Question 1

Unlike monopolistically competitive firms,oligopolistic firms:

Accepted Answer

A) face a downward-sloping demand curve. 
B) exhibit a strong mutual interdependence. 
C) produce at the point where price is equal to marginal cost. 
D) do not have a supply curve. 
A) face a downward-sloping demand curve. 
B) exhibit a strong mutual interdependence. 
C) produce at the point where price is equal to marginal cost. 
D) do not have a supply curve.

Question 2

Which of the following,if true,will be the best example of an oligopoly market?

Accepted Answer

A) The cigarette industry where a similar product is produced by a small number of sellers 
B) Dine-in pizza outlets where a differentiated product is produced by a large number of sellers 
C) The milk industry where a homogeneous product is provided by a large number of sellers 
D) The market for electricity where a single firm can produce electricity at the lowest possible cost 
A) The cigarette industry where a similar product is produced by a small number of sellers 
B) Dine-in pizza outlets where a differentiated product is produced by a large number of sellers 
C) The milk industry where a homogeneous product is provided by a large number of sellers 
D) The market for electricity where a single firm can produce electricity at the lowest possible cost

Question 3

How does the Cournot model of oligopoly differ from the Stackelberg model?

Accepted Answer

A) The Cournot model cannot be extended to include more than two firms unlike the Stackelberg model. 
B) The Cournot model explains the mutual interdependence of firms in an oligopoly market unlike the Stackelberg model. 
C) The equilibrium output in the Stackelberg model is relatively higher than the Cournot model. 
D) The Cournot model assumes that a single firm is the market leader while the Stackelberg model assumes no single firm has a large market share. 
A) The Cournot model cannot be extended to include more than two firms unlike the Stackelberg model. 
B) The Cournot model explains the mutual interdependence of firms in an oligopoly market unlike the Stackelberg model. 
C) The equilibrium output in the Stackelberg model is relatively higher than the Cournot model. 
D) The Cournot model assumes that a single firm is the market leader while the Stackelberg model assumes no single firm has a large market share.

Question 4

Consider a dominant firm model where the elasticity of market demand is 2,the elasticity of supply of the competitive fringe is 4,and the elasticity of the dominant firm's demand is 10.Calculate the dominant firm's market share.

Accepted Answer

A) 2/3 
B) 2/5 
C) 3/5 
D) 3/7 
A) 2/3 
B) 2/5 
C) 3/5 
D) 3/7

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.If the market had been perfectly competitive,the equilibrium price and output would be _____ respectively.

Accepted Answer

A) PC and QT 
B) P and Q0 
C) PC and QF 
D) P and QF 
A) PC and QT 
B) P and Q0 
C) PC and QF 
D) P and QF

Question 6

Compared to a Cournot equilibrium,the _____ in a Stackelberg equilibrium.

Accepted Answer

A) price paid by the consumers is higher 
B) total industry output is higher 
C) profit made by the leader firm is lower 
D) output is closer to monopoly output 
A) price paid by the consumers is higher 
B) total industry output is higher 
C) profit made by the leader firm is lower 
D) output is closer to monopoly output

Question 7

Which of the following is not true of a monopolistically competitive firm in long run equilibrium?

Accepted Answer

A) Price exceeds marginal cost 
B) The average total cost curve lies above the demand curve 
C) Marginal revenue equals marginal cost 
D) The price elasticity of demand is zero 
A) Price exceeds marginal cost 
B) The average total cost curve lies above the demand curve 
C) Marginal revenue equals marginal cost 
D) The price elasticity of demand is zero

Question 8

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.On the AD' portion of the demand curve _____.

Accepted Answer

A) the cartel and fringe firms will produce equal quantities of output 
B) only the fringe firms will produce output 
C) the demand curve is more elastic 
D) only the cartel acting as a dominant firm will produce output 
A) the cartel and fringe firms will produce equal quantities of output 
B) only the fringe firms will produce output 
C) the demand curve is more elastic 
D) only the cartel acting as a dominant firm will produce output

Question 9

In Cournot's duopoly model,a firm's profit-maximizing level of output:

Accepted Answer

A) depends on the market price of the good. 
B) is based on the assumption that the other firm produces zero output. 
C) based on the other firm's expected level of output,which is assumed to remain unchanged. 
D) is equal to the other firm's expected level of output,which is assumed to remain unchanged. 
A) depends on the market price of the good. 
B) is based on the assumption that the other firm produces zero output. 
C) based on the other firm's expected level of output,which is assumed to remain unchanged. 
D) is equal to the other firm's expected level of output,which is assumed to remain unchanged.

