Question 1

The world of imperfect competition:

Accepted Answer

A)  lies between the extremes of perfect competition and monopoly. 
B)  is a world where firms battle over market shares. 
C)  is a world where economic profits may or may not persist in the long run. 
D)  is described by all of the above. 
A)  lies between the extremes of perfect competition and monopoly. 
B)  is a world where firms battle over market shares. 
C)  is a world where economic profits may or may not persist in the long run. 
D)  is described by all of the above.

Question 2

Price discrimination is the practice of:

Accepted Answer

A)  charging different prices to buyers of the same good. 
B)  paying different prices to suppliers of the same good. 
C)  equating price to marginal cost. 
D)  equating price to marginal revenue. 
A)  charging different prices to buyers of the same good. 
B)  paying different prices to suppliers of the same good. 
C)  equating price to marginal cost. 
D)  equating price to marginal revenue.

Question 3

Use the following to answer question(s): Monopoly Through Collusion
  
-(Exhibit: Monopoly Through Collusion) Given the industry illustrated in the exhibit, the efficient solution is found where price is _______ and quantity is _______.

Accepted Answer

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

Question 4

A price setter may engage in price discrimination.

Accepted Answer

A) True 
 B)False

Question 5

A cartel is an example of:

Accepted Answer

A)  price extortion. 
B)  price leadership. 
C)  overt collusion. 
D)  tacit collusion. 
A)  price extortion. 
B)  price leadership. 
C)  overt collusion. 
D)  tacit collusion.

Question 6

The outcome of a strategic choice is a:

Accepted Answer

A)  payoff. 
B)  game. 
C)  product. 
D)  dilemma. 
A)  payoff. 
B)  game. 
C)  product. 
D)  dilemma.

Question 7

Monopolistic competition leads to overutilization of plants.

Accepted Answer

A) True 
 B)False

Question 8

The HHI is found by squaring the percentage of each firm in the industry and then summing the squared market shares.

Accepted Answer

A) True 
 B)False

Question 9

For an oligopoly to maximize profits it need not make MR = MC.

Accepted Answer

A) True 
 B)False

Question 10

An example of monopolistic competition is the restaurant business.

Accepted Answer

A) True 
 B)False

Question 11

Price discrimination is:

Accepted Answer

A)  rare in the U.S.economy. 
B)  quite common in the U.S.economy. 
C)  can be the result of monopoly power alone. 
D)  characteristic of perfect competition. 
A)  rare in the U.S.economy. 
B)  quite common in the U.S.economy. 
C)  can be the result of monopoly power alone. 
D)  characteristic of perfect competition.

Question 12

According to the text exhibit on concentration ratios and Herfindahl-Hirschman Indexes, which of the following industries has the highest HHI?

Accepted Answer

A)  ice cream 
B)  breakfast cereals 
C)  tobacco manufacturing 
D)  sporting and athletic goods 
A)  ice cream 
B)  breakfast cereals 
C)  tobacco manufacturing 
D)  sporting and athletic goods

Question 13

Define and explain the role of tacit and overt collusion in the operation of a cartel.

Accepted Answer

Tacit collusion and overt collusion are

Question 14

A strategic choice is defined as:

Accepted Answer

A)  a choice based on the recognition that the outcomes of others will not affect the choice. 
B)  a choice based on the recognition that the outcomes of others will affect the choice. 
C)  a choice that takes into account the actions of others. 
D)  both B and C. 
A)  a choice based on the recognition that the outcomes of others will not affect the choice. 
B)  a choice based on the recognition that the outcomes of others will affect the choice. 
C)  a choice that takes into account the actions of others. 
D)  both B and C.

Question 15

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition
  
-(Exhibit: Profit Maximization in Monopolistic Competition) If other firms see economic profits in the industry, they will enter it, and the demand curve for firms already in the industry will shift to the ________ ; in the long run, this will result in economic profit _______ and price _______ .

