Question 1

Economies of scale will create a barrier to entry in an oligopoly industry when

Accepted Answer

A)  a firm's minimum efficient scale occurs where long-run average total costs are constant. 
B)  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)  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)  the industry's four-firm concentration ratio is less than 40 per cent. 
A)  a firm's minimum efficient scale occurs where long-run average total costs are constant. 
B)  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)  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)  the industry's four-firm concentration ratio is less than 40 per cent.

Question 2

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits but,unlike perfectly competitive firms in the long run,monopolistically competitive firms

Accepted Answer

A)  charge a price that is greater than average revenue. 
B)  charge a price that is equal to marginal cost. 
C)  do not produce at minimum average total cost. 
D)  charge a price that is equal to average total cost. 
A)  charge a price that is greater than average revenue. 
B)  charge a price that is equal to marginal cost. 
C)  do not produce at minimum average total cost. 
D)  charge a price that is equal to average total cost.

Question 3

A monopolistically competitive firm will

Accepted Answer

A)  charge the same price as its competitors do. 
B)  always produce at the minimum efficient scale of production. 
C)  have some control over its price because its product is differentiated. 
D)  produce an output level that is productively and allocatively efficient. 
A)  charge the same price as its competitors do. 
B)  always produce at the minimum efficient scale of production. 
C)  have some control over its price because its product is differentiated. 
D)  produce an output level that is productively and allocatively efficient.

Question 4

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 Eco Energy's profit?

Accepted Answer

A)  $125 
B)  $140 
C)  $145 
D)  $150 
A)  $125 
B)  $140 
C)  $145 
D)  $150

Question 5

A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Accepted Answer

A) True 
 B)False

Question 6

What is the difference between explicit collusion and implicit collusion?

Accepted Answer

Explicit collusion involves ma

Question 7

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A)  few sellers. 
B)  sellers selling similar but differentiated products. 
C)  high barriers to entry. 
D)  sellers acting to maximise revenue. 
A)  few sellers. 
B)  sellers selling similar but differentiated products. 
C)  high barriers to entry. 
D)  sellers acting to maximise revenue.

Question 8

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

Accepted Answer

A)  Firms in perfect competition achieve productive and allocative efficiency, while firms in monopolistic competition achieve neither allocative nor productive efficiency. 
B)  The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product. 
C)  Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency. 
D)  Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency. 
A)  Firms in perfect competition achieve productive and allocative efficiency, while firms in monopolistic competition achieve neither allocative nor productive efficiency. 
B)  The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product. 
C)  Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency. 
D)  Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency.

Question 9

The prisoner's dilemma illustrates

Accepted Answer

A)  how oligopolists engage in implicit collusion under strategic situations. 
B)  why firms will not cooperate if they behave strategically. 
C)  why firms have an incentive to cheat on agreements. 
D)  how cooperation in strategic situations leads to the economically efficient market outcome. 
A)  how oligopolists engage in implicit collusion under strategic situations. 
B)  why firms will not cooperate if they behave strategically. 
C)  why firms have an incentive to cheat on agreements. 
D)  how cooperation in strategic situations leads to the economically efficient market outcome.

Question 10

A dominant strategy is

Accepted Answer

A)  an equilibrium where each firm chooses the best strategy, given the strategies of other firms. 
B)  a strategy chosen by two firms that decide to charge the same price or otherwise not to compete. 
C)  a strategy that is obviously the best for each firm that is a party to a business decision. 
D)  a strategy that is the best for a firm no matter what strategies other firms use. 
A)  an equilibrium where each firm chooses the best strategy, given the strategies of other firms. 
B)  a strategy chosen by two firms that decide to charge the same price or otherwise not to compete. 
C)  a strategy that is obviously the best for each firm that is a party to a business decision. 
D)  a strategy that is the best for a firm no matter what strategies other firms use.

Question 11

Table 9-4
   Table 9-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 9-4.Victoria's profit-maximising quantity sold (Q)and price (P)are

Accepted Answer

A)  Q = 3; P = $7. 
B)  Q = 4; P = $6. 
C)  Q = 5; P = $5. 
D)  Q = 6; P = $4. 
A)  Q = 3; P = $7. 
B)  Q = 4; P = $6. 
C)  Q = 5; P = $5. 
D)  Q = 6; P = $4.

Question 12

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

Accepted Answer

A) True 
 B)False

Question 13

Long-run equilibrium under monopolistic competition is similar to long-run equilibrium under perfect competition in that

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.