Question 10

Which of the following the best example of a cartel?

Accepted Answer

A) An association of tobacco companies that attempts to influence anti-tobacco legislation 
B) A labor union that raises wages above competitive level by restricting the supply of labor 
C) A group of countries that sign an agreement to lower trade barriers and exchange goods and services 
D) Firms that register their headquarters in the Cayman Islands in order to evade corporate taxes 
A) An association of tobacco companies that attempts to influence anti-tobacco legislation 
B) A labor union that raises wages above competitive level by restricting the supply of labor 
C) A group of countries that sign an agreement to lower trade barriers and exchange goods and services 
D) Firms that register their headquarters in the Cayman Islands in order to evade corporate taxes

Question 11

Monopolistically competitive firms _____.

Accepted Answer

A) earn positive economic profit both in the short run and the long run 
B) suffer an economic loss in the long run 
C) earn positive economic profit in the long run 
D) earn zero economic profit in the long run 
A) earn positive economic profit both in the short run and the long run 
B) suffer an economic loss in the long run 
C) earn positive economic profit in the long run 
D) earn zero economic profit in the long run

Question 12

The output of a monopolistically competitive industry is inefficient because firms:

Accepted Answer

A) produce at the highest point on the average cost curve. 
B) do not produce at the minimum point on their average cost curve. 
C) produce at the highest point on the marginal cost curve. 
D) do not produce at the minimum point on the marginal cost curve. 
A) produce at the highest point on the average cost curve. 
B) do not produce at the minimum point on their average cost curve. 
C) produce at the highest point on the marginal cost curve. 
D) do not produce at the minimum point on the marginal cost curve.

Question 13

A significant criticism of the Cournot model is that:

Accepted Answer

A) markets do not operate according to the Cournot model in the real world. 
B) its key assumption does not hold if the market is still adjusting toward equilibrium. 
C) firms cannot estimate reaction curves of other firms. 
D) the Cournot model cannot be applied to industries with more than two firms. 
A) markets do not operate according to the Cournot model in the real world. 
B) its key assumption does not hold if the market is still adjusting toward equilibrium. 
C) firms cannot estimate reaction curves of other firms. 
D) the Cournot model cannot be applied to industries with more than two firms.

Question 14

In an industry where one firm with a high market share uses the reaction curves of other firms to set output,the _____ model is most applicable.

Accepted Answer

A) Cournot duopoly 
B) perfectly competitive 
C) Stackelberg 
D) dominant firm 
A) Cournot duopoly 
B) perfectly competitive 
C) Stackelberg 
D) dominant firm

Question 15

How is total output determined in the dominant firm model?

Accepted Answer

A) The dominant firm produces the highest level of output given its production function. 
B) All firms in the market produce at the level where marginal cost equals marginal revenue. 
C) The dominant firm produces at the level where marginal cost equals marginal revenue. 
D) The fringe firms produce at the point where marginal revenue equals marginal cost. 
A) The dominant firm produces the highest level of output given its production function. 
B) All firms in the market produce at the level where marginal cost equals marginal revenue. 
C) The dominant firm produces at the level where marginal cost equals marginal revenue. 
D) The fringe firms produce at the point where marginal revenue equals marginal cost.

Question 16

Cartels and collusion are more common in oligopolistic industries because:

Accepted Answer

A) products are differentiated. 
B) there are no barriers to entry and exit. 
C) there are a smaller number of firms. 
D) the market demand curve is horizontal. 
A) products are differentiated. 
B) there are no barriers to entry and exit. 
C) there are a smaller number of firms. 
D) the market demand curve is horizontal.

