Question 1

Mutual interdependence is a significant characteristic of a monopolistically competitive industry.

Accepted Answer

A) True 
 B)False

Question 2

According to Galbraith,why might modern corporations not attempt to maximize profits?

Accepted Answer

A) Because the managers are more interested in maximizing their own incomes. 
B) They are afraid of the reaction of their consumers. 
C) They are afraid of the reaction of rival companies. 
D) They are afraid of the reaction of the government. 
A) Because the managers are more interested in maximizing their own incomes. 
B) They are afraid of the reaction of their consumers. 
C) They are afraid of the reaction of rival companies. 
D) They are afraid of the reaction of the government.

Question 3

Product differentiation includes all,except one,of the following.Which is the exception?

Accepted Answer

A) Developing a recognized brand name or product logo. 
B) Securing a superior location or developing a reputation for exceptional service. 
C) Engaging in product development or improvement. 
D) Developing an effective advertising strategy. 
E) Charging a price lower than the competitor's. 
A) Developing a recognized brand name or product logo. 
B) Securing a superior location or developing a reputation for exceptional service. 
C) Engaging in product development or improvement. 
D) Developing an effective advertising strategy. 
E) Charging a price lower than the competitor's.

Question 4

All of the following statements,except one,are correct concerning the cartel variant of oligopoly theory.Which is the exception?

Accepted Answer

A) An effective cartel restricts the supply of the product being sold. 
B) The individual members of the cartel must agree to and respect quotas on their output. 
C) The primary threat to the success of a cartel is government regulation. 
D) The output and the price of the cartel are often similar to that of a monopoly. 
A) An effective cartel restricts the supply of the product being sold. 
B) The individual members of the cartel must agree to and respect quotas on their output. 
C) The primary threat to the success of a cartel is government regulation. 
D) The output and the price of the cartel are often similar to that of a monopoly.

Question 5

Which of the following statements best describes the thinking of a single firm in the kinked-demand curve variant of oligopoly theory?

Accepted Answer

A) If we raise our price our rivals will follow us,and if we lower our price our rivals will simply do nothing. 
B) If we lower price our rivals will follow us,and if we raise our price our rivals will simply do nothing. 
C) If we raise our output our rivals will follow us,and if we lower our output our rivals will simply do nothing. 
D) If we lower our output our rivals will follow us,and if we raise our output our rivals will simply do nothing. 
A) If we raise our price our rivals will follow us,and if we lower our price our rivals will simply do nothing. 
B) If we lower price our rivals will follow us,and if we raise our price our rivals will simply do nothing. 
C) If we raise our output our rivals will follow us,and if we lower our output our rivals will simply do nothing. 
D) If we lower our output our rivals will follow us,and if we raise our output our rivals will simply do nothing.

Question 6

If we assume that price leadership prevails in a particular industry,what might prevent the leader from announcing a dramatic increase in the price of the product sold?

Accepted Answer

A) The fear that the AC of the other firms within the industry would decrease. 
B) The fear that new firms would be tempted to enter the industry. 
C) The fear that one of the other firms would break ranks and increase their price even more. 
D) The fear that such action would provide proof that the firms are engaged in overt collusion. 
A) The fear that the AC of the other firms within the industry would decrease. 
B) The fear that new firms would be tempted to enter the industry. 
C) The fear that one of the other firms would break ranks and increase their price even more. 
D) The fear that such action would provide proof that the firms are engaged in overt collusion.

Question 7

Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc.and Hobbs Ltd.Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.
  
-Refer to the information above to answer this question.All of the following statements expect one,is correct if no agreement between Calvin and Hobbs is in place and each is considering what to do in terms of its advertising budget?

Accepted Answer

A) Collusion and trust between Calvin and Hobbs is necessary if both are to adopt and maintain a low advertising budget. 
B) Without collusion and trust between Calvin and Hobbs,both will adopt a high advertising budget. 
C) If Calvin adopts a low advertising budget,then Hobbs will be in a position to profit from this. 
D) If Hobbs adopts a low advertising budget,then Calvin will be in a position to profit from this. 
E) If Hobbs adopts a high advertising budget and Calvin does not,then Hobbs will earn $300 in profits. 
A) Collusion and trust between Calvin and Hobbs is necessary if both are to adopt and maintain a low advertising budget. 
B) Without collusion and trust between Calvin and Hobbs,both will adopt a high advertising budget. 
C) If Calvin adopts a low advertising budget,then Hobbs will be in a position to profit from this. 
D) If Hobbs adopts a low advertising budget,then Calvin will be in a position to profit from this. 
E) If Hobbs adopts a high advertising budget and Calvin does not,then Hobbs will earn $300 in profits.

