Question 1

In an oligopoly market

Accepted Answer

A)  the pricing decisions of all other firms have no effect on an individual firm. 
B)  individual firms pay no attention to the behavior of other firms. 
C)  advertising of one firm has no effect on all other firms. 
D)  one firm's pricing decision affects all the other firms. 
A)  the pricing decisions of all other firms have no effect on an individual firm. 
B)  individual firms pay no attention to the behavior of other firms. 
C)  advertising of one firm has no effect on all other firms. 
D)  one firm's pricing decision affects all the other firms.

Question 2

All of the following characteristics are common to both monopolistic competition and perfect competition except

Accepted Answer

A)  firms act to maximize profit. 
B)  entry barriers into the industries are low. 
C)  the market demand curves are downward-sloping. 
D)  firms take market prices as given. 
A)  firms act to maximize profit. 
B)  entry barriers into the industries are low. 
C)  the market demand curves are downward-sloping. 
D)  firms take market prices as given.

Question 3

An oligopoly between two firms is called

Accepted Answer

A)  a biopoly. 
B)  an oligopoly; there are no special terms used for oligopolies with different numbers of firms. 
C)  a dual-firm oligopoly. 
D)  a duopoly. 
A)  a biopoly. 
B)  an oligopoly; there are no special terms used for oligopolies with different numbers of firms. 
C)  a dual-firm oligopoly. 
D)  a duopoly.

Question 4

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

Accepted Answer

A) True 
 B)False

Question 5

Table 11-1
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 7.50 & \$ 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$
-Refer to Table 11-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A)  output effect = $24.00; price effect = $19.50 
B)  output effect = $6.50; price effect = $2.00 
C)  output effect = -$0.50; price effect = $5.00 
D)  output effect = $6.00; price effect = -$1.50 
A)  output effect = $24.00; price effect = $19.50 
B)  output effect = $6.50; price effect = $2.00 
C)  output effect = -$0.50; price effect = $5.00 
D)  output effect = $6.00; price effect = -$1.50

Question 6

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

Accepted Answer

A)  a copyright. 
B)  a patent. 
C)  an exclusive marketing agreement. 
D)  a tariff. 
A)  a copyright. 
B)  a patent. 
C)  an exclusive marketing agreement. 
D)  a tariff.

Question 7

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Accepted Answer

A) True 
 B)False

Question 8

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a characteristic of an oligopoly?

Accepted Answer

A)  the ability to influence price 
B)  a small number of firms 
C)  low barriers to entry 
D)  interdependent firms 
A)  the ability to influence price 
B)  a small number of firms 
C)  low barriers to entry 
D)  interdependent firms

Question 10

If a monopolistically competitive firm lowers its price and,as a result,its total revenue decreases then

Accepted Answer

A)  the output effect of the price change was less than the price effect. 
B)  the output effect of the price change was greater than the price effect. 
C)  the firm's demand curve must have decreased. 
D)  the substitution effect of the price change was greater than the income effect. 
A)  the output effect of the price change was less than the price effect. 
B)  the output effect of the price change was greater than the price effect. 
C)  the firm's demand curve must have decreased. 
D)  the substitution effect of the price change was greater than the income effect.

Question 11

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

Accepted Answer

A) True 
 B)False

Question 12

A monopolistically competitive industry that earns economic profits in the short run will

Accepted Answer

A)  continue to earn economic profits in the long run. 
B)  experience the entry of new rival firms into the industry in the long run. 
C)  experience the exit of existing firms out of the industry in the long run. 
D)  experience a rise in demand in the long run. 
A)  continue to earn economic profits in the long run. 
B)  experience the entry of new rival firms into the industry in the long run. 
C)  experience the exit of existing firms out of the industry in the long run. 
D)  experience a rise in demand in the long run.

Question 13

Figure 11-19
  
-Refer to Figure 11-19 to answer the following questions.
a.What is the productively efficient output?
b.What is the allocatively efficient output?
c.What is the amount of excess capacity?
d.Suppose the firm is currently producing 14 units.What happens if it increases output to 17 units?

Accepted Answer

a∙The productively efficient output is 2

Question 14

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants.You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce.What is likely to happen in the restaurant market in your hometown after you open?

