Question 1

Which of the following is not an example of nonprice competition?

Accepted Answer

A) Kellogg's introduces Froot Loops with Lemonberry Swirls. 
B) Sterling Planet provides consumers the opportunity to purchase renewable electricity in upstate New York. 
C) Mountain Dew sells "Livewire" orange soda in the summer of 2003. 
D) Nissan lowers the interest rate charged for new automobile financing. 
E) Honda produces a hybrid version of its Civic. 
A) Kellogg's introduces Froot Loops with Lemonberry Swirls. 
B) Sterling Planet provides consumers the opportunity to purchase renewable electricity in upstate New York. 
C) Mountain Dew sells "Livewire" orange soda in the summer of 2003. 
D) Nissan lowers the interest rate charged for new automobile financing. 
E) Honda produces a hybrid version of its Civic.

Question 2

If all the firms in a monopolistically competitive market are incurring losses,then eventually:

Accepted Answer

A) the aggregate demand for the products will increase. 
B) the aggregate supply of the products will increase. 
C) the price of the products in general will decline. 
D) the cost of production will increase. 
E) the firms will exit until the existing ones just break even. 
A) the aggregate demand for the products will increase. 
B) the aggregate supply of the products will increase. 
C) the price of the products in general will decline. 
D) the cost of production will increase. 
E) the firms will exit until the existing ones just break even.

Question 3

When firms use cost-plus pricing in a market,

Accepted Answer

A) each firm determines its price based on other firms' costs and prices. 
B) it may appear as though firms are colluding in price when they actually are not. 
C) prices of different firms will diverge widely. 
D) each firm will never maximize profit as they are charging the same prices irrespective of their costs. 
E) each will sell only to its most-favored customer. 
A) each firm determines its price based on other firms' costs and prices. 
B) it may appear as though firms are colluding in price when they actually are not. 
C) prices of different firms will diverge widely. 
D) each firm will never maximize profit as they are charging the same prices irrespective of their costs. 
E) each will sell only to its most-favored customer.

Question 4

Oligopoly can arise from:

Accepted Answer

A) diseconomies of scale in production. 
B) limited demand for a product in the market. 
C) government regulations. 
D) easy availability of the crucial inputs. 
E) reduction of trade barriers. 
A) diseconomies of scale in production. 
B) limited demand for a product in the market. 
C) government regulations. 
D) easy availability of the crucial inputs. 
E) reduction of trade barriers.

Question 5

Which of the following is a characteristic of an oligopoly market?

Accepted Answer

A) Each firm in an oligopoly market can take independent pricing and output decisions. 
B) There are many firms in an oligopoly market hence a firm cannot influence the market price. 
C) In an oligopoly market,each firm's pricing and output decisions depend on those of its rivals. 
D) Firms in an oligopoly market always manufacture differentiated products. 
E) Barriers to entry does not exist in an oligopoly market. 
A) Each firm in an oligopoly market can take independent pricing and output decisions. 
B) There are many firms in an oligopoly market hence a firm cannot influence the market price. 
C) In an oligopoly market,each firm's pricing and output decisions depend on those of its rivals. 
D) Firms in an oligopoly market always manufacture differentiated products. 
E) Barriers to entry does not exist in an oligopoly market.

Question 6

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms). Table 11.2   
-According to Table 11.2,if firm A follows its dominant strategy but firm B does not,firm A earns a profit of:

Accepted Answer

A) $50. 
B) $40. 
C) $60. 
D) $45. 
E) $42. 
A) $50. 
B) $40. 
C) $60. 
D) $45. 
E) $42.

Question 7

Which of the following is true of price leadership?

Accepted Answer

A) Price leadership requires that firms collude. 
B) Price leadership will not exist when there is a dominant firm. 
C) Price leadership may come into being as firms recognize the benefits of not engaging in competitive pricing. 
D) Price leadership is most likely to arise when no firm has a history of making accurate evaluations of market conditions. 
E) Price leadership is never used in the real world. 
A) Price leadership requires that firms collude. 
B) Price leadership will not exist when there is a dominant firm. 
C) Price leadership may come into being as firms recognize the benefits of not engaging in competitive pricing. 
D) Price leadership is most likely to arise when no firm has a history of making accurate evaluations of market conditions. 
E) Price leadership is never used in the real world.

Question 8

If additional firms enter a monopolistically competitive industry,the demand facing a typical firm increases.

Accepted Answer

A) True 
 B)False

Question 9

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure 11.4   
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Refer to Figure 11.4.What is the profit earned by the firm at equilibrium?

Accepted Answer

A) 0AGF 
B) 0BKJ 
C) ACHG 
D) AEIG 
E) CEIH 
A) 0AGF 
B) 0BKJ 
C) ACHG 
D) AEIG 
E) CEIH

Question 10

Celebrity endorsements are often used by monopolistically competitive firms to boost the reputation of the product that is being endorsed.

