Question 1

If a firm in monopolistic competition is earning an economic profit,

Accepted Answer

A) it is in the long run. 
B) other firms can enter the market. 
C) it can do so because it is "monopolistic" and other firms will have a hard time competing with it. 
D) its average cost must exceed its marginal cost. 
E) The question errs because firms in monopolistic competition cannot earn an economic profit. 
A) it is in the long run. 
B) other firms can enter the market. 
C) it can do so because it is "monopolistic" and other firms will have a hard time competing with it. 
D) its average cost must exceed its marginal cost. 
E) The question errs because firms in monopolistic competition cannot earn an economic profit.

Question 2

Economists use game theory to analyze strategic behavior, which takes into account

Accepted Answer

A) monopoly situations. 
B) the expected behavior of others and the recognition of mutual interdependence. 
C) the price-taking behavior of oligopolists. 
D) non-price competition. 
E) that increased demand decreases the market power of the firms in the market. 
A) monopoly situations. 
B) the expected behavior of others and the recognition of mutual interdependence. 
C) the price-taking behavior of oligopolists. 
D) non-price competition. 
E) that increased demand decreases the market power of the firms in the market.

Question 3

When firms in monopolistic competition incur an economic loss, some firms will

Accepted Answer

A) enter the industry and produce more products. 
B) exit the industry, and demand will increase for the firms that remain. 
C) exit the industry, and demand will decrease for the firms that remain. 
D) enter the industry, and demand will become more elastic for the original firms. 
E) exit the industry and other firms will enter. 
A) enter the industry and produce more products. 
B) exit the industry, and demand will increase for the firms that remain. 
C) exit the industry, and demand will decrease for the firms that remain. 
D) enter the industry, and demand will become more elastic for the original firms. 
E) exit the industry and other firms will enter.

Question 4

If a large number of firms are competing, the market could be

Accepted Answer

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

Question 5

Excess capacity is the

Accepted Answer

A) difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B) difference between a perfectly competitive firm's and a monopoly's output. 
C) output at the maximum point of the ATC curve. 
D) difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E) None of the above answers is correct. 
A) difference between a perfectly competitive firm's and a monopolistically competitive firm's output. 
B) difference between a perfectly competitive firm's and a monopoly's output. 
C) output at the maximum point of the ATC curve. 
D) difference between the price charged by a monopoly and a monopolistically competitive firm with the same costs. 
E) None of the above answers is correct.

Question 6

As a firm in monopolistic competition sets the price for its product, the firm faces a tradeoff between

Accepted Answer

A) supply and demand. 
B) efficiency and equity. 
C) internal and external economies of scale. 
D) price and the quantity it can sell. 
E) its marginal revenue and its price. 
A) supply and demand. 
B) efficiency and equity. 
C) internal and external economies of scale. 
D) price and the quantity it can sell. 
E) its marginal revenue and its price.

Question 7

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

Accepted Answer

The statement is correct. In m

Question 8

-The table above shows the payoff matrix offered to two suspected criminals, Bonnie and Clyde. The payoffs are the years they will spend in prison. The suspected criminals are not allowed to communicate. Given the information in the payoff matrix, the Nash equilibrium is

Accepted Answer

A) Bonnie confesses only if she thinks Clyde denies committing the crime. 
B) Clyde confesses only if he thinks Bonnie denies committing the crime. 
C) both Bonnie and Clyde confess to the crime. 
D) both Bonnie and Clyde deny committing the crime. 
E) Clyde confesses and Bonnie might either confess or not confess; either outcome is consistent with the Nash equilibrium. 
A) Bonnie confesses only if she thinks Clyde denies committing the crime. 
B) Clyde confesses only if he thinks Bonnie denies committing the crime. 
C) both Bonnie and Clyde confess to the crime. 
D) both Bonnie and Clyde deny committing the crime. 
E) Clyde confesses and Bonnie might either confess or not confess; either outcome is consistent with the Nash equilibrium.

