Question 1

The entry and exit of firms in a monopolistically competitive market guarantees that

Accepted Answer

A)  marginal revenue equals marginal cost, and average total cost is minimised. 
B)  firms can earn economic profits in the long run. 
C)  price equals average total cost in the long run. 
D)  firms can earn economic profits in the short run. 
A)  marginal revenue equals marginal cost, and average total cost is minimised. 
B)  firms can earn economic profits in the long run. 
C)  price equals average total cost in the long run. 
D)  firms can earn economic profits in the short run.

Question 2

In a Nash equilibrium,all players select non-dominant strategies.

Accepted Answer

A) True 
 B)False

Question 3

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

Accepted Answer

A) True 
 B)False

Question 4

One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?

Accepted Answer

Product differentiation is a s

Question 5

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a gain in revenue due to the

Accepted Answer

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

Question 6

A prisoner's dilemma leads to a non-cooperative equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

If advertising by a firm takes market share from competitors but does not add to total industry sales,then

Accepted Answer

A)  profits will not increase if other firms in the industry do not advertise. 
B)  profits will not increase if other firms also advertise. 
C)  the best outcome is for firms to all advertise together. 
D)  firms would be better off by agreeing not to advertise. 
A)  profits will not increase if other firms in the industry do not advertise. 
B)  profits will not increase if other firms also advertise. 
C)  the best outcome is for firms to all advertise together. 
D)  firms would be better off by agreeing not to advertise.

Question 8

Which of the following is not an example of a monopolistically competitive market?

Accepted Answer

A)  Automobile producers 
B)  Supermarkets 
C)  Video stores 
D)  Makers of women's clothing 
A)  Automobile producers 
B)  Supermarkets 
C)  Video stores 
D)  Makers of women's clothing

Question 9

Figure 9-12  
-Refer to Figure 9-12.The diagram depicts a firm

Accepted Answer

A)  in a constant-cost industry. 
B)  in an increasing-cost industry. 
C)  in long-run equilibrium. 
D)  that is incurring short-run losses. 
A)  in a constant-cost industry. 
B)  in an increasing-cost industry. 
C)  in long-run equilibrium. 
D)  that is incurring short-run losses.

Question 10

Two firms would sometimes be better off if they got together and agreed to charge a high price,rather than to compete and risk having to charge a lower,competitive price.What is the greatest deterrent to this strategy?

Accepted Answer

A)  The firms may find that the price they charge is greater than the price that would maximise their profits. 
B)  An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail. 
C)  Consumers may resent having to pay high prices and not buy from either of the firms. 
D)  One of the firms may decide to lower its price and take business away from the firm that charged the high price. 
A)  The firms may find that the price they charge is greater than the price that would maximise their profits. 
B)  An agreement by firms to charge high prices is illegal. The government can fine the firms and send their managers to jail. 
C)  Consumers may resent having to pay high prices and not buy from either of the firms. 
D)  One of the firms may decide to lower its price and take business away from the firm that charged the high price.

Question 11

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?

Accepted Answer

A)  Producing more of its product 
B)  Advertising that it will match its rival's price 
C)  Reneging on a previous tacit agreement with rival firms to charge identical high prices 
D)  Ignoring the pricing decisions of the other firms 
A)  Producing more of its product 
B)  Advertising that it will match its rival's price 
C)  Reneging on a previous tacit agreement with rival firms to charge identical high prices 
D)  Ignoring the pricing decisions of the other firms

Question 12

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 13

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

Accepted Answer

A) True 
 B)False

Question 14

The profit-maximising level of output and the profit-maximising price for an oligopolist cannot be calculated when we don't know

Accepted Answer

A)  what the concentration ratio for the oligopolist's industry is. 
B)  what the minimum efficient scale in the oligopolist's industry is. 
C)  the demand curve and the marginal revenue curve of the oligopolist. 
D)  the type of barrier to entry that exists in the oligopolist's industry. 
A)  what the concentration ratio for the oligopolist's industry is. 
B)  what the minimum efficient scale in the oligopolist's industry is. 
C)  the demand curve and the marginal revenue curve of the oligopolist. 
D)  the type of barrier to entry that exists in the oligopolist's industry.

Question 15

Table 9-2
   Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 9-2 shows the firm's demand and cost schedules.
-Refer to Table 9-2.What is the marginal profit from producing and selling the 5th case?

Accepted Answer

A)  $275 
B)  $145 
C)  $35 
D)  $20 
A)  $275 
B)  $145 
C)  $35 
D)  $20

Question 16

Which of the following statements about the prisoner's dilemma is false?

Accepted Answer

A)  The prisoner's dilemma in a one-shot game leads to a non-cooperative, equilibrium outcome. 
B)  The prisoner's dilemma in repeated games could lead to cooperation, especially if there is some enforcement mechanism that punishes a player who does not cooperate. 
C)  Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal. 
D)  The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate. 
A)  The prisoner's dilemma in a one-shot game leads to a non-cooperative, equilibrium outcome. 
B)  The prisoner's dilemma in repeated games could lead to cooperation, especially if there is some enforcement mechanism that punishes a player who does not cooperate. 
C)  Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal. 
D)  The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate.

Question 17

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Accepted Answer

New firms entering an industry cause the

Question 18

Table 9-1
  
-Refer to Table 9-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

Accepted Answer

A)  Output effect = $24.00; price effect = $19.50 
B)  Output effect = $6.50; price effect = $2.00 
C)  Output effect = -$0.50; price effect = $5.00 
D)  Output effect = $6.00; price effect = -$1.50 
A)  Output effect = $24.00; price effect = $19.50 
B)  Output effect = $6.50; price effect = $2.00 
C)  Output effect = -$0.50; price effect = $5.00 
D)  Output effect = $6.00; price effect = -$1.50

Question 19

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

Accepted Answer

A)  Deciding 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 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 20

Sparkle,one of many firms in the market for toothpaste,is in long-run equilibrium.Sparkle has a small market share and has been in business for a long time.
a.Identify the market structure in which Sparkle operates.Explain your answer.
b.What is Sparkle's profit or loss? Explain your answer.If you cannot determine the profit or loss,explain what information is missing.
c.Draw a diagram showing Sparkle's demand curve,marginal revenue curve,average total cost curve and marginal cost curve.Label your diagram.

Accepted Answer

a.Monopolistic competition; pr

The entry and exit of firms in a monopolistically competitive market guarantees that

In a Nash equilibrium,all players select non-dominant strategies.

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a gain in revenue due to the

A prisoner's dilemma leads to a non-cooperative equilibrium.

If advertising by a firm takes market share from competitors but does not add to total industry sales,then

Which of the following is not an example of a monopolistically competitive market?

Figure 9-12 -Refer to Figure 9-12.The diagram depicts a firm

Two firms would sometimes be better off if they got together and agreed to charge a high price,rather than to compete and risk having to charge a lower,competitive price.What is the greatest deterrent to this strategy?

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?

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

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

The profit-maximising level of output and the profit-maximising price for an oligopolist cannot be calculated when we don't know

Table 9-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 9-2 shows the firm's demand and cost schedules. -Refer to Table 9-2.What is the marginal profit from producing and selling the 5th case?

Which of the following statements about the prisoner's dilemma is false?

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Table 9-1 -Refer to Table 9-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 9: Firms in Perfectly Competitive Markets

The entry and exit of firms in a monopolistically competitive market guarantees that

In a Nash equilibrium,all players select non-dominant strategies.

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a gain in revenue due to the

A prisoner's dilemma leads to a non-cooperative equilibrium.

If advertising by a firm takes market share from competitors but does not add to total industry sales,then

Which of the following is not an example of a monopolistically competitive market?

Figure 9-12 -Refer to Figure 9-12.The diagram depicts a firm

Two firms would sometimes be better off if they got together and agreed to charge a high price,rather than to compete and risk having to charge a lower,competitive price.What is the greatest deterrent to this strategy?

Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?

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

In an oligopoly,minimum efficient scale is likely to occur at a level of output that is a large fraction of industry sales.

The profit-maximising level of output and the profit-maximising price for an oligopolist cannot be calculated when we don't know

Table 9-2 Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 9-2 shows the firm's demand and cost schedules. -Refer to Table 9-2.What is the marginal profit from producing and selling the 5th case?

Which of the following statements about the prisoner's dilemma is false?

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

Table 9-1 -Refer to Table 9-1.What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters