Question 1

Monopolistic competition means:

Accepted Answer

A)  a market situation where competition is based entirely on product differentiation and advertising. 
B)  a large number of firms producing a standardized or homogeneous product. 
C)  many firms producing differentiated products. 
D)  a few firms producing a standardized or homogeneous product. 
A)  a market situation where competition is based entirely on product differentiation and advertising. 
B)  a large number of firms producing a standardized or homogeneous product. 
C)  many firms producing differentiated products. 
D)  a few firms producing a standardized or homogeneous product.

Question 2

Nonprice competition refers to:

Accepted Answer

A)  competition between products of different industries,for example,competition between aluminum and steel in the manufacture of automobile parts. 
B)  price increases by a firm that are ignored by its rivals. 
C)  advertising,product promotion,and changes in the real or perceived characteristics of a product. 
D)  reductions in production costs that are not reflected in price reductions. 
A)  competition between products of different industries,for example,competition between aluminum and steel in the manufacture of automobile parts. 
B)  price increases by a firm that are ignored by its rivals. 
C)  advertising,product promotion,and changes in the real or perceived characteristics of a product. 
D)  reductions in production costs that are not reflected in price reductions.

Question 3

Game theory is best suited to analyze the pricing behavior of:

Accepted Answer

A)  pure monopolists. 
B)  pure competitors. 
C)  monopolistic competitors. 
D)  oligopolists. 
A)  pure monopolists. 
B)  pure competitors. 
C)  monopolistic competitors. 
D)  oligopolists.

Question 4

Which of the following statements concerning a monopolistically competitive industry is correct?

Accepted Answer

A)  If there are short-run losses,firms will leave the industry and the demand curves of the remaining firms will shift to the right. 
B)  If there are short-run economic profits,firms will enter the industry and the demand curves of existing firms will shift to the right. 
C)  If there are short-run losses,firms will leave the industry and the demand curves of the remaining firms will shift to the left. 
D)  If there are short-run economic profits,firms will leave the industry and the demand curves of the remaining firms will shift to the right. 
A)  If there are short-run losses,firms will leave the industry and the demand curves of the remaining firms will shift to the right. 
B)  If there are short-run economic profits,firms will enter the industry and the demand curves of existing firms will shift to the right. 
C)  If there are short-run losses,firms will leave the industry and the demand curves of the remaining firms will shift to the left. 
D)  If there are short-run economic profits,firms will leave the industry and the demand curves of the remaining firms will shift to the right.

Question 5

An important similarity between a monopolistically competitive firm and a purely competitive firm is that:

Accepted Answer

A)  both face perfectly elastic demand schedules. 
B)  economic profit tends toward zero for both. 
C)  both realize productive efficiency. 
D)  both realize allocative efficiency. 
A)  both face perfectly elastic demand schedules. 
B)  economic profit tends toward zero for both. 
C)  both realize productive efficiency. 
D)  both realize allocative efficiency.

Question 6

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Accepted Answer

A) True 
 B)False

Question 7

Concentration ratios measure the:

Accepted Answer

A)  geographic location of the largest corporations in each industry. 
B)  degree to which product price exceeds marginal cost in various industries. 
C)  percentage of total industry sales accounted for by the largest firms in the industry. 
D)  number of firms in an industry. 
A)  geographic location of the largest corporations in each industry. 
B)  degree to which product price exceeds marginal cost in various industries. 
C)  percentage of total industry sales accounted for by the largest firms in the industry. 
D)  number of firms in an industry.

Question 8

Answer the question on the basis of the following demand and cost data for a specific firm: $\begin{array}{c}
\underline{\text { Demand Data}}\quad\quad\quad\quad\quad\underline{\text { Cost Data}} \
\begin{array}{c}
\text { (1) }\
\underline{\text { Price } }\
 \$ 11.00 \
9.99 \
9.00 \
8.00 \
7.10 \
6.00 \
5.15
\end{array}
\begin{array}{c}
\text { (2)}\
\underline{\text { Price}}\
\$ 10.00 \
8.85\
8.00\
7.00\
6.10\
5.00\
4.15
\end{array}
\begin{array}{c}
\text { (3)}\
\underline{\text { Quantity}}\
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{c}
\
\underline{\text { Output }} \
6 \
7 \
8 \
9 \
10 \
11 \
12 
\end{array}
\begin{array}{c}
\text { Total}\
\underline{\text { Cost}} \
 \$ 61 \
62 \
64 \
67 \
72 \
79 \
86
\end{array}
\end{array}$
 Refer to the data.With the demand schedule shown by columns (2)and (3),in long-run equilibrium:

Accepted Answer

A)  price will equal average total cost. 
B)  total cost will exceed total revenue. 
C)  marginal cost will exceed price. 
D)  price will equal marginal revenue. 
A)  price will equal average total cost. 
B)  total cost will exceed total revenue. 
C)  marginal cost will exceed price. 
D)  price will equal marginal revenue.

