Question 1

When a monopolistically competitive firm is in long-run equilibrium:

Accepted Answer

A)  production takes place where ATC is minimized. 
B)  marginal revenue equals marginal cost and price equals average total cost. 
C)  normal profit is zero and price equals marginal cost. 
D)  economic profit is zero and price equals marginal cost. 
A)  production takes place where ATC is minimized. 
B)  marginal revenue equals marginal cost and price equals average total cost. 
C)  normal profit is zero and price equals marginal cost. 
D)  economic profit is zero and price equals marginal cost.

Question 2

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because:

Accepted Answer

A)  they include interindustry competition. 
B)  foreign competition is not considered. 
C)  they are only calculated for local and regional markets. 
D)  they do not distinguish between normal and economic profit. 
A)  they include interindustry competition. 
B)  foreign competition is not considered. 
C)  they are only calculated for local and regional markets. 
D)  they do not distinguish between normal and economic profit.

Question 3

If the four-firm concentration ratio for industry X is 80:

Accepted Answer

A)  the four largest firms account for 80 percent of total sales. 
B)  each of the four largest firms accounts for 20 percent of total sales. 
C)  the four largest firms account for 20 percent of total sales. 
D)  the industry is monopolistically competitive. 
A)  the four largest firms account for 80 percent of total sales. 
B)  each of the four largest firms accounts for 20 percent of total sales. 
C)  the four largest firms account for 20 percent of total sales. 
D)  the industry is monopolistically competitive.

Question 4

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

Accepted Answer

A) True 
 B)False

Question 5

The copper,aluminum,cement,and industrial alcohol industries are examples of:

Accepted Answer

A)  interproduct competition. 
B)  homogeneous oligopoly. 
C)  monopolistic competition. 
D)  differentiated oligopoly. 
A)  interproduct competition. 
B)  homogeneous oligopoly. 
C)  monopolistic competition. 
D)  differentiated oligopoly.

Question 6

The likelihood of a cartel being successful is greater when:

Accepted Answer

A)  firms are producing a differentiated,rather than a homogeneous,product. 
B)  cost and demand curves of various participants are very similar. 
C)  the number of firms involved is relatively large. 
D)  the economy is in the recession phase of the business cycle. 
A)  firms are producing a differentiated,rather than a homogeneous,product. 
B)  cost and demand curves of various participants are very similar. 
C)  the number of firms involved is relatively large. 
D)  the economy is in the recession phase of the business cycle.

Question 7

Monopolistically competitive firms:

Accepted Answer

A)  realize normal profits in the short run but losses in the long run. 
B)  incur persistent losses in both the short run and long run. 
C)  may realize either profits or losses in the short run but realize normal profits in the long run. 
D)  persistently realize economic profits in both the short run and long run. 
A)  realize normal profits in the short run but losses in the long run. 
B)  incur persistent losses in both the short run and long run. 
C)  may realize either profits or losses in the short run but realize normal profits in the long run. 
D)  persistently realize economic profits in both the short run and long run.

Question 8

The first mover in a sequential game always has the advantage over the second mover.

Accepted Answer

A) True 
 B)False

Question 9

Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves.

Accepted Answer

A) True 
 B)False

Question 10

Aluminum competes with copper in the market for power transmission lines.This illustrates:

Accepted Answer

A)  mutual interdependence. 
B)  differentiated oligopoly. 
C)  interindustry competition. 
D)  homogeneous oligopoly. 
A)  mutual interdependence. 
B)  differentiated oligopoly. 
C)  interindustry competition. 
D)  homogeneous oligopoly.

Question 11

The monopolistically competitive seller's demand curve will become more elastic the:

Accepted Answer

A)  more significant the barriers to entering the industry. 
B)  greater the degree of product differentiation. 
C)  larger the number of competitors. 
D)  smaller the number of competitors. 
A)  more significant the barriers to entering the industry. 
B)  greater the degree of product differentiation. 
C)  larger the number of competitors. 
D)  smaller the number of competitors.

Question 12

In a sequential game,the first mover into a new market:

Accepted Answer

A)  always earns a greater payoff than the second mover. 
B)  may discourage the second mover from entering that market. 
C)  only enters when there is a dominant strategy. 
D)  guarantees that a Nash equilibrium will result. 
A)  always earns a greater payoff than the second mover. 
B)  may discourage the second mover from entering that market. 
C)  only enters when there is a dominant strategy. 
D)  guarantees that a Nash equilibrium will result.

