Question 1

Monopolistic competition is characterized by a single firm producing a product that has no close substitutes.

Accepted Answer

A) True 
 B)False

Question 2

Oligopoly is a market structure characterized by:

Accepted Answer

A)  independence in decisionmaking. 
B)  a horizontal demand curve. 
C)  a small number of interdependent firms. 
D)  relatively easy entry and exit. 
A)  independence in decisionmaking. 
B)  a horizontal demand curve. 
C)  a small number of interdependent firms. 
D)  relatively easy entry and exit.

Question 3

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

Accepted Answer

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

Question 4

A restaurant:

Accepted Answer

A)  is a price taker. 
B)  can set its own price. 
C)  will lose all of its customers if it raises its prices. 
D)  is described by both B and C. 
A)  is a price taker. 
B)  can set its own price. 
C)  will lose all of its customers if it raises its prices. 
D)  is described by both B and C.

Question 5

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.If the firms collude and agree to share the market demand equally, then each firm will act as if its demand curve is given by:

Accepted Answer

A)  D₁. 
B)  D₂. 
C)  MR₁. 
D)  2 x D₁. 
A)  D₁. 
B)  D₂. 
C)  MR₁. 
D)  2 x D₁.

Question 6

A cartel is an example of secretive, informal collusive agreements.

Accepted Answer

A) True 
 B)False

Question 7

On the spectrum of market structures, monopolistic competition lies:

Accepted Answer

A)  at the same location as monopoly. 
B)  at the same location as perfect competition. 
C)  between perfect competition and monopoly. 
D)  to the left of both perfect competition and monopoly. 
A)  at the same location as monopoly. 
B)  at the same location as perfect competition. 
C)  between perfect competition and monopoly. 
D)  to the left of both perfect competition and monopoly.

Question 8

Monopolistic competition is an industry characterized by:

Accepted Answer

A)  a product with no close substitutes. 
B)  many firms facing their own downward-sloping demand curve. 
C)  a small number of firms. 
D)  barriers to entry and exit. 
A)  a product with no close substitutes. 
B)  many firms facing their own downward-sloping demand curve. 
C)  a small number of firms. 
D)  barriers to entry and exit.

Question 9

Price discrimination is when a firm charges:

Accepted Answer

A)  the same price to all customers. 
B)  different prices for different goods to different customers. 
C)  different prices for the same goods to different customers. 
D)  None of the above are true. 
A)  the same price to all customers. 
B)  different prices for different goods to different customers. 
C)  different prices for the same goods to different customers. 
D)  None of the above are true.

Question 10

Use the following to answer question(s): Monopoly Through Collusion
  
-(Exhibit: Monopoly Through Collusion) For this question assume that the duopoly industry illustrated in the exhibit produces a perishable good.If each firm acted on the belief that it faced demand curve D₂ and acted without consideration of the other firm's behavior, the market price would likely end up being _______ and the combined economic profits of the firms would be _______ .

Accepted Answer

A)  P₁; given by the area of the rectangle bounded by 0P₁CQ₄ 
B)  P₁; zero 
C)  P₃; given by the area of the rectangle bounded by 0P₃AQ₁ 
D)  P₂; given by the area of the rectangle bounded by P₁P₂BG 
A)  P₁; given by the area of the rectangle bounded by 0P₁CQ₄ 
B)  P₁; zero 
C)  P₃; given by the area of the rectangle bounded by 0P₃AQ₁ 
D)  P₂; given by the area of the rectangle bounded by P₁P₂BG

Question 11

In general, the higher the concentration ratio in an industry, the:

Accepted Answer

A)  greater the ratio of MC to ATC. 
B)  lower the ratio of MC to ATC. 
C)  less firms need to pay attention to individual rivals. 
D)  more firms need to pay attention to individual rivals. 
A)  greater the ratio of MC to ATC. 
B)  lower the ratio of MC to ATC. 
C)  less firms need to pay attention to individual rivals. 
D)  more firms need to pay attention to individual rivals.

