Question 1

A monopolistically competitive firm is similar to a monopoly in that the firm:

Accepted Answer

A) has no rivals that produce close substitutes. 
B) is very large relative to the market. 
C) produces on the inelastic portion of its demand curve. 
D) faces a downward-sloping demand curve. 
A) has no rivals that produce close substitutes. 
B) is very large relative to the market. 
C) produces on the inelastic portion of its demand curve. 
D) faces a downward-sloping demand curve. D

Question 2

Which of the following has contributed to the success of OPEC [Organization of the Petroleum Exporting Countries] as an oil cartel?

Accepted Answer

A) The product supplied by OPEC is homogeneous and has few substitutes. 
B) The supply elasticity of non-OPEC oil suppliers is relatively high. 
C) The demand for oil is relatively price elastic,especially in the short run. 
D) OPEC is formed by a large number of member countries that differ in size,cost,and other aspects. 
A) The product supplied by OPEC is homogeneous and has few substitutes. 
B) The supply elasticity of non-OPEC oil suppliers is relatively high. 
C) The demand for oil is relatively price elastic,especially in the short run. 
D) OPEC is formed by a large number of member countries that differ in size,cost,and other aspects. A

Question 3

A monopolistically competitive firm that is maximizing profit will choose to produce at the level where:

Accepted Answer

A) total revenue is maximized. 
B) average total cost exceeds average revenue. 
C) marginal revenue equals marginal cost. 
D) marginal revenue exceeds average revenue. 
A) total revenue is maximized. 
B) average total cost exceeds average revenue. 
C) marginal revenue equals marginal cost. 
D) marginal revenue exceeds average revenue. C

Question 4

If the member of a cartel violates the cartel agreement and sells at a price below the cartel price:

Accepted Answer

A) the violator will not be able to sell the additional output at a price above his marginal cost. 
B) the violator will make a smaller profit per unit that he sells. 
C) the violator will face a more elastic demand curve for the additional output. 
D) the violator's demand curve will be downward sloping for the additional output. 
A) the violator will not be able to sell the additional output at a price above his marginal cost. 
B) the violator will make a smaller profit per unit that he sells. 
C) the violator will face a more elastic demand curve for the additional output. 
D) the violator's demand curve will be downward sloping for the additional output.

Question 5

The following figure shows the market demand curve [DD'],the supply curve of the fringe firms [SS1U1B1FS1U1B0],the cartel's marginal cost curve [MCS1U1B10S1U1B0],and the cartel's marginal revenue curve [MRS1U1B10S1U1B0].Assume that the cartel behaves like a dominant firm.  
-Refer to Figure 13-2.Which of the following statements is true?

Accepted Answer

A) The residual demand curve is less elastic than the market demand curve. 
B) The difference between QF and Q0 represent the inefficiency in output from a monopoly. 
C) The total industry output is equal to TC. 
D) The total industry output is the sum of QF and Q0. 
A) The residual demand curve is less elastic than the market demand curve. 
B) The difference between QF and Q0 represent the inefficiency in output from a monopoly. 
C) The total industry output is equal to TC. 
D) The total industry output is the sum of QF and Q0.

Question 6

In the dominant firm model of oligopoly,the dominant firm maximizes profits by producing at the point where:

Accepted Answer

A) its marginal revenue is equal to its marginal cost. 
B) the market demand equals the supply by the competitive fringe firms. 
C) its marginal cost curve intersects the market demand curve. 
D) its demand curve coincides with the market demand curve. 
A) its marginal revenue is equal to its marginal cost. 
B) the market demand equals the supply by the competitive fringe firms. 
C) its marginal cost curve intersects the market demand curve. 
D) its demand curve coincides with the market demand curve.

Question 7

What is a cartel and why are cartels considered to be inherently unstable?

Accepted Answer

A cartel is an agreement among several i

Question 8

Given that OPEC [Organization of the Petroleum Exporting Countries] has been a successful cartel,all of the following factors could have contributed to its success,except:

Accepted Answer

A) a low price elasticity of demand for oil. 
B) an increase in the consumption of products that require oil. 
C) OPEC's ownership of a large percentage of known oil reserves. 
D) a high supply elasticity of crude oil by non-OPEC producers. 
A) a low price elasticity of demand for oil. 
B) an increase in the consumption of products that require oil. 
C) OPEC's ownership of a large percentage of known oil reserves. 
D) a high supply elasticity of crude oil by non-OPEC producers.

