Question 1

If competing oligopolists completely ignore oligopolist X's price changes,then X's:

Accepted Answer

A)  demand curve will be less elastic than if the other oligopolists matched X's price changes. 
B)  demand curve will be more elastic than if the other oligopolists matched X's price changes. 
C)  marginal revenue curve will have a vertical gap. 
D)  demand and marginal revenue curves will coincide. 
A)  demand curve will be less elastic than if the other oligopolists matched X's price changes. 
B)  demand curve will be more elastic than if the other oligopolists matched X's price changes. 
C)  marginal revenue curve will have a vertical gap. 
D)  demand and marginal revenue curves will coincide. B

Question 2

In a zero-sum game,the gains by one player will be exactly offset by the losses of the other.

Accepted Answer

A) True 
 B)False  True

Question 3

Larry's Lizards and Ronaldo's Reptiles are competing pet store franchises.Both are considering opening a store in the small town of Turtleville.If Ronaldo's opens a profitable store in Turtleville and Larry's management determines that it is not profitable to also open a store,then:

Accepted Answer

A)  this is a simultaneous game. 
B)  a Nash equilibrium is not possible in this game. 
C)  Ronaldo's had a first-mover advantage in this game. 
D)  this is a zero-sum game. 
A)  this is a simultaneous game. 
B)  a Nash equilibrium is not possible in this game. 
C)  Ronaldo's had a first-mover advantage in this game. 
D)  this is a zero-sum game. C

Question 4

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract.This best describes:

Accepted Answer

A)  cost-plus pricing. 
B)  multiproduct pricing. 
C)  a cartel. 
D)  price leadership. 
A)  cost-plus pricing. 
B)  multiproduct pricing. 
C)  a cartel. 
D)  price leadership.

Question 5

In 2011,advertising expenditures in the United States were:

Accepted Answer

A)  10 to 12 percent of GDP. 
B)  about $137 billion. 
C)  about $103 billion. 
D)  about $498 billion. 
A)  10 to 12 percent of GDP. 
B)  about $137 billion. 
C)  about $103 billion. 
D)  about $498 billion.

Question 6

The less elastic a monopolistic competitor's long-run demand curve,the:

Accepted Answer

A)  less its excess capacity. 
B)  higher its price relative to that of a pure competitor having the same cost curves. 
C)  higher its long-run profits. 
D)  lower its average total cost at its equilibrium level of output. 
A)  less its excess capacity. 
B)  higher its price relative to that of a pure competitor having the same cost curves. 
C)  higher its long-run profits. 
D)  lower its average total cost at its equilibrium level of output.

Question 7

Use your basic knowledge and your understanding of market structures to answer this question.Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Accepted Answer

A)  Kellogg's. 
B)  Pittsburgh Plate Glass. 
C)  Ford Motor Company. 
D)  Starbucks Coffee. 
A)  Kellogg's. 
B)  Pittsburgh Plate Glass. 
C)  Ford Motor Company. 
D)  Starbucks Coffee.

Question 8

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

Accepted Answer

A)  Price equals minimum average total cost. 
B)  Marginal cost equals marginal revenue. 
C)  Price is equal to average total cost. 
D)  Price exceeds marginal cost. 
A)  Price equals minimum average total cost. 
B)  Marginal cost equals marginal revenue. 
C)  Price is equal to average total cost. 
D)  Price exceeds marginal cost.

Question 9

A player is said to have a dominant strategy when one of the options available is superior,regardless of what strategy the other player chooses.

Accepted Answer

A) True 
 B)False

Question 10

(Consider This)The prisoner's dilemma is generally demonstrated through:

Accepted Answer

A)  the kinked-demand model. 
B)  game theory. 
C)  monopolistic competition. 
D)  a tightly knit cartel. 
A)  the kinked-demand model. 
B)  game theory. 
C)  monopolistic competition. 
D)  a tightly knit cartel.

Question 11

Other things equal,cartels and similar collusive arrangements are easier to establish and maintain:

Accepted Answer

A)  when there are ample opportunities for the firms to make secret price concessions to selected buyers. 
B)  during periods of business-cycle stability and full employment. 
C)  when the demand and cost conditions of the participating firms differ substantially. 
D)  when the number of firms is relatively large. 
A)  when there are ample opportunities for the firms to make secret price concessions to selected buyers. 
B)  during periods of business-cycle stability and full employment. 
C)  when the demand and cost conditions of the participating firms differ substantially. 
D)  when the number of firms is relatively large.

Question 12

Suppose that a particular industry has a four-firm concentration ratio of 85 and a Herfindahl index of 3,000.Most likely,this industry would achieve:

Accepted Answer

A)  both productive efficiency and allocative efficiency. 
B)  allocative efficiency but not productive efficiency. 
C)  neither productive efficiency nor allocative efficiency. 
D)  productive efficiency but not allocative efficiency. 
A)  both productive efficiency and allocative efficiency. 
B)  allocative efficiency but not productive efficiency. 
C)  neither productive efficiency nor allocative efficiency. 
D)  productive efficiency but not allocative efficiency.