Accepted Answer

A)  Your competitors are likely to change their menus to make their products more similar to yours. 
B)  The demand curve facing each restaurant owner shifts to the right. 
C)  The demand curve facing each restaurant owner becomes more elastic. 
D)  While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic. 
A)  Your competitors are likely to change their menus to make their products more similar to yours. 
B)  The demand curve facing each restaurant owner shifts to the right. 
C)  The demand curve facing each restaurant owner becomes more elastic. 
D)  While the demand curves facing your competitors becomes more elastic, your demand curve will be inelastic.

Question 15

Figure 11-8
   Figure 11-8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 11-8.What is the profit-maximizing output level?

Accepted Answer

A)  22 cases 
B)  24 cases 
C)  30 cases 
D)  38 cases 
A)  22 cases 
B)  24 cases 
C)  30 cases 
D)  38 cases

Question 16

What is the profit-maximizing rule for a monopolistically competitive firm?

Accepted Answer

A)  to produce a quantity that maximizes market share 
B)  to produce a quantity that maximizes total revenue 
C)  to produce a quantity such that marginal revenue equals marginal cost 
D)  to produce a quantity such that price equals marginal cost 
A)  to produce a quantity that maximizes market share 
B)  to produce a quantity that maximizes total revenue 
C)  to produce a quantity such that marginal revenue equals marginal cost 
D)  to produce a quantity such that price equals marginal cost

Question 17

Economies of scale will create a barrier to entry in an oligopoly when

Accepted Answer

A)  a firm's minimum efficient scale occurs where long-run average total costs are constant. 
B)  the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales. 
C)  the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a small fraction of total industry sales. 
D)  the industry's four-firm concentration ratio is less than 40 percent. 
A)  a firm's minimum efficient scale occurs where long-run average total costs are constant. 
B)  the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales. 
C)  the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a small fraction of total industry sales. 
D)  the industry's four-firm concentration ratio is less than 40 percent.

Question 18

Figure 11-4
   Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-4.What is the area that represents the total revenue made by the firm?

Accepted Answer

A)  0P₀aQₐ 
B)  0P₁bQₐ 
C)  0P₂cQₐ 
D)  0P₃dQₐ 
A)  0P₀aQₐ 
B)  0P₁bQₐ 
C)  0P₂cQₐ 
D)  0P₃dQₐ

Question 19

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 LimoZeenz and if so,what is it?

Accepted Answer

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

Question 20

In 2011,Red Robin announced that it would open 12 fast-casual restaurants,and in 2016 the company decided to abandon the fast-casual restaurant business.Which of the following reasons relating to the characteristics of monopolistic competition did the company give for getting out of the fast-casual restaurant business?

Accepted Answer

A)  Barriers to entry were too high. 
B)  The restaurants were not differentiated enough from their full-service restaurants. 
C)  There were very few buyers and sellers in the market. 
D)  Standardized pricing in the industry gave them no potential to earn a profit. 
A)  Barriers to entry were too high. 
B)  The restaurants were not differentiated enough from their full-service restaurants. 
C)  There were very few buyers and sellers in the market. 
D)  Standardized pricing in the industry gave them no potential to earn a profit.

In an oligopoly market

All of the following characteristics are common to both monopolistic competition and perfect competition except

An oligopoly between two firms is called

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

Table 11-1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Which of the following is not a characteristic of an oligopoly?

If a monopolistically competitive firm lowers its price and,as a result,its total revenue decreases then

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

A monopolistically competitive industry that earns economic profits in the short run will

Figure 11-8 Figure 11-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 11-8.What is the profit-maximizing output level?

What is the profit-maximizing rule for a monopolistically competitive firm?

Economies of scale will create a barrier to entry in an oligopoly when

Figure 11-4 Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-4.What is the area that represents the total revenue made by the firm?

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

In an oligopoly market

All of the following characteristics are common to both monopolistic competition and perfect competition except

An oligopoly between two firms is called

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

Table 11-1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Which of the following is not a characteristic of an oligopoly?

If a monopolistically competitive firm lowers its price and,as a result,its total revenue decreases then

When a monopolistically competitive firm breaks even in the long run,this is equivalent to earning a zero accounting profit.

A monopolistically competitive industry that earns economic profits in the short run will

Figure 11-8 Figure 11-8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 11-8.What is the profit-maximizing output level?

What is the profit-maximizing rule for a monopolistically competitive firm?

Economies of scale will create a barrier to entry in an oligopoly when

Figure 11-4 Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-4.What is the area that represents the total revenue made by the firm?

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