Question 1

Which of the following statements is correct?

Accepted Answer

A)  Purely competitive firms,monopolistically competitive firms,and pure monopolies all earn zero economic profits in the long run. 
B)  Purely competitive firms,monopolistically competitive firms,and pure monopolies all earn positive economic profits in the long run. 
C)  In the long run,purely competitive firms and monopolistically competitive firms earn zero economic profits,while pure monopolies may or may not earn economic profits. 
D)  Monopolistically competitive firms earn zero economic profits in both the short run and the long run. 
A)  Purely competitive firms,monopolistically competitive firms,and pure monopolies all earn zero economic profits in the long run. 
B)  Purely competitive firms,monopolistically competitive firms,and pure monopolies all earn positive economic profits in the long run. 
C)  In the long run,purely competitive firms and monopolistically competitive firms earn zero economic profits,while pure monopolies may or may not earn economic profits. 
D)  Monopolistically competitive firms earn zero economic profits in both the short run and the long run.

Question 2

The U.S.steel industry is an example of homogeneous oligopoly.

Accepted Answer

A) True 
 B)False

Question 3

Monopolistically competitive industries are inefficient because:

Accepted Answer

A)  they realize diseconomies of scale. 
B)  advertising costs retard technological advance and product development. 
C)  they are overpopulated with firms whose plants are underutilized. 
D)  monopolistically competitive sellers engage in misleading advertising. 
A)  they realize diseconomies of scale. 
B)  advertising costs retard technological advance and product development. 
C)  they are overpopulated with firms whose plants are underutilized. 
D)  monopolistically competitive sellers engage in misleading advertising.

Question 4

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

Accepted Answer

A)  rising marginal costs. 
B)  a perfectly elastic product demand curve. 
C)  relatively easy entry. 
D)  product differentiation and development. 
A)  rising marginal costs. 
B)  a perfectly elastic product demand curve. 
C)  relatively easy entry. 
D)  product differentiation and development.

Question 5

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

Accepted Answer

A) True 
 B)False

Question 6

In game theory,the credibility of a threat:

Accepted Answer

A)  determines whether or not a Nash equilibrium to a game exists. 
B)  influences the degree of cooperation between two rivals. 
C)  is relevant only in simultaneous games. 
D)  determines whether or not a firm has a dominant strategy. 
A)  determines whether or not a Nash equilibrium to a game exists. 
B)  influences the degree of cooperation between two rivals. 
C)  is relevant only in simultaneous games. 
D)  determines whether or not a firm has a dominant strategy.

Question 7

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

Accepted Answer

A) True 
 B)False

Question 8

A significant benefit of monopolistic competition compared with pure competition is:

Accepted Answer

A)  less likelihood of X-inefficiency. 
B)  improved resource allocation. 
C)  greater product variety. 
D)  stronger incentives to achieve economies of scale. 
A)  less likelihood of X-inefficiency. 
B)  improved resource allocation. 
C)  greater product variety. 
D)  stronger incentives to achieve economies of scale.

Question 9

If the several oligopolistic firms that comprise an industry behave collusively,the resulting price and output will most likely resemble those of:

Accepted Answer

A)  bilateral monopoly. 
B)  pure monopoly. 
C)  monopolistic competition. 
D)  pure competition. 
A)  bilateral monopoly. 
B)  pure monopoly. 
C)  monopolistic competition. 
D)  pure competition.

Question 10

In the United States cartels are:

Accepted Answer

A)  quite common in industries that produce nondurable goods. 
B)  in violation of the antitrust laws. 
C)  concentrated in monopolistically competitive industries. 
D)  encouraged by government policy so firms can achieve economies of scale. 
A)  quite common in industries that produce nondurable goods. 
B)  in violation of the antitrust laws. 
C)  concentrated in monopolistically competitive industries. 
D)  encouraged by government policy so firms can achieve economies of scale.

Question 11

An important similarity between a monopolistically competitive firm and a pure monopolist is that both:

Accepted Answer

A)  realize an economic profit in the long run. 
B)  achieve allocative efficiency. 
C)  face demand curves that are less than perfectly elastic. 
D)  achieve productive efficiency. 
A)  realize an economic profit in the long run. 
B)  achieve allocative efficiency. 
C)  face demand curves that are less than perfectly elastic. 
D)  achieve productive efficiency.

