Question 1

In the long run in monopolistic competition, firms

Accepted Answer

A) can earn an economic profit. 
B) incur an economic loss. 
C) can earn zero economic profit but not an economic profit. 
D) shut down if they are earning zero economic profit. 
E) earn either an economic profit or zero economic profit. 
A) can earn an economic profit. 
B) incur an economic loss. 
C) can earn zero economic profit but not an economic profit. 
D) shut down if they are earning zero economic profit. 
E) earn either an economic profit or zero economic profit.

Question 2

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

Accepted Answer

A) less than 
B) equal to 
C) more than 
D) not comparable to 
E) All of the above are possible depending on market conditions. 
A) less than 
B) equal to 
C) more than 
D) not comparable to 
E) All of the above are possible depending on market conditions.

Question 3

The darkened area in the figure above is the

Accepted Answer

A) deadweight loss. 
B) firm's economic loss. 
C) consumer surplus. 
D) firm's total cost. 
E) firm's total revenue. 
A) deadweight loss. 
B) firm's economic loss. 
C) consumer surplus. 
D) firm's total cost. 
E) firm's total revenue.

Question 4

What is the dilemma faced by firms in oligopoly?

Accepted Answer

Because there are just a few large firms

Question 5

In monopolistic competition there are ________ barriers to entry, so therefore in the long run, economic profit ________.

Accepted Answer

A) no; is substantial 
B) no; equals zero 
C) many; equals zero 
D) many; is substantial 
E) many; might be earned depending on the degree of product differentiation 
A) no; is substantial 
B) no; equals zero 
C) many; equals zero 
D) many; is substantial 
E) many; might be earned depending on the degree of product differentiation

Question 6

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Industry A } \
\text { (total revenue, millions of dollars) }
\end{array} & \begin{array} { c } 
\text { Industry B } \
\text { (total revenue, millions of dollars) }
\end{array} \
\hline 5 & 10 \
7 & 8 \
4 & 9 \
16 & 8 \
11 & 9 \
10 & 10 \
8 & 9 \
19 & 9 \
13 & 10 \
4 & 9 \
3 & 9
\end{array}$$
-Listed in the above table are the total revenues for the firms in two different industries. Each industry has only eleven firms. Find the four-firm concentration ratio and the Herfindahl-Hirschman Index for each industry.

Accepted Answer

Industry A has a four-firm concentration

Question 7

Which of the following is correct?

Accepted Answer

A) A firm in monopolistic competition does not have excess capacity in the long run. 
B) A firm in perfect competition operates at maximum average total cost in the long run. 
C) In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. 
D) In the long run, a firm in monopolistic competition earns zero economic profit and its price is equal to the minimum average total cost. 
E) In the long run, a firm in monopolistic competition can earn an economic profit because of product differentiation. 
A) A firm in monopolistic competition does not have excess capacity in the long run. 
B) A firm in perfect competition operates at maximum average total cost in the long run. 
C) In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. 
D) In the long run, a firm in monopolistic competition earns zero economic profit and its price is equal to the minimum average total cost. 
E) In the long run, a firm in monopolistic competition can earn an economic profit because of product differentiation.

Question 8

In the long run, firms in monopolistic competition earn zero economic profit. When firms earn zero economic profit, in the long run they exit the industry.

Accepted Answer

A) The first sentence is correct and the second sentence is incorrect. 
B) The first sentence is incorrect and the second sentence is correct. 
C) Both sentences are correct. 
D) Both sentences are incorrect. 
E) More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false. 
A) The first sentence is correct and the second sentence is incorrect. 
B) The first sentence is incorrect and the second sentence is correct. 
C) Both sentences are correct. 
D) Both sentences are incorrect. 
E) More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.

Question 9

The shampoo industry is constantly coming out with new products. The reason is that when a firm introduces a new shampoo into the market, the demand for the shampoo becomes ________ temporarily and economic profit ________.

Accepted Answer

A) more elastic; decreases 
B) less elastic; increases 
C) more elastic; increases 
D) less elastic; decreases 
E) unit elastic; increases 
A) more elastic; decreases 
B) less elastic; increases 
C) more elastic; increases 
D) less elastic; decreases 
E) unit elastic; increases

Question 10

If the HHI for the widget industry is 1,200, then the market structure is

Accepted Answer

A) a monopoly. 
B) monopolistic competition. 
C) an oligopoly. 
D) perfect competition. 
E) impossible to determine 
A) a monopoly. 
B) monopolistic competition. 
C) an oligopoly. 
D) perfect competition. 
E) impossible to determine

Question 11

The four largest firms in an industry account for the following value of industry revenues: 12 percent, 8 percent, 5 percent and 4 percent. Calculate the four-firm concentration ratio. Would this industry be regarded as competitive or concentrated?

Accepted Answer

The four-firm concentration ra

Question 12

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry, you have found the

Accepted Answer

A) elasticity of demand value. 
B) elasticity of supply value. 
C) Herfindahl-Hirschman Index. 
D) four-firm concentration ratio. 
E) monopolistic concentration index. 
A) elasticity of demand value. 
B) elasticity of supply value. 
C) Herfindahl-Hirschman Index. 
D) four-firm concentration ratio. 
E) monopolistic concentration index.

Question 13

A group of firms that has entered into an agreement to restrict output and increase prices and profits is called

Accepted Answer

A) a compliance. 
B) a cartel. 
C) an oligopoly. 
D) a duopoly. 
E) a multi-firm monopoly. 
A) a compliance. 
B) a cartel. 
C) an oligopoly. 
D) a duopoly. 
E) a multi-firm monopoly.