Question 9

The larger the number of firms and the less the degree of product differentiation,the greater will be the elasticity of a monopolistically competitive seller's demand curve.

Accepted Answer

A) True 
 B)False

Question 10

Answer the question on the basis of the following demand and cost data for a specific firm: $\begin{array}{c}
\underline{\text { Demand Data}}\quad\quad\quad\quad\quad\underline{\text { Cost Data}} \
\begin{array}{c}
\text { (1) }\
\underline{\text { Price } }\
 \$ 11.00 \
9.99 \
9.00 \
8.00 \
7.10 \
6.00 \
5.15
\end{array}
\begin{array}{c}
\text { (2)}\
\underline{\text { Price}}\
\$ 10.00 \
8.85\
8.00\
7.00\
6.10\
5.00\
4.15
\end{array}
\begin{array}{c}
\text { (3)}\
\underline{\text { Quantity}}\
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{c}
\
\underline{\text { Output }} \
6 \
7 \
8 \
9 \
10 \
11 \
12 
\end{array}
\begin{array}{c}
\text { Total}\
\underline{\text { Cost}} \
 \$ 61 \
62 \
64 \
67 \
72 \
79 \
86
\end{array}
\end{array}$
 Refer to the data.If columns (1)and (3)of the demand data shown are this firm's demand schedule,the profit-maximizing level of output will be:

Accepted Answer

A)  12 units. 
B)  8 units. 
C)  10 units. 
D)  9 units. 
A)  12 units. 
B)  8 units. 
C)  10 units. 
D)  9 units.

Question 11

Which of the following is an illustration of differentiated oligopoly?

Accepted Answer

A)  The aluminum industry. 
B)  The steel industry. 
C)  The soft drink industry. 
D)  Retail stores in large cities. 
A)  The aluminum industry. 
B)  The steel industry. 
C)  The soft drink industry. 
D)  Retail stores in large cities.

Question 12

Answer the question on the basis of the following demand and cost data for a specific firm: $\begin{array}{c}
\underline{\text { Demand Data}}\quad\quad\quad\quad\quad\underline{\text { Cost Data}} \
\begin{array}{c}
\text { (1) }\
\underline{\text { Price } }\
 \$ 11.00 \
9.99 \
9.00 \
8.00 \
7.10 \
6.00 \
5.15
\end{array}
\begin{array}{c}
\text { (2)}\
\underline{\text { Price}}\
\$ 10.00 \
8.85\
8.00\
7.00\
6.10\
5.00\
4.15
\end{array}
\begin{array}{c}
\text { (3)}\
\underline{\text { Quantity}}\
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{c}
\
\underline{\text { Output }} \
6 \
7 \
8 \
9 \
10 \
11 \
12 
\end{array}
\begin{array}{c}
\text { Total}\
\underline{\text { Cost}} \
 \$ 61 \
62 \
64 \
67 \
72 \
79 \
86
\end{array}
\end{array}$

Refer to the data.Suppose that entry into this industry changes this firm's demand schedule from columns (1)and (3)shown to columns (2)and (3).We can conclude that this industry is:

Accepted Answer

A)  a pure monopoly. 
B)  purely competitive. 
C)  a constant cost industry. 
D)  monopolistically competitive. 
A)  a pure monopoly. 
B)  purely competitive. 
C)  a constant cost industry. 
D)  monopolistically competitive.

Question 13

Mutual interdependence means that each oligopolistic firm:

Accepted Answer

A)  faces a perfectly elastic demand for its product. 
B)  must consider the reactions of its rivals when it determines its price policy. 
C)  produces a product identical to those of its rivals. 
D)  produces a product similar but not identical to the products of its rivals. 
A)  faces a perfectly elastic demand for its product. 
B)  must consider the reactions of its rivals when it determines its price policy. 
C)  produces a product identical to those of its rivals. 
D)  produces a product similar but not identical to the products of its rivals.

