Question 1

A monopolistically competitive firm's demand curve slopes downward because:

Accepted Answer

A) other firms are free to enter the market. 
B) there are a large number of firms in the market. 
C) a differentiated product gives the firm some monopoly power. 
D) the firm has complete information about the market. 
E) the firm sells a standardized product. 
A) other firms are free to enter the market. 
B) there are a large number of firms in the market. 
C) a differentiated product gives the firm some monopoly power. 
D) the firm has complete information about the market. 
E) the firm sells a standardized product.

Question 2

A cartel attempts to increase profits in the industry by limiting the production of each member firm.

Accepted Answer

A) True 
 B)False

Question 3

In the short run,a monopolistically competitive firm:

Accepted Answer

A) can earn only a normal profit. 
B) will produce at the point where marginal revenue is greater than marginal cost,in order to maximize profits. 
C) will produce at the point at which price equals minimum ATC to maximize profits. 
D) will be able to enter another monopolistically competitive industry. 
E) will shut down temporarily if price is less than AVC. 
A) can earn only a normal profit. 
B) will produce at the point where marginal revenue is greater than marginal cost,in order to maximize profits. 
C) will produce at the point at which price equals minimum ATC to maximize profits. 
D) will be able to enter another monopolistically competitive industry. 
E) will shut down temporarily if price is less than AVC.

Question 4

Successful product differentiation by a monopolistically competitive firm makes the demand curve faced by the firm steeper.

Accepted Answer

A) True 
 B)False

Question 5

The condition under which a cartel can maintain its stability is that:

Accepted Answer

A) the barriers to entry should be relaxed. 
B) an identical product should be produced by the colluding firms. 
C) there should be a large number of firms in the market. 
D) there should be legal barriers to share agreements. 
E) the products of the colluding firms should be highly differentiated. 
A) the barriers to entry should be relaxed. 
B) an identical product should be produced by the colluding firms. 
C) there should be a large number of firms in the market. 
D) there should be legal barriers to share agreements. 
E) the products of the colluding firms should be highly differentiated.

Question 6

Monopolistic competition is similar to perfect competition in that:

Accepted Answer

A) there are only a few firms in the market. 
B) entry into and exit from the market is easy. 
C) there are significant barriers to entry in the market. 
D) each firm sells a homogeneous product. 
E) each firm differentiates its product through advertising. 
A) there are only a few firms in the market. 
B) entry into and exit from the market is easy. 
C) there are significant barriers to entry in the market. 
D) each firm sells a homogeneous product. 
E) each firm differentiates its product through advertising.

Question 7

The monopolistically competitive firm will charge a price which is more than that charged by a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 8

In a certain monopolistically competitive market that is characterized by high prices and equally high-quality merchandise,if a firm's competitors begin to successfully introduce new products that cut into the firm's market share,the firm's best counter-strategy is to:

Accepted Answer

A) raise price in order to increase the revenue. 
B) introduce its own new products in order to meet competitors head on. 
C) reduce its advertising budget in order to save costs. 
D) ignore its competitors and hope its customers' loyalty carry it through the threat. 
E) look to the government for protection. 
A) raise price in order to increase the revenue. 
B) introduce its own new products in order to meet competitors head on. 
C) reduce its advertising budget in order to save costs. 
D) ignore its competitors and hope its customers' loyalty carry it through the threat. 
E) look to the government for protection.

Question 9

In long-run equilibrium,the monopolistically competitive firm:

Accepted Answer

A) will break even. 
B) will cease to advertise. 
C) will earn a positive economic profit. 
D) will face a perfectly elastic demand curve. 
E) will no longer need to engage in non-price competition. 
A) will break even. 
B) will cease to advertise. 
C) will earn a positive economic profit. 
D) will face a perfectly elastic demand curve. 
E) will no longer need to engage in non-price competition.

Question 10

Consumers are willing to pay a higher price for a product with a brand name as opposed to a generic product because:

Accepted Answer

A) a brand name provides a signal about a product's quality and reliability. 
B) they are willing to pay more for the privilege of watching the firm's commercials. 
C) a product with a brand name is always of higher quality. 
D) consumers maximize utility by purchasing the most expensive products. 
E) consumers are irrational. 
A) a brand name provides a signal about a product's quality and reliability. 
B) they are willing to pay more for the privilege of watching the firm's commercials. 
C) a product with a brand name is always of higher quality. 
D) consumers maximize utility by purchasing the most expensive products. 
E) consumers are irrational.

Question 11

An efficient way to move toward the Nash equilibrium is called a(n):

Accepted Answer

A) an agreement. 
B) a convention. 
C) a principle. 
D) a resolution. 
E) a convergence. 
A) an agreement. 
B) a convention. 
C) a principle. 
D) a resolution. 
E) a convergence.

Question 12

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.3   In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-The profit per unit of output for the firm in the Figure 11.3 is:

Accepted Answer

A) P5 - P3. 
B) P6 - P3. 
C) P3 - P2. 
D) P6 - P2. 
E) P4 - P2. 
A) P5 - P3. 
B) P6 - P3. 
C) P3 - P2. 
D) P6 - P2. 
E) P4 - P2.

Question 13

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.3   In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
-The monopolistically competitive firm in Figure 11.3 will maximize profits (or minimize losses) by producing _____ and charging _____.

Accepted Answer

A) Q2; P6 
B) Q1; P1 
C) Q2; P2 
D) Q3; P3 
E) Q4; P5 
A) Q2; P6 
B) Q1; P1 
C) Q2; P2 
D) Q3; P3 
E) Q4; P5

Question 14

Strategic interdependence occurs in:

Accepted Answer

A) perfect competition. 
B) monopoly. 
C) monopolistic competition. 
D) oligopoly. 
E) local monopoly. 
A) perfect competition. 
B) monopoly. 
C) monopolistic competition. 
D) oligopoly. 
E) local monopoly.

Question 15

Consumers who purchase brand-name pharmaceuticals because they believe the brand name has some value,may be right even if a brand-name pharmaceutical and a generic product are chemically identical.

Accepted Answer

A) True 
 B)False

Question 16

In monopolistic competition,firms may differentiate their products in many ways except on the basis of:

Accepted Answer

A) quality. 
B) style. 
C) price. 
D) packaging. 
E) guarantees. 
A) quality. 
B) style. 
C) price. 
D) packaging. 
E) guarantees.

Question 17

In a price-leadership oligopoly model,the oligopoly firms engage in price wars.

Accepted Answer

A) True 
 B)False

Question 18

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
-Consider the monopolistically competitive firm described in Figure 11.4.The profit-maximizing output level and price are,respectively:

Accepted Answer

A) F and A. 
B) F and E. 
C) J and B. 
D) L and D. 
E) N and P. 
A) F and A. 
B) F and E. 
C) J and B. 
D) L and D. 
E) N and P.

Question 19

Perfect competition is the only market structure in which firms are economically efficient in the long run.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true of product differentiation?

Accepted Answer

A) Product differentiation is the first order derivative of the production function. 
B) Product differentiation exists only when the products are actually different from each other. 
C) Product differentiation exists when consumers perceive the products to be different. 
D) Product differentiation exists when producers perceive the products to be different. 
E) Product differentiation exists when similar goods are sold in geographically segregated markets. 
A) Product differentiation is the first order derivative of the production function. 
B) Product differentiation exists only when the products are actually different from each other. 
C) Product differentiation exists when consumers perceive the products to be different. 
D) Product differentiation exists when producers perceive the products to be different. 
E) Product differentiation exists when similar goods are sold in geographically segregated markets.

A monopolistically competitive firm's demand curve slopes downward because:

A cartel attempts to increase profits in the industry by limiting the production of each member firm.

In the short run,a monopolistically competitive firm:

Successful product differentiation by a monopolistically competitive firm makes the demand curve faced by the firm steeper.

The condition under which a cartel can maintain its stability is that:

Monopolistic competition is similar to perfect competition in that:

The monopolistically competitive firm will charge a price which is more than that charged by a perfectly competitive firm.

In a certain monopolistically competitive market that is characterized by high prices and equally high-quality merchandise,if a firm's competitors begin to successfully introduce new products that cut into the firm's market share,the firm's best counter-strategy is to:

In long-run equilibrium,the monopolistically competitive firm:

Consumers are willing to pay a higher price for a product with a brand name as opposed to a generic product because:

An efficient way to move toward the Nash equilibrium is called a(n):

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.3 In the figure, D: Demand curve MR: Marginal revenue curve MC: Marginal cost curve ATC: Average total cost curve -The profit per unit of output for the firm in the Figure 11.3 is:

Strategic interdependence occurs in:

Consumers who purchase brand-name pharmaceuticals because they believe the brand name has some value,may be right even if a brand-name pharmaceutical and a generic product are chemically identical.

In monopolistic competition,firms may differentiate their products in many ways except on the basis of:

In a price-leadership oligopoly model,the oligopoly firms engage in price wars.

Perfect competition is the only market structure in which firms are economically efficient in the long run.

Which of the following is true of product differentiation?

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

A monopolistically competitive firm's demand curve slopes downward because:

A cartel attempts to increase profits in the industry by limiting the production of each member firm.

In the short run,a monopolistically competitive firm:

Successful product differentiation by a monopolistically competitive firm makes the demand curve faced by the firm steeper.

The condition under which a cartel can maintain its stability is that:

Monopolistic competition is similar to perfect competition in that:

The monopolistically competitive firm will charge a price which is more than that charged by a perfectly competitive firm.

In a certain monopolistically competitive market that is characterized by high prices and equally high-quality merchandise,if a firm's competitors begin to successfully introduce new products that cut into the firm's market share,the firm's best counter-strategy is to:

In long-run equilibrium,the monopolistically competitive firm:

Consumers are willing to pay a higher price for a product with a brand name as opposed to a generic product because:

An efficient way to move toward the Nash equilibrium is called a(n):

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.3 In the figure, D: Demand curve MR: Marginal revenue curve MC: Marginal cost curve ATC: Average total cost curve -The profit per unit of output for the firm in the Figure 11.3 is:

Strategic interdependence occurs in:

Consumers who purchase brand-name pharmaceuticals because they believe the brand name has some value,may be right even if a brand-name pharmaceutical and a generic product are chemically identical.

In monopolistic competition,firms may differentiate their products in many ways except on the basis of:

In a price-leadership oligopoly model,the oligopoly firms engage in price wars.

Perfect competition is the only market structure in which firms are economically efficient in the long run.

Which of the following is true of product differentiation?

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