Question 1

Price discrimination leads to a _______ price in the market with a _______ demand.

Accepted Answer

A)  higher; more elastic 
B)  higher; perfectly elastic 
C)  lower; more elastic 
D)  lower; less elastic 
A)  higher; more elastic 
B)  higher; perfectly elastic 
C)  lower; more elastic 
D)  lower; less elastic

Question 2

Which of the following is (are) true?

Accepted Answer

A)  It is difficult to determine how much tacit collusion exists in a particular industry. 
B)  It is often seen that prices of firms in perfect competition are different. 
C)  The fact that one firm changes its price shortly after another firm is proof of tacit collusion. 
D)  A and B are true. 
A)  It is difficult to determine how much tacit collusion exists in a particular industry. 
B)  It is often seen that prices of firms in perfect competition are different. 
C)  The fact that one firm changes its price shortly after another firm is proof of tacit collusion. 
D)  A and B are true.

Question 3

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition
  
-(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (b), the profit-maximizing price is P₂ and the ATC curve is tangent to the new demand curve.The portion of the ATC that lies to the right of the tangency and continues down to the intersection of MC with ATC indicates _______ , because in the long run in _______ the price would be equal to _______.

Accepted Answer

A)  unused capacity; oligopoly; MC = minimum ATC 
B)  excess capacity; perfect competition; MC = minimum ATC 
C)  under-utilization; monopoly; MR = MC 
D)  excess capacity; perfect competition; MC > minimum ATC 
A)  unused capacity; oligopoly; MC = minimum ATC 
B)  excess capacity; perfect competition; MC = minimum ATC 
C)  under-utilization; monopoly; MR = MC 
D)  excess capacity; perfect competition; MC > minimum ATC

Question 4

The market for plumbing services in a city can be characterized by the model of monopolistic competition.Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services.We expect that in the long run the economic profits of typical firms in the industry will be:

Accepted Answer

A)  typical of those earned by monopoly firms. 
B)  negative. 
C)  zero. 
D)  positive but less than the level typically earned by monopoly firms. 
A)  typical of those earned by monopoly firms. 
B)  negative. 
C)  zero. 
D)  positive but less than the level typically earned by monopoly firms.

Question 5

Use the following for questions 43-51.
Exhibit: Firms in Monopolistic Competition
  
-(Exhibit: Firms in Monopolistic Competition) In Panel (c), economic loss per unit is amount:

Accepted Answer

A)  XT. 
B)  UW. 
C)  VW. 
D)  VT. 
A)  XT. 
B)  UW. 
C)  VW. 
D)  VT.

Question 6

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, its profit per unit is:

Accepted Answer

A)  ae. 
B)  fd. 
C)  bf. 
D)  bd. 
A)  ae. 
B)  fd. 
C)  bf. 
D)  bd.

Question 7

Which of the following is (are) true?

Accepted Answer

A)  There is no role for advertising in perfect competition. 
B)  Firms in monopolistic competition and oligopoly use advertising in expectation of increasing profit. 
C)  Advertising has costs but few, if any, benefits. 
D)  A and B are true. 
A)  There is no role for advertising in perfect competition. 
B)  Firms in monopolistic competition and oligopoly use advertising in expectation of increasing profit. 
C)  Advertising has costs but few, if any, benefits. 
D)  A and B are true.

Question 8

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' Before the innovation reduced the cost, the firm's maximum economic profit was:

Accepted Answer

A)  $0. 
B)  $30. 
C)  $750. 
D)  $4,500. 
A)  $0. 
B)  $30. 
C)  $750. 
D)  $4,500.

Question 9

Firms that openly collude are engaging in:

Accepted Answer

A)  advertising. 
B)  overt collusion. 
C)  tacit collusion 
D)  perfect competition. 
A)  advertising. 
B)  overt collusion. 
C)  tacit collusion 
D)  perfect competition.

