Question 1

Which of the following is (are) true?

Accepted Answer

A)  According to the text, perfect competition is a goal toward which an economy should strive. 
B)  Monopolistic competition results in excess capacity, since in the long run MR = MC to the left of the minimum of the ATC curve. 
C)  One might characterize monopolistic competition as an industry, such as gasoline stations, which in the long run experiences economic profits. 
D)  All of the above are true. 
A)  According to the text, perfect competition is a goal toward which an economy should strive. 
B)  Monopolistic competition results in excess capacity, since in the long run MR = MC to the left of the minimum of the ATC curve. 
C)  One might characterize monopolistic competition as an industry, such as gasoline stations, which in the long run experiences economic profits. 
D)  All of the above are true.

Question 2

If the only two firms in an industry agree to fix the price at a given level, this is an example of:

Accepted Answer

A)  collusion. 
B)  satisfying. 
C)  price extortion. 
D)  price leadership. 
A)  collusion. 
B)  satisfying. 
C)  price extortion. 
D)  price leadership.

Question 3

As in all other market structures, firms in monopolistic competition maximize profit by equating marginal cost to price.

Accepted Answer

A) True 
 B)False

Question 4

OPEC is:

Accepted Answer

A)  the Organization of Petroleum Exporting Countries. 
B)  an international cartel made up of 13 oil-producing countries. 
C)  the cartel that was responsible for the large increases in crude oil prices in the 1970s. 
D)  described by all of the above. 
A)  the Organization of Petroleum Exporting Countries. 
B)  an international cartel made up of 13 oil-producing countries. 
C)  the cartel that was responsible for the large increases in crude oil prices in the 1970s. 
D)  described by all of the above.

Question 5

A firm will adjust prices so that customers with more _______ demand pay ________ prices than those customers with _______ elastic demand.

Accepted Answer

A)  inelastic; lower; less 
B)  elastic; lower; less 
C)  elastic; the same; more 
D)  A and B are true. 
A)  inelastic; lower; less 
B)  elastic; lower; less 
C)  elastic; the same; more 
D)  A and B are true.

Question 6

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition
  
-(Exhibit: Profit Maximization in Monopolistic Competition) In determining the price in monopolistic competition:

Accepted Answer

A)  the price to the firm is given by supply and demand for the industry. 
B)  the firm is a price taker. 
C)  the firm applies the marginal decision rule. 
D)  A and B are true. 
A)  the price to the firm is given by supply and demand for the industry. 
B)  the firm is a price taker. 
C)  the firm applies the marginal decision rule. 
D)  A and B are true.

Question 7

A firm in monopolistic competition maximizes its profit by producing at the level at which:

Accepted Answer

A)  MC = ATC. 
B)  MC = AR. 
C)  MC = MR. 
D)  MC = P. 
A)  MC = ATC. 
B)  MC = AR. 
C)  MC = MR. 
D)  MC = P.

Question 8

In game theory, a strategy to respond to cheating by cheating is called a trigger strategy.

Accepted Answer

A) True 
 B)False

Question 9

When one firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a:

Accepted Answer

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

Question 10

Firms will seek a price structure that offers customers with a _______ demand a ________ price and offers customers with a _______ demand a _______ price.

Accepted Answer

A)  less elastic; lower; more elastic; higher 
B)  less elastic; higher; more elastic; lower 
C)  lower; higher; higher; lower 
D)  seasonal; lower; unchanging; higher 
A)  less elastic; lower; more elastic; higher 
B)  less elastic; higher; more elastic; lower 
C)  lower; higher; higher; lower 
D)  seasonal; lower; unchanging; higher

Question 11

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:

Accepted Answer

A)  price discrimination. 
B)  privatizing. 
C)  monopolizing. 
D)  output prioritizing. 
A)  price discrimination. 
B)  privatizing. 
C)  monopolizing. 
D)  output prioritizing.

Question 12

The profit-maximizing rule MC = P is followed by 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)  either monopolistic competition or perfect competition, depending on the costs of production. 
A)  monopolistic competition, but not perfect competition. 
B)  perfect competition, but not monopolistic competition. 
C)  both monopolistic competition and perfect competition. 
D)  either monopolistic competition or perfect competition, depending on the costs of production.

Question 13

A strategy that is the same regardless of the action of the other player in a game is said to be a:

Accepted Answer

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

Question 14

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:

Accepted Answer

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

Question 15

Economists agree that, in general, a world with advertising is _______ than would be a world without advertising.

Accepted Answer

A)  more competitive 
B)  less competitive 
C)  more fair 
D)  less fair 
A)  more competitive 
B)  less competitive 
C)  more fair 
D)  less fair

Question 16

An industry with more than one firm and in which at least one firm is a price setter is:

Accepted Answer

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

Question 17

In the long run, a monopolistically competitive firm earns zero economic profit because its demand curve is tangent to its average fixed cost curve.

Accepted Answer

A) True 
 B)False

Question 18

In order to engage in price discrimination, a firm must be:

Accepted Answer

A)  a price setter. 
B)  able to prevent resale by the customers charged a lower price. 
C)  able to segment the market. 
D)  All of the above are true. 
A)  a price setter. 
B)  able to prevent resale by the customers charged a lower price. 
C)  able to segment the market. 
D)  All of the above are true.

Question 19

In game theory, a strategy to respond to cheating by cheating is called a tit-for-tat strategy.

Accepted Answer

A) True 
 B)False

Question 20

Monopolistic competition is an industry characterized by a:

Accepted Answer

A)  small number of firms producing identical products, with barriers to entry for firms. 
B)  small number of firms producing similar products, with relatively easy entry for firms. 
C)  large number of firms producing similar products, with relatively easy entry for firms. 
D)  large number of firms producing identical products, with relatively easy entry for firms. 
A)  small number of firms producing identical products, with barriers to entry for firms. 
B)  small number of firms producing similar products, with relatively easy entry for firms. 
C)  large number of firms producing similar products, with relatively easy entry for firms. 
D)  large number of firms producing identical products, with relatively easy entry for firms.

Which of the following is (are) true?

If the only two firms in an industry agree to fix the price at a given level, this is an example of:

As in all other market structures, firms in monopolistic competition maximize profit by equating marginal cost to price.

OPEC is:

A firm will adjust prices so that customers with more _ demand pay prices than those customers with _ elastic demand.

Use the following for questions 22-31. Exhibit: Profit Maximization in Monopolistic Competition -(Exhibit: Profit Maximization in Monopolistic Competition) In determining the price in monopolistic competition:

A firm in monopolistic competition maximizes its profit by producing at the level at which:

In game theory, a strategy to respond to cheating by cheating is called a trigger strategy.

When one firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a:

Firms will seek a price structure that offers customers with a ___ demand a price and offers customers with a _ demand a _____ price.

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:

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

A strategy that is the same regardless of the action of the other player in a game is said to be a:

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:

Economists agree that, in general, a world with advertising is _______ than would be a world without advertising.

An industry with more than one firm and in which at least one firm is a price setter is:

In the long run, a monopolistically competitive firm earns zero economic profit because its demand curve is tangent to its average fixed cost curve.

In order to engage in price discrimination, a firm must be:

In game theory, a strategy to respond to cheating by cheating is called a tit-for-tat strategy.

Monopolistic competition is an industry characterized by a:

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

Which of the following is (are) true?

If the only two firms in an industry agree to fix the price at a given level, this is an example of:

As in all other market structures, firms in monopolistic competition maximize profit by equating marginal cost to price.

OPEC is:

A firm will adjust prices so that customers with more _______ demand pay ________ prices than those customers with _______ elastic demand.

Use the following for questions 22-31. Exhibit: Profit Maximization in Monopolistic Competition -(Exhibit: Profit Maximization in Monopolistic Competition) In determining the price in monopolistic competition:

A firm in monopolistic competition maximizes its profit by producing at the level at which:

In game theory, a strategy to respond to cheating by cheating is called a trigger strategy.

When one firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a:

Firms will seek a price structure that offers customers with a _______ demand a ________ price and offers customers with a _______ demand a _______ price.

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:

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

A strategy that is the same regardless of the action of the other player in a game is said to be a:

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:

Economists agree that, in general, a world with advertising is _______ than would be a world without advertising.

An industry with more than one firm and in which at least one firm is a price setter is:

In the long run, a monopolistically competitive firm earns zero economic profit because its demand curve is tangent to its average fixed cost curve.

In order to engage in price discrimination, a firm must be:

In game theory, a strategy to respond to cheating by cheating is called a tit-for-tat strategy.

Monopolistic competition is an industry characterized by a:

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 firm will adjust prices so that customers with more _ demand pay prices than those customers with _ elastic demand.

Firms will seek a price structure that offers customers with a ___ demand a price and offers customers with a _ demand a _____ price.