Question 1

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is important in determining the extent of competition in an industry?

Accepted Answer

A)  the minimum level of short-run average total costs of production 
B)  the minimum efficient scale of production relative to market demand 
C)  whether or not the industry product is differentiated or standardized 
D)  only the level of market demand for the industry's product 
A)  the minimum level of short-run average total costs of production 
B)  the minimum efficient scale of production relative to market demand 
C)  whether or not the industry product is differentiated or standardized 
D)  only the level of market demand for the industry's product

Question 3

Suppose Jason owns a small pastry shop.Jason wants to maximize his profit,and thinking back to the microeconomics class he took in college,he decides he needs to produce a quantity of pastries which will minimize his average total cost.Will Jason's strategy necessarily maximize profits for his pastry shop?

Accepted Answer

A)  Yes; Since Jason's pastry shop is in a perfectly competitive market, the only way to maximize profit is to produce the quantity where average total cost is minimized. 
B)  Not necessarily; This strategy will only maximize Jason's profit in the long run, but not in the short run. 
C)  No; In order to maximize profit, Jason would never want to produce the quantity where average total cost is minimized. 
D)  Not necessarily; Depending on demand, Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum. 
A)  Yes; Since Jason's pastry shop is in a perfectly competitive market, the only way to maximize profit is to produce the quantity where average total cost is minimized. 
B)  Not necessarily; This strategy will only maximize Jason's profit in the long run, but not in the short run. 
C)  No; In order to maximize profit, Jason would never want to produce the quantity where average total cost is minimized. 
D)  Not necessarily; Depending on demand, Jason may maximize profit by producing a quantity other than that where average total cost is at a minimum.

Question 4

Table 11-13
   Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 11-13 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts.
-Refer to Table 11-13.If Zuma selects a high price,what is Wide Awake's best strategy and what will Wide Awake earn as a result of this strategy?

Accepted Answer

A)  Wide Awake will select a low price and earn $2 million. 
B)  Wide Awake will select a low price and earn $4 million. 
C)  Wide Awake will select a high price and earn $3 million. 
D)  Wide Awake will select a high price and earn $4 million. 
A)  Wide Awake will select a low price and earn $2 million. 
B)  Wide Awake will select a low price and earn $4 million. 
C)  Wide Awake will select a high price and earn $3 million. 
D)  Wide Awake will select a high price and earn $4 million.

Question 5

Table 11-12
   The payoff matrix shown above assumes that Perfect Plants and Floribunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not offer same-day delivery. The amount of profit for one firm depends on whether the other firm offers same-day delivery.
-Refer to Table 11-12.Which of the following statements is true?

Accepted Answer

A)  Neither Perfect nor Floribunda have a dominant strategy. 
B)  Perfect's dominant strategy is to offer same-day delivery; Floribunda's dominant strategy is to not offer same-day delivery. 
C)  Floribunda's dominant strategy is to offer same-day delivery; Perfect's dominant strategy is to not offer same-day delivery. 
D)  The dominant strategy for both firms is to offer same-day delivery. 
A)  Neither Perfect nor Floribunda have a dominant strategy. 
B)  Perfect's dominant strategy is to offer same-day delivery; Floribunda's dominant strategy is to not offer same-day delivery. 
C)  Floribunda's dominant strategy is to offer same-day delivery; Perfect's dominant strategy is to not offer same-day delivery. 
D)  The dominant strategy for both firms is to offer same-day delivery.

Question 6

Table 11-6
   LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 11-6 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.
-Refer to Table 11-6.Is there a dominant strategy for AirPorter and if so,what is it?

Accepted Answer

A)  No, its outcome depends on what LimoZeenz does. 
B)  Yes, AirPorter should offer the mid-week discount. 
C)  Yes, AirPorter should not offer the mid-week discount. 
D)  Yes, AirPorter's dominant strategy is to collude with LimoZeenz. 
A)  No, its outcome depends on what LimoZeenz does. 
B)  Yes, AirPorter should offer the mid-week discount. 
C)  Yes, AirPorter should not offer the mid-week discount. 
D)  Yes, AirPorter's dominant strategy is to collude with LimoZeenz.

Question 7

If economies of scale are significant,the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

Accepted Answer

A) True 
 B)False

Question 8

When a firm faces a downward-sloping demand curve,marginal revenue

Accepted Answer

A)  must exceed price because the price effect outweighs the output effect. 
B)  is less than price because a firm must lower its price to sell more. 
C)  equals price because the firm sells a standardized product. 
D)  must exceed price because the output effect outweighs the price effect. 
A)  must exceed price because the price effect outweighs the output effect. 
B)  is less than price because a firm must lower its price to sell more. 
C)  equals price because the firm sells a standardized product. 
D)  must exceed price because the output effect outweighs the price effect.

Question 9

Producing a homogeneous product occurs in which of the following industries?

Accepted Answer

A)  oligopoly, monopolistic competition, and perfect competition 
B)  perfect competition only 
C)  oligopoly and perfect competition 
D)  monopolistic competition and perfect competition 
A)  oligopoly, monopolistic competition, and perfect competition 
B)  perfect competition only 
C)  oligopoly and perfect competition 
D)  monopolistic competition and perfect competition

Question 10

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue,total cost is $1,674 and total revenue is $2,000,its average profit is

Accepted Answer

A)  $326. 
B)  $40. 
C)  $6.52. 
D)  impossible to determine without additional information. 
A)  $326. 
B)  $40. 
C)  $6.52. 
D)  impossible to determine without additional information.