Question 10

A monopoly will have a Herfindahl-Hirschman Index equal to about:

Accepted Answer

A)  1. 
B)  100. 
C)  1,000. 
D)  10,000. 
A)  1. 
B)  100. 
C)  1,000. 
D)  10,000.

Question 11

In the long run, in monopolistic competition economic profits most likely will be zero.

Accepted Answer

A) True 
 B)False

Question 12

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.If the restaurant shown here were to raise its price above the profit-maximizing price, it would experience:

Accepted Answer

A)  a reduction in total revenue. 
B)  an increase in total revenue. 
C)  no change in total revenue. 
D)  There is not enough information given to answer the question. 
A)  a reduction in total revenue. 
B)  an increase in total revenue. 
C)  no change in total revenue. 
D)  There is not enough information given to answer the question.

Question 13

By providing information to consumers about _______ , advertising may encourage ________ .

Accepted Answer

A)  quality; cheating in a cartel 
B)  prices; price competition 
C)  competitors; competition 
D)  None of the above are true. 
A)  quality; cheating in a cartel 
B)  prices; price competition 
C)  competitors; competition 
D)  None of the above are true.

Question 14

Use the following for questions 43-51.
Exhibit: Firms in Monopolistic Competition
  
-(Exhibit: Firms in Monopolistic Competition) In Panel (b), the profit-maximizing quantity of output is generated by the intersection at point:

Accepted Answer

A)  Q. 
B)  R. 
C)  S. 
D)  T. 
A)  Q. 
B)  R. 
C)  S. 
D)  T.

Question 15

Defenders of advertising argue that it:

Accepted Answer

A)  seeks to persuade, rather than inform, buyers. 
B)  provides education and information about products. 
C)  facilitates the concentration of monopoly power. 
D)  encourages artificial product differentiation. 
A)  seeks to persuade, rather than inform, buyers. 
B)  provides education and information about products. 
C)  facilitates the concentration of monopoly power. 
D)  encourages artificial product differentiation.

Question 16

Because monopolistically competitive firms charge a P > MC:

Accepted Answer

A)  monopolistic competition is efficient. 
B)  monopolistic competition is inefficient. 
C)  the marginal benefit to society of an additional unit of output is below its cost. 
D)  B and C are true. 
A)  monopolistic competition is efficient. 
B)  monopolistic competition is inefficient. 
C)  the marginal benefit to society of an additional unit of output is below its cost. 
D)  B and C are true.

Question 17

A restaurant is a price setter.

Accepted Answer

A) True 
 B)False

Price discrimination leads to a _ price in the market with a _ demand.

Which of the following is (are) true?

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) In Panel (c), economic loss per unit is amount:

Which of the following is (are) true?

Firms that openly collude are engaging in:

A monopoly will have a Herfindahl-Hirschman Index equal to about:

In the long run, in monopolistic competition economic profits most likely will be zero.

By providing information to consumers about _ , advertising may encourage __ .

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) In Panel (b), the profit-maximizing quantity of output is generated by the intersection at point:

Defenders of advertising argue that it:

Because monopolistically competitive firms charge a P > MC:

A restaurant is a price setter.

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

Price discrimination leads to a _______ price in the market with a _______ demand.

Which of the following is (are) true?

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) In Panel (c), economic loss per unit is amount:

Which of the following is (are) true?

Firms that openly collude are engaging in:

A monopoly will have a Herfindahl-Hirschman Index equal to about:

In the long run, in monopolistic competition economic profits most likely will be zero.

By providing information to consumers about _______ , advertising may encourage ________ .

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) In Panel (b), the profit-maximizing quantity of output is generated by the intersection at point:

Defenders of advertising argue that it:

Because monopolistically competitive firms charge a P > MC:

A restaurant is a price setter.

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

Price discrimination leads to a _ price in the market with a _ demand.

By providing information to consumers about _ , advertising may encourage __ .