Question 8

What is imperfect competition?

Accepted Answer

A) A market structure in which firms always collude. 
B) A market structure in which producers are identifiable and have some control over price. 
C) A market structure in which firms try to compete but find it impossible. 
D) A market structure in which the government greatly intervenes. 
E) A market structure in which producers are identifiable but have no control over price. 
A) A market structure in which firms always collude. 
B) A market structure in which producers are identifiable and have some control over price. 
C) A market structure in which firms try to compete but find it impossible. 
D) A market structure in which the government greatly intervenes. 
E) A market structure in which producers are identifiable but have no control over price.

Question 9

Below is a profit pay-off matrix for two oligopoly firms: North and South.North's profits are shown in the upper portion of each box and South's are in the lower portion.
  
-Refer to the information above to answer this question.What will be the profit for North and South respectively if they successfully collude with each other?

Accepted Answer

A) $180 and $180. 
B) $200 and $80. 
C) $80 and $200. 
D) $100 and $100. 
A) $180 and $180. 
B) $200 and $80. 
C) $80 and $200. 
D) $100 and $100.

Question 10

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:
  
-Refer to the graph above to answer this question.Which of the following will be a result of the situation illustrated in the graph above?

Accepted Answer

A) The market demand curve will shift to the left. 
B) The market demand curve will shift to the right. 
C) The market supply curve will shift to the left. 
D) The market supply curve will shift the right. 
A) The market demand curve will shift to the left. 
B) The market demand curve will shift to the right. 
C) The market supply curve will shift to the left. 
D) The market supply curve will shift the right.

Question 11

Productive efficiency occurs when firms charge a price that is equal to AC.

Accepted Answer

A) True 
 B)False

Question 12

The Canadian gumnut industry consists of 10 companies whose annual sales are as shown:
  
-What is the four-firm concentration ratio for this industry?

Accepted Answer

A) 25%. 
B) 65%. 
C) 75%. 
D) 80% 
A) 25%. 
B) 65%. 
C) 75%. 
D) 80%

Question 13

Both the kinked demand curve and the price leadership variants of oligopoly theory assume that firms collude with each other.

Accepted Answer

A) True 
 B)False

Question 14

All of the following except one are valid statements concerning the debate about oligopolies and efficiency.Which is the exception?

Accepted Answer

A) Oligopolies are often very large and this creates an environment that is conducive to research and technological change. 
B) The barriers to entry in an oligopoly industry encourage research. 
C) Oligopolies usually achieve productive efficiency. 
D) Because of the barriers to entry in oligopoly industries,oligopolies are likely to become complacent and lose their competitive edge. 
A) Oligopolies are often very large and this creates an environment that is conducive to research and technological change. 
B) The barriers to entry in an oligopoly industry encourage research. 
C) Oligopolies usually achieve productive efficiency. 
D) Because of the barriers to entry in oligopoly industries,oligopolies are likely to become complacent and lose their competitive edge.

Question 15

One characteristic of monopolistic competition is the existence of many firms operating in the same industry.

Accepted Answer

A) True 
 B)False

Question 16

What is the name for the condition where a firm will not take action without considering the reactions of rival firms?

Accepted Answer

A) Perfect competition. 
B) Productive efficiency. 
C) Mutual interdependence. 
D) Duopoly. 
A) Perfect competition. 
B) Productive efficiency. 
C) Mutual interdependence. 
D) Duopoly.

Question 17

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.
  
-Refer to the graph above to answer this question.Which of the following statements is correct?

Accepted Answer

A) This firm will charge price 0A and make no economic profits. 
B) This firm will charge price 0A and make economic profits. 
C) This firm will charge price 0B and make only normal profits. 
D) This firm will charge price 0B and make economic profits. 
A) This firm will charge price 0A and make no economic profits. 
B) This firm will charge price 0A and make economic profits. 
C) This firm will charge price 0B and make only normal profits. 
D) This firm will charge price 0B and make economic profits.

Question 18

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:
  
-Refer to the graph above to answer this question.Which of the following statements is correct?

Accepted Answer

A) This graph illustrates a short-run situation and some firms will soon exit from the industry. 
B) This graph illustrates a short-run situation and new firms will soon enter the industry. 
C) This graph illustrates a long-run situation and some firms will soon exit from the industry. 
D) This graph illustrates a long-run situation and new firms will soon enter the industry. 
E) This graph illustrates what could be either a short-run or a long-run situation. 
A) This graph illustrates a short-run situation and some firms will soon exit from the industry. 
B) This graph illustrates a short-run situation and new firms will soon enter the industry. 
C) This graph illustrates a long-run situation and some firms will soon exit from the industry. 
D) This graph illustrates a long-run situation and new firms will soon enter the industry. 
E) This graph illustrates what could be either a short-run or a long-run situation.

