Question 1

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

Accepted Answer

A)  more elastic because there are many close substitutes for the product of a monopolistically competitive firm. 
B)  less elastic because monopolistically competitive firms produce similar, but not identical, products. 
C)  just as elastic because there are many sellers in both markets. 
D)  more elastic because in the long run, the demand curve is tangent to the firm's average total cost curve. 
A)  more elastic because there are many close substitutes for the product of a monopolistically competitive firm. 
B)  less elastic because monopolistically competitive firms produce similar, but not identical, products. 
C)  just as elastic because there are many sellers in both markets. 
D)  more elastic because in the long run, the demand curve is tangent to the firm's average total cost curve.

Question 2

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 best course of action for the firm in the short run?

Accepted Answer

A)  It should shut down. 
B)  It should stay in business because it covers some of its fixed cost. 
C)  It should increase its sales by lowering its price. 
D)  It should not cut its price but it should increase its sales by advertising. 
A)  It should shut down. 
B)  It should stay in business because it covers some of its fixed cost. 
C)  It should increase its sales by lowering its price. 
D)  It should not cut its price but it should increase its sales by advertising.

Question 3

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down.But reality teaches us that people and firms often cooperate successfully to achieve their goals.Why do the results from prisoner's dilemma games fail to predict real-world results?

Accepted Answer

A)  Prisoner's dilemma games do not permit people or firms from reneging on agreements, which often occurs in real-word situations. 
B)  The prisoner's dilemma does not apply to most business situations that are repeated over and over. 
C)  Prisoner's dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity. 
D)  Most real-world situations involve more than two people or firms; the prisoner's dilemma is only applicable to situations that involve two parties. 
A)  Prisoner's dilemma games do not permit people or firms from reneging on agreements, which often occurs in real-word situations. 
B)  The prisoner's dilemma does not apply to most business situations that are repeated over and over. 
C)  Prisoner's dilemma games predict the behavior of people and firms that engage in illegal activity; most people and firms do not resort to illegal activity. 
D)  Most real-world situations involve more than two people or firms; the prisoner's dilemma is only applicable to situations that involve two parties.

Question 4

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Accepted Answer

Unlike the perfectly competitive firm,th

Question 5

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

Accepted Answer

A low cartel production level results in

Question 6

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

Accepted Answer

A)  ownership of a key input 
B)  a government-imposed barrier 
C)  a patent on the manufacture of aluminum 
D)  economies of scale 
A)  ownership of a key input 
B)  a government-imposed barrier 
C)  a patent on the manufacture of aluminum 
D)  economies of scale

Question 7

Figure 11-17
  
-Refer to Figure 11-17.What is the allocatively efficient output for the firm represented in the diagram?

Accepted Answer

A)  Qf units 
B)  Qg units 
C)  Qh units 
D)  Qⱼ units 
A)  Qf units 
B)  Qg units 
C)  Qh units 
D)  Qⱼ units

Question 8

In a Nash equilibrium,all players select non-dominant strategies.

Accepted Answer

A) True 
 B)False

Question 9

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A)  many small (relative to the total market) sellers acting independently. 
B)  all sellers sell a homogeneous product. 
C)  barriers to entry are strong. 
D)  sellers have no incentive to advertise their products. 
A)  many small (relative to the total market) sellers acting independently. 
B)  all sellers sell a homogeneous product. 
C)  barriers to entry are strong. 
D)  sellers have no incentive to advertise their products.

Question 10

Unlike a perfectly competitive firm,for a monopolistically competitive firm

Accepted Answer

A)  price ≠ marginal cost for all output levels. 
B)  price ≠ marginal revenue for all output levels. 
C)  price ≠ average revenue for all output levels. 
D)  marginal revenue = marginal cost at the profit-maximizing output. 
A)  price ≠ marginal cost for all output levels. 
B)  price ≠ marginal revenue for all output levels. 
C)  price ≠ average revenue for all output levels. 
D)  marginal revenue = marginal cost at the profit-maximizing output.

Question 11

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

Accepted Answer

A prisoners' dilemma is a game in which

Question 12

When top managers of all four major airlines publicly stated that they intended to undertake only modest increases in capacity by buying additional planes or flying additional routes,the Department of Justice

Accepted Answer

A)  brought charges against the airlines for collusion. 
B)  stated that since this was an issue of capacity and not price, no collusion could have taken place. 
C)  forced the airlines to increase capacity and lower prices. 
D)  decided there was not enough evidence to charge the airlines with collusion. 
A)  brought charges against the airlines for collusion. 
B)  stated that since this was an issue of capacity and not price, no collusion could have taken place. 
C)  forced the airlines to increase capacity and lower prices. 
D)  decided there was not enough evidence to charge the airlines with collusion.

Question 13

What is the incentive for a firm to join a cartel?