Question 14

Clear-cut mutual interdependence with respect to the price-output policies exists in:

Accepted Answer

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

Question 15

(Consider This)The story about three sellers of Native American arts and crafts best illustrates the idea of:

Accepted Answer

A)  strategic behavior. 
B)  excess capacity. 
C)  the role of advertising. 
D)  product differentiation. 
A)  strategic behavior. 
B)  excess capacity. 
C)  the role of advertising. 
D)  product differentiation.

Question 16

Monopolistic competition is characterized by a:

Accepted Answer

A)  few dominant firms and low entry barriers. 
B)  large number of firms and substantial entry barriers. 
C)  large number of firms and low entry barriers. 
D)  few dominant firms and substantial entry barriers. 
A)  few dominant firms and low entry barriers. 
B)  large number of firms and substantial entry barriers. 
C)  large number of firms and low entry barriers. 
D)  few dominant firms and substantial entry barriers.

Question 17

Advertising can enhance economic efficiency when it:

Accepted Answer

A)  increases brand loyalty. 
B)  raises entry barriers. 
C)  increases consumer awareness of substitute products. 
D)  boosts average total cost. 
A)  increases brand loyalty. 
B)  raises entry barriers. 
C)  increases consumer awareness of substitute products. 
D)  boosts average total cost.

Question 18

If an industry evolves from monopolistic competition to oligopoly,we would expect:

Accepted Answer

A)  the four-firm concentration ratio to decrease. 
B)  the four-firm concentration ratio to increase. 
C)  the four-firm concentration ratio to remain the same. 
D)  barriers to entry to weaken. 
A)  the four-firm concentration ratio to decrease. 
B)  the four-firm concentration ratio to increase. 
C)  the four-firm concentration ratio to remain the same. 
D)  barriers to entry to weaken.

Question 19

A monopolistically competitive firm's marginal revenue curve:

Accepted Answer

A)  is downsloping and coincides with the demand curve. 
B)  coincides with the demand curve and is parallel to the horizontal axis. 
C)  is downsloping and lies below the demand curve. 
D)  does not exist because the firm is a "price maker." 
A)  is downsloping and coincides with the demand curve. 
B)  coincides with the demand curve and is parallel to the horizontal axis. 
C)  is downsloping and lies below the demand curve. 
D)  does not exist because the firm is a "price maker."

Question 20

Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.

Accepted Answer

A) True 
 B)False

Monopolistic competition means:

Nonprice competition refers to:

Game theory is best suited to analyze the pricing behavior of:

Which of the following statements concerning a monopolistically competitive industry is correct?

An important similarity between a monopolistically competitive firm and a purely competitive firm is that:

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Concentration ratios measure the:

The larger the number of firms and the less the degree of product differentiation,the greater will be the elasticity of a monopolistically competitive seller's demand curve.

Which of the following is an illustration of differentiated oligopoly?

Mutual interdependence means that each oligopolistic firm:

Clear-cut mutual interdependence with respect to the price-output policies exists in:

(Consider This)The story about three sellers of Native American arts and crafts best illustrates the idea of:

Monopolistic competition is characterized by a:

Advertising can enhance economic efficiency when it:

If an industry evolves from monopolistic competition to oligopoly,we would expect:

A monopolistically competitive firm's marginal revenue curve:

Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.

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

Filters

Exam 13: Monopolistic Competition and Oligopoly

Monopolistic competition means:

Nonprice competition refers to:

Game theory is best suited to analyze the pricing behavior of:

Which of the following statements concerning a monopolistically competitive industry is correct?

An important similarity between a monopolistically competitive firm and a purely competitive firm is that:

Mutual interdependence means that oligopolistic producers rely primarily on price competition in determining their shares of the total market for their product.

Concentration ratios measure the:

The larger the number of firms and the less the degree of product differentiation,the greater will be the elasticity of a monopolistically competitive seller's demand curve.

Which of the following is an illustration of differentiated oligopoly?

Mutual interdependence means that each oligopolistic firm:

Clear-cut mutual interdependence with respect to the price-output policies exists in:

(Consider This)The story about three sellers of Native American arts and crafts best illustrates the idea of:

Monopolistic competition is characterized by a:

Advertising can enhance economic efficiency when it:

If an industry evolves from monopolistic competition to oligopoly,we would expect:

A monopolistically competitive firm's marginal revenue curve:

Homogeneous oligopolists tend to advertise more than do differentiated oligopolists.

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

Filters