Accepted Answer

A)  right; = 0; = ATC; = minimum ATC 
B)  right; > 0; > ATC 
C)  left;  minimum ATC 
A)  right; = 0; = ATC; = minimum ATC 
B)  right; > 0; > ATC 
C)  left;  minimum ATC

Question 16

Overt collusion exists if:

Accepted Answer

A)  firms agree openly on price, output, and other decisions aimed at achieving monopoly profits. 
B)  smaller firms in an industry tacitly agree to charge the same price as the largest firm. 
C)  competition among a large number of small firms generates a stable market price. 
D)  competition among a large number of small firms generates similar, but slightly different, prices. 
A)  firms agree openly on price, output, and other decisions aimed at achieving monopoly profits. 
B)  smaller firms in an industry tacitly agree to charge the same price as the largest firm. 
C)  competition among a large number of small firms generates a stable market price. 
D)  competition among a large number of small firms generates similar, but slightly different, prices.

Question 17

Firms in oligopolistic industries tend to exhibit mutual interdependence in pricing decisions.

Accepted Answer

A) True 
 B)False

Question 18

Use the following for questions 43-51.
Exhibit: Firms in Monopolistic Competition
  
-(Exhibit: Firms in Monopolistic Competition) Economic profit is earned if the profit-maximizing price is 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)

Question 19

It is not in the interest of firms to discriminate in regard to prices.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  a price taker. 
B)  a price setter. 
C)  able to identify consumers whose elasticities differ. 
D)  both B and C. 
A)  a price taker. 
B)  a price setter. 
C)  able to identify consumers whose elasticities differ. 
D)  both B and C.

The world of imperfect competition:

Price discrimination is the practice of:

Use the following to answer question(s): Monopoly Through Collusion -(Exhibit: Monopoly Through Collusion) Given the industry illustrated in the exhibit, the efficient solution is found where price is _ and quantity is _.

A price setter may engage in price discrimination.

A cartel is an example of:

The outcome of a strategic choice is a:

Monopolistic competition leads to overutilization of plants.

The HHI is found by squaring the percentage of each firm in the industry and then summing the squared market shares.

For an oligopoly to maximize profits it need not make MR = MC.

An example of monopolistic competition is the restaurant business.

Price discrimination is:

According to the text exhibit on concentration ratios and Herfindahl-Hirschman Indexes, which of the following industries has the highest HHI?

Define and explain the role of tacit and overt collusion in the operation of a cartel.

A strategic choice is defined as:

Overt collusion exists if:

Firms in oligopolistic industries tend to exhibit mutual interdependence in pricing decisions.

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) Economic profit is earned if the profit-maximizing price is price _ in Panel _ .

It is not in the interest of firms to discriminate in regard to prices.

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

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 world of imperfect competition:

Price discrimination is the practice of:

Use the following to answer question(s): Monopoly Through Collusion -(Exhibit: Monopoly Through Collusion) Given the industry illustrated in the exhibit, the efficient solution is found where price is _______ and quantity is _______.

A price setter may engage in price discrimination.

A cartel is an example of:

The outcome of a strategic choice is a:

Monopolistic competition leads to overutilization of plants.

The HHI is found by squaring the percentage of each firm in the industry and then summing the squared market shares.

For an oligopoly to maximize profits it need not make MR = MC.

An example of monopolistic competition is the restaurant business.

Price discrimination is:

According to the text exhibit on concentration ratios and Herfindahl-Hirschman Indexes, which of the following industries has the highest HHI?

Define and explain the role of tacit and overt collusion in the operation of a cartel.

A strategic choice is defined as:

Overt collusion exists if:

Firms in oligopolistic industries tend to exhibit mutual interdependence in pricing decisions.

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) Economic profit is earned if the profit-maximizing price is price _______ in Panel _______ .

It is not in the interest of firms to discriminate in regard to prices.

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

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

Use the following to answer question(s): Monopoly Through Collusion -(Exhibit: Monopoly Through Collusion) Given the industry illustrated in the exhibit, the efficient solution is found where price is _ and quantity is _.

Use the following for questions 43-51. Exhibit: Firms in Monopolistic Competition -(Exhibit: Firms in Monopolistic Competition) Economic profit is earned if the profit-maximizing price is price _ in Panel _ .