Question 1

The HHI for an industry with 10,000 firms that each have 0.01 percent share of the market is:

Accepted Answer

A)  0. 
B)  1. 
C)  10. 
D)  100. 
A)  0. 
B)  1. 
C)  10. 
D)  100. B

Question 2

Duopoly is a type of oligopoly consisting of three or more firms.

Accepted Answer

A) True 
 B)False  False

Question 3

The market for plumbing services in a city can be characterized by the model of monopolistic competition.Suppose that the market is in long-run equilibrium.For a typical plumbing firm, price:

Accepted Answer

A)  equals average total cost. 
B)  exceeds average total cost. 
C)  is less than average total cost. 
D)  is greater than the average for all other firms in the market. 
A)  equals average total cost. 
B)  exceeds average total cost. 
C)  is less than average total cost. 
D)  is greater than the average for all other firms in the market. A

Question 4

Use the following for questions 40-42.
Exhibit: Profit Maximization for a Firm in Monopolistic Competition
  
-(Exhibit: Profit Maximization for a Firm in Monopolistic Competition.) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC'.After the innovation reduced the cost, the firm's maximum economic profit is:

Accepted Answer

A)  $0. 
B)  $30. 
C)  $1,500. 
D)  $3,000. 
A)  $0. 
B)  $30. 
C)  $1,500. 
D)  $3,000.

Question 5

One benefit of advertising is that it provides information to consumers.

Accepted Answer

A) True 
 B)False

Question 6

A threat to respond to a rival's cheating by permanently revoking an agreement is a:

Accepted Answer

A)  dormant strategy. 
B)  trigger strategy. 
C)  tit-for-tat strategy. 
D)  dominant strategy. 
A)  dormant strategy. 
B)  trigger strategy. 
C)  tit-for-tat strategy. 
D)  dominant strategy.

Question 7

Product differentiation under monopolistic competition means that each firm:

Accepted Answer

A)  charges slightly different prices. 
B)  has a pure monopoly. 
C)  maximizes profit where MC = P. 
D)  faces a horizontal demand curve. 
A)  charges slightly different prices. 
B)  has a pure monopoly. 
C)  maximizes profit where MC = P. 
D)  faces a horizontal demand curve.

Question 8

Product differentiation under monopolistic competition means that each firm:

Accepted Answer

A)  charges the same price. 
B)  maximizes profit where MC = P. 
C)  faces a downward-sloping demand curve. 
D)  receives economic profits. 
A)  charges the same price. 
B)  maximizes profit where MC = P. 
C)  faces a downward-sloping demand curve. 
D)  receives economic profits.

Question 9

Price for a firm under monopolistic competition is:

Accepted Answer

A)  equal to marginal revenue. 
B)  greater than marginal revenue. 
C)  less than marginal revenue. 
D)  greater than total revenue. 
A)  equal to marginal revenue. 
B)  greater than marginal revenue. 
C)  less than marginal revenue. 
D)  greater than total revenue.

Question 10

Use the following to answer question(s): The Restaurant Model
  
-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.For the restaurant shown here the profit-maximizing price is:

Accepted Answer

A)  P₁. 
B)  P₂. 
C)  P₃. 
D)  There is not enough information given to answer the question. 
A)  P₁. 
B)  P₂. 
C)  P₃. 
D)  There is not enough information given to answer the question.

Question 11

Economic profits in the long run are guaranteed for firms under:

Accepted Answer

A)  monopolistic competition, but not perfect competition. 
B)  perfect competition, but not monopolistic competition. 
C)  both monopolistic competition and perfect competition. 
D)  neither monopolistic competition nor perfect competition. 
A)  monopolistic competition, but not perfect competition. 
B)  perfect competition, but not monopolistic competition. 
C)  both monopolistic competition and perfect competition. 
D)  neither monopolistic competition nor perfect competition.

Question 12

A monopolistically competitive industry shares some of the same characteristics as perfect competition, including:

Accepted Answer

A)  many firms making economic profit in the long run. 
B)  easy entry and exit. 
C)  identical products. 
D)  both B and C. 
A)  many firms making economic profit in the long run. 
B)  easy entry and exit. 
C)  identical products. 
D)  both B and C.

Question 13

Use the following to answer question(s): The Restaurant Model
  
-(Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.In long-run equilibrium, the economic profit earned by the typical restaurant in the community will be:

Accepted Answer

A)  negative. 
B)  zero. 
C)  equal to the level shown in the exhibit. 
D)  There is not enough information given to answer the question. 
A)  negative. 
B)  zero. 
C)  equal to the level shown in the exhibit. 
D)  There is not enough information given to answer the question.

Question 14

Firms in a duopoly industry could achieve the maximum combined profit possible if they colluded.

Accepted Answer

A) True 
 B)False

Question 15

Imperfect competition includes:

Accepted Answer

A)  monopolistic competition and oligopoly. 
B)  monopolistic competition and monopoly. 
C)  perfect competition and monopoly. 
D)  monopoly and oligopoly. 
A)  monopolistic competition and oligopoly. 
B)  monopolistic competition and monopoly. 
C)  perfect competition and monopoly. 
D)  monopoly and oligopoly.