Question 17

In the Cournot duopoly model,the reaction curve shows:

Accepted Answer

A) one firm's best possible price as a function of the profit of the other firm. 
B) one firm's most possible profit as a function of the costs of the other firm. 
C) one firm's best possible revenue as a function of the profit of the other firm. 
D) one firm's most profitable output as a function of the output of the other firm. 
A) one firm's best possible price as a function of the profit of the other firm. 
B) one firm's most possible profit as a function of the costs of the other firm. 
C) one firm's best possible revenue as a function of the profit of the other firm. 
D) one firm's most profitable output as a function of the output of the other firm.

Question 18

Long-run equilibrium under monopolistic competition is characterized by:

Accepted Answer

A) a positive deadweight loss. 
B) a positive but small economic profit. 
C) an equilibrium price that is equal to marginal cost. 
D) an equilibrium price that is greater than average cost. 
A) a positive deadweight loss. 
B) a positive but small economic profit. 
C) an equilibrium price that is equal to marginal cost. 
D) an equilibrium price that is greater than average cost.

Question 19

The price that is set by a cartel is most likely to be:

Accepted Answer

A) lower than the marginal cost. 
B) lower than the competitive price. 
C) higher than average revenue. 
D) equal to the monopoly price. 
A) lower than the marginal cost. 
B) lower than the competitive price. 
C) higher than average revenue. 
D) equal to the monopoly price.

Question 20

Figure 13-1 shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL.  
-Refer to Figure 13-1.In the Stackelberg equilibrium,the total industry output is _____.

Accepted Answer

A) OF 
B) OK 
C) OE 
D) OL 
A) OF 
B) OK 
C) OE 
D) OL

Unlike monopolistically competitive firms,oligopolistic firms:

Which of the following,if true,will be the best example of an oligopoly market?

How does the Cournot model of oligopoly differ from the Stackelberg model?

Consider a dominant firm model where the elasticity of market demand is 2,the elasticity of supply of the competitive fringe is 4,and the elasticity of the dominant firm's demand is 10.Calculate the dominant firm's market share.

Compared to a Cournot equilibrium,the _____ in a Stackelberg equilibrium.

Which of the following is not true of a monopolistically competitive firm in long run equilibrium?

In Cournot's duopoly model,a firm's profit-maximizing level of output:

Which of the following the best example of a cartel?

Monopolistically competitive firms _____.

The output of a monopolistically competitive industry is inefficient because firms:

A significant criticism of the Cournot model is that:

In an industry where one firm with a high market share uses the reaction curves of other firms to set output,the _____ model is most applicable.

How is total output determined in the dominant firm model?

Cartels and collusion are more common in oligopolistic industries because:

In the Cournot duopoly model,the reaction curve shows:

Long-run equilibrium under monopolistic competition is characterized by:

The price that is set by a cartel is most likely to be:

Figure 13-1 shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL. -Refer to Figure 13-1.In the Stackelberg equilibrium,the total industry output 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

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Exam 13: Monopolistic Competition and Oligopoly

Unlike monopolistically competitive firms,oligopolistic firms:

Which of the following,if true,will be the best example of an oligopoly market?

How does the Cournot model of oligopoly differ from the Stackelberg model?

Consider a dominant firm model where the elasticity of market demand is 2,the elasticity of supply of the competitive fringe is 4,and the elasticity of the dominant firm's demand is 10.Calculate the dominant firm's market share.

Compared to a Cournot equilibrium,the _____ in a Stackelberg equilibrium.

Which of the following is not true of a monopolistically competitive firm in long run equilibrium?

In Cournot's duopoly model,a firm's profit-maximizing level of output:

Which of the following the best example of a cartel?

Monopolistically competitive firms _____.

The output of a monopolistically competitive industry is inefficient because firms:

A significant criticism of the Cournot model is that:

In an industry where one firm with a high market share uses the reaction curves of other firms to set output,the _____ model is most applicable.

How is total output determined in the dominant firm model?

Cartels and collusion are more common in oligopolistic industries because:

In the Cournot duopoly model,the reaction curve shows:

Long-run equilibrium under monopolistic competition is characterized by:

The price that is set by a cartel is most likely to be:

Figure 13-1 shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL. -Refer to Figure 13-1.In the Stackelberg equilibrium,the total industry output 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