Question 1

When a firm faces a downward-sloping demand curve,marginal revenue __________.

Accepted Answer

A)  must exceed price because the price effect outweighs the output effect 
B)  is less than price because a firm must lower its price to sell more 
C)  equals price because the firm sells a standardised product 
D)  must exceed price because the output effect outweighs the price effect 
A)  must exceed price because the price effect outweighs the output effect 
B)  is less than price because a firm must lower its price to sell more 
C)  equals price because the firm sells a standardised product 
D)  must exceed price because the output effect outweighs the price effect B

Question 2

A patent is an example of ________.

Accepted Answer

A)  how ownership of a key input creates a barrier to entry 
B)  a government-imposed barrier to entry 
C)  occupational licensing 
D)  how market failure can lead to oligopoly 
A)  how ownership of a key input creates a barrier to entry 
B)  a government-imposed barrier to entry 
C)  occupational licensing 
D)  how market failure can lead to oligopoly B

Question 3

For the monopolistically competitive firm,_______.

Accepted Answer

A)  Price (P) = Marginal Revenue (MR) = Average Revenue (AR) 
B)  P = MR > AR 
C)  P = AR > MR 
D)  P > MR = AR 
A)  Price (P) = Marginal Revenue (MR) = Average Revenue (AR) 
B)  P = MR > AR 
C)  P = AR > MR 
D)  P > MR = AR C

Question 4

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Accepted Answer

A)  higher; lower 
B)  lower; lower 
C)  lower; higher 
D)  higher; higher 
A)  higher; lower 
B)  lower; lower 
C)  lower; higher 
D)  higher; higher

Question 5

Table 9.3   Firm A(Alistair's) and Firm B (Baine's) are the only firms selling luggage in the upscale town of Adelaide. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 9.3 shows the payoff matrix for this advertising game.
-Refer to Table 9.3.The Nash equilibrium in this game is:

Accepted Answer

A)  There is no Nash equilibrium. 
B)  Baine increases its advertising budget, but Alistair does not. 
C)  Alistair increases its advertising budget, but Baine does not. 
D)  Both Alistair and Baine increase their advertising budgets. 
A)  There is no Nash equilibrium. 
B)  Baine increases its advertising budget, but Alistair does not. 
C)  Alistair increases its advertising budget, but Baine does not. 
D)  Both Alistair and Baine increase their advertising budgets.

Question 6

Which of the following is an example of implicit collusion?

Accepted Answer

A)  Product differentiation 
B)  A retaliation strategy 
C)  A second-price auction 
D)  Price leadership 
A)  Product differentiation 
B)  A retaliation strategy 
C)  A second-price auction 
D)  Price leadership

Question 7

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price.The cells of the payoff matrix show ________.

Accepted Answer

A)  the profit that each producer can expect to earn by pursuing a single strategy 
B)  the profit that each producer can expect to earn from every combination of strategies by the firms in the market 
C)  the strategy that a firm must pursue to earn various levels of profit 
D)  the expected profits of rival firms 
A)  the profit that each producer can expect to earn by pursuing a single strategy 
B)  the profit that each producer can expect to earn from every combination of strategies by the firms in the market 
C)  the strategy that a firm must pursue to earn various levels of profit 
D)  the expected profits of rival firms

Question 8

Figure 9.8   Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 9.8.Based on the diagram,one can conclude that _______.

Accepted Answer

A)  some existing firms will exit the market 
B)  new firms will enter the market 
C)  the industry is in long-run equilibrium 
D)  firms achieve productive efficiency 
A)  some existing firms will exit the market 
B)  new firms will enter the market 
C)  the industry is in long-run equilibrium 
D)  firms achieve productive efficiency

Question 9

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 10

One reason why the coffeehouse market is competitive is that _______.

Accepted Answer

A)  demand for specialty coffee is very high 
B)  it is trendy and therefore is likely to have a customer following 
C)  barriers to entry are low 
D)  consumption takes place in public 
A)  demand for specialty coffee is very high 
B)  it is trendy and therefore is likely to have a customer following 
C)  barriers to entry are low 
D)  consumption takes place in public

Question 11

Figure 9.8   Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 9.8.The profit-maximising output level is ______.

Accepted Answer

A)  22 cases 
B)  24 cases 
C)  30 cases 
D)  38 cases 
A)  22 cases 
B)  24 cases 
C)  30 cases 
D)  38 cases

Question 12

What one good thing happens when a monopolistically competitive firm lowers it price?

Accepted Answer

A)  The output effect 
B)  The price effect 
C)  The income effect 
D)  The substitution effect 
A)  The output effect 
B)  The price effect 
C)  The income effect 
D)  The substitution effect

Question 13

Which of the following is not part of an oligopolist's business strategy?

Accepted Answer

A)  Deciding on how to manage relations with suppliers 
B)  Choosing what new technologies to adopt 
C)  Selecting which new markets to enter 
D)  Independently setting a product's price without consideration of its rivals' pricing policies 
A)  Deciding on how to manage relations with suppliers 
B)  Choosing what new technologies to adopt 
C)  Selecting which new markets to enter 
D)  Independently setting a product's price without consideration of its rivals' pricing policies

Question 14

What happens when large firms in oligopoly markets cut their prices?

Accepted Answer

A)  Rival firms will also cut their prices to avoid losing sales. 
B)  Rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C)  We don't know for sure how rival firms will respond. 
D)  Rival firms will not cut their prices because they fear that the federal government will accuse them of collusion. 
A)  Rival firms will also cut their prices to avoid losing sales. 
B)  Rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts. 
C)  We don't know for sure how rival firms will respond. 
D)  Rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.

Question 15

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Accepted Answer

A) True 
 B)False

Question 16

Why are oligopolies difficult to analyse?

Accepted Answer

A)  The firms are so large. 
B)  Demand and cost curves do not exist for these types of industries. 
C)  How firms respond to a price change by a rival is uncertain. 
D)  Oligopolies are a recent development so economists have not had time to develop models. 
A)  The firms are so large. 
B)  Demand and cost curves do not exist for these types of industries. 
C)  How firms respond to a price change by a rival is uncertain. 
D)  Oligopolies are a recent development so economists have not had time to develop models.

Question 17

Figure 9.13   Figure 9.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 9.13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

Accepted Answer

A)  Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B)  The firms that are incurring losses will be purchased by their more successful rivals. 
C)  Inefficient firms will exit the market, and new cost efficient firms will enter the market. 
D)  Firms will have to raise their prices to cover costs of production. 
A)  Some firms will exit the market causing the demand to increase for firms remaining in the market. 
B)  The firms that are incurring losses will be purchased by their more successful rivals. 
C)  Inefficient firms will exit the market, and new cost efficient firms will enter the market. 
D)  Firms will have to raise their prices to cover costs of production.

Question 18

When does collusion occur?

Accepted Answer

A)  When a firm chooses a level of output to maximise its own profit 
B)  When two firms' price and output decisions come into conflict 
C)  When there is an agreement among firms to charge the same price or otherwise not to compete 
D)  When firms refuse to follow their price leaders 
A)  When a firm chooses a level of output to maximise its own profit 
B)  When two firms' price and output decisions come into conflict 
C)  When there is an agreement among firms to charge the same price or otherwise not to compete 
D)  When firms refuse to follow their price leaders

Question 19

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called ____________.

Accepted Answer

A)  an earnings table 
B)  a payoff table 
C)  a payoff matrix 
D)  a strategic matrix 
A)  an earnings table 
B)  a payoff table 
C)  a payoff matrix 
D)  a strategic matrix

Question 20

Figure 9.17  
-Refer to Figure 9.17.The allocatively efficient output for the firm represented in the diagram is _____.

Accepted Answer

A)  Qf units 
B)  Qg units 
C)  Qh units 
D)  Qj units 
A)  Qf units 
B)  Qg units 
C)  Qh units 
D)  Qj units

When a firm faces a downward-sloping demand curve,marginal revenue __________.

A patent is an example of ________.

For the monopolistically competitive firm,_______.

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a level of output and charges a price.

Which of the following is an example of implicit collusion?

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price.The cells of the payoff matrix show ________.

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.Based on the diagram,one can conclude that _______.

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

One reason why the coffeehouse market is competitive is that _______.

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.The profit-maximising output level is ______.

What one good thing happens when a monopolistically competitive firm lowers it price?

Which of the following is not part of an oligopolist's business strategy?

What happens when large firms in oligopoly markets cut their prices?

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Why are oligopolies difficult to analyse?

Figure 9.13 Figure 9.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

When does collusion occur?

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called ____________.

Figure 9.17 -Refer to Figure 9.17.The allocatively efficient output for the firm represented in the diagram is _____.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 9: Monopolistic Competition and Oligopoly

When a firm faces a downward-sloping demand curve,marginal revenue __________.

A patent is an example of ________.

For the monopolistically competitive firm,_______.

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Which of the following is an example of implicit collusion?

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price.The cells of the payoff matrix show ________.

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.Based on the diagram,one can conclude that _______.

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

One reason why the coffeehouse market is competitive is that _______.

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.The profit-maximising output level is ______.

What one good thing happens when a monopolistically competitive firm lowers it price?

Which of the following is not part of an oligopolist's business strategy?

What happens when large firms in oligopoly markets cut their prices?

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Why are oligopolies difficult to analyse?

Figure 9.13 Figure 9.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

When does collusion occur?

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called ____________.

Figure 9.17 -Refer to Figure 9.17.The allocatively efficient output for the firm represented in the diagram is _____.

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a level of output and charges a price.