Question 9

In the Boeing/Airbus oligopoly example discussed in the text, why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

Accepted Answer

Both Boeing and Airbus wanted to produce

Question 10

For a firm in monopolistic competition to undertake product development, the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

Accepted Answer

A) greater than 
B) less than 
C) not comparable to 
D) equal to or less than 
E) None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development. 
A) greater than 
B) less than 
C) not comparable to 
D) equal to or less than 
E) None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development.

Question 11

Game theory reveals that

Accepted Answer

A) the equilibrium might not be the best solution for the parties involved. 
B) firms in oligopoly are not interdependent. 
C) each player looks after what is best for the industry. 
D) if all firms in an oligopoly take the action that maximizes their profit, then the equilibrium will have the largest possible combined profit of all the firms. 
E) firms in an oligopoly choose their actions without regard for what the other firms might do. 
A) the equilibrium might not be the best solution for the parties involved. 
B) firms in oligopoly are not interdependent. 
C) each player looks after what is best for the industry. 
D) if all firms in an oligopoly take the action that maximizes their profit, then the equilibrium will have the largest possible combined profit of all the firms. 
E) firms in an oligopoly choose their actions without regard for what the other firms might do.

Question 12

Product differentiation allows a firm to compete with another firm on the basis of

Accepted Answer

A) efficiency. 
B) elasticity. 
C) quality, price, and marketing. 
D) the level of output and the price. 
E) demand. 
A) efficiency. 
B) elasticity. 
C) quality, price, and marketing. 
D) the level of output and the price. 
E) demand.

Question 13

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. A firm in mo

Question 14

If the four-firm concentration ratio of an industry is

Accepted Answer

A) near 100, the industry is considered very competitive. 
B) less than 40, the industry is considered an oligopoly. 
C) over 40, the industry is considered monopolistic competition. 
D) less than 40, the industry is considered monopolistic competition. 
E) close to 0, the industry is considered a monopoly. 
A) near 100, the industry is considered very competitive. 
B) less than 40, the industry is considered an oligopoly. 
C) over 40, the industry is considered monopolistic competition. 
D) less than 40, the industry is considered monopolistic competition. 
E) close to 0, the industry is considered a monopoly.

Question 15

Firms attempt to create a consumer perception of product differentiation through i. packaging.
Ii. marketing.
Iii. advertising.

Accepted Answer

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

Question 16

When a firm maximizes its profit, which of the following is correct for firms in monopolistic competition and perfect competition?

Accepted Answer

A) P = MC for both types of firms. 
B) P = MR = MC for firms in perfect competition and P > MR = MC for firms in monopolistic competition. 
C) MR = MC for firms in perfect competition and MR > MC for firms in monopolistic competition. 
D) P > MR = MC for firms in both perfect competition and monopolistic competition. 
E) P = ATC always for firms in both perfect competition and monopolistic competition. 
A) P = MC for both types of firms. 
B) P = MR = MC for firms in perfect competition and P > MR = MC for firms in monopolistic competition. 
C) MR = MC for firms in perfect competition and MR > MC for firms in monopolistic competition. 
D) P > MR = MC for firms in both perfect competition and monopolistic competition. 
E) P = ATC always for firms in both perfect competition and monopolistic competition.

Question 17

In which of the following ways do advertising and other selling costs affect a firm's cost curves?
I. Advertising expenditures increase total fixed costs.
Ii. Selling costs increase total fixed costs.
Iii. Advertising and other selling costs per unit of output decrease as output increases.

Accepted Answer

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

Question 18

An example of a firm in monopolistic competition is

Accepted Answer

A) your local water company. 
B) the sole cable television company. 
C) the many Chinese restaurants in San Francisco. 
D) Kansas Power and Light, the sole provider of electricity in Kansas City. 
E) Shaniq, a wheat farmer. 
A) your local water company. 
B) the sole cable television company. 
C) the many Chinese restaurants in San Francisco. 
D) Kansas Power and Light, the sole provider of electricity in Kansas City. 
E) Shaniq, a wheat farmer.

