Question 1

The De Beers Company blocked competition

Accepted Answer

A)  in the diamond market by controlling the output of most of the world's diamond mines. 
B)  by controlling the supply of most of the world's high-quality bauxite, the mineral used to produce aluminum. 
C)  in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D)  because it has lower production costs than other department stores due to economies of scale. 
A)  in the diamond market by controlling the output of most of the world's diamond mines. 
B)  by controlling the supply of most of the world's high-quality bauxite, the mineral used to produce aluminum. 
C)  in the market for fresh and frozen cranberries because it controls about 80 percent of the cranberry crop. 
D)  because it has lower production costs than other department stores due to economies of scale.

Question 2

In the long run,if the demand curve of a profit-maximizing monopolistically competitive firm is tangent to its average total cost curve then

Accepted Answer

A)  the firm would break even. 
B)  the firm would shut down temporarily. 
C)  the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D)  the firm would earn an economic profit. 
A)  the firm would break even. 
B)  the firm would shut down temporarily. 
C)  the firm would earn enough revenue to cover its variable costs, but not its fixed costs. 
D)  the firm would earn an economic profit.

Question 3

Which of the following statements is true about marginal revenue?

Accepted Answer

A)  If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. 
B)  If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
C)  If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
D)  Marginal revenue increases as price falls and quantity sold increases. 
A)  If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. 
B)  If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
C)  If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
D)  Marginal revenue increases as price falls and quantity sold increases.

Question 4

Which of the following is the best example of an oligopolistic industry?

Accepted Answer

A)  the wheat market 
B)  the pharmaceutical industry 
C)  public education 
D)  the beauty products industry 
A)  the wheat market 
B)  the pharmaceutical industry 
C)  public education 
D)  the beauty products industry

Question 5

Figure 11-11
  
-Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing output?

Accepted Answer

A)  Q₁ units 
B)  Q₂ units 
C)  Q₃ units 
D)  Q₄ units 
A)  Q₁ units 
B)  Q₂ units 
C)  Q₃ units 
D)  Q₄ units

Question 6

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Accepted Answer

A)  higher; lower 
B)  lower; lower 
C)  lower; higher 
D)  higher; higher 
A)  higher; lower 
B)  lower; lower 
C)  lower; higher 
D)  higher; higher

Question 7

An oligopolist's demand curve is

Accepted Answer

A)  identical to that of a perfectly competitive firm. 
B)  identical to that of a monopolistically competitive firm. 
C)  vertical on a price-quantity diagram. 
D)  unknown because a response of firms to price changes by rivals is uncertain. 
A)  identical to that of a perfectly competitive firm. 
B)  identical to that of a monopolistically competitive firm. 
C)  vertical on a price-quantity diagram. 
D)  unknown because a response of firms to price changes by rivals is uncertain.

Question 8

Figure 11-17
  
-Refer to Figure 11-17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

Accepted Answer

A)  Its average cost of production will fall and its profit will rise. 
B)  It will be taking advantage of economies of scale and will be able to lower the price of its product. 
C)  It will move from a zero profit situation to a profit situation 
D)  It will move from a zero profit situation to a loss situation 
A)  Its average cost of production will fall and its profit will rise. 
B)  It will be taking advantage of economies of scale and will be able to lower the price of its product. 
C)  It will move from a zero profit situation to a profit situation 
D)  It will move from a zero profit situation to a loss situation

Question 9

For a monopolistically competitive firm,marginal revenue

Accepted Answer

A)  equals the price. 
B)  is greater than the price. 
C)  is less than the price. 
D)  and the price are unrelated. 
A)  equals the price. 
B)  is greater than the price. 
C)  is less than the price. 
D)  and the price are unrelated.

Question 10

Selling baked goods out of your home or apartment is illegal in Wisconsin and New Jersey.In these states,baked goods must be prepared in commercial kitchens that are subject to state inspection if they are to be sold to the public.For home bakers in these two states,they barrier to entry they face is

Accepted Answer

A)  due to economies of scale. 
B)  due to ownership of a key resource. 
C)  government imposed. 
D)  self imposed. 
A)  due to economies of scale. 
B)  due to ownership of a key resource. 
C)  government imposed. 
D)  self imposed.

Question 11

A dominant strategy

Accepted Answer

A)  is one that is the best for a firm, no matter what strategies other firms use. 
B)  is one that a firm is forced into following by government policy. 
C)  involves colluding with rivals to maximize joint profits. 
D)  involves deciding what to do after all rivals have chosen their own strategies. 
A)  is one that is the best for a firm, no matter what strategies other firms use. 
B)  is one that a firm is forced into following by government policy. 
C)  involves colluding with rivals to maximize joint profits. 
D)  involves deciding what to do after all rivals have chosen their own strategies.

Question 12

An oligopolistic industry is characterized by a few large firms acting independently.

Accepted Answer

A) True 
 B)False

Question 13

Figure 11-18
  
-Refer to Figure 11-18.Which of the following statements is true?

Accepted Answer

A)  Dₐ represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B)  Dₐ represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C)  Dₐ represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D)  Dₐ represents the long-run supply curve in a perfectly competitive, constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry. 
A)  Dₐ represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the demand curve in the short run. 
B)  Dₐ represents the long-run demand curve facing a monopolistic competitor in a constant-cost industry while Db depicts the long-run demand curve in an increasing-cost industry. 
C)  Dₐ represents the long-run demand curve facing a perfect competitor while Db depicts the long-run demand curve facing a monopolistic competitor. 
D)  Dₐ represents the long-run supply curve in a perfectly competitive, constant-cost industry while Db depicts the long-run demand curve facing a monopolistic competitor in a decreasing-cost industry.

Question 14

Selling baked goods out of your home or apartment is illegal in Wisconsin and New Jersey,but in recent years,California,Minnesota,and Texas have repealed their laws banning the sale of home-baked goods.The repeal of these laws will cause the revenues of commercial bakeries in these three states to ________ and their profits to ________.

Accepted Answer

A)  rise; increase 
B)  rise; decrease 
C)  fall; decrease 
D)  fall; increase 
A)  rise; increase 
B)  rise; decrease 
C)  fall; decrease 
D)  fall; increase

Question 15

A patent is a government-imposed entry barrier because

Accepted Answer

A)  it allows a firm to achieve economies of scale. 
B)  it is a key input owned by the firm that is granted the patent. 
C)  it limits the quantity of a good that can be imported into a country. 
D)  it gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented. 
A)  it allows a firm to achieve economies of scale. 
B)  it is a key input owned by the firm that is granted the patent. 
C)  it limits the quantity of a good that can be imported into a country. 
D)  it gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.

Question 16

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

Accepted Answer

A)  the automobile cannot be improved upon in any way by new producers. 
B)  new auto makers cannot obtain necessary inputs to produce new cars. 
C)  governments restrict who can produce automobiles. 
D)  new producers cannot match the economies of scale of existing auto makers. 
A)  the automobile cannot be improved upon in any way by new producers. 
B)  new auto makers cannot obtain necessary inputs to produce new cars. 
C)  governments restrict who can produce automobiles. 
D)  new producers cannot match the economies of scale of existing auto makers.

Question 17

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Accepted Answer

A) True 
 B)False

Question 18

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits,but unlike perfectly competitive firms in the long run,monopolistically competitive firms

Accepted Answer

A)  charge a price that is greater than average revenue. 
B)  charge a price that is equal to marginal cost. 
C)  do not produce at minimum average total cost. 
D)  charge a price that is equal to average total cost. 
A)  charge a price that is greater than average revenue. 
B)  charge a price that is equal to marginal cost. 
C)  do not produce at minimum average total cost. 
D)  charge a price that is equal to average total cost.

Question 19

Consider two craft bourbons distilled in Brooklyn,New York: Kings County and Stillhouse.If the distilleries advertise,they can both sell more bourbon and increase their revenue.However,the cost of advertising more than offsets the increased revenue so that each distillery ends up with a lower profit than if they do not advertise.On the other hand,if only one advertises,that distillery increases its market share and also its profit.
a.Construct a payoff matrix using the following hypothetical information: If neither distillery advertises,each earns a profit of $500,000 per month.If both advertise,each earns a profit of $250,000 per month.If one advertises and the other does not,the distillery that advertises earns a profit of $750,000 and the distillery that does not advertise earns a profit of $125,000.
b.If Kings County wants to maximize profit,will it advertise? Briefly explain.
c.If Stillhouse wants to maximize profit,will it advertise? Briefly explain.
d.Is there a dominant strategy for each distiller? Briefly explain.

Accepted Answer

a∙The payoff matrix:
 @#IMG-DLM& 
b∙If Kings Count

Question 20

Figure 11-11
  
-Refer to Figure 11-11.What is the amount of excess capacity?

Accepted Answer

A)  Q₄ - Q₃ units 
B)  Q₄ - Q₂ units 
C)  Q₃ - Q₂ units 
D)  Q₃ - Q₁ units 
A)  Q₄ - Q₃ units 
B)  Q₄ - Q₂ units 
C)  Q₃ - Q₂ units 
D)  Q₃ - Q₁ units

The De Beers Company blocked competition

In the long run,if the demand curve of a profit-maximizing monopolistically competitive firm is tangent to its average total cost curve then

Which of the following statements is true about marginal revenue?

Which of the following is the best example of an oligopolistic industry?

Figure 11-11 -Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing output?

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a level of output and charges a price.

An oligopolist's demand curve is

Figure 11-17 -Refer to Figure 11-17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

For a monopolistically competitive firm,marginal revenue

A dominant strategy

An oligopolistic industry is characterized by a few large firms acting independently.

Figure 11-18 -Refer to Figure 11-18.Which of the following statements is true?

A patent is a government-imposed entry barrier because

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits,but unlike perfectly competitive firms in the long run,monopolistically competitive firms

Figure 11-11 -Refer to Figure 11-11.What is the amount of excess capacity?

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

The De Beers Company blocked competition

In the long run,if the demand curve of a profit-maximizing monopolistically competitive firm is tangent to its average total cost curve then

Which of the following statements is true about marginal revenue?

Which of the following is the best example of an oligopolistic industry?

Figure 11-11 -Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing output?

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

An oligopolist's demand curve is

Figure 11-17 -Refer to Figure 11-17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

For a monopolistically competitive firm,marginal revenue

A dominant strategy

An oligopolistic industry is characterized by a few large firms acting independently.

Figure 11-18 -Refer to Figure 11-18.Which of the following statements is true?

A patent is a government-imposed entry barrier because

One reason why,in the last four decades,the number of new auto makers in the world has been very small compared to the past is that

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits,but unlike perfectly competitive firms in the long run,monopolistically competitive firms

Figure 11-11 -Refer to Figure 11-11.What is the amount of excess capacity?

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

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a level of output and charges a price.