Question 1

The outcome of a strategic choice is called a:

Accepted Answer

A)  profit. 
B)  payin. 
C)  payoff. 
D)  payout. 
A)  profit. 
B)  payin. 
C)  payoff. 
D)  payout.

Question 2

Suppose that each of two prisoners has the independent choice of confessing to a crime or not confessing.If neither confesses, they spend 2 years in jail; if both confess, they spend 3 years in jail; and if one confesses while the other does not, the confessor gets off with 1 year in jail while the other gets 6 years in jail.According to game theory, the likely strategy by the prisoners is:

Accepted Answer

A)  both will confess. 
B)  neither will confess. 
C)  one will confess and the other will not. 
D)  both may or may not confess. 
A)  both will confess. 
B)  neither will confess. 
C)  one will confess and the other will not. 
D)  both may or may not confess.

Question 3

An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a(n):

Accepted Answer

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

Question 4

Suppose that the sales of the six largest firms in an industry are 90,000, 85,000, 80,000, 75,000, 70,000, and 65,000 units, respectively.If the industry's total sales are 1 million units, the four-firm concentration ratio is:

Accepted Answer

A)  82.5 percent. 
B)  71 percent. 
C)  66.7 percent. 
D)  33 percent. 
A)  82.5 percent. 
B)  71 percent. 
C)  66.7 percent. 
D)  33 percent.

Question 5

Compare, contrast, and discuss the marginal rules involved in profit maximization in the pricing decisions of firms in perfect competition and monopolistic competition.Include a graph showing the long-run equilibrium for each market structure to support your answers.

Accepted Answer

In perfect competition, firms are price

Question 6

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition
  
-(Exhibit: Profit Maximization in Monopolistic Competition).When the demand curve for a firm in monopolistic competition shifts, the marginal revenue curve:

Accepted Answer

A)  must shift too. 
B)  shifts in the opposite direction. 
C)  will stay the same. 
D)  will shift, but the profit-maximizing quantity will not change. 
A)  must shift too. 
B)  shifts in the opposite direction. 
C)  will stay the same. 
D)  will shift, but the profit-maximizing quantity will not change.

Question 7

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.The restaurant shown here will maximize profits at a quantity of:

Accepted Answer

A)  Q₁. 
B)  Q₂. 
C)  Q₃. 
D)  There is not enough information given to answer the question. 
A)  Q₁. 
B)  Q₂. 
C)  Q₃. 
D)  There is not enough information given to answer the question.

Question 8

The sum of the squared market shares of each firm in an industry is the:

Accepted Answer

A)  concentration ratio. 
B)  employment rate. 
C)  Herfindahl-Hirschman Index. 
D)  market number. 
A)  concentration ratio. 
B)  employment rate. 
C)  Herfindahl-Hirschman Index. 
D)  market number.

Question 9

The excess capacity in monopolistic competition may be viewed as:

Accepted Answer

A)  the cost of product diversity. 
B)  efficient. 
C)  the reason P = MR = MC in monopolistic competition. 
D)  all of the above. 
A)  the cost of product diversity. 
B)  efficient. 
C)  the reason P = MR = MC in monopolistic competition. 
D)  all of the above.

Question 10

An oligopoly is an industry dominated by a few firms.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is (are) true?

Accepted Answer

A)  When choosing the profit-maximizing quantity, the short-run decisionmaking process for a firm in perfect competition and a firm in monopolistic competition is the same, since they produce the quantity where MR = MC. 
B)  In the long run in perfect competition economic profits = 0, and in monopolistic competition in the long-run economic profits are = 0. 
C)  In perfect competition P = MC and in monopolistic competition, MR = MC, but P > MC and there is excess capacity. 
D)  All of the above are true. 
A)  When choosing the profit-maximizing quantity, the short-run decisionmaking process for a firm in perfect competition and a firm in monopolistic competition is the same, since they produce the quantity where MR = MC. 
B)  In the long run in perfect competition economic profits = 0, and in monopolistic competition in the long-run economic profits are = 0. 
C)  In perfect competition P = MC and in monopolistic competition, MR = MC, but P > MC and there is excess capacity. 
D)  All of the above are true.

Question 12

Critics of advertising argue that it:

Accepted Answer

A)  tends to make markets better. 
B)  leads to low-cost, low-quality goods. 
C)  results in higher prices to consumers. 
D)  encourages competition through price comparison. 
A)  tends to make markets better. 
B)  leads to low-cost, low-quality goods. 
C)  results in higher prices to consumers. 
D)  encourages competition through price comparison.

Question 13

Use the following to answer question(s): Monopoly Through Collusion
  
-(Exhibit: Monopoly Through Collusion) The exhibit illustrates the situation in an industry that consists of two firms facing identical demand curves; the demand curve for each firm is D₁.f the firms collude and agree to share the market demand equally, then each firm will act as if its marginal revenue curve is given by:

Accepted Answer

A)  MR₁. 
B)  2 x MR₁. 
C)  MR₂. 
D)  MC. 
A)  MR₁. 
B)  2 x MR₁. 
C)  MR₂. 
D)  MC.

Question 14

For a firm to maximize profits in monopolistic competition it should produce where P = MC.

Accepted Answer

A) True 
 B)False

Question 15

Firms in a duopoly situation may collude to choose the monopoly solution to the determination of quantity to produce and the price at which to sell their products.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that each of two firms has the independent choice of advertising its product or not advertising.If neither advertises, each gets $10 million in profit; if both advertise, their profits will be $5 million each; and if one advertises while the other does not, the advertiser gets $15 million profit while the other gets $2 million profit.According to game theory, the likely strategy by the firms is:

Accepted Answer

A)  both may or may not advertise. 
B)  one will advertise and the other will not. 
C)  both will advertise. 
D)  neither will advertise. 
A)  both may or may not advertise. 
B)  one will advertise and the other will not. 
C)  both will advertise. 
D)  neither will advertise.

Question 17

Advertising is a multi-billion industry in the United States.The costs involved in only a few seconds of advertising during the "Superbowl" run into the millions of dollars.Discuss in some detail the economics of advertising; that is, what are the positive and negative aspects of advertising from an economist's viewpoint?

Accepted Answer

From an economist's viewpoint, advertisi

Question 18

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents.Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a _______ for swimming at the pool than residents.

Accepted Answer

A)  greater demand 
B)  lower demand 
C)  more elastic demand 
D)  less elastic demand 
A)  greater demand 
B)  lower demand 
C)  more elastic demand 
D)  less elastic demand

Question 19

The percentage of total industry output accounted for by the largest firms in the industry is the:

Accepted Answer

A)  concentration ratio. 
B)  employment rate. 
C)  sales index. 
D)  market number. 
A)  concentration ratio. 
B)  employment rate. 
C)  sales index. 
D)  market number.

Question 20

Imperfectly competitive markets include:

Accepted Answer

A)  a category where many firms sell identical products. 
B)  an industry with a few firms, producing a similar product, and in some cases an identical product. 
C)  a category where P = MR = MC is the profit maximizing condition. 
D)  monopolies. 
A)  a category where many firms sell identical products. 
B)  an industry with a few firms, producing a similar product, and in some cases an identical product. 
C)  a category where P = MR = MC is the profit maximizing condition. 
D)  monopolies.

The outcome of a strategic choice is called a:

An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a(n):

Suppose that the sales of the six largest firms in an industry are 90,000, 85,000, 80,000, 75,000, 70,000, and 65,000 units, respectively.If the industry's total sales are 1 million units, the four-firm concentration ratio is:

Compare, contrast, and discuss the marginal rules involved in profit maximization in the pricing decisions of firms in perfect competition and monopolistic competition.Include a graph showing the long-run equilibrium for each market structure to support your answers.

Use the following for questions 22-31. Exhibit: Profit Maximization in Monopolistic Competition -(Exhibit: Profit Maximization in Monopolistic Competition).When the demand curve for a firm in monopolistic competition shifts, the marginal revenue curve:

The sum of the squared market shares of each firm in an industry is the:

The excess capacity in monopolistic competition may be viewed as:

An oligopoly is an industry dominated by a few firms.

Which of the following is (are) true?

Critics of advertising argue that it:

For a firm to maximize profits in monopolistic competition it should produce where P = MC.

Firms in a duopoly situation may collude to choose the monopoly solution to the determination of quantity to produce and the price at which to sell their products.

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents.Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a _______ for swimming at the pool than residents.

The percentage of total industry output accounted for by the largest firms in the industry is the:

Imperfectly competitive markets include:

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 outcome of a strategic choice is called a:

An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a(n):

Suppose that the sales of the six largest firms in an industry are 90,000, 85,000, 80,000, 75,000, 70,000, and 65,000 units, respectively.If the industry's total sales are 1 million units, the four-firm concentration ratio is:

Compare, contrast, and discuss the marginal rules involved in profit maximization in the pricing decisions of firms in perfect competition and monopolistic competition.Include a graph showing the long-run equilibrium for each market structure to support your answers.

Use the following for questions 22-31. Exhibit: Profit Maximization in Monopolistic Competition -(Exhibit: Profit Maximization in Monopolistic Competition).When the demand curve for a firm in monopolistic competition shifts, the marginal revenue curve:

The sum of the squared market shares of each firm in an industry is the:

The excess capacity in monopolistic competition may be viewed as:

An oligopoly is an industry dominated by a few firms.

Which of the following is (are) true?

Critics of advertising argue that it:

For a firm to maximize profits in monopolistic competition it should produce where P = MC.

Firms in a duopoly situation may collude to choose the monopoly solution to the determination of quantity to produce and the price at which to sell their products.

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents.Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a _______ for swimming at the pool than residents.

The percentage of total industry output accounted for by the largest firms in the industry is the:

Imperfectly competitive markets include:

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