Question 9

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A) Inelastic demand 
B) Free entry and exit 
C) Homogeneous products 
D) A small number of buyers 
A) Inelastic demand 
B) Free entry and exit 
C) Homogeneous products 
D) A small number of buyers

Question 10

The output of a cartel that maximizes profits is closest to the equilibrium output of:

Accepted Answer

A) a perfectly competitive firm. 
B) a monopoly. 
C) a monopolistically competitive firm. 
D) an oligopoly. 
A) a perfectly competitive firm. 
B) a monopoly. 
C) a monopolistically competitive firm. 
D) an oligopoly.

Question 11

For firms with constant and equal long-run marginal cost curves,the Cournot equilibrium occurs at:

Accepted Answer

A) the point of intersection of the firms' reaction curves. 
B) the point where price equals marginal cost. 
C) the point where the demand curve is tangent to the marginal cost curve. 
D) the point of intersection of one firm's reaction curve and the demand curve. 
A) the point of intersection of the firms' reaction curves. 
B) the point where price equals marginal cost. 
C) the point where the demand curve is tangent to the marginal cost curve. 
D) the point of intersection of one firm's reaction curve and the demand curve.

Question 12

The demand curve that a monopolistically competitive firm faces is _____.

Accepted Answer

A) relatively elastic compared to a monopoly 
B) perfectly elastic at the equilibrium price 
C) relatively elastic compared to a perfectly competitive firm 
D) perfectly inelastic at the equilibrium output 
A) relatively elastic compared to a monopoly 
B) perfectly elastic at the equilibrium price 
C) relatively elastic compared to a perfectly competitive firm 
D) perfectly inelastic at the equilibrium output

Question 13

A monopolistically competitive firm differs from a perfectly competitive firm in that:

Accepted Answer

A) the monopolistically competitive firm faces a downward-sloping demand curve. 
B) the demand for the monopolistically competitive firm's product is fairly inelastic. 
C) entry into a monopolistic market is restricted while entry is free in a perfectly competitive market. 
D) a monopolistically competitive firm is a price taker in the market. 
A) the monopolistically competitive firm faces a downward-sloping demand curve. 
B) the demand for the monopolistically competitive firm's product is fairly inelastic. 
C) entry into a monopolistic market is restricted while entry is free in a perfectly competitive market. 
D) a monopolistically competitive firm is a price taker in the market.

Question 14

A single firm serves a large part of the market.The rest of the market is served by a large number of competitive firms.Which market model is best applicable to this type of industry?

Accepted Answer

A) Monopoly 
B) Monopolistic competition 
C) Dominant firm model 
D) Cournot duopoly 
A) Monopoly 
B) Monopolistic competition 
C) Dominant firm model 
D) Cournot duopoly

Question 15

Product differentiation and a certain degree of monopoly power are characteristics of:

Accepted Answer

A) perfectly competitive firms. 
B) monopolistically competitive firms. 
C) monopoly markets. 
D) monopsony markets. 
A) perfectly competitive firms. 
B) monopolistically competitive firms. 
C) monopoly markets. 
D) monopsony markets.

Question 16

In the Stackelberg model of oligopoly,the dominant firm:

Accepted Answer

A) will equate marginal cost with the residual demand curve to maximize profits. 
B) faces a perfectly elastic demand curve. 
C) can maximize profits ignoring the actions of other firms in the industry. 
D) faces a marginal revenue curve that lies under the residual demand curve. 
A) will equate marginal cost with the residual demand curve to maximize profits. 
B) faces a perfectly elastic demand curve. 
C) can maximize profits ignoring the actions of other firms in the industry. 
D) faces a marginal revenue curve that lies under the residual demand curve.

Question 17

A _____ shows the relationship between one firm's profit-maximizing output as a function of the output of a rival firm in a duopoly market.

Accepted Answer

A) demand curve 
B) supply curve 
C) joint output curve 
D) reaction curve 
A) demand curve 
B) supply curve 
C) joint output curve 
D) reaction curve

Question 18

The market demand for personalized key chains is given by P = 150 - QD.Suppose that there are only two firms in this market;firm 1's cost function is given by C1 = 5Q12 and firm 2's cost function is given by C2 = 0.3Q2.Derive the reaction function that shows firm 1's most profitable output as a function of firm 2's output.