Accepted Answer

A) True 
 B)False

Question 11

The firms in an oligopoly market structure agree to collude because:

Accepted Answer

A) acting jointly helps them to earn more profits. 
B) each firm wants to know the strategy of its rivals. 
C) each firm wants to charge a lower price for its product than its rivals. 
D) the firms want to maintain a healthy relationship with each other. 
E) it helps them to enjoy economies of scale. 
A) acting jointly helps them to earn more profits. 
B) each firm wants to know the strategy of its rivals. 
C) each firm wants to charge a lower price for its product than its rivals. 
D) the firms want to maintain a healthy relationship with each other. 
E) it helps them to enjoy economies of scale.

Question 12

The figure given below shows revenue and cost curves of a monopolistically competitive firm. Figure: 11.1   In the figure,
MR: Marginal revenue curve
ATC: Average total cost curve
AVC: Average variable cost curve
MC: Marginal cost curve
-According to Figure 11.1,the firm:

Accepted Answer

A) 0 and 0. 
B) H and D. 
C) I and A. 
D) J and C. 
E) J and E. 
A) 0 and 0. 
B) H and D. 
C) I and A. 
D) J and C. 
E) J and E.

Question 13

The following table shows the payoff matrix of the two firms (Firm X and Firm Y) in dollars when they advertise and when they do not advertise. Table 11.1  
- According to Table 11.1,if both the firms follow their dominant strategies:

Accepted Answer

A) firm X earns $100 and firm Y earns $150. 
B) firm X earns $50and firm Y earns $200. 
C) firm X earns $180 and firm Y earns $150. 
D) firm X earns $180 and firm Y earns $100. 
E) firm X earns $150 and firm Y earns $180. 
A) firm X earns $100 and firm Y earns $150. 
B) firm X earns $50and firm Y earns $200. 
C) firm X earns $180 and firm Y earns $150. 
D) firm X earns $180 and firm Y earns $100. 
E) firm X earns $150 and firm Y earns $180.

Question 14

If economic losses exist in a monopolistically competitive market,

Accepted Answer

A) new products will be introduced. 
B) new firms will enter the market because they see potential for profit in the future. 
C) firms will exit the market and the existing firms' demand curves will shift inward. 
D) the average total cost curve must lie below the demand curve. 
E) firms will exit the market and existing firms' demand curves will shift outward. 
A) new products will be introduced. 
B) new firms will enter the market because they see potential for profit in the future. 
C) firms will exit the market and the existing firms' demand curves will shift inward. 
D) the average total cost curve must lie below the demand curve. 
E) firms will exit the market and existing firms' demand curves will shift outward.

Question 15

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms). Table 11.2   
-Refer to Table 11.2.If firm both firm A and firm B choose their dominant strategies then:

Accepted Answer

A) firm A makes a profit of $40 and firm B makes a profit of $45. 
B) firm A makes a profit of $50 and firm B makes a profit of $45. 
C) firm A makes a profit of $50 and firm B makes a profit of $40. 
D) firm A makes a profit of $42 and firm B makes a profit of $40. 
E) firm A makes a profit of $40 and firm B makes a profit of $20. 
A) firm A makes a profit of $40 and firm B makes a profit of $45. 
B) firm A makes a profit of $50 and firm B makes a profit of $45. 
C) firm A makes a profit of $50 and firm B makes a profit of $40. 
D) firm A makes a profit of $42 and firm B makes a profit of $40. 
E) firm A makes a profit of $40 and firm B makes a profit of $20.

Question 16

Which of the following statements about the monopolistically competitive market in the long run is true?

Accepted Answer

A) The resources are efficiently utilized. 
B) Consumers have a greater variety of products to choose from than under perfectly competitive market conditions. 
C) The marginal-revenue curve coincides with the demand curve facing the firm. 
D) The firms produce the output level that is less than the output corresponding to the minimum of average total cost. 
E) The firms operate in the upward-sloping portion of the long run average cost curve. 
A) The resources are efficiently utilized. 
B) Consumers have a greater variety of products to choose from than under perfectly competitive market conditions. 
C) The marginal-revenue curve coincides with the demand curve facing the firm. 
D) The firms produce the output level that is less than the output corresponding to the minimum of average total cost. 
E) The firms operate in the upward-sloping portion of the long run average cost curve.

Question 17

If a monopolistically competitive industry is in long-run equilibrium and suddenly the cost of resources increases,then:

Accepted Answer

A) the demand and average-revenue curves will shift to the right. 
B) the demand and average-revenue curves will shift to the left. 
C) some firms will eventually leave the industry. 
D) new firms will eventually enter the industry. 
E) the cost structure of the firm will shift down. 
A) the demand and average-revenue curves will shift to the right. 
B) the demand and average-revenue curves will shift to the left. 
C) some firms will eventually leave the industry. 
D) new firms will eventually enter the industry. 
E) the cost structure of the firm will shift down.