Question 12

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:

Accepted Answer

A)  of product differentiation and consequent product promotion activities. 
B)  monopolistically competitive firms cannot realize an economic profit in the long run. 
C)  the number of firms in the industry is larger. 
D)  monopolistically competitive producers use strategic pricing strategies to combat rivals. 
A)  of product differentiation and consequent product promotion activities. 
B)  monopolistically competitive firms cannot realize an economic profit in the long run. 
C)  the number of firms in the industry is larger. 
D)  monopolistically competitive producers use strategic pricing strategies to combat rivals.

Question 13

The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

Accepted Answer

A) True 
 B)False

Question 14

The monopolistically competitive seller maximizes profits by equating price and marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

In monopolistically competitive markets,resources are:

Accepted Answer

A)  overallocated because long-run equilibrium occurs where price exceeds marginal cost. 
B)  underallocated because long-run equilibrium occurs where price exceeds marginal cost. 
C)  overallocated because long-run equilibrium occurs where marginal cost exceeds price. 
D)  underallocated because long-run equilibrium occurs where marginal cost exceeds price. 
A)  overallocated because long-run equilibrium occurs where price exceeds marginal cost. 
B)  underallocated because long-run equilibrium occurs where price exceeds marginal cost. 
C)  overallocated because long-run equilibrium occurs where marginal cost exceeds price. 
D)  underallocated because long-run equilibrium occurs where marginal cost exceeds price.

Question 16

If an oligopolist is faced with a marginal revenue curve that has a gap in it,we may assume that:

Accepted Answer

A)  it is colluding with its rivals to maximize joint profits. 
B)  its demand curve is kinked. 
C)  it is selling a standardized product. 
D)  it is selling a differentiated product. 
A)  it is colluding with its rivals to maximize joint profits. 
B)  its demand curve is kinked. 
C)  it is selling a standardized product. 
D)  it is selling a differentiated product.

Question 17

In long-run equilibrium,monopolistic competition entails:

Accepted Answer

A)  an efficient allocation of resources. 
B)  an overallocation of resources due to inadequate capacity. 
C)  an underallocation of resources due to excess capacity. 
D)  production at the minimum attainable average total cost. 
A)  an efficient allocation of resources. 
B)  an overallocation of resources due to inadequate capacity. 
C)  an underallocation of resources due to excess capacity. 
D)  production at the minimum attainable average total cost.

Question 18

Which of the following is a unique feature of oligopoly?

Accepted Answer

A)  Mutual interdependence. 
B)  Advertising expenditures. 
C)  Product differentiation. 
D)  Nonprice competition. 
A)  Mutual interdependence. 
B)  Advertising expenditures. 
C)  Product differentiation. 
D)  Nonprice competition.

Question 19

A monopolistically competitive industry combines elements of both competition and monopoly.The monopoly element results from:

Accepted Answer

A)  the likelihood of collusion. 
B)  high entry barriers. 
C)  product differentiation. 
D)  mutual interdependence in decision making. 
A)  the likelihood of collusion. 
B)  high entry barriers. 
C)  product differentiation. 
D)  mutual interdependence in decision making.

Question 20

The larger the number of firms and the smaller the degree of product differentiation the:

Accepted Answer

A)  greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm. 
B)  larger will be the monopolistically competitive firm's fixed costs. 
C)  less elastic is the monopolistically competitive firm's demand curve. 
D)  more elastic is the monopolistically competitive firm's demand curve. 
A)  greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm. 
B)  larger will be the monopolistically competitive firm's fixed costs. 
C)  less elastic is the monopolistically competitive firm's demand curve. 
D)  more elastic is the monopolistically competitive firm's demand curve.

Exam 13: Monopolistic Competition and Oligopoly

Which of the following statements is correct?

The U.S.steel industry is an example of homogeneous oligopoly.

Monopolistically competitive industries are inefficient because:

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist.

In game theory,the credibility of a threat:

The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.

A significant benefit of monopolistic competition compared with pure competition is:

If the several oligopolistic firms that comprise an industry behave collusively,the resulting price and output will most likely resemble those of:

In the United States cartels are:

An important similarity between a monopolistically competitive firm and a pure monopolist is that both:

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:

The oligopolist's kinked-demand curve is highly elastic below and highly inelastic above the going product price.

The monopolistically competitive seller maximizes profits by equating price and marginal cost.

In monopolistically competitive markets,resources are:

If an oligopolist is faced with a marginal revenue curve that has a gap in it,we may assume that:

In long-run equilibrium,monopolistic competition entails:

Which of the following is a unique feature of oligopoly?

A monopolistically competitive industry combines elements of both competition and monopoly.The monopoly element results from:

The larger the number of firms and the smaller the degree of product differentiation 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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