Question 12

If a firm under monopolistic competition is producing a quantity that generates MC > MR, then the marginal decision rule tells us that profit:

Accepted Answer

A)  can be increased by increasing production. 
B)  can be increased by decreasing production. 
C)  can be increased by decreasing the price. 
D)  is maximized only if MC = P. 
A)  can be increased by increasing production. 
B)  can be increased by decreasing production. 
C)  can be increased by decreasing the price. 
D)  is maximized only if MC = P.

Question 13

The HHI is a measure of concentration of industry.

Accepted Answer

A) True 
 B)False

Question 14

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 is typical of others in the community, then in the long run, we would expect to observe:

Accepted Answer

A)  restaurants leaving the market. 
B)  new restaurants entering the market. 
C)  neither entry nor exit. 
D)  There is not enough information given to answer the question. 
A)  restaurants leaving the market. 
B)  new restaurants entering the market. 
C)  neither entry nor exit. 
D)  There is not enough information given to answer the question.

Question 15

In monopolistic competition, consumers would be better off if output were expanded.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  K. 
B)  M. 
C)  N. 
D)  O. 
A)  K. 
B)  M. 
C)  N. 
D)  O.

Question 17

A perfectly competitive industry 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 18

The practice of charging different prices to different customers for the same good or service even though the cost of supplying those customers is the same is:

Accepted Answer

A)  privatization. 
B)  monopolization. 
C)  output competition. 
D)  price discrimination. 
A)  privatization. 
B)  monopolization. 
C)  output competition. 
D)  price discrimination.

Question 19

If a firm wants to charge different customers different prices:

Accepted Answer

A)  the firm must be a price taker. 
B)  firm must be in perfect competition. 
C)  firm must be a price setter. 
D)  A and B must be true. 
A)  the firm must be a price taker. 
B)  firm must be in perfect competition. 
C)  firm must be a price setter. 
D)  A and B must be true.

Question 20

An analytical framework used in the analysis of strategic choices is:

Accepted Answer

A)  the tacit supply curve model. 
B)  game theory. 
C)  perfect competition. 
D)  risk assessment. 
A)  the tacit supply curve model. 
B)  game theory. 
C)  perfect competition. 
D)  risk assessment.

Monopolistic competition is characterized by a single firm producing a product that has no close substitutes.

Oligopoly is a market structure characterized by:

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

A restaurant:

A cartel is an example of secretive, informal collusive agreements.

On the spectrum of market structures, monopolistic competition lies:

Monopolistic competition is an industry characterized by:

Price discrimination is when a firm charges:

In general, the higher the concentration ratio in an industry, the:

If a firm under monopolistic competition is producing a quantity that generates MC > MR, then the marginal decision rule tells us that profit:

The HHI is a measure of concentration of industry.

In monopolistic competition, consumers would be better off if output were expanded.

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

A perfectly competitive industry will have a Herfindahl-Hirschman Index equal to about:

The practice of charging different prices to different customers for the same good or service even though the cost of supplying those customers is the same is:

If a firm wants to charge different customers different prices:

An analytical framework used in the analysis of strategic choices is:

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 is characterized by a single firm producing a product that has no close substitutes.

Oligopoly is a market structure characterized by:

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

A restaurant:

A cartel is an example of secretive, informal collusive agreements.

On the spectrum of market structures, monopolistic competition lies:

Monopolistic competition is an industry characterized by:

Price discrimination is when a firm charges:

In general, the higher the concentration ratio in an industry, the:

If a firm under monopolistic competition is producing a quantity that generates MC > MR, then the marginal decision rule tells us that profit:

The HHI is a measure of concentration of industry.

In monopolistic competition, consumers would be better off if output were expanded.

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

A perfectly competitive industry will have a Herfindahl-Hirschman Index equal to about:

The practice of charging different prices to different customers for the same good or service even though the cost of supplying those customers is the same is:

If a firm wants to charge different customers different prices:

An analytical framework used in the analysis of strategic choices is:

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