Question 1

One characteristic of monopolistic competition is that it has

Accepted Answer

A) many firms producing a slightly differentiated product. 
B) many firms producing identical goods. 
C) one firm producing a unique good. 
D) a few firms producing a slightly differentiated product. 
E) large barriers to entry. 
A) many firms producing a slightly differentiated product. 
B) many firms producing identical goods. 
C) one firm producing a unique good. 
D) a few firms producing a slightly differentiated product. 
E) large barriers to entry.

Question 2

A firm in monopolistic competition ________ influence its price and ________ influence the market average price.

Accepted Answer

A) can; can 
B) can; cannot 
C) cannot; can 
D) cannot; cannot 
E) can; only in the short run can 
A) can; can 
B) can; cannot 
C) cannot; can 
D) cannot; cannot 
E) can; only in the short run can

Question 3

Does an oligopoly produce the efficient quantity of output or does it create a deadweight loss?
 Do the firms want to produce the efficient quantity of output?
 Explain your answer.

Accepted Answer

An oligopoly might or might not operate

Question 4

-Suppose MCI and AT&T can each charge either 3¢ or 4¢ a minute for a long distance call. The above table illustrates the payoffs, in millions of dollars, from each of the four possible outcomes that could occur in their duopoly setting. If MCI charges 3¢ a minute and AT&T charges 4¢ a minute, then MCI's profit will be ________ million and AT&T's profit will be ________ million.

Accepted Answer

A) $320; $320 
B) $200; $500 
C) $500; $200 
D) $450; $450 
E) $320; $450 
A) $320; $320 
B) $200; $500 
C) $500; $200 
D) $450; $450 
E) $320; $450

Question 5

Imagine a duopoly in which two firms, A and B, produce the monopoly profit-maximizing output and equally share the economic profit. If firm A increases output,

Accepted Answer

A) both firms' profits increase. 
B) firm A's profits increase and firm B's profits decrease. 
C) firm B's profits increase and firm A's profits decrease. 
D) both firms' profits decrease. 
E) firm A's profits increase and firm B's profits do not change. 
A) both firms' profits increase. 
B) firm A's profits increase and firm B's profits decrease. 
C) firm B's profits increase and firm A's profits decrease. 
D) both firms' profits decrease. 
E) firm A's profits increase and firm B's profits do not change.

Question 6

Product differentiation means

Accepted Answer

A) making a product that has perfect substitutes. 
B) making a product that is entirely unique. 
C) the inability to set your own price. 
D) making a product that is slightly different from products of competing firms. 
E) making your demand curve horizontal. 
A) making a product that has perfect substitutes. 
B) making a product that is entirely unique. 
C) the inability to set your own price. 
D) making a product that is slightly different from products of competing firms. 
E) making your demand curve horizontal.

Question 7

A collusive agreement to form a cartel is difficult to maintain because

Accepted Answer

A) each member firm can increase its own profits by cutting its price and selling more. 
B) forming a cartel is legal but frowned upon throughout the world. 
C) supply will decrease because of the high cartel price. 
D) demanders will rebel once they realize a cartel has been formed. 
E) each firm can increase its profit if it decreases its production even more than the decrease set by the cartel. 
A) each member firm can increase its own profits by cutting its price and selling more. 
B) forming a cartel is legal but frowned upon throughout the world. 
C) supply will decrease because of the high cartel price. 
D) demanders will rebel once they realize a cartel has been formed. 
E) each firm can increase its profit if it decreases its production even more than the decrease set by the cartel.

Question 8

If the Herfindahl-Hirschman Index for an industry is 8,528, is the industry competitive or concentrated?

Accepted Answer

With a Herfindahl-Hirschman In

Question 9

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 , then the single-use camera 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 10

Crest Toothpaste offers new whitening toothpaste one year, a new gel swirl design the next year, and an improved cleaning formula the year after. Crest Toothpaste does this because it is

Accepted Answer

A) a monopoly trying to decrease its costs. 
B) a perfectly competitive firm trying to increase its price. 
C) a monopolistically competitive firm trying to maintain its economic profit. 
D) driving its competitors out of business. 
E) a perfectly competitive firm trying to increase its costs so it can increase its price. 
A) a monopoly trying to decrease its costs. 
B) a perfectly competitive firm trying to increase its price. 
C) a monopolistically competitive firm trying to maintain its economic profit. 
D) driving its competitors out of business. 
E) a perfectly competitive firm trying to increase its costs so it can increase its price.

Question 11

For a monopolistically competitive firm, the demand curve

Accepted Answer

A) is a horizontal line. 
B) has a positive slope. 
C) is vertical. 
D) has a negative slope. 
E) is the same as the marginal revenue curve. 
A) is a horizontal line. 
B) has a positive slope. 
C) is vertical. 
D) has a negative slope. 
E) is the same as the marginal revenue curve.

Question 12

Which of the following statements about product development in monopolistic competition is correct?
I. Firms in monopolistic competition undertake too much product development for efficiency.
Ii. Firms in monopolistic competition undertake too little product development for efficiency.
Iii. Product development might allow the firm to temporarily earn an economic profit.

Accepted Answer

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

Question 13

Herb's Inc. has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in

Accepted Answer

A) an oligopoly. 
B) a monopolistically competitive market. 
C) a monopoly market. 
D) a perfectly competitive market. 
E) a collusively protected market. 
A) an oligopoly. 
B) a monopolistically competitive market. 
C) a monopoly market. 
D) a perfectly competitive market. 
E) a collusively protected market.

Question 14

Why is collusion about the price and amount of output impossible in monopolistic competition?

Accepted Answer

The smaller the number of firm

Question 15

The prisoners' dilemma is

Accepted Answer

A) an example of a duopoly game. 
B) a theory about why firms break the law. 
C) competition that can occur among firms in monopolistic competition. 
D) an example of the monopolist charging high prices. 
E) an example of a game that does not have a Nash equilibrium. 
A) an example of a duopoly game. 
B) a theory about why firms break the law. 
C) competition that can occur among firms in monopolistic competition. 
D) an example of the monopolist charging high prices. 
E) an example of a game that does not have a Nash equilibrium.

Question 16

At a long-run equilibrium in monopolistic competition, price equals

Accepted Answer

A) average total cost. 
B) marginal cost but not marginal revenue. 
C) marginal revenue but not marginal cost. 
D) zero. 
E) marginal revenue and marginal cost. 
A) average total cost. 
B) marginal cost but not marginal revenue. 
C) marginal revenue but not marginal cost. 
D) zero. 
E) marginal revenue and marginal cost.

Question 17

OPEC, the Organization of Petroleum Exporting Countries, was formed in Baghdad in 1960. Since its formation, this cartel has suffered from a major problem with respect to the quota (limit)of output it assigns each member nation. What is OPEC's goal and what sort of quota do you think the cartel assigns?
 How and why do nations cheat on their quota?
 What happens when a nation cheats on its quota?

Accepted Answer

In order to keep oil prices high, as has

Question 18

What is game theory and what light does it shed on the duopolists' dilemma?

Accepted Answer

Game theory is a tool economists use to

Question 19

If a monopolistically competitive seller's marginal cost is $3.56, the firm will not change its output if

Accepted Answer

A) its marginal revenue is less than $3.56. 
B) its marginal revenue is equal to $3.56. 
C) its marginal revenue is more than $3.56. 
D) its average total cost is equal to $3.56. 
E) Both answers B and D are correct. 
A) its marginal revenue is less than $3.56. 
B) its marginal revenue is equal to $3.56. 
C) its marginal revenue is more than $3.56. 
D) its average total cost is equal to $3.56. 
E) Both answers B and D are correct.

Question 20

Draw an example of a firm in monopolistic competition that is earning an economic profit. Be sure to label all the curves. Indicate the area that equals the firm's economic profit.

Accepted Answer

@#IMG-DLM& The compl

One characteristic of monopolistic competition is that it has

A firm in monopolistic competition influence its price and influence the market average price.

Does an oligopoly produce the efficient quantity of output or does it create a deadweight loss? Do the firms want to produce the efficient quantity of output? Explain your answer.

Imagine a duopoly in which two firms, A and B, produce the monopoly profit-maximizing output and equally share the economic profit. If firm A increases output,

Product differentiation means

A collusive agreement to form a cartel is difficult to maintain because

If the Herfindahl-Hirschman Index for an industry is 8,528, is the industry competitive or concentrated?

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 , then the single-use camera industry is best characterized as

Crest Toothpaste offers new whitening toothpaste one year, a new gel swirl design the next year, and an improved cleaning formula the year after. Crest Toothpaste does this because it is

For a monopolistically competitive firm, the demand curve

Herb's Inc. has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in

Why is collusion about the price and amount of output impossible in monopolistic competition?

The prisoners' dilemma is

At a long-run equilibrium in monopolistic competition, price equals

What is game theory and what light does it shed on the duopolists' dilemma?

If a monopolistically competitive seller's marginal cost is $3.56, the firm will not change its output if

Draw an example of a firm in monopolistic competition that is earning an economic profit. Be sure to label all the curves. Indicate the area that equals the firm's economic profit.

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

One characteristic of monopolistic competition is that it has

A firm in monopolistic competition ________ influence its price and ________ influence the market average price.

Does an oligopoly produce the efficient quantity of output or does it create a deadweight loss? Do the firms want to produce the efficient quantity of output? Explain your answer.

Imagine a duopoly in which two firms, A and B, produce the monopoly profit-maximizing output and equally share the economic profit. If firm A increases output,

Product differentiation means

A collusive agreement to form a cartel is difficult to maintain because

If the Herfindahl-Hirschman Index for an industry is 8,528, is the industry competitive or concentrated?

If the Herfindahl-Hirschman Index in the market for single-use cameras equals 10,000 , then the single-use camera industry is best characterized as

Crest Toothpaste offers new whitening toothpaste one year, a new gel swirl design the next year, and an improved cleaning formula the year after. Crest Toothpaste does this because it is

For a monopolistically competitive firm, the demand curve

Herb's Inc. has a large share of its market and is tempted to collude with the few firms that are in its market. Herb's operates in

Why is collusion about the price and amount of output impossible in monopolistic competition?

The prisoners' dilemma is

At a long-run equilibrium in monopolistic competition, price equals

What is game theory and what light does it shed on the duopolists' dilemma?

If a monopolistically competitive seller's marginal cost is $3.56, the firm will not change its output if

Draw an example of a firm in monopolistic competition that is earning an economic profit. Be sure to label all the curves. Indicate the area that equals the firm's economic profit.

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

A firm in monopolistic competition influence its price and influence the market average price.