Question 1

How does oligopoly differ from perfect competition and monopolistic competition?

Accepted Answer

A)  Barriers to entry are lower in oligopoly industries than they are in perfectly competitive and monopolistically competitive industries. 
B)  Demand and marginal revenue curves are more useful for analysing oligopoly than they are for analysing perfect competition and monopolistic competition. 
C)  Oligopoly firms often react when other firms in their industry change their prices, so it is difficult to know what the oligopolist's demand curve looks like. 
D)  The concentration ratios of oligopoly industries are lower than they are for perfectly competitive and monopolistically competitive firms. 
A)  Barriers to entry are lower in oligopoly industries than they are in perfectly competitive and monopolistically competitive industries. 
B)  Demand and marginal revenue curves are more useful for analysing oligopoly than they are for analysing perfect competition and monopolistic competition. 
C)  Oligopoly firms often react when other firms in their industry change their prices, so it is difficult to know what the oligopolist's demand curve looks like. 
D)  The concentration ratios of oligopoly industries are lower than they are for perfectly competitive and monopolistically competitive firms.

Question 2

How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The demand curve facing a perfectly comp

Question 3

Because the monopolistically competitive firm faces a ________ demand curve for its product,it ________ the price of its output.

Accepted Answer

A)  downward-sloping; cannot influence 
B)  horizontal; can influence 
C)  horizontal; cannot influence 
D)  downward-sloping; can influence 
A)  downward-sloping; cannot influence 
B)  horizontal; can influence 
C)  horizontal; cannot influence 
D)  downward-sloping; can influence

Question 4

Figure 9.4   Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 9.4.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

Accepted Answer

A)  P0 
B)  P1 
C)  P2 
D)  P3 
A)  P0 
B)  P1 
C)  P2 
D)  P3

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.If Alistair assumes that Baine would increase its advertising budget,what should it do?

Accepted Answer

A)  Alistair should keep its own budget the same and allow Baine to incur the higher cost. 
B)  Alistair should also increase its advertising spending. 
C)  Alistair should reduce its advertising spending. 
D)  Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 per cent market share. 
A)  Alistair should keep its own budget the same and allow Baine to incur the higher cost. 
B)  Alistair should also increase its advertising spending. 
C)  Alistair should reduce its advertising spending. 
D)  Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 per cent market share.

Question 6

What is a major difference between monopolistic competition and perfect competition?

Accepted Answer

A)  The number of sellers in the markets 
B)  The degree by which the market demand curves slope downwards 
C)  That products are not standardised in monopolistic competition, unlike in perfect competition 
D)  The barriers to entry in the two markets 
A)  The number of sellers in the markets 
B)  The degree by which the market demand curves slope downwards 
C)  That products are not standardised in monopolistic competition, unlike in perfect competition 
D)  The barriers to entry in the two markets

Question 7

Explain the difference between a cooperative equilibrium and a non-cooperative equilibrium in game theory.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

A cooperative equilibrium is one in whic

Question 8

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas.

Accepted Answer

A) True 
 B)False

Question 9

There are many cattle ranchers in the world,and there are also many McDonald's restaurants in the world.Why,then,does a McDonald's restaurant face a downward-sloping demand curve while a cattle rancher faces a horizontal demand curve?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

All cattle ranchers are selling identica

Question 10

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.In this game,the Nash equilibrium is:

Accepted Answer

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

Question 11

Figure 9.6  
-Refer to Figure 9.6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced as shown in Figure 9.6.Dell will maximise profits if it produces ________ notebook computers per month.

Accepted Answer

A)  100 000 
B)  200 000 
C)  300 000 
D)  Not enough information is given to determine the profit-maximising quantity. 
A)  100 000 
B)  200 000 
C)  300 000 
D)  Not enough information is given to determine the profit-maximising quantity.

Question 12

OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has _______.

Accepted Answer

A)  a cooperative equilibrium 
B)  a non-cooperative equilibrium 
C)  new potential entrants 
D)  a threat of substitute goods 
A)  a cooperative equilibrium 
B)  a non-cooperative equilibrium 
C)  new potential entrants 
D)  a threat of substitute goods

Question 13

Figure 9.4   Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 9.4.The area that represents the loss made by the firm is ______.

Accepted Answer

A)  the area P0adP3 
B)  the area P1bcP2 
C)  the area P0acP2 
D)  the area P2cdP3 
A)  the area P0adP3 
B)  the area P1bcP2 
C)  the area P0acP2 
D)  the area P2cdP3

Question 14

What is the result when new firms are encouraged to enter a monopolistically competitive market?

Accepted Answer

A)  Some existing firms must be earning economic profits. 
B)  They do so because there is insufficient product differentiation. 
C)  The demand curve facing an existing firm shifts to the right. 
D)  The marginal cost curve facing an existing firm shifts downwards. 
A)  Some existing firms must be earning economic profits. 
B)  They do so because there is insufficient product differentiation. 
C)  The demand curve facing an existing firm shifts to the right. 
D)  The marginal cost curve facing an existing firm shifts downwards.