Question 19

Which of the following statements is correct about oligopoly firms?

Accepted Answer

A) They typically achieve economic capacity. 
B) They may or may not charge a price higher than marginal cost. 
C) They maximize profits by equating marginal revenue and marginal cost. 
D) They operate in an intensely competitive atmosphere in which the market dictates price. 
E) They produce an output that puts them graphically on the rising portion of the AC curve. 
A) They typically achieve economic capacity. 
B) They may or may not charge a price higher than marginal cost. 
C) They maximize profits by equating marginal revenue and marginal cost. 
D) They operate in an intensely competitive atmosphere in which the market dictates price. 
E) They produce an output that puts them graphically on the rising portion of the AC curve.

Question 20

Below are data for a monopolistically competitive firm.
  
-Refer to the information above to answer this question.What output will this profit-maximizing firm produce?

Accepted Answer

A) 3. 
B) 4. 
C) 5. 
D) 6. 
E) 7. 
A) 3. 
B) 4. 
C) 5. 
D) 6. 
E) 7.

Mutual interdependence is a significant characteristic of a monopolistically competitive industry.

According to Galbraith,why might modern corporations not attempt to maximize profits?

Product differentiation includes all,except one,of the following.Which is the exception?

All of the following statements,except one,are correct concerning the cartel variant of oligopoly theory.Which is the exception?

Which of the following statements best describes the thinking of a single firm in the kinked-demand curve variant of oligopoly theory?

If we assume that price leadership prevails in a particular industry,what might prevent the leader from announcing a dramatic increase in the price of the product sold?

What is imperfect competition?

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry: -Refer to the graph above to answer this question.Which of the following will be a result of the situation illustrated in the graph above?

Productive efficiency occurs when firms charge a price that is equal to AC.

The Canadian gumnut industry consists of 10 companies whose annual sales are as shown: -What is the four-firm concentration ratio for this industry?

Both the kinked demand curve and the price leadership variants of oligopoly theory assume that firms collude with each other.

All of the following except one are valid statements concerning the debate about oligopolies and efficiency.Which is the exception?

One characteristic of monopolistic competition is the existence of many firms operating in the same industry.

What is the name for the condition where a firm will not take action without considering the reactions of rival firms?

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry. -Refer to the graph above to answer this question.Which of the following statements is correct?

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry: -Refer to the graph above to answer this question.Which of the following statements is correct?

Which of the following statements is correct about oligopoly firms?

Below are data for a monopolistically competitive firm. -Refer to the information above to answer this question.What output will this profit-maximizing firm produce?

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

Perfect Competition

An Evaluation of Competitive Markets

Monopoly

The Factors of Production

International Trade

Filters

Exam 11: Imperfect Competition

Mutual interdependence is a significant characteristic of a monopolistically competitive industry.

According to Galbraith,why might modern corporations not attempt to maximize profits?

Product differentiation includes all,except one,of the following.Which is the exception?

All of the following statements,except one,are correct concerning the cartel variant of oligopoly theory.Which is the exception?

Which of the following statements best describes the thinking of a single firm in the kinked-demand curve variant of oligopoly theory?

If we assume that price leadership prevails in a particular industry,what might prevent the leader from announcing a dramatic increase in the price of the product sold?

What is imperfect competition?

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry: -Refer to the graph above to answer this question.Which of the following will be a result of the situation illustrated in the graph above?

Productive efficiency occurs when firms charge a price that is equal to AC.

The Canadian gumnut industry consists of 10 companies whose annual sales are as shown: -What is the four-firm concentration ratio for this industry?

Both the kinked demand curve and the price leadership variants of oligopoly theory assume that firms collude with each other.

All of the following except one are valid statements concerning the debate about oligopolies and efficiency.Which is the exception?

One characteristic of monopolistic competition is the existence of many firms operating in the same industry.

What is the name for the condition where a firm will not take action without considering the reactions of rival firms?

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry. -Refer to the graph above to answer this question.Which of the following statements is correct?

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry: -Refer to the graph above to answer this question.Which of the following statements is correct?

Which of the following statements is correct about oligopoly firms?

Below are data for a monopolistically competitive firm. -Refer to the information above to answer this question.What output will this profit-maximizing firm produce?

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

Perfect Competition

An Evaluation of Competitive Markets

Monopoly

The Factors of Production

International Trade

Filters