Question 19

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized, then that firm

Accepted Answer

A) must be suffering an economic loss. 
B) must be earning an economic profit. 
C) has excess capacity. 
D) is producing at its capacity output. 
E) must be earning a normal profit. 
A) must be suffering an economic loss. 
B) must be earning an economic profit. 
C) has excess capacity. 
D) is producing at its capacity output. 
E) must be earning a normal profit.

Question 20

-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. AMD is playing a tit-for-tat strategy and Intel did not conduct R&D last period. Then, of the following answers, Intel's total profit for the next two periods is the highest if Intel ________ R&D this period and ________ R&D next period.

Accepted Answer

A) conducts; conducts 
B) does not conduct; conducts 
C) conducts; does not conduct 
D) does not conduct; does not conduct 
E) conducts; either conducts or does not conduct because the profit is the same in either case 
A) conducts; conducts 
B) does not conduct; conducts 
C) conducts; does not conduct 
D) does not conduct; does not conduct 
E) conducts; either conducts or does not conduct because the profit is the same in either case

If a firm in monopolistic competition is earning an economic profit,

Economists use game theory to analyze strategic behavior, which takes into account

When firms in monopolistic competition incur an economic loss, some firms will

If a large number of firms are competing, the market could be

Excess capacity is the

As a firm in monopolistic competition sets the price for its product, the firm faces a tradeoff between

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

-The table above shows the payoff matrix offered to two suspected criminals, Bonnie and Clyde. The payoffs are the years they will spend in prison. The suspected criminals are not allowed to communicate. Given the information in the payoff matrix, the Nash equilibrium is

In the Boeing/Airbus oligopoly example discussed in the text, why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

For a firm in monopolistic competition to undertake product development, the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

Game theory reveals that

Product differentiation allows a firm to compete with another firm on the basis of

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

If the four-firm concentration ratio of an industry is

Firms attempt to create a consumer perception of product differentiation through i. packaging. Ii. marketing. Iii. advertising.

When a firm maximizes its profit, which of the following is correct for firms in monopolistic competition and perfect competition?

In which of the following ways do advertising and other selling costs affect a firm's cost curves? I. Advertising expenditures increase total fixed costs. Ii. Selling costs increase total fixed costs. Iii. Advertising and other selling costs per unit of output decrease as output increases.

An example of a firm in monopolistic competition is

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized, then that firm

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

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Exam 13: Monopolistic Competition and Oligopoly

If a firm in monopolistic competition is earning an economic profit,

Economists use game theory to analyze strategic behavior, which takes into account

When firms in monopolistic competition incur an economic loss, some firms will

If a large number of firms are competing, the market could be

Excess capacity is the

As a firm in monopolistic competition sets the price for its product, the firm faces a tradeoff between

"One of the defining features of monopolistic competition is product variety." Is the previous statement correct or incorrect?

-The table above shows the payoff matrix offered to two suspected criminals, Bonnie and Clyde. The payoffs are the years they will spend in prison. The suspected criminals are not allowed to communicate. Given the information in the payoff matrix, the Nash equilibrium is

In the Boeing/Airbus oligopoly example discussed in the text, why did Boeing and Airbus have an incentive to produce more planes than the monopoly outcome?

For a firm in monopolistic competition to undertake product development, the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

Game theory reveals that

Product differentiation allows a firm to compete with another firm on the basis of

"A firm in monopolistic competition maximizes its profit by producing where its price is equal to its marginal cost." Is the previous statement correct or incorrect?

If the four-firm concentration ratio of an industry is

Firms attempt to create a consumer perception of product differentiation through i. packaging. Ii. marketing. Iii. advertising.

When a firm maximizes its profit, which of the following is correct for firms in monopolistic competition and perfect competition?

In which of the following ways do advertising and other selling costs affect a firm's cost curves? I. Advertising expenditures increase total fixed costs. Ii. Selling costs increase total fixed costs. Iii. Advertising and other selling costs per unit of output decrease as output increases.

An example of a firm in monopolistic competition is

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized, then that firm

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