Question 1

An oligopolist differs from a perfect competitor in that

Accepted Answer

A)  there is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. 
B)  firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. 
C)  the market demand curve for a perfectly competitive industry is perfectly elastic but it is downward-sloping in an oligopolistic industry. 
D)  there are no entry barriers in perfect competition but there are entry barriers in oligopoly. 
A)  there is cutthroat competition in perfect competition but little competition in oligopoly because firms have significant market power. 
B)  firms in an oligopoly do not produce homogeneous products while firms in perfect competition do. 
C)  the market demand curve for a perfectly competitive industry is perfectly elastic but it is downward-sloping in an oligopolistic industry. 
D)  there are no entry barriers in perfect competition but there are entry barriers in oligopoly.

Question 2

Table 11-5
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 18 & \$ 14 \
\hline 2 & 16 & 20 \
\hline 3 & 14 & 26 \
\hline 4 & 12 & 32 \
\hline 5 & 10 & 38 \
\hline 6 & 8 & 44 \
\hline
\end{array}$ Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags.
-Refer to Table 11-5.At the profit-maximizing or loss-minimizing output level

Accepted Answer

A)  the firm makes a profit of $12. 
B)  the firm incurs a loss equal to its fixed cost. 
C)  the firm makes a profit of $16. 
D)  the firm incurs a loss of $14. 
A)  the firm makes a profit of $12. 
B)  the firm incurs a loss equal to its fixed cost. 
C)  the firm makes a profit of $16. 
D)  the firm incurs a loss of $14.

Question 3

Collusion between two firms occurs when

Accepted Answer

A)  the firms independently pursue strategies that could hurt each other. 
B)  firms explicitly or implicitly agree to adopt a uniform business strategy. 
C)  announce that each will match its rival's market price. 
D)  firms act altruistically to bring about the economically efficient outcome. 
A)  the firms independently pursue strategies that could hurt each other. 
B)  firms explicitly or implicitly agree to adopt a uniform business strategy. 
C)  announce that each will match its rival's market price. 
D)  firms act altruistically to bring about the economically efficient outcome.

Question 4

When large firms in oligopolies cut their prices

Accepted Answer

A)  rival firms will also cut their prices to avoid losing sales. 
B)  rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C)  we don't know for sure how rival firms will respond. 
D)  rival firms will not cut their prices because they fear that the federal government will accuse them of collusion. 
A)  rival firms will also cut their prices to avoid losing sales. 
B)  rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C)  we don't know for sure how rival firms will respond. 
D)  rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.

Question 5

Which of the following describes the relative positions of the demand curve and the average total cost (ATC)curve of a monopolistically competitive firm that earns a profit in the short run?

Accepted Answer

A)  In the short run, the firm's demand curve will lie above its ATC curve. The demand curve will be tangent to the ATC curve in the long run. 
B)  In the short run, the firm's demand curve will lie below its ATC curve. The demand curve will be tangent to the ATC curve in the long run. 
C)  In the short run, the firm's demand curve will cross its ATC curve at the ATC curve's lowest point. The demand curve will be above the ATC curve in the long run. 
D)  In the short run, the firm's ATC curve will cross the demand curve at the profit maximizing level of output. The demand curve will be tangent to the ATC curve in the long run. 
A)  In the short run, the firm's demand curve will lie above its ATC curve. The demand curve will be tangent to the ATC curve in the long run. 
B)  In the short run, the firm's demand curve will lie below its ATC curve. The demand curve will be tangent to the ATC curve in the long run. 
C)  In the short run, the firm's demand curve will cross its ATC curve at the ATC curve's lowest point. The demand curve will be above the ATC curve in the long run. 
D)  In the short run, the firm's ATC curve will cross the demand curve at the profit maximizing level of output. The demand curve will be tangent to the ATC curve in the long run.

Question 6

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Accepted Answer

A)  new entrants into the market are more likely to have cutting edge products. 
B)  as the firm raises its price in the long run, it will lose some customers to new entrants in the market. 
C)  some of its customers have switched to purchasing the products of new entrants in the market. 
D)  its costs of production rises. 
A)  new entrants into the market are more likely to have cutting edge products. 
B)  as the firm raises its price in the long run, it will lose some customers to new entrants in the market. 
C)  some of its customers have switched to purchasing the products of new entrants in the market. 
D)  its costs of production rises.

Question 7

Oligopolies exist and do not attract new rivals because

Accepted Answer

A)  of competition. 
B)  of barriers to entry. 
C)  the firms keep profits and prices so low that no rivals are attracted. 
D)  there can be no product differentiation. 
A)  of competition. 
B)  of barriers to entry. 
C)  the firms keep profits and prices so low that no rivals are attracted. 
D)  there can be no product differentiation.

Question 8

If the painting firms in a city sign a contract outlining a pricing plan,they are involved in

Accepted Answer

A)  price competition. 
B)  a legal form of business contract in the United States. 
C)  collusion. 
D)  price regulation. 
A)  price competition. 
B)  a legal form of business contract in the United States. 
C)  collusion. 
D)  price regulation.

Question 9

In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

Accepted Answer

A) True 
 B)False

Question 10

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the eighth pair of jeans is

Accepted Answer

A)  $20. 
B)  $90. 
C)  $100. 
D)  $700. 
A)  $20. 
B)  $90. 
C)  $100. 
D)  $700.

Question 11

Table 11-3
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Variable } \
\text { Cost (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$ Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What is the amount of the firm's loss at its optimal output level?

Accepted Answer

A)  $0 
B)  $41 
C)  $45 
D)  $50 
A)  $0 
B)  $41 
C)  $45 
D)  $50

Question 12

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 the firms cooperate,what prices will they select?

Accepted Answer

A)  Both firms will select a low price. 
B)  Zuma will select a high price and Wide Awake will select a low price. 
C)  Both firms will select a high price. 
D)  Zuma will select a low price and Wide Awake will select a high price. 
A)  Both firms will select a low price. 
B)  Zuma will select a high price and Wide Awake will select a low price. 
C)  Both firms will select a high price. 
D)  Zuma will select a low price and Wide Awake will select a high price.

Question 13

A cartel is

Accepted Answer

A)  a temporary storage facility for automobiles. 
B)  a group of firms that enter into an informal agreement to fix prices to maximize joint profits. 
C)  a group of firms that enter into a formal agreement to fix prices to maximize joint profits. 
D)  an example of a group of firms that collectively regulate a competitive industry. 
A)  a temporary storage facility for automobiles. 
B)  a group of firms that enter into an informal agreement to fix prices to maximize joint profits. 
C)  a group of firms that enter into a formal agreement to fix prices to maximize joint profits. 
D)  an example of a group of firms that collectively regulate a competitive industry.

Question 14

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

Accepted Answer

A)  the output effect 
B)  the income effect 
C)  the substitution effect 
D)  the price effect 
A)  the output effect 
B)  the income effect 
C)  the substitution effect 
D)  the price effect

Question 15

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Accepted Answer

A)  new rivals entering the market. 
B)  a decrease in demand for its product. 
C)  demand for the firm's product becomes more elastic. 
D)  a decrease in the number of rival products. 
A)  new rivals entering the market. 
B)  a decrease in demand for its product. 
C)  demand for the firm's product becomes more elastic. 
D)  a decrease in the number of rival products.

Question 16

Table 11-7
   Table 11-7 shows the payoff matrix for Walmart and Target from every combination of pricing strategies for the popular PlayStation 4. At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.For each firm,is there a better outcome than the current situation in which each firm charges the low price and earns a profit of $7,000?

Accepted Answer

A)  Yes, the firms can implicitly collude and agree to charge a higher price. 
B)  No, there is no incentive for each firm to consider any other strategy. 
C)  No, any other strategy hurts consumers. 
D)  Yes, each firm can implicitly agree to increase output and not to deviate from a low price. 
A)  Yes, the firms can implicitly collude and agree to charge a higher price. 
B)  No, there is no incentive for each firm to consider any other strategy. 
C)  No, any other strategy hurts consumers. 
D)  Yes, each firm can implicitly agree to increase output and not to deviate from a low price.

Question 17

A monopolistically competitive firm chooses

Accepted Answer

A)  both the quantity of output to produce and the price at which it will sell its output. 
B)  the price of the product it sells but market forces determine the quantity it will be able to sell. 
C)  the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D)  the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry. 
A)  both the quantity of output to produce and the price at which it will sell its output. 
B)  the price of the product it sells but market forces determine the quantity it will be able to sell. 
C)  the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. 
D)  the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.

Question 18

Figure 11-18
  
-Refer to Figure 11-18.The diagram demonstrates that

Accepted Answer

A)  in the short run, the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Qₐ. 
B)  it is not possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, because of product differentiation. 
C)  it is possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, if it is willing to lower its price from Pb to Pₐ. 
D)  in the long run, the monopolistic competitor produces the minimum-cost output level, Qₐ, but in the short run its output of Qb is not cost minimizing. 
A)  in the short run, the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Qₐ. 
B)  it is not possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, because of product differentiation. 
C)  it is possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, if it is willing to lower its price from Pb to Pₐ. 
D)  in the long run, the monopolistic competitor produces the minimum-cost output level, Qₐ, but in the short run its output of Qb is not cost minimizing.

Question 19

The table below shows the demand and cost data facing "Velvet Touches," a monopolistically competitive producer of velvet throw pillows.
 $\begin{array}{|c|c|c|c|c|c|}
\hline \text { Quantity } & \text { Price } & \begin{array}{c}
\text { Total } \
\text { Revenue }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue }
\end{array} & \text { Total Cost } & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 1 & \$ 30 & & & \$ 32 & \
\hline 2 & 28 & & & 43 & \
\hline 3 & 26 & & & 53 & \
\hline 4 & 24 & & & 64 & \
\hline 5 & 22 & & & 76 & \
\hline 6 & 20 & & & 90 & \
\hline 7 & 18 & & & 106 & \
\hline 8 & 16 & & & 126 & \
\hline
\end{array}$ 
Use the data to answer the following questions.
a.Complete the Total Revenue (TR),Marginal Revenue (MR),and Marginal Cost (MC)columns above.
b.What are the profit-maximizing price and quantity for Velvet Touches?
c.Is the firm making a profit or a loss? How much is the profit or loss? Show your work.
d.Is this firm operating in the long run or in the short run? Explain your answer.
e.If the firm's profit or loss is typical of all firms in the market for throw pillows,what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer.
f.What will happen to the typical firm's profit or loss after all entry/exit adjustments?

Accepted Answer

a.
b∙Q = 5; P = $22
c∙Profit = $(110-76

Question 20

Table 11-3
 $\begin{array}{|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Variable } \
\text { Cost (dollars) }
\end{array} & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$ Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What are the profit-maximizing/loss-minimizing output level and price?

Accepted Answer

A)  Q = 0 (firm should not produce) 
B)  Q = 3; P = $18 
C)  Q = 4; P = $17 
D)  Q = 5; P = $16 
A)  Q = 0 (firm should not produce) 
B)  Q = 3; P = $18 
C)  Q = 4; P = $17 
D)  Q = 5; P = $16

An oligopolist differs from a perfect competitor in that

Table 11-5 Quantity Price Total Cost 1 \ 18 \ 14 2 16 20 3 14 26 4 12 32 5 10 38 6 8 44 Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 11-5.At the profit-maximizing or loss-minimizing output level

Collusion between two firms occurs when

When large firms in oligopolies cut their prices

Which of the following describes the relative positions of the demand curve and the average total cost (ATC)curve of a monopolistically competitive firm that earns a profit in the short run?

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Oligopolies exist and do not attract new rivals because

If the painting firms in a city sign a contract outlining a pricing plan,they are involved in

In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the eighth pair of jeans is

A cartel is

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

A monopolistically competitive firm chooses

Figure 11-18 -Refer to Figure 11-18.The diagram demonstrates 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

An oligopolist differs from a perfect competitor in that

Table 11-5 Quantity Price Total Cost 1 \ 18 \ 14 2 16 20 3 14 26 4 12 32 5 10 38 6 8 44 Table 11-5 shows the demand and cost data facing a monopolistically competitive producer of canvas bags. -Refer to Table 11-5.At the profit-maximizing or loss-minimizing output level

Collusion between two firms occurs when

When large firms in oligopolies cut their prices

Which of the following describes the relative positions of the demand curve and the average total cost (ATC)curve of a monopolistically competitive firm that earns a profit in the short run?

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Oligopolies exist and do not attract new rivals because

If the painting firms in a city sign a contract outlining a pricing plan,they are involved in

In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the eighth pair of jeans is

A cartel is

When a monopolistically competitive firm lowers it price one bad thing happens to the firm.What is this "one bad thing" called?

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

A monopolistically competitive firm chooses

Figure 11-18 -Refer to Figure 11-18.The diagram demonstrates 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