Question 13

Concentration ratios:

Accepted Answer

A)  may overstate the degree of competition because they ignore imported products. 
B)  may overstate the degree of competition because interindustry competition is ignored. 
C)  may understate the degree of competition because they ignore imported products. 
D)  provide detailed insights as to the price and output behavior of firms that comprise the various industries. 
A)  may overstate the degree of competition because they ignore imported products. 
B)  may overstate the degree of competition because interindustry competition is ignored. 
C)  may understate the degree of competition because they ignore imported products. 
D)  provide detailed insights as to the price and output behavior of firms that comprise the various industries.

Question 14

(Last Word)Which market structure best characterizes the various Internet markets?

Accepted Answer

A)  Differentiated oligopoly. 
B)  Homogeneous oligopoly. 
C)  Monopolistic competition. 
D)  Pure monopoly. 
A)  Differentiated oligopoly. 
B)  Homogeneous oligopoly. 
C)  Monopolistic competition. 
D)  Pure monopoly.

Question 15

Other things equal,if more firms enter a monopolistically competitive industry:

Accepted Answer

A)  the demand curves facing existing firms would shift to the right. 
B)  the demand curves facing existing firms would shift to the left. 
C)  the demand curves facing existing firms would become less elastic. 
D)  losses would necessarily occur. 
A)  the demand curves facing existing firms would shift to the right. 
B)  the demand curves facing existing firms would shift to the left. 
C)  the demand curves facing existing firms would become less elastic. 
D)  losses would necessarily occur.

Question 16

Three major means of collusion by oligopolists are:

Accepted Answer

A)  cartels,informal understandings,and price leadership. 
B)  market sharing,mutual interdependence,and product differentiation. 
C)  cartels,kinked-demand pricing,and product differentiation. 
D)  informal understandings,P = MC pricing,and mutual interdependence. 
A)  cartels,informal understandings,and price leadership. 
B)  market sharing,mutual interdependence,and product differentiation. 
C)  cartels,kinked-demand pricing,and product differentiation. 
D)  informal understandings,P = MC pricing,and mutual interdependence.

Question 17

If an oligopolist's several rivals exactly match any price changes it initiates,the demand curve will be less elastic than if its price changes are ignored by its rivals.

Accepted Answer

A) True 
 B)False

Question 18

In the long run,monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

Accepted Answer

A) True 
 B)False

Question 19

The mutual interdependence that characterizes oligopoly arises because:

Accepted Answer

A)  the products of various firms are homogeneous. 
B)  the products of various firms are differentiated. 
C)  each firm in an oligopoly depends on its own pricing strategy and that of its rivals. 
D)  the demand curves of firms are kinked at the prevailing price. 
A)  the products of various firms are homogeneous. 
B)  the products of various firms are differentiated. 
C)  each firm in an oligopoly depends on its own pricing strategy and that of its rivals. 
D)  the demand curves of firms are kinked at the prevailing price.

Question 20

Excess capacity refers to the:

Accepted Answer

A)  amount by which actual production falls short of the minimum ATC output. 
B)  fact that entry barriers artificially reduce the number of firms in an industry. 
C)  differential between price and marginal costs that characterizes monopolistically competitive firms. 
D)  fact that most monopolistically competitive firms encounter diseconomies of scale. 
A)  amount by which actual production falls short of the minimum ATC output. 
B)  fact that entry barriers artificially reduce the number of firms in an industry. 
C)  differential between price and marginal costs that characterizes monopolistically competitive firms. 
D)  fact that most monopolistically competitive firms encounter diseconomies of scale.

Exam 13: Monopolistic Competition and Oligopoly

If competing oligopolists completely ignore oligopolist X's price changes,then X's:

In a zero-sum game,the gains by one player will be exactly offset by the losses of the other.

Larry's Lizards and Ronaldo's Reptiles are competing pet store franchises.Both are considering opening a store in the small town of Turtleville.If Ronaldo's opens a profitable store in Turtleville and Larry's management determines that it is not profitable to also open a store,then:

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract.This best describes:

In 2011,advertising expenditures in the United States were:

The less elastic a monopolistic competitor's long-run demand curve,the:

Use your basic knowledge and your understanding of market structures to answer this question.Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

A player is said to have a dominant strategy when one of the options available is superior,regardless of what strategy the other player chooses.

(Consider This)The prisoner's dilemma is generally demonstrated through:

Other things equal,cartels and similar collusive arrangements are easier to establish and maintain:

Suppose that a particular industry has a four-firm concentration ratio of 85 and a Herfindahl index of 3,000.Most likely,this industry would achieve:

Concentration ratios:

(Last Word)Which market structure best characterizes the various Internet markets?

Other things equal,if more firms enter a monopolistically competitive industry:

Three major means of collusion by oligopolists are:

If an oligopolist's several rivals exactly match any price changes it initiates,the demand curve will be less elastic than if its price changes are ignored by its rivals.

In the long run,monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

The mutual interdependence that characterizes oligopoly arises because:

Excess capacity refers to the:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

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