Accepted Answer

A)  to be able to earn profits in the long run but not in the short run 
B)  to be able to earn larger profits than if it was not part of the cartel 
C)  to completely insulate itself from competition 
D)  to produce a larger amount of output than if it was not part of the cartel 
A)  to be able to earn profits in the long run but not in the short run 
B)  to be able to earn larger profits than if it was not part of the cartel 
C)  to completely insulate itself from competition 
D)  to produce a larger amount of output than if it was not part of the cartel

Question 14

If the demand curve for a firm is downward-sloping,its marginal revenue curve

Accepted Answer

A)  will lie above the demand curve. 
B)  will lie below the demand curve. 
C)  is the same as the demand curve. 
D)  is horizontal. 
A)  will lie above the demand curve. 
B)  will lie below the demand curve. 
C)  is the same as the demand curve. 
D)  is horizontal.

Question 15

In game theory,the three key characteristics of a game are

Accepted Answer

A)  rules, strategies, and payoffs. 
B)  rules, regulations, and payoffs. 
C)  winners, losers, and rules. 
D)  risks, rewards, and penalties. 
A)  rules, strategies, and payoffs. 
B)  rules, regulations, and payoffs. 
C)  winners, losers, and rules. 
D)  risks, rewards, and penalties.

Question 16

A monopolistically competitive firm maximizes profit in the short run by producing where

Accepted Answer

A)  price is less than marginal cost. 
B)  price is less than marginal revenue. 
C)  price is less than average revenue. 
D)  price is greater than marginal cost. 
A)  price is less than marginal cost. 
B)  price is less than marginal revenue. 
C)  price is less than average revenue. 
D)  price is greater than marginal cost.

Question 17

For a profit-maximizing monopolistically competitive firm,for the last unit sold,the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

Accepted Answer

A) True 
 B)False

Question 18

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A)  few sellers. 
B)  sellers selling similar but differentiated products. 
C)  high barriers to entry. 
D)  sellers acting to maximize revenue. 
A)  few sellers. 
B)  sellers selling similar but differentiated products. 
C)  high barriers to entry. 
D)  sellers acting to maximize revenue.

Question 19

Which of the following is not an example of a monopolistically competitive market?

Accepted Answer

A)  automobile producers 
B)  supermarkets 
C)  gas stations 
D)  makers of women's clothing 
A)  automobile producers 
B)  supermarkets 
C)  gas stations 
D)  makers of women's clothing

Question 20

An oligopoly firm is similar to a monopolistically competitive firm in that

Accepted Answer

A)  both firms face the prisoner's dilemma. 
B)  both operate in a market in which there are significant entry barriers. 
C)  both firms have market power. 
D)  both firms are in industries characterized by interdependence of firms. 
A)  both firms face the prisoner's dilemma. 
B)  both operate in a market in which there are significant entry barriers. 
C)  both firms have market power. 
D)  both firms are in industries characterized by interdependence of firms.

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down.But reality teaches us that people and firms often cooperate successfully to achieve their goals.Why do the results from prisoner's dilemma games fail to predict real-world results?

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

Figure 11-17 -Refer to Figure 11-17.What is the allocatively efficient output for the firm represented in the diagram?

In a Nash equilibrium,all players select non-dominant strategies.

The key characteristics of a monopolistically competitive market structure include

Unlike a perfectly competitive firm,for a monopolistically competitive firm

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

When top managers of all four major airlines publicly stated that they intended to undertake only modest increases in capacity by buying additional planes or flying additional routes,the Department of Justice

What is the incentive for a firm to join a cartel?

If the demand curve for a firm is downward-sloping,its marginal revenue curve

In game theory,the three key characteristics of a game are

A monopolistically competitive firm maximizes profit in the short run by producing where

For a profit-maximizing monopolistically competitive firm,for the last unit sold,the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

The key characteristics of a monopolistically competitive market structure include

Which of the following is not an example of a monopolistically competitive market?

An oligopoly firm is similar to a monopolistically competitive firm 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

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Exam 11: Monopolistic Competition and Oligopoly

Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is

Prisoner's dilemma games imply that cooperative behavior between two people or two firms always breaks down.But reality teaches us that people and firms often cooperate successfully to achieve their goals.Why do the results from prisoner's dilemma games fail to predict real-world results?

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota.

For many years the Aluminum Company of America (Alcoa)controlled most of the world's supply of high quality bauxite,the ore needed to produce aluminum.What type of entry barrier was responsible for Alcoa's position in the aluminum industry?

Figure 11-17 -Refer to Figure 11-17.What is the allocatively efficient output for the firm represented in the diagram?

In a Nash equilibrium,all players select non-dominant strategies.

The key characteristics of a monopolistically competitive market structure include

Unlike a perfectly competitive firm,for a monopolistically competitive firm

Why do economists refer to the pricing strategies of oligopoly firms as a prisoner's dilemma game?

When top managers of all four major airlines publicly stated that they intended to undertake only modest increases in capacity by buying additional planes or flying additional routes,the Department of Justice

What is the incentive for a firm to join a cartel?

If the demand curve for a firm is downward-sloping,its marginal revenue curve

In game theory,the three key characteristics of a game are

A monopolistically competitive firm maximizes profit in the short run by producing where

For a profit-maximizing monopolistically competitive firm,for the last unit sold,the marginal cost of production is less than the marginal benefit received by a customer from the purchase of that unit.

The key characteristics of a monopolistically competitive market structure include

Which of the following is not an example of a monopolistically competitive market?

An oligopoly firm is similar to a monopolistically competitive firm 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