Question 15

Figure 9.17  
-Refer to Figure 9.17.The amount of excess capacity is _______.

Accepted Answer

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

Question 16

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

Accepted Answer

A) True 
 B)False

Question 17

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.Is there a dominant strategy for Saudi Arabia and,if so,what is it?

Accepted Answer

A)  Yes, the dominant strategy is to produce a high output. 
B)  Yes, the dominant strategy is to produce a low output. 
C)  No, there is no dominant strategy. 
D)  Yes, it has a dominant strategy depending on what Nigeria does. 
A)  Yes, the dominant strategy is to produce a high output. 
B)  Yes, the dominant strategy is to produce a low output. 
C)  No, there is no dominant strategy. 
D)  Yes, it has a dominant strategy depending on what Nigeria does.

Question 18

When will economies of scale create a barrier to entry in an oligopoly industry?

Accepted Answer

A)  When a firm's minimum efficient scale occurs where long-run average total costs are constant 
B)  When the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales 
C)  When the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a small fraction of total industry sales 
D)  When the industry's four-firm concentration ratio is less than 40 per cent 
A)  When a firm's minimum efficient scale occurs where long-run average total costs are constant 
B)  When the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a large fraction of total industry sales 
C)  When the typical firm's long-run average total cost curve reaches a minimum at a level of output that is a small fraction of total industry sales 
D)  When the industry's four-firm concentration ratio is less than 40 per cent

Question 19

Economists agree that a monopolistically competitive market structure _______.

Accepted Answer

A)  lowers consumer utility because consumers pay a price higher than the marginal cost of production. 
B)  is detrimental to society because it leads to a waste of scarce resources. 
C)  benefits consumers because firms produce products that appeal to a wide range of consumer tastes. 
D)  can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products. 
A)  lowers consumer utility because consumers pay a price higher than the marginal cost of production. 
B)  is detrimental to society because it leads to a waste of scarce resources. 
C)  benefits consumers because firms produce products that appeal to a wide range of consumer tastes. 
D)  can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products.

Question 20

How is long-run equilibrium under monopolistic competition similar to long-run equilibrium under perfect competition?

Accepted Answer

A)  Firms produce at the minimum point of their average cost curves. 
B)  Price equals marginal cost. 
C)  Firms break even. 
D)  Price equals marginal revenue. 
A)  Firms produce at the minimum point of their average cost curves. 
B)  Price equals marginal cost. 
C)  Firms break even. 
D)  Price equals marginal revenue.

How does oligopoly differ from perfect competition and monopolistic competition?

Because the monopolistically competitive firm faces a demand curve for its product,it the price of its output.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.If the firm represented in the diagram is currently producing and selling Q_aunits,what is the price charged?

What is a major difference between monopolistic competition and perfect competition?

Explain the difference between a cooperative equilibrium and a non-cooperative equilibrium in game theory. __________________________________________________________________________________________________________________________________________________________________________________________

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas.

Figure 9.6 -Refer to Figure 9.6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced as shown in Figure 9.6.Dell will maximise profits if it produces ________ notebook computers per month.

OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has _______.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.The area that represents the loss made by the firm is ______.

What is the result when new firms are encouraged to enter a monopolistically competitive market?

Figure 9.17 -Refer to Figure 9.17.The amount of excess capacity is _______.

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

When will economies of scale create a barrier to entry in an oligopoly industry?

Economists agree that a monopolistically competitive market structure _______.

How is long-run equilibrium under monopolistic competition similar to long-run equilibrium under perfect competition?

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

How does oligopoly differ from perfect competition and monopolistic competition?

Because the monopolistically competitive firm faces a ________ demand curve for its product,it ________ the price of its output.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

What is a major difference between monopolistic competition and perfect competition?

Explain the difference between a cooperative equilibrium and a non-cooperative equilibrium in game theory. __________________________________________________________________________________________________________________________________________________________________________________________

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas.

Figure 9.6 -Refer to Figure 9.6.Suppose Dell finds the relationship between the average total cost of producing notebook computers and the quantity of notebook computers produced as shown in Figure 9.6.Dell will maximise profits if it produces ________ notebook computers per month.

OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has _______.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.The area that represents the loss made by the firm is ______.

What is the result when new firms are encouraged to enter a monopolistically competitive market?

Figure 9.17 -Refer to Figure 9.17.The amount of excess capacity is _______.

If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.

When will economies of scale create a barrier to entry in an oligopoly industry?

Economists agree that a monopolistically competitive market structure _______.

How is long-run equilibrium under monopolistic competition similar to long-run equilibrium under perfect competition?

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

Because the monopolistically competitive firm faces a demand curve for its product,it the price of its output.

Figure 9.4 Figure 9.4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.4.If the firm represented in the diagram is currently producing and selling Q_aunits,what is the price charged?