Question 1

Monopolistic competition within an industry results in:

Accepted Answer

A)  overutilization of plants. 
B)  chronic excess capacity. 
C)  less advertising than in perfect competition. 
D)  lower prices than in perfect competition. 
A)  overutilization of plants. 
B)  chronic excess capacity. 
C)  less advertising than in perfect competition. 
D)  lower prices than in perfect competition.

Question 2

To practice effective price discrimination, a firm must:

Accepted Answer

A)  have some degree of monopoly power. 
B)  avoid detection by government regulatory agencies. 
C)  enable the resale of goods between groups of buyers. 
D)  calculate the utility level of each buyer in the market. 
A)  have some degree of monopoly power. 
B)  avoid detection by government regulatory agencies. 
C)  enable the resale of goods between groups of buyers. 
D)  calculate the utility level of each buyer in the market.

Question 3

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

Accepted Answer

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

Question 4

Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for financial planners is best considered:

Accepted Answer

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

Question 5

A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account, is a:

Accepted Answer

A)  tacit supply curve model. 
B)  playoff payoff. 
C)  perfect competition. 
D)  strategic choice. 
A)  tacit supply curve model. 
B)  playoff payoff. 
C)  perfect competition. 
D)  strategic choice.

Question 6

If advertising enhances competition, it will tend to _______ prices and ________ quantities demanded.

Accepted Answer

A)  increase; lower 
B)  lower; increase 
C)  lower; decrease 
D)  increase; increase 
A)  increase; lower 
B)  lower; increase 
C)  lower; decrease 
D)  increase; increase

Question 7

The largest HHI possible is 10.

Accepted Answer

A) True 
 B)False

Question 8

Defenders of advertising argue that it:

Accepted Answer

A)  seeks to persuade, rather than inform, buyers. 
B)  facilitates the concentration of monopoly power. 
C)  encourages artificial product differentiation. 
D)  encourages competition through new-product advertising. 
A)  seeks to persuade, rather than inform, buyers. 
B)  facilitates the concentration of monopoly power. 
C)  encourages artificial product differentiation. 
D)  encourages competition through new-product advertising.

Question 9

An industry with two firms is called a duopoly.

Accepted Answer

A) True 
 B)False

Question 10

The Herfindahl-Hirschman Index (HHI) is a measure of concentration found by:

Accepted Answer

A)  squaring the percentage share of each firm in the industry. 
B)  squaring the percentage share of each firm in the industry and then summing the squared market shares. 
C)  summing the percentage shares of each firm in the industry. 
D)  squaring the sums of the concentrations ratios found in an industry survey of the largest 4 and largest 8 firms. 
A)  squaring the percentage share of each firm in the industry. 
B)  squaring the percentage share of each firm in the industry and then summing the squared market shares. 
C)  summing the percentage shares of each firm in the industry. 
D)  squaring the sums of the concentrations ratios found in an industry survey of the largest 4 and largest 8 firms.

Question 11

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´.Suppose further that after the innovation reduced the cost to ATC´, it costs a total of $18 per unit to produce 170 units per day.If the firm charges a price equal to marginal cost, total net profit will be:

Accepted Answer

A)  $1,190. 
B)  $1,700. 
C)  $3,060. 
D)  $3,400. 
A)  $1,190. 
B)  $1,700. 
C)  $3,060. 
D)  $3,400.

Question 12

To practice effective price discrimination, a monopolist must be able to:

Accepted Answer

A)  avoid detection by government regulatory agencies. 
B)  calculate the utility level of each buyer in the market. 
C)  distinguish between buyers who are in the market and others who would enter the market if the price were increased. 
D)  determine whether there are differences in demand elasticities among buyers. 
A)  avoid detection by government regulatory agencies. 
B)  calculate the utility level of each buyer in the market. 
C)  distinguish between buyers who are in the market and others who would enter the market if the price were increased. 
D)  determine whether there are differences in demand elasticities among buyers.

Question 13

Other things remaining the same, the concentration ratio in an industry will increase if:

Accepted Answer

A)  new firms enter the industry. 
B)  some firms leave the industry. 
C)  the largest firms are broken up into smaller firms. 
D)  the industry's output increases. 
A)  new firms enter the industry. 
B)  some firms leave the industry. 
C)  the largest firms are broken up into smaller firms. 
D)  the industry's output increases.

Question 14

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.Which of the following assumptions is part of the analysis illustrated by the model?

Accepted Answer

A)  The two firms have identical marginal cost but different average total cost. 
B)  The two firms sell differentiated products. 
C)  The MR curve is not relevant to either firm's choices. 
D)  If the firms cooperate by acting as a cartel, they can maximize their combined economic profit. 
A)  The two firms have identical marginal cost but different average total cost. 
B)  The two firms sell differentiated products. 
C)  The MR curve is not relevant to either firm's choices. 
D)  If the firms cooperate by acting as a cartel, they can maximize their combined economic profit.

Question 15

Oligopoly is a market structure characterized by:

Accepted Answer

A)  independence in decisionmaking. 
B)  uncertainty about the interaction of rival firms. 
C)  substantial diseconomies of scale. 
D)  a large number of small firms. 
A)  independence in decisionmaking. 
B)  uncertainty about the interaction of rival firms. 
C)  substantial diseconomies of scale. 
D)  a large number of small firms.

Question 16

Advertising that provides information about prices may increase competition.

Accepted Answer

A) True 
 B)False

Question 17

In general, there is a _______ correlation between the degree of concentration of market power and the _______ .

Accepted Answer

A)  negative; fraction of total costs devoted to advertising 
B)  positive; method of advertising 
C)  positive; fraction of total costs devoted to advertising 
D)  negative; costs devoted to product differentiation 
A)  negative; fraction of total costs devoted to advertising 
B)  positive; method of advertising 
C)  positive; fraction of total costs devoted to advertising 
D)  negative; costs devoted to product differentiation

Question 18

A well-known example of an international cartel is:

Accepted Answer

A)  Japan. 
B)  OPEC. 
C)  Exxon. 
D)  General Motors. 
A)  Japan. 
B)  OPEC. 
C)  Exxon. 
D)  General Motors.

Question 19

Which of the following is (are) true?

Accepted Answer

A)  One can criticize monopolistic competition because it falls short of the efficiency standards of perfect competition. 
B)  Monopolistic competition is inefficient because of product differentiation. 
C)  According to the text, the inefficiency of monopolistic competition may be a small price to pay for the wide range of product choices it offers. 
D)  All of the above are true. 
A)  One can criticize monopolistic competition because it falls short of the efficiency standards of perfect competition. 
B)  Monopolistic competition is inefficient because of product differentiation. 
C)  According to the text, the inefficiency of monopolistic competition may be a small price to pay for the wide range of product choices it offers. 
D)  All of the above are true.

Question 20

Critics of advertising argue that it:

Accepted Answer

A)  tends to make markets more perfect. 
B)  leads to low-cost mass production. 
C)  results in higher prices to consumers. 
D)  encourages competition through new-product advertising. 
A)  tends to make markets more perfect. 
B)  leads to low-cost mass production. 
C)  results in higher prices to consumers. 
D)  encourages competition through new-product advertising.

Monopolistic competition within an industry results in:

To practice effective price discrimination, a firm must:

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

Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for financial planners is best considered:

A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account, is a:

If advertising enhances competition, it will tend to _ prices and __ quantities demanded.

The largest HHI possible is 10.

Defenders of advertising argue that it:

An industry with two firms is called a duopoly.

The Herfindahl-Hirschman Index (HHI) is a measure of concentration found by:

To practice effective price discrimination, a monopolist must be able to:

Other things remaining the same, the concentration ratio in an industry will increase if:

Oligopoly is a market structure characterized by:

Advertising that provides information about prices may increase competition.

In general, there is a _ correlation between the degree of concentration of market power and the _ .

A well-known example of an international cartel is:

Which of the following is (are) true?

Critics of advertising argue that it:

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

Monopolistic competition within an industry results in:

To practice effective price discrimination, a firm must:

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

Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for financial planners is best considered:

A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account, is a:

If advertising enhances competition, it will tend to _______ prices and ________ quantities demanded.

The largest HHI possible is 10.

Defenders of advertising argue that it:

An industry with two firms is called a duopoly.

The Herfindahl-Hirschman Index (HHI) is a measure of concentration found by:

To practice effective price discrimination, a monopolist must be able to:

Other things remaining the same, the concentration ratio in an industry will increase if:

Oligopoly is a market structure characterized by:

Advertising that provides information about prices may increase competition.

In general, there is a _______ correlation between the degree of concentration of market power and the _______ .

A well-known example of an international cartel is:

Which of the following is (are) true?

Critics of advertising argue that it:

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.

If advertising enhances competition, it will tend to _ prices and __ quantities demanded.

In general, there is a _ correlation between the degree of concentration of market power and the _ .