Question 14

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the 8th pair of jeans is

Accepted Answer

A)  $20. 
B)  $90. 
C)  $100. 
D)  $700. 
A)  $20. 
B)  $90. 
C)  $100. 
D)  $700.

Question 15

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

Accepted Answer

A)  Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B)  Consumers pay a price greater than marginal cost but have the luxury of choices more suited to their tastes. 
C)  Consumers pay higher prices but the products are produced by highly efficient firms. 
D)  Consumers pay lower prices but have fewer choices. 
A)  Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms. 
B)  Consumers pay a price greater than marginal cost but have the luxury of choices more suited to their tastes. 
C)  Consumers pay higher prices but the products are produced by highly efficient firms. 
D)  Consumers pay lower prices but have fewer choices.

Question 16

eBay is an online auction site where more than 200 million items are auctioned annually.What type of auctions are run on eBay?

Accepted Answer

A)  Non-cooperative auctions 
B)  Second-price auctions 
C)  Cooperative auctions 
D)  Double-blind auctions 
A)  Non-cooperative auctions 
B)  Second-price auctions 
C)  Cooperative auctions 
D)  Double-blind auctions

Question 17

For allocative efficiency to hold,

Accepted Answer

A)  price must equal the marginal revenue of the last unit sold. 
B)  price must equal the marginal cost of the last unit produced. 
C)  average variable cost is minimised in production. 
D)  average total cost is minimised in production. 
A)  price must equal the marginal revenue of the last unit sold. 
B)  price must equal the marginal cost of the last unit produced. 
C)  average variable cost is minimised in production. 
D)  average total cost is minimised in production.

Question 18

If economies of scale are relatively unimportant in an industry,the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a ________ fraction of total industry sales.The industry will be ________.

Accepted Answer

A)  large; competitive 
B)  large; an oligopoly 
C)  small; competitive 
D)  small; an oligopoly 
A)  large; competitive 
B)  large; an oligopoly 
C)  small; competitive 
D)  small; an oligopoly

Question 19

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)  Firms are price takers. 
B)  There are many buyers and sellers. 
C)  Barriers to entry are low. 
D)  Firms sell similar, but not identical, products. 
A)  Firms are price takers. 
B)  There are many buyers and sellers. 
C)  Barriers to entry are low. 
D)  Firms sell similar, but not identical, products.

Question 20

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.

Economies of scale will create a barrier to entry in an oligopoly industry when

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits but,unlike perfectly competitive firms in the long run,monopolistically competitive firms

A monopolistically competitive firm will

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 Eco Energy's profit?

A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

What is the difference between explicit collusion and implicit collusion?

The key characteristics of a monopolistically competitive market structure include

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

The prisoner's dilemma illustrates

A dominant strategy is

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

Long-run equilibrium under monopolistic competition is similar to long-run equilibrium under perfect competition in that

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the 8th pair of jeans is

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

eBay is an online auction site where more than 200 million items are auctioned annually.What type of auctions are run on eBay?

For allocative efficiency to hold,

If economies of scale are relatively unimportant in an industry,the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a fraction of total industry sales.The industry will be .

Which of the following is not a characteristic of monopolistic competition?

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?

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

Exam 9: Firms in Perfectly Competitive Markets

Economies of scale will create a barrier to entry in an oligopoly industry when

In the long run,firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits but,unlike perfectly competitive firms in the long run,monopolistically competitive firms

A monopolistically competitive firm will

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 Eco Energy's profit?

A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

What is the difference between explicit collusion and implicit collusion?

The key characteristics of a monopolistically competitive market structure include

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

The prisoner's dilemma illustrates

A dominant strategy is

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently.

Long-run equilibrium under monopolistic competition is similar to long-run equilibrium under perfect competition in that

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.The marginal revenue of the 8th pair of jeans is

What is the trade-off that consumers face when buying the product of a monopolistically competitive firm?

eBay is an online auction site where more than 200 million items are auctioned annually.What type of auctions are run on eBay?

For allocative efficiency to hold,

If economies of scale are relatively unimportant in an industry,the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a ________ fraction of total industry sales.The industry will be ________.

Which of the following is not a characteristic of monopolistic competition?

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?

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

If economies of scale are relatively unimportant in an industry,the typical firm's long-run average total cost curve will reach a minimum at a level of output that is a fraction of total industry sales.The industry will be .