Question 14

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

Accepted Answer

Firms in an oligopoly have large market

Question 15

What is the four-firm concentration ratio if the four largest firms in an industry account for 5 percent, 6 percent, 7 percent, and 8 percent of total revenue?

Accepted Answer

A) 26 percent 
B) 174 percent 
C) 1,680 
D) There is enough information given to answer the question, but none of the answers above are correct. 
E) There is not enough information given to answer the question. 
A) 26 percent 
B) 174 percent 
C) 1,680 
D) There is enough information given to answer the question, but none of the answers above are correct. 
E) There is not enough information given to answer the question.

Question 16

In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

Accepted Answer

The more firms that are involved in the

Question 17

A cartel is most likely to occur in

Accepted Answer

A) perfect competition as firms compete by reducing cost. 
B) oligopoly as firms act together to raise prices and increase profits. 
C) monopolistic competition where firms collude to increase profits. 
D) oligopoly as firms compete to lower price and increase their own profits. 
E) monopoly because it faces no competition. 
A) perfect competition as firms compete by reducing cost. 
B) oligopoly as firms act together to raise prices and increase profits. 
C) monopolistic competition where firms collude to increase profits. 
D) oligopoly as firms compete to lower price and increase their own profits. 
E) monopoly because it faces no competition.

Question 18

The larger the four-firm concentration ratio, the ________ competition within an industry; the larger the Herfindahl-Hirschman Index, the ________ competition within an industry.

Accepted Answer

A) more; more 
B) more; less 
C) less; more 
D) less; less 
E) The premise of the question is wrong because the four-firm concentration ratio applies only to markets with four firms in it and these markets are, by definition, not competitive. 
A) more; more 
B) more; less 
C) less; more 
D) less; less 
E) The premise of the question is wrong because the four-firm concentration ratio applies only to markets with four firms in it and these markets are, by definition, not competitive.

Question 19

Because of product differentiation, firms

Accepted Answer

A) do not have to compete because their products are unique. 
B) cannot compete on price. 
C) can compete on the basis of quality. 
D) are unable to compete by using advertising. 
E) must compete on only price. 
A) do not have to compete because their products are unique. 
B) cannot compete on price. 
C) can compete on the basis of quality. 
D) are unable to compete by using advertising. 
E) must compete on only price.

Question 20

In monopolistic competition there

Accepted Answer

A) are many firms and many buyers. 
B) are several large firms. 
C) is one large firm. 
D) might be many, several, or one firm. 
E) are many firms but only a few buyers. 
A) are many firms and many buyers. 
B) are several large firms. 
C) is one large firm. 
D) might be many, several, or one firm. 
E) are many firms but only a few buyers.

In the long run in monopolistic competition, firms

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

The darkened area in the figure above is the

What is the dilemma faced by firms in oligopoly?

In monopolistic competition there are barriers to entry, so therefore in the long run, economic profit .

Which of the following is correct?

In the long run, firms in monopolistic competition earn zero economic profit. When firms earn zero economic profit, in the long run they exit the industry.

The shampoo industry is constantly coming out with new products. The reason is that when a firm introduces a new shampoo into the market, the demand for the shampoo becomes temporarily and economic profit .

If the HHI for the widget industry is 1,200, then the market structure is

The four largest firms in an industry account for the following value of industry revenues: 12 percent, 8 percent, 5 percent and 4 percent. Calculate the four-firm concentration ratio. Would this industry be regarded as competitive or concentrated?

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry, you have found the

A group of firms that has entered into an agreement to restrict output and increase prices and profits is called

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

What is the four-firm concentration ratio if the four largest firms in an industry account for 5 percent, 6 percent, 7 percent, and 8 percent of total revenue?

In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

A cartel is most likely to occur in

The larger the four-firm concentration ratio, the competition within an industry; the larger the Herfindahl-Hirschman Index, the competition within an industry.

Because of product differentiation, firms

In monopolistic competition there

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

In the long run in monopolistic competition, firms

In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output.

The darkened area in the figure above is the

What is the dilemma faced by firms in oligopoly?

In monopolistic competition there are ________ barriers to entry, so therefore in the long run, economic profit ________.

Which of the following is correct?

In the long run, firms in monopolistic competition earn zero economic profit. When firms earn zero economic profit, in the long run they exit the industry.

The shampoo industry is constantly coming out with new products. The reason is that when a firm introduces a new shampoo into the market, the demand for the shampoo becomes ________ temporarily and economic profit ________.

If the HHI for the widget industry is 1,200, then the market structure is

The four largest firms in an industry account for the following value of industry revenues: 12 percent, 8 percent, 5 percent and 4 percent. Calculate the four-firm concentration ratio. Would this industry be regarded as competitive or concentrated?

If you have found the percentage of the value of total revenue accounted for by the four largest firms in an industry, you have found the

A group of firms that has entered into an agreement to restrict output and increase prices and profits is called

Why do oligopoly firms find it difficult to cooperate and not cheat on a cartel agreement?

What is the four-firm concentration ratio if the four largest firms in an industry account for 5 percent, 6 percent, 7 percent, and 8 percent of total revenue?

In a cartel, how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

A cartel is most likely to occur in

The larger the four-firm concentration ratio, the ________ competition within an industry; the larger the Herfindahl-Hirschman Index, the ________ competition within an industry.

Because of product differentiation, firms

In monopolistic competition there

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

In monopolistic competition there are barriers to entry, so therefore in the long run, economic profit .

The shampoo industry is constantly coming out with new products. The reason is that when a firm introduces a new shampoo into the market, the demand for the shampoo becomes temporarily and economic profit .

The larger the four-firm concentration ratio, the competition within an industry; the larger the Herfindahl-Hirschman Index, the competition within an industry.