Question 11

The profit-maximizing rule for a monopolistically competitive firm is to select the quantity at which

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  average revenue exceeds marginal cost by the greatest amount. 
C)  price equals marginal cost. 
D)  average revenue equals average total cost. 
A)  marginal revenue equals marginal cost. 
B)  average revenue exceeds marginal cost by the greatest amount. 
C)  price equals marginal cost. 
D)  average revenue equals average total cost.

Question 12

On January 2,1971,all cigarette advertising was banned on U.S.television and radio stations.Assuming that advertising is a prisoner's dilemma,and that if one company advertises,its competitors will also choose to spend money to advertise,did this ban likely increase or decrease the profits of cigarette companies in 1971? Briefly explain.

Accepted Answer

If advertising is a prisoners'

Question 13

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

Accepted Answer

A)  cartel equilibrium. 
B)  noncooperative equilibrium. 
C)  prisoner's dilemma equilibrium. 
D)  dominant strategy equilibrium. 
A)  cartel equilibrium. 
B)  noncooperative equilibrium. 
C)  prisoner's dilemma equilibrium. 
D)  dominant strategy equilibrium.

Question 14

Table 11-6
   LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 11-6 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.
-Refer to Table 11-6.Let's suppose the game starts with each firm offering the mid-week discount so that LimoZeenz earns a profit of $6,000 and AirPorter earns a profit of $12,000.Is there an incentive for any one firm to stop offering the mid-week discount?

Accepted Answer

A)  No, neither firm has an incentive to stop offering the discount. 
B)  Yes, both firms have an incentive to stop offering the discount. 
C)  Yes, AirPorter has an incentive to stop offering the discount, but LimoZeenz does not. 
D)  Yes, LimoZeenz has an incentive to stop offering the discount, but AirPorter does not. 
A)  No, neither firm has an incentive to stop offering the discount. 
B)  Yes, both firms have an incentive to stop offering the discount. 
C)  Yes, AirPorter has an incentive to stop offering the discount, but LimoZeenz does not. 
D)  Yes, LimoZeenz has an incentive to stop offering the discount, but AirPorter does not.

Question 15

Which of the following characterizes the market that Panera Bread competes in?

Accepted Answer

A)  All "fast-casual" restaurants face horizontal demand curves. 
B)  "Fast-casual" restaurants sell identical products. 
C)  Barriers to entry are low. 
D)  There are a small number of firms. 
A)  All "fast-casual" restaurants face horizontal demand curves. 
B)  "Fast-casual" restaurants sell identical products. 
C)  Barriers to entry are low. 
D)  There are a small number of firms.

Question 16

Doctors and lawyers in every state need a license to practice.This is an example of

Accepted Answer

A)  consumer protection laws. 
B)  consumer advocacy. 
C)  occupational licensing. 
D)  ownership of a key input. 
A)  consumer protection laws. 
B)  consumer advocacy. 
C)  occupational licensing. 
D)  ownership of a key input.

Question 17

What is meant by "excess capacity"? How does it relate to consumer utility?

Accepted Answer

Excess capacity refers to a situation wh

Question 18

Figure 11-6
  
-Refer to Figure 11-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Accepted Answer

A)  100,000 
B)  200,000 
C)  300,000 
D)  Not enough information is given to determine the profit-maximizing quantity. 
A)  100,000 
B)  200,000 
C)  300,000 
D)  Not enough information is given to determine the profit-maximizing quantity.

Question 19

Why do most firms in monopolistic competition typically make zero profit in the long run?

Accepted Answer

A)  because firms produce differentiated products 
B)  because the lack of entry barriers would compete away profits 
C)  because firms do not produce at their minimum efficient scale 
D)  because the total market is not large enough to accommodate so many firms 
A)  because firms produce differentiated products 
B)  because the lack of entry barriers would compete away profits 
C)  because firms do not produce at their minimum efficient scale 
D)  because the total market is not large enough to accommodate so many firms

Question 20

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

Accepted Answer

A)  firms produce at the minimum point of their average cost curves. 
B)  price equals marginal cost. 
C)  firms earn normal profits. 
D)  price equals marginal revenue. 
A)  firms produce at the minimum point of their average cost curves. 
B)  price equals marginal cost. 
C)  firms earn normal profits. 
D)  price equals marginal revenue.

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Which of the following is important in determining the extent of competition in an industry?

If economies of scale are significant,the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

When a firm faces a downward-sloping demand curve,marginal revenue

Producing a homogeneous product occurs in which of the following industries?

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue,total cost is $1,674 and total revenue is $2,000,its average profit is

The profit-maximizing rule for a monopolistically competitive firm is to select the quantity at which

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

Which of the following characterizes the market that Panera Bread competes in?

Doctors and lawyers in every state need a license to practice.This is an example of

What is meant by "excess capacity"? How does it relate to consumer utility?

Figure 11-6 -Refer to Figure 11-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Why do most firms in monopolistic competition typically make zero profit in the long run?

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Exam 11: Monopolistic Competition and Oligopoly

Occupational licensing is an example of an entry barrier that improves a country's standard of living.

Which of the following is important in determining the extent of competition in an industry?

If economies of scale are significant,the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

When a firm faces a downward-sloping demand curve,marginal revenue

Producing a homogeneous product occurs in which of the following industries?

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue,total cost is $1,674 and total revenue is $2,000,its average profit is

The profit-maximizing rule for a monopolistically competitive firm is to select the quantity at which

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a

Which of the following characterizes the market that Panera Bread competes in?

Doctors and lawyers in every state need a license to practice.This is an example of

What is meant by "excess capacity"? How does it relate to consumer utility?

Figure 11-6 -Refer to Figure 11-6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced is as shown by Figure 13-2.Dell will maximize profits if it produces ________ notebook computers per month.

Why do most firms in monopolistic competition typically make zero profit in the long run?

Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters