Question 1

Figure 9-12  
-Refer to Figure 9-12.What is the amount of excess capacity?

Accepted Answer

A)  Q4 - Q3 units 
B)  Q4 - Q2 units 
C)  Q3 - Q2 units 
D)  Q3 - Q1 units 
A)  Q4 - Q3 units 
B)  Q4 - Q2 units 
C)  Q3 - Q2 units 
D)  Q3 - Q1 units

Question 2

The marginal revenue of a monopolistically competitive firm

Accepted Answer

A)  cannot be negative because the price the firm charges will always be greater than zero. 
B)  can be negative if the firm charges a high price. 
C)  can be negative if the firm charges a low price. 
D)  will equal average revenue. 
A)  cannot be negative because the price the firm charges will always be greater than zero. 
B)  can be negative if the firm charges a high price. 
C)  can be negative if the firm charges a low price. 
D)  will equal average revenue.

Question 3

Which of the following statements is true about marginal revenue?

Accepted Answer

A)  If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. 
B)  If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
C)  If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
D)  Marginal revenue increases as price falls and quantity sold increases. 
A)  If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. 
B)  If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
C)  If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
D)  Marginal revenue increases as price falls and quantity sold increases.

Question 4

A monopolistically competitive industry that earns economic profits in the short run will

Accepted Answer

A)  continue to earn economic profits in the long run. 
B)  experience the entry of new rival firms into the industry in the long run. 
C)  experience the exit of existing firms out of the industry in the long run. 
D)  experience a rise in demand in the long run. 
A)  continue to earn economic profits in the long run. 
B)  experience the entry of new rival firms into the industry in the long run. 
C)  experience the exit of existing firms out of the industry in the long run. 
D)  experience a rise in demand in the long run.

Question 5

Marginal revenue for an oligopolist is

Accepted Answer

A)  identical to the demand for the firm's product. 
B)  difficult to determine because the firm's demand curve is typically unknown. 
C)  downward sloping beneath the firm's demand curve. 
D)  horizontal on a price-quantity diagram. 
A)  identical to the demand for the firm's product. 
B)  difficult to determine because the firm's demand curve is typically unknown. 
C)  downward sloping beneath the firm's demand curve. 
D)  horizontal on a price-quantity diagram.

Question 6

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.What is the area that represents the loss made by the firm?

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 7

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

Accepted Answer

A)  a copyright. 
B)  a patent. 
C)  an exclusive marketing agreement. 
D)  a tariff. 
A)  a copyright. 
B)  a patent. 
C)  an exclusive marketing agreement. 
D)  a tariff.

Question 8

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.What is the area that represents the total revenue made by the firm?

Accepted Answer

A)  0P0aQa 
B)  0P1bQa 
C)  0P2cQa 
D)  0P3dQa 
A)  0P0aQa 
B)  0P1bQa 
C)  0P2cQa 
D)  0P3dQa

Question 9

Figure 9-17  
-Refer to Figure 9-17.What is the amount of excess capacity?

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 10

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Accepted Answer

A) True 
 B)False

Question 11

Most economists are concerned about entry barriers.Why is this so important to them?

Accepted Answer

Entry barriers enable a firm to earn lon

Question 12

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not an example of a government-imposed entry barrier?

Accepted Answer

A)  Patents 
B)  Occupational licensing 
C)  Barriers to international trade 
D)  Antitrust legislation 
A)  Patents 
B)  Occupational licensing 
C)  Barriers to international trade 
D)  Antitrust legislation

Question 14

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

Accepted Answer

A)  Nash equilibrium. 
B)  the prisoner's dilemma. 
C)  game theory. 
D)  dominant strategy equilibrium. 
A)  Nash equilibrium. 
B)  the prisoner's dilemma. 
C)  game theory. 
D)  dominant strategy equilibrium.

Question 15

In contrast with perfect competition,excess capacity characterises monopolistic competition.Excess capacity is due to which of the following?

Accepted Answer

A)  Monopolistically competitive firms produce at the minimum point on their average total cost curves. 
B)  Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves. 
C)  Monopolistically competitive firms produce where marginal revenue is equal to marginal cost. 
D)  Monopolistically competitive markets have low barriers to entry. 
A)  Monopolistically competitive firms produce at the minimum point on their average total cost curves. 
B)  Monopolistically competitive firms face downward-sloping demand curves. In the long run, firms produce where their demand curves are tangent to their long-run average total cost curves. 
C)  Monopolistically competitive firms produce where marginal revenue is equal to marginal cost. 
D)  Monopolistically competitive markets have low barriers to entry.

Question 16

A member of a cartel like OPEC has an incentive to

Accepted Answer

A)  argue for larger production quotas for each member of the cartel. 
B)  agree to a low cartel production level and then produce more than its quota. 
C)  abide by its individual production quota. 
D)  support equal production quotas for each member. 
A)  argue for larger production quotas for each member of the cartel. 
B)  agree to a low cartel production level and then produce more than its quota. 
C)  abide by its individual production quota. 
D)  support equal production quotas for each member.

Question 17

Producing a differentiated product occurs in which of the following industries?

Accepted Answer

A)  Oligopoly, monopolistic competition and perfect competition 
B)  Monopolistic competition only 
C)  Oligopoly only 
D)  Monopolistic competition and oligopoly 
A)  Oligopoly, monopolistic competition and perfect competition 
B)  Monopolistic competition only 
C)  Oligopoly only 
D)  Monopolistic competition and oligopoly

Question 18

Explain why OPEC is caught in a prisoner's dilemma?

Accepted Answer

If every member of OPEC cooperates and p

Question 19

A monopolistically competitive market is described as one in which there are

Accepted Answer

A)  a few firms producing an identical product. 
B)  a large number of firms selling similar, but not identical, products. 
C)  a few firms producing differentiated products. 
D)  one large firm and many small firms producing identical products. 
A)  a few firms producing an identical product. 
B)  a large number of firms selling similar, but not identical, products. 
C)  a few firms producing differentiated products. 
D)  one large firm and many small firms producing identical products.

Question 20

Table 9-7   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 9-7 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 9-7.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.

Figure 9-12 -Refer to Figure 9-12.What is the amount of excess capacity?

The marginal revenue of a monopolistically competitive firm

Which of the following statements is true about marginal revenue?

A monopolistically competitive industry that earns economic profits in the short run will

Marginal revenue for an oligopolist is

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.What is the area that represents the loss made by the firm?

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

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.What is the area that represents the total revenue made by the firm?

Figure 9-17 -Refer to Figure 9-17.What is the amount of excess capacity?

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Most economists are concerned about entry barriers.Why is this so important to them?

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

Which of the following is not an example of a government-imposed entry barrier?

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

In contrast with perfect competition,excess capacity characterises monopolistic competition.Excess capacity is due to which of the following?

A member of a cartel like OPEC has an incentive to

Producing a differentiated product occurs in which of the following industries?

Explain why OPEC is caught in a prisoner's dilemma?

A monopolistically competitive market is described as one in which there are

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

Figure 9-12 -Refer to Figure 9-12.What is the amount of excess capacity?

The marginal revenue of a monopolistically competitive firm

Which of the following statements is true about marginal revenue?

A monopolistically competitive industry that earns economic profits in the short run will

Marginal revenue for an oligopolist is

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.What is the area that represents the loss made by the firm?

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as

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.What is the area that represents the total revenue made by the firm?

Figure 9-17 -Refer to Figure 9-17.What is the amount of excess capacity?

A monopolistic competitor does not earn profits in the long run unless it can successfully differentiate its product in the minds of its consumers.

Most economists are concerned about entry barriers.Why is this so important to them?

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

Which of the following is not an example of a government-imposed entry barrier?

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

In contrast with perfect competition,excess capacity characterises monopolistic competition.Excess capacity is due to which of the following?

A member of a cartel like OPEC has an incentive to

Producing a differentiated product occurs in which of the following industries?

Explain why OPEC is caught in a prisoner's dilemma?

A monopolistically competitive market is described as one in which there are

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