
D) P = ATC 
E) MC = ATC

Question 20

When the firm in the figure above maximizes its profit, it earns an economic profit of

Accepted Answer

A) $3,125. 
B) $6,250. 
C) $9,375. 
D) $5,625. 
E) None of the above answers are correct because the firm incurs an economic loss. 
A) $3,125. 
B) $6,250. 
C) $9,375. 
D) $5,625. 
E) None of the above answers are correct because the firm incurs an economic loss.

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Even though monopolistic competition results in inefficiency, it does have which of the following benefits for society?

An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent. What is the Herfindahl-Hirschman Index?

The possible alternatives for an oligopoly range from the monopoly case with to the perfectly competitive case with .

Which of the following is NOT similar between monopolistic competition and perfect competition?

For a firm in monopolistic competition, selling costs

-Intel and AMD are a duopoly that produce CPU chips. Intel and AMD can conduct R&D or they can not conduct R&D. The table above shows the payoff matrix for the two firms. The numbers are millions of dollars of profit. The Nash equilibrium is for Intel to and for AMD to .

A Nash equilibrium is defined as

Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?

The players in a game theory situation often do not act in their joint interest because of which of the following?

What does monopolistic competition have in common with perfect competition?

Oligopoly is

In monopolistic competition, each firm supplies a small part of the market. This occurs because

If firms in monopolistic competition are earning economic profits, then

When a monopolistically competitive firm's demand curve shifts leftward, what happens to its marginal revenue curve?

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it earn in the short run and the long run?

Which of the following is TRUE about a firm in monopolistic competition in the long run?

When the firm in the figure above maximizes its profit, it earns an economic profit of

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

What is the difference between a four-firm concentration ratio and a Herfindahl-Hirschman Index?

Even though monopolistic competition results in inefficiency, it does have which of the following benefits for society?

An industry has only four firms, who have market shares of 45 percent, 25 percent, 20 percent, and 10 percent. What is the Herfindahl-Hirschman Index?

The possible alternatives for an oligopoly range from the monopoly case with ________ to the perfectly competitive case with ________.

Which of the following is NOT similar between monopolistic competition and perfect competition?

For a firm in monopolistic competition, selling costs

-Intel and AMD are a duopoly that produce CPU chips. Intel and AMD can conduct R&D or they can not conduct R&D. The table above shows the payoff matrix for the two firms. The numbers are millions of dollars of profit. The Nash equilibrium is for Intel to ________ and for AMD to ________ .

A Nash equilibrium is defined as

Which of the following is NOT a characteristic of long-run equilibrium in monopolistic competition?

The players in a game theory situation often do not act in their joint interest because of which of the following?

What does monopolistic competition have in common with perfect competition?

Oligopoly is

In monopolistic competition, each firm supplies a small part of the market. This occurs because

If firms in monopolistic competition are earning economic profits, then

When a monopolistically competitive firm's demand curve shifts leftward, what happens to its marginal revenue curve?

How does a firm in monopolistic competition determine its price and quantity? What type of profit can it earn in the short run and the long run?

Which of the following is TRUE about a firm in monopolistic competition in the long run?

When the firm in the figure above maximizes its profit, it earns an economic profit of

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

The possible alternatives for an oligopoly range from the monopoly case with to the perfectly competitive case with .

-Intel and AMD are a duopoly that produce CPU chips. Intel and AMD can conduct R&D or they can not conduct R&D. The table above shows the payoff matrix for the two firms. The numbers are millions of dollars of profit. The Nash equilibrium is for Intel to and for AMD to .