Question 18

Firms in monopolistically competitive markets spend significant sums on product differentiation because:

Accepted Answer

A) it enables them to earn positive profits in the short run. 
B) it increases the elasticity of demand for a firm's product. 
C) it reduces the number of competitors. 
D) it causes the firm's supply curve to become horizontal so the firm can expand output indefinitely. 
E) it causes the firm's demand curve to become horizontal so that it can charge a fixed price for its product. 
A) it enables them to earn positive profits in the short run. 
B) it increases the elasticity of demand for a firm's product. 
C) it reduces the number of competitors. 
D) it causes the firm's supply curve to become horizontal so the firm can expand output indefinitely. 
E) it causes the firm's demand curve to become horizontal so that it can charge a fixed price for its product.

Question 19

The short-run equilibrium position for a firm in monopolistic competition is the point at which the firm's marginal-cost curve intersects its marginal-revenue curve from above.

Accepted Answer

A) True 
 B)False

Question 20

A strategy that produces the best result no matter what strategy the opposing player follows is known as the dominated strategy.

Accepted Answer

A) True 
 B)False

Which of the following is not an example of nonprice competition?

If all the firms in a monopolistically competitive market are incurring losses,then eventually:

When firms use cost-plus pricing in a market,

Oligopoly can arise from:

Which of the following is a characteristic of an oligopoly market?

Which of the following is true of price leadership?

If additional firms enter a monopolistically competitive industry,the demand facing a typical firm increases.

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure 11.4 MR: Marginal revenue curve ATC: Average total cost curve MC: Marginal cost curve -Refer to Figure 11.4.What is the profit earned by the firm at equilibrium?

Celebrity endorsements are often used by monopolistically competitive firms to boost the reputation of the product that is being endorsed.

The firms in an oligopoly market structure agree to collude because:

The figure given below shows revenue and cost curves of a monopolistically competitive firm. Figure: 11.1 In the figure, MR: Marginal revenue curve ATC: Average total cost curve AVC: Average variable cost curve MC: Marginal cost curve -According to Figure 11.1,the firm:

The following table shows the payoff matrix of the two firms (Firm X and Firm Y) in dollars when they advertise and when they do not advertise. Table 11.1 - According to Table 11.1,if both the firms follow their dominant strategies:

If economic losses exist in a monopolistically competitive market,

Which of the following statements about the monopolistically competitive market in the long run is true?

If a monopolistically competitive industry is in long-run equilibrium and suddenly the cost of resources increases,then:

Firms in monopolistically competitive markets spend significant sums on product differentiation because:

The short-run equilibrium position for a firm in monopolistic competition is the point at which the firm's marginal-cost curve intersects its marginal-revenue curve from above.

A strategy that produces the best result no matter what strategy the opposing player follows is known as the dominated strategy.

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 11: Monopolistic Competition and Oligopoly

Which of the following is not an example of nonprice competition?

If all the firms in a monopolistically competitive market are incurring losses,then eventually:

When firms use cost-plus pricing in a market,

Oligopoly can arise from:

Which of the following is a characteristic of an oligopoly market?

Which of the following is true of price leadership?

If additional firms enter a monopolistically competitive industry,the demand facing a typical firm increases.

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure 11.4 MR: Marginal revenue curve ATC: Average total cost curve MC: Marginal cost curve -Refer to Figure 11.4.What is the profit earned by the firm at equilibrium?

Celebrity endorsements are often used by monopolistically competitive firms to boost the reputation of the product that is being endorsed.

The firms in an oligopoly market structure agree to collude because:

The figure given below shows revenue and cost curves of a monopolistically competitive firm. Figure: 11.1 In the figure, MR: Marginal revenue curve ATC: Average total cost curve AVC: Average variable cost curve MC: Marginal cost curve -According to Figure 11.1,the firm:

The following table shows the payoff matrix of the two firms (Firm X and Firm Y) in dollars when they advertise and when they do not advertise. Table 11.1 - According to Table 11.1,if both the firms follow their dominant strategies:

If economic losses exist in a monopolistically competitive market,

Which of the following statements about the monopolistically competitive market in the long run is true?

If a monopolistically competitive industry is in long-run equilibrium and suddenly the cost of resources increases,then:

Firms in monopolistically competitive markets spend significant sums on product differentiation because:

The short-run equilibrium position for a firm in monopolistic competition is the point at which the firm's marginal-cost curve intersects its marginal-revenue curve from above.

A strategy that produces the best result no matter what strategy the opposing player follows is known as the dominated strategy.

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters