Question 1

Figure 11-11
  
-Refer to Figure 11-11.The firm represented in the diagram

Accepted Answer

A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale. 
A)  makes zero economic profit. 
B)  makes zero accounting profit. 
C)  should exit the industry. 
D)  should expand its output to take advantage of economies of scale.

Question 2

Complete the following table.
 $\begin{array}{|l|l|c|c|c|}
\hline \begin{array}{c}
\text { Energy } \
\text { Drinks } \
\text { Consumed } \
\text { per Week }
\end{array} & \text { Price }(P) & \begin{array}{c}
\text { Total } \
\text { Revenue }(T R)
\end{array} & \begin{array}{c}
\text { Average } \
\text { Revenue }(A R)
\end{array} & \begin{array}{c}
\text { Marginal }\
\text { Revenue } \
(M R)
\end{array} \
\hline 0 & \$ 6.00 & & & \
\hline 1 & 5.50 & & & \
\hline 2 & 5.00 & & & \
\hline 3 & 4.50 & & & \
\hline 4 & 4.00 & & & \
\hline 5 & 3.50 & & & \
\hline 6 & 3.00 & & & \
\hline 7 & 2.50 & & & \
\hline 8 & 2.00 & & & \
\hline
\end{array}$

Accepted Answer

None

Question 3

Table 11-4
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity } \
\text { Sold }
\end{array} & \text { Price } & \begin{array}{c}
\text { Total } \
\text { Revenue }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} & \text { Profit } \
\hline 0 & \$ 10 & \$ 0 & \cdots &\$ 2& \ldots & -\$ 2 \
\hline 1 & 9 & 9 & & 82 & \
\hline 2 & 8 & 16 & & 13 & & \
\hline 3 & 7 & 21 & & 17 & & \
\hline 4 & 6 & 24 & & 20 & & \
\hline 5 & 5 & 25 & & 22 & & \
\hline 6 & 4 & 24 & & 26 & & \
\hline
\end{array}$ Table 11-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to universities and private research laboratories.
-Refer to Table 11-4.Victoria's profit-maximizing output is where

Accepted Answer

A)  total profit equals $3. 
B)  marginal revenue and marginal cost both equal $4. 
C)  marginal revenue and marginal cost both equal $3. 
D)  marginal cost is at its minimum value. 
A)  total profit equals $3. 
B)  marginal revenue and marginal cost both equal $4. 
C)  marginal revenue and marginal cost both equal $3. 
D)  marginal cost is at its minimum value.

Question 4

Figure 11-9
  
-Refer to Figure 11-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel A and Panel C 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel A and Panel C

Question 5

Explain why OPEC is caught in a prisoner's dilemma?

Accepted Answer

If every member of OPEC cooperates and p

Question 6

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 loss incurred by the firm?

Accepted Answer

A)  the area P₀adP₃ 
B)  the area P₁bcP₂ 
C)  the area P₀acP₂ 
D)  the area P₂cdP₃ 
A)  the area P₀adP₃ 
B)  the area P₁bcP₂ 
C)  the area P₀acP₂ 
D)  the area P₂cdP₃

Question 7

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

Accepted Answer

A)  OPEC is a monopoly, but it is located outside of the boundaries of any one country. This is the definition of a cartel. 
B)  this is the term used for an oligopoly that is controlled by national governments rather than private firms. 
C)  it is a group of firms that collude to restrict output to increase prices and profits. 
D)  this is the term economists use to describe an oligopoly that sells a standardized product, such as oil, rather than a differentiated product, such as automobiles. 
A)  OPEC is a monopoly, but it is located outside of the boundaries of any one country. This is the definition of a cartel. 
B)  this is the term used for an oligopoly that is controlled by national governments rather than private firms. 
C)  it is a group of firms that collude to restrict output to increase prices and profits. 
D)  this is the term economists use to describe an oligopoly that sells a standardized product, such as oil, rather than a differentiated product, such as automobiles.

Question 8

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)  Firms are price takers. 
B)  There are many buyers and sellers. 
C)  Barriers to entry are low. 
D)  Firms sell similar, but not identical, products. 
A)  Firms are price takers. 
B)  There are many buyers and sellers. 
C)  Barriers to entry are low. 
D)  Firms sell similar, but not identical, products.

Question 9

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

Accepted Answer

A)  Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years. The 20-year period ended in the 1990s. 
B)  Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries. 
C)  Ocean Spray was able to achieve significant economies of scale in the production of cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as well, but Ocean Spray still controls about 80 percent of the cranberry market. 
D)  The federal government imposed a high tariff on cranberry imports. During the 1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the cranberry market. 
A)  Ocean Spray had a patent on the production of cranberries that gave the company the exclusive right to market its product for 20 years. The 20-year period ended in the 1990s. 
B)  Until the 1990s, Ocean Spray controlled almost the entire supply of cranberries. 
C)  Ocean Spray was able to achieve significant economies of scale in the production of cranberries. Beginning in the 1990s, other firms finally achieved economies of scale as well, but Ocean Spray still controls about 80 percent of the cranberry market. 
D)  The federal government imposed a high tariff on cranberry imports. During the 1990s the tariff was eliminated, but Ocean Spray still controls about 80 percent of the cranberry market.