Question 13

The highest possible value of the Herfindahl index is 1,000.

Accepted Answer

A) True 
 B)False

Question 14

Advertising can impede economic efficiency when it:

Accepted Answer

A)  increases entry barriers. 
B)  reduces brand loyalty. 
C)  enables firms to achieve substantial economies of scale. 
D)  increases consumer awareness of substitute products. 
A)  increases entry barriers. 
B)  reduces brand loyalty. 
C)  enables firms to achieve substantial economies of scale. 
D)  increases consumer awareness of substitute products.

Question 15

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above,and relatively inelastic below,the going price,then it will:

Accepted Answer

A)  increase total revenue by increasing price but lower total revenue by decreasing price. 
B)  decrease total revenue by either increasing or decreasing price. 
C)  increase total revenue by either increasing or decreasing price. 
D)  increase total revenue by decreasing price but lower total revenue by increasing price. 
A)  increase total revenue by increasing price but lower total revenue by decreasing price. 
B)  decrease total revenue by either increasing or decreasing price. 
C)  increase total revenue by either increasing or decreasing price. 
D)  increase total revenue by decreasing price but lower total revenue by increasing price.

Question 16

Game theory:

Accepted Answer

A)  is the analysis of how people (or firms)behave in strategic situations. 
B)  is best suited for analyzing purely competitive markets. 
C)  reveals that mergers between rival firms are self-defeating. 
D)  reveals that price-fixing among firms reduces profits. 
A)  is the analysis of how people (or firms)behave in strategic situations. 
B)  is best suited for analyzing purely competitive markets. 
C)  reveals that mergers between rival firms are self-defeating. 
D)  reveals that price-fixing among firms reduces profits.

Question 17

If three or four homogeneous oligopolists collude,the resulting price and production outcomes will be similar to those of pure monopoly.

Accepted Answer

A) True 
 B)False

Question 18

The Herfindahl index for a pure monopolist is:

Accepted Answer

A)  100. 
B)  10,000. 
C)  100,000. 
D)  10. 
A)  100. 
B)  10,000. 
C)  100,000. 
D)  10.

Question 19

Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run.

Accepted Answer

A) True 
 B)False

Question 20

Industries X and Y both have four-firm concentration ratios of 65 percent,but the Herfindahl index for X is 1,500 while that for Y is 2,000.These data suggest:

Accepted Answer

A)  greater market power in X than in Y. 
B)  greater market power in Y than in X. 
C)  that X is more technologically progressive than Y. 
D)  that price competition is stronger in Y than in X. 
A)  greater market power in X than in Y. 
B)  greater market power in Y than in X. 
C)  that X is more technologically progressive than Y. 
D)  that price competition is stronger in Y than in X.

Exam 13: Monopolistic Competition and Oligopoly

When a monopolistically competitive firm is in long-run equilibrium:

Concentration ratios may be inaccurate indicators of the degree of monopoly power in an industry because:

If the four-firm concentration ratio for industry X is 80:

Both collusive and noncollusive oligopoly models suggest that price changes will be relatively infrequent in these types of industries.

The copper,aluminum,cement,and industrial alcohol industries are examples of:

The likelihood of a cartel being successful is greater when:

Monopolistically competitive firms:

The first mover in a sequential game always has the advantage over the second mover.

Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves.

Aluminum competes with copper in the market for power transmission lines.This illustrates:

The monopolistically competitive seller's demand curve will become more elastic the:

In a sequential game,the first mover into a new market:

The highest possible value of the Herfindahl index is 1,000.

Advertising can impede economic efficiency when it:

If an oligopoly is faced with a kinked-demand curve that is relatively elastic above,and relatively inelastic below,the going price,then it will:

Game theory:

If three or four homogeneous oligopolists collude,the resulting price and production outcomes will be similar to those of pure monopoly.

The Herfindahl index for a pure monopolist is:

Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run.

Industries X and Y both have four-firm concentration ratios of 65 percent,but the Herfindahl index for X is 1,500 while that for Y is 2,000.These data suggest:

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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