Question 1

Collusion would be common in an oligopoly and a monopolistically competitive industry.

Accepted Answer

A) True 
 B)False

Question 2

Figure 9.17  
-Refer to Figure 9.17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

Accepted Answer

A)  Its average cost of production will fall and its profit will rise. 
B)  It will be taking advantage of economies of scale and will be able to lower the price of its product. 
C)  It will move from a zero profit situation to a profit situation. 
D)  It will move from a zero profit situation to a loss situation. 
A)  Its average cost of production will fall and its profit will rise. 
B)  It will be taking advantage of economies of scale and will be able to lower the price of its product. 
C)  It will move from a zero profit situation to a profit situation. 
D)  It will move from a zero profit situation to a loss situation.

Question 3

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Accepted Answer

A)  It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B)  It means that firms hire more than the minimum number of workers needed to produce the profit-maximising level of output. 
C)  It means that firms produce with inefficient combinations of resources. 
D)  It means that firms build plants that are not large enough to achieve minimum efficient scale. 
A)  It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves. 
B)  It means that firms hire more than the minimum number of workers needed to produce the profit-maximising level of output. 
C)  It means that firms produce with inefficient combinations of resources. 
D)  It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question 4

Table 9.1   Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 9.1 shows the payoff matrix for this advertising game.
-Refer to Table 9.1.Is there a dominant strategy for Star Connections and,if so,what is it?

Accepted Answer

A)  No, its outcome depends on what Godrickporter does. 
B)  Yes, Star Connections should increase its advertising spending. 
C)  Yes, Star Connections should reduce its advertising spending. 
D)  Yes, Star Connections' dominant strategy is to collude with Godrickporter. 
A)  No, its outcome depends on what Godrickporter does. 
B)  Yes, Star Connections should increase its advertising spending. 
C)  Yes, Star Connections should reduce its advertising spending. 
D)  Yes, Star Connections' dominant strategy is to collude with Godrickporter.

Question 5

Table 9.1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Revenue } \
&\text { (dollars) } & \text { (dollars) } \
\hline 1 & 7.50 & 7.50 \
\hline 2 & 7.00 & 14.00 \
\hline 3 & 6.50 & 19.50 \
\hline 4 & 6.00 & 24.00 \
\hline 5 & 5.50 & 27.50 \
\hline 6 & 5.00 & 30.00 \
\hline
\end{array}$$
-Refer to Table 9.1.The marginal revenue of the 3rd unit is ______.

Accepted Answer

A)  $6.50 
B)  $5.50 
C)  $1.83 
D)  $0.50 
A)  $6.50 
B)  $5.50 
C)  $1.83 
D)  $0.50

Question 6

Is a monopolistically competitive firm productively efficient?

Accepted Answer

A)  No, because it does not produce at minimum average total cost. 
B)  Yes, because it produces where marginal cost equals marginal revenue. 
C)  No, because price is greater than marginal cost. 
D)  Yes, because price equals average total cost. 
A)  No, because it does not produce at minimum average total cost. 
B)  Yes, because it produces where marginal cost equals marginal revenue. 
C)  No, because price is greater than marginal cost. 
D)  Yes, because price equals average total cost.

Question 7

What do economists call a set of actions that a firm takes to achieve a goal,such as maximising profits?

Accepted Answer

A)  A business strategy 
B)  A payoff matrix 
C)  The Porter's Competitive Forces plan 
D)  Game theory 
A)  A business strategy 
B)  A payoff matrix 
C)  The Porter's Competitive Forces plan 
D)  Game theory

Question 8

Figure 9.14  
-Refer to Figure 9.14.The output price is _____.

Accepted Answer

A)  P4 
B)  P3 
C)  P2 
D)  P1 
A)  P4 
B)  P3 
C)  P2 
D)  P1

Question 9

In economics,the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called ______.

Accepted Answer

A)  decision theory 
B)  game theory 
C)  market structure analysis 
D)  profit analysis 
A)  decision theory 
B)  game theory 
C)  market structure analysis 
D)  profit analysis

Question 10

A cooperative equilibrium results when firms _______.

Accepted Answer

A)  choose the best strategy regardless of what other players do 
B)  choose the strategy that maximises the total game payoff 
C)  choose the strategy that minimises the payoff to other players 
D)  choose a strategy by random chance 
A)  choose the best strategy regardless of what other players do 
B)  choose the strategy that maximises the total game payoff 
C)  choose the strategy that minimises the payoff to other players 
D)  choose a strategy by random chance

Question 11

Table 9.2   Suppose OPEC has only two producers, Saudi Arabia and Nigeria. Saudi Arabia has far more oil reserves and is the lower cost producer compared to Nigeria. The payoff matrix in Table 9.2 shows the profits earned per day by each country. 'Low output' corresponds to producing the OPEC assigned quota and 'high output' corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 9.2.The Nash equilibrium in this game is:

Accepted Answer

A)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C)  In the Nash equilibrium, Saudi Arabia produces a low output and earns a profit of $80 million, and Nigeria produces a high output and earns a profit of $30 million. 
D)  There is no Nash equilibrium. 
A)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B)  In the Nash equilibrium, both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C)  In the Nash equilibrium, Saudi Arabia produces a low output and earns a profit of $80 million, and Nigeria produces a high output and earns a profit of $30 million. 
D)  There is no Nash equilibrium.

Question 12

In most business situations where firms compete,often they can escape the prisoner's dilemma and reach the most profitable outcome.Which of the following is a reason for this?

Accepted Answer

A)  Firms engage in aggressive advertising to overcome the barriers to loyalty. 
B)  Most games are one-shot games so firms learn from their mistakes. 
C)  Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate. 
D)  Firms are constantly improving their products and anticipating changing consumer tastes. 
A)  Firms engage in aggressive advertising to overcome the barriers to loyalty. 
B)  Most games are one-shot games so firms learn from their mistakes. 
C)  Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate. 
D)  Firms are constantly improving their products and anticipating changing consumer tastes.

Question 13

Which of the following is true if a monopolistically competitive firm has excess capacity?

Accepted Answer

A)  It has exhausted all economies of scale. 
B)  It is producing beyond the minimum efficient scale. 
C)  It is experiencing diseconomies of scale. 
D)  It produces an output rate that places it on the negatively sloped portion of its average total cost curve. 
A)  It has exhausted all economies of scale. 
B)  It is producing beyond the minimum efficient scale. 
C)  It is experiencing diseconomies of scale. 
D)  It produces an output rate that places it on the negatively sloped portion of its average total cost curve.

Question 14

Which of the following statements is true?

Accepted Answer

A)  The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices. 
B)  Because the demand curve for a monopolistically competitive firm is downward sloping, its marginal revenue will be negative. 
C)  The marginal revenue of a monopolistically competitive firm will be always be positive. 
D)  The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices. 
A)  The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices. 
B)  Because the demand curve for a monopolistically competitive firm is downward sloping, its marginal revenue will be negative. 
C)  The marginal revenue of a monopolistically competitive firm will be always be positive. 
D)  The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices.

Question 15

What is an agreement among firms to charge the same price or otherwise not to compete?

Accepted Answer

A)  A payoff matrix 
B)  A subgame-perfect equilibrium 
C)  A Nash equilibrium 
D)  Collusion 
A)  A payoff matrix 
B)  A subgame-perfect equilibrium 
C)  A Nash equilibrium 
D)  Collusion

Question 16

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Unlike the perfectly competitive firm,th

Question 17

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

Accepted Answer

A)  The firm's demand curve will shift to the right if it stays in business in the long run. 
B)  The firm will exit the industry if it continues to suffer economic losses. 
C)  The firm will break even if it stays in business in the long run. 
D)  In the long run, the firm will be able to charge a price that is greater than its average total cost. 
A)  The firm's demand curve will shift to the right if it stays in business in the long run. 
B)  The firm will exit the industry if it continues to suffer economic losses. 
C)  The firm will break even if it stays in business in the long run. 
D)  In the long run, the firm will be able to charge a price that is greater than its average total cost.

Question 18

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a _______.

Accepted Answer

A)  cartel equilibrium 
B)  non-cooperative equilibrium 
C)  prisoner's dilemma equilibrium 
D)  dominant strategy equilibrium 
A)  cartel equilibrium 
B)  non-cooperative equilibrium 
C)  prisoner's dilemma equilibrium 
D)  dominant strategy equilibrium

Question 19

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Accepted Answer

A)  Selling price equals average total cost. 
B)  Production is at minimum average total cost. 
C)  Marginal revenue equals marginal cost. 
D)  Selling price is greater than marginal cost. 
A)  Selling price equals average total cost. 
B)  Production is at minimum average total cost. 
C)  Marginal revenue equals marginal cost. 
D)  Selling price is greater than marginal cost.

Question 20

What one bad thing happens when a monopolistically competitive firm lowers its price?

Accepted Answer

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

Collusion would be common in an oligopoly and a monopolistically competitive industry.

Figure 9.17 -Refer to Figure 9.17.Suppose the firm is currently producing Q_f units.What happens if it increases its output to Q_gunits?

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Table 9.1 Quantity Price Total Revenue (dollars) (dollars) 1 7.50 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 9.1.The marginal revenue of the 3rd unit is ______.

Is a monopolistically competitive firm productively efficient?

What do economists call a set of actions that a firm takes to achieve a goal,such as maximising profits?

Figure 9.14 -Refer to Figure 9.14.The output price is _____.

In economics,the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called ______.

A cooperative equilibrium results when firms _______.

In most business situations where firms compete,often they can escape the prisoner's dilemma and reach the most profitable outcome.Which of the following is a reason for this?

Which of the following is true if a monopolistically competitive firm has excess capacity?

Which of the following statements is true?

What is an agreement among firms to charge the same price or otherwise not to compete?

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a _______.

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

What one bad thing happens when a monopolistically competitive firm lowers its price?

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

Collusion would be common in an oligopoly and a monopolistically competitive industry.

Figure 9.17 -Refer to Figure 9.17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?

Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?

Table 9.1 Quantity Price Total Revenue (dollars) (dollars) 1 7.50 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 9.1.The marginal revenue of the 3rd unit is ______.

Is a monopolistically competitive firm productively efficient?

What do economists call a set of actions that a firm takes to achieve a goal,such as maximising profits?

Figure 9.14 -Refer to Figure 9.14.The output price is _____.

In economics,the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called ______.

A cooperative equilibrium results when firms _______.

In most business situations where firms compete,often they can escape the prisoner's dilemma and reach the most profitable outcome.Which of the following is a reason for this?

Which of the following is true if a monopolistically competitive firm has excess capacity?

Which of the following statements is true?

What is an agreement among firms to charge the same price or otherwise not to compete?

Which of the following will not happen as a consequence of a monopolistically competitive firm suffering economic losses in the short run?

An equilibrium in a game in which players pursue their own self-interests and do not cooperate is called a _______.

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

What one bad thing happens when a monopolistically competitive firm lowers its price?

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

Figure 9.17 -Refer to Figure 9.17.Suppose the firm is currently producing Q_f units.What happens if it increases its output to Q_gunits?