Question 10

If firms in a monopolistically competitive industry are making profits in the short run,then

Accepted Answer

A)  barriers to entry will be erected to keep out rivals. 
B)  some firms will ultimately exit the industry. 
C)  they will resort to advertising wars to help sustain these profits. 
D)  new firms will enter the market. 
A)  barriers to entry will be erected to keep out rivals. 
B)  some firms will ultimately exit the industry. 
C)  they will resort to advertising wars to help sustain these profits. 
D)  new firms will enter the market.

Question 11

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

Accepted Answer

A)  interdependence. 
B)  collusion. 
C)  cutthroat competition. 
D)  price fixing. 
A)  interdependence. 
B)  collusion. 
C)  cutthroat competition. 
D)  price fixing.

Question 12

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Accepted Answer

A)  The firm should raise its price. 
B)  The firm should decrease its fixed costs. 
C)  The firm should increase its implicit costs. 
D)  The firm should lower its price. 
A)  The firm should raise its price. 
B)  The firm should decrease its fixed costs. 
C)  The firm should increase its implicit costs. 
D)  The firm should lower its price.

Question 13

Explain how collusion makes firms better off.Given the incentives to collude,briefly explain why every industry does not become a cartel.

Accepted Answer

Collusion makes firms better off because

Question 14

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

Accepted Answer

A)  "follow the leader" pricing. 
B)  price leadership. 
C)  retaliation pricing. 
D)  "tit-for-tat" pricing. 
A)  "follow the leader" pricing. 
B)  price leadership. 
C)  retaliation pricing. 
D)  "tit-for-tat" pricing.

Question 15

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A)  Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B)  Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes. 
C)  Consumers pay higher prices but the products are produced by highly efficient firms. 
D)  Consumers pay lower prices but have fewer choices. 
A)  Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B)  Consumers pay a price greater than marginal cost, but have the luxury of choices more suited to their tastes. 
C)  Consumers pay higher prices but the products are produced by highly efficient firms. 
D)  Consumers pay lower prices but have fewer choices.

Question 16

Which of the following economists did not help to develop game theory analysis?

Accepted Answer

A)  Adam Smith 
B)  John Nash 
C)  John von Neumann 
D)  Oskar Morgenstern 
A)  Adam Smith 
B)  John Nash 
C)  John von Neumann 
D)  Oskar Morgenstern

Question 17

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is true about monopolistically competitive firms?

Accepted Answer

A)  Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. 
B)  Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. 
C)  Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. 
D)  Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves. 
A)  Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers. 
B)  Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products. 
C)  Like perfectly competitive firms, monopolistically competitive firms maximize their profits by setting price equal to marginal cost. 
D)  Unlike perfectly competitive firms, monopolistically competitive face perfectly inelastic demand curves.

Question 19

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Accepted Answer

A) True 
 B)False

Question 20

For a monopolistically competitive firm,price equals average revenue.

Accepted Answer

A) True 
 B)False

Figure 11-11 -Refer to Figure 11-11.The firm represented in the diagram

Complete the following table. Energy Drinks Consumed per Week Price (P) Total Revenue (TR) Average Revenue (AR) Marginal Revenue (MR) 0 \ 6.00 1 5.50 2 5.00 3 4.50 4 4.00 5 3.50 6 3.00 7 2.50 8 2.00

Figure 11-9 -Refer to Figure 11-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Explain why OPEC is caught in a prisoner's dilemma?

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 loss incurred by the firm?

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

Which of the following is not a characteristic of monopolistic competition?

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

If firms in a monopolistically competitive industry are making profits in the short run,then

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Explain how collusion makes firms better off.Given the incentives to collude,briefly explain why every industry does not become a cartel.

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Which of the following economists did not help to develop game theory analysis?

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Which of the following statements is true about monopolistically competitive firms?

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

For a monopolistically competitive firm,price equals average revenue.

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

Figure 11-11 -Refer to Figure 11-11.The firm represented in the diagram

Complete the following table. Energy Drinks Consumed per Week Price (P) Total Revenue (TR) Average Revenue (AR) Marginal Revenue (MR) 0 \ 6.00 1 5.50 2 5.00 3 4.50 4 4.00 5 3.50 6 3.00 7 2.50 8 2.00

Figure 11-9 -Refer to Figure 11-9.Which of the graphs in the figure depicts a monopolistically competitive firm that is minimizing its losses?

Explain why OPEC is caught in a prisoner's dilemma?

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 loss incurred by the firm?

The Organization of Petroleum Exporting Countries (OPEC)controls about 75 percent of the world's proven oil reserves.Economists refer to OPEC as a cartel because

Which of the following is not a characteristic of monopolistic competition?

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

If firms in a monopolistically competitive industry are making profits in the short run,then

Hewlett-Packard will not raise the prices of its personal computers without first considering how Dell might respond.This is evidence of

A monopolistically competitive firm is producing an output level where marginal revenue is greater than marginal cost.What should this firm do to increase its profit or reduce its losses?

Explain how collusion makes firms better off.Given the incentives to collude,briefly explain why every industry does not become a cartel.

A form of implicit collusion where one firm in an oligopoly announces a price change which is matched by other firms in the same industry is

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Which of the following economists did not help to develop game theory analysis?

In the long-run equilibrium,both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR=MC and charge a price equal to the average total cost of production.

Which of the following statements is true about monopolistically competitive firms?

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

For a monopolistically competitive firm,price equals average revenue.

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