Question 16

A(n) _______ is a single firm with _______ , whereas _______ implies an industry with ________ firm(s) who have (has) _______ .

Accepted Answer

A)  oligopoly; no barriers to entry; monopoly; many; easy entry and exit 
B)  monopoly; barriers to entry; monopolistic competition; many; easy entry and exit 
C)  monopoly; barriers to entry; oligopoly; few; no barriers to entry 
D)  monopolistic competitor; barriers to entry; monopoly; one; barriers to entry 
A)  oligopoly; no barriers to entry; monopoly; many; easy entry and exit 
B)  monopoly; barriers to entry; monopolistic competition; many; easy entry and exit 
C)  monopoly; barriers to entry; oligopoly; few; no barriers to entry 
D)  monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

Question 17

The profit-maximizing rule MC = MR is followed by firms under:

Accepted Answer

A)  monopolistic competition, but not perfect competition. 
B)  perfect competition, but not monopolistic competition. 
C)  either monopolistic competition or perfect competition, depending on the costs of production. 
D)  both monopolistic competition and perfect competition. 
A)  monopolistic competition, but not perfect competition. 
B)  perfect competition, but not monopolistic competition. 
C)  either monopolistic competition or perfect competition, depending on the costs of production. 
D)  both monopolistic competition and perfect competition.

Question 18

Use the following to answer question(s): Monopoly Through Collusion
  
-(Exhibit: Monopoly Through Collusion) Given the duopoly industry illustrated in the exhibit, if each firm acted on the belief that it faced demand curve D₂ and acted without consideration of the other, each firm would attempt to maximize economic profits by producing quantity _______ and setting price equal to _______ .

Accepted Answer

A)  Q₄; P₁ 
B)  Q₄; P₂ 
C)  Q₁; P3 
D)  Q₂; P₂ 
A)  Q₄; P₁ 
B)  Q₄; P₂ 
C)  Q₁; P3 
D)  Q₂; P₂

Question 19

Which of the following statements is true?

Accepted Answer

A)  It is always in the interest of the firm to engage in price discrimination if possible. 
B)  Rearranging sales among different groups of customers decreases total revenue while increasing total cost. 
C)  Most goods and services we buy are offered on a discriminatory basis. 
D)  Price discrimination is illegal. 
A)  It is always in the interest of the firm to engage in price discrimination if possible. 
B)  Rearranging sales among different groups of customers decreases total revenue while increasing total cost. 
C)  Most goods and services we buy are offered on a discriminatory basis. 
D)  Price discrimination is illegal.

Question 20

Use the following for questions 43-51.
Exhibit: Firms in Monopolistic Competition
  
-(Exhibit: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profit-maximizing price _______ in Panel _______ .

Accepted Answer

A)  F; (a) 
B)  G; (a) 
C)  H; (b) 
D)  I; (c) 
A)  F; (a) 
B)  G; (a) 
C)  H; (b) 
D)  I; (c)

The HHI for an industry with 10,000 firms that each have 0.01 percent share of the market is:

Duopoly is a type of oligopoly consisting of three or more firms.

The market for plumbing services in a city can be characterized by the model of monopolistic competition.Suppose that the market is in long-run equilibrium.For a typical plumbing firm, price:

One benefit of advertising is that it provides information to consumers.

A threat to respond to a rival's cheating by permanently revoking an agreement is a:

Product differentiation under monopolistic competition means that each firm:

Product differentiation under monopolistic competition means that each firm:

Price for a firm under monopolistic competition is:

Economic profits in the long run are guaranteed for firms under:

A monopolistically competitive industry shares some of the same characteristics as perfect competition, including:

Firms in a duopoly industry could achieve the maximum combined profit possible if they colluded.

Imperfect competition includes:

A(n) ___ is a single firm with _ , whereas _ implies an industry with firm(s) who have (has) ___ .

The profit-maximizing rule MC = MR is followed by firms under:

Which of the following statements is true?

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profit-maximizing price _ in Panel _ .

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

Monopoly

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 11: The World of Imperfect Competition

The HHI for an industry with 10,000 firms that each have 0.01 percent share of the market is:

Duopoly is a type of oligopoly consisting of three or more firms.

The market for plumbing services in a city can be characterized by the model of monopolistic competition.Suppose that the market is in long-run equilibrium.For a typical plumbing firm, price:

One benefit of advertising is that it provides information to consumers.

A threat to respond to a rival's cheating by permanently revoking an agreement is a:

Product differentiation under monopolistic competition means that each firm:

Product differentiation under monopolistic competition means that each firm:

Price for a firm under monopolistic competition is:

Economic profits in the long run are guaranteed for firms under:

A monopolistically competitive industry shares some of the same characteristics as perfect competition, including:

Firms in a duopoly industry could achieve the maximum combined profit possible if they colluded.

Imperfect competition includes:

A(n) _______ is a single firm with _______ , whereas _______ implies an industry with ________ firm(s) who have (has) _______ .

The profit-maximizing rule MC = MR is followed by firms under:

Which of the following statements is true?

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profit-maximizing price _______ in Panel _______ .

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

Monopoly

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

A(n) ___ is a single firm with _ , whereas _ implies an industry with firm(s) who have (has) ___ .

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profit-maximizing price _ in Panel _ .