Accepted Answer

The reaction function for firm 1 will sh

Question 19

The markup of price over marginal cost of a profit-maximizing firm in the long run is _____.

Accepted Answer

A) higher in a perfectly competitive market than in a monopoly market 
B) higher in a monopoly market than in a monopolistically competitive market 
C) higher in a perfectly competitive market than in an oligopoly 
D) higher in a monopolistically competitive market than in a competitive market 
A) higher in a perfectly competitive market than in a monopoly market 
B) higher in a monopoly market than in a monopolistically competitive market 
C) higher in a perfectly competitive market than in an oligopoly 
D) higher in a monopolistically competitive market than in a competitive market

Question 20

The Organization of the Petroleum Exporting Countries [OPEC] serves the global oil market.Suppose Saudi Arabia,an OPEC member country,produces 50% of the oil supplied to this market.The elasticity of market demand is 0.4 and the elasticity of supply for the other eleven OPEC countries is 1.What is the elasticity of demand for oil produced by Saudi Arabia?

Accepted Answer

A) 0.4 
B) 2.4 
C) 1.8 
D) 3.4 
A) 0.4 
B) 2.4 
C) 1.8 
D) 3.4

A monopolistically competitive firm is similar to a monopoly in that the firm:

Which of the following has contributed to the success of OPEC [Organization of the Petroleum Exporting Countries] as an oil cartel?

A monopolistically competitive firm that is maximizing profit will choose to produce at the level where:

If the member of a cartel violates the cartel agreement and sells at a price below the cartel price:

In the dominant firm model of oligopoly,the dominant firm maximizes profits by producing at the point where:

What is a cartel and why are cartels considered to be inherently unstable?

Given that OPEC [Organization of the Petroleum Exporting Countries] has been a successful cartel,all of the following factors could have contributed to its success,except:

Which of the following is a characteristic of monopolistic competition?

The output of a cartel that maximizes profits is closest to the equilibrium output of:

For firms with constant and equal long-run marginal cost curves,the Cournot equilibrium occurs at:

The demand curve that a monopolistically competitive firm faces is _____.

A monopolistically competitive firm differs from a perfectly competitive firm in that:

A single firm serves a large part of the market.The rest of the market is served by a large number of competitive firms.Which market model is best applicable to this type of industry?

Product differentiation and a certain degree of monopoly power are characteristics of:

In the Stackelberg model of oligopoly,the dominant firm:

A _____ shows the relationship between one firm's profit-maximizing output as a function of the output of a rival firm in a duopoly market.

The markup of price over marginal cost of a profit-maximizing firm in the long run is _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 13: Monopolistic Competition and Oligopoly

A monopolistically competitive firm is similar to a monopoly in that the firm:

Which of the following has contributed to the success of OPEC [Organization of the Petroleum Exporting Countries] as an oil cartel?

A monopolistically competitive firm that is maximizing profit will choose to produce at the level where:

If the member of a cartel violates the cartel agreement and sells at a price below the cartel price:

In the dominant firm model of oligopoly,the dominant firm maximizes profits by producing at the point where:

What is a cartel and why are cartels considered to be inherently unstable?

Given that OPEC [Organization of the Petroleum Exporting Countries] has been a successful cartel,all of the following factors could have contributed to its success,except:

Which of the following is a characteristic of monopolistic competition?

The output of a cartel that maximizes profits is closest to the equilibrium output of:

For firms with constant and equal long-run marginal cost curves,the Cournot equilibrium occurs at:

The demand curve that a monopolistically competitive firm faces is _____.

A monopolistically competitive firm differs from a perfectly competitive firm in that:

A single firm serves a large part of the market.The rest of the market is served by a large number of competitive firms.Which market model is best applicable to this type of industry?

Product differentiation and a certain degree of monopoly power are characteristics of:

In the Stackelberg model of oligopoly,the dominant firm:

A _____ shows the relationship between one firm's profit-maximizing output as a function of the output of a rival firm in a duopoly market.

The markup of price over marginal cost of a profit-maximizing firm in the long run is _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters