Question 1

If price exceeds average variable cost but is less than average total cost,a firm

Accepted Answer

A)  should further differentiate its product. 
B)  should stay in business for a while longer until its fixed costs expire. 
C)  is making some profit but less than maximum profit. 
D)  should shut down. 
A)  should further differentiate its product. 
B)  should stay in business for a while longer until its fixed costs expire. 
C)  is making some profit but less than maximum profit. 
D)  should shut down.

Question 2

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Accepted Answer

A)  new entrants into the market are more likely to have cutting-edge products. 
B)  as the firm raises its price in the long run, it will lose some customers to new entrants in the market. 
C)  some of its customers will have switched to purchasing the products of new entrants in the market. 
D)  its costs of production rise. 
A)  new entrants into the market are more likely to have cutting-edge products. 
B)  as the firm raises its price in the long run, it will lose some customers to new entrants in the market. 
C)  some of its customers will have switched to purchasing the products of new entrants in the market. 
D)  its costs of production rise.

Question 3

A monopolistically competitive firm maximises profit where

Accepted Answer

A)  price = marginal revenue. 
B)  price > marginal cost. 
C)  marginal revenue > average revenue. 
D)  total revenue > marginal cost. 
A)  price = marginal revenue. 
B)  price > marginal cost. 
C)  marginal revenue > average revenue. 
D)  total revenue > marginal cost.

Question 4

All of the following are characteristics of game theory except

Accepted Answer

A)  rules that determine what actions are allowable. 
B)  payoffs that are the results of the interaction among players' strategies. 
C)  strategies that players employ to attain their objectives. 
D)  independence among players. 
A)  rules that determine what actions are allowable. 
B)  payoffs that are the results of the interaction among players' strategies. 
C)  strategies that players employ to attain their objectives. 
D)  independence among players.

Question 5

For a monopolistically competitive firm,marginal revenue

Accepted Answer

A)  equals the price. 
B)  is greater than the price. 
C)  is less than the price. 
D)  and price are unrelated. 
A)  equals the price. 
B)  is greater than the price. 
C)  is less than the price. 
D)  and price are unrelated.

Question 6

What is an oligopoly? Give two examples of oligopolistic industries in Australia.

Accepted Answer

Oligopoly is a market structur

Question 7

Figure 9-3  
-Refer to Figure 9-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Accepted Answer

A)  X represents the gain (price effect) and Y the loss (output effect). 
B)  X + Z represents the loss (output effect) and Y the gain (price effect). 
C)  Y represents the gain (output effect) and X the loss (price effect). 
D)  X represents the loss (price effect) and Y + Z the gain (output effect). 
A)  X represents the gain (price effect) and Y the loss (output effect). 
B)  X + Z represents the loss (output effect) and Y the gain (price effect). 
C)  Y represents the gain (output effect) and X the loss (price effect). 
D)  X represents the loss (price effect) and Y + Z the gain (output effect).

Question 8

Complete the following table.

Accepted Answer

The answer of Complete the following table.
  ...

Question 9

Assume that two interior design companies,Alistair and Baine,are competing for customers and,if they both advertise,they would each earn $30 million in profits.If neither advertises,they each earn $50 million in profits.If one advertises and the other doesn't,the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
a. Present the information above in the form of a payoff matrix.Let Baine be the row player and Alistair the column player.
b. Does each firm have a dominant strategy and if so what is it?
c. What is the Nash equilibrium?

Accepted Answer

a. See the table below. @#IMG-DLM& b. No,there is

Question 10

What is the incentive for a firm to join a cartel?

Accepted Answer

A)  To be able to earn profits in the long run but not in the short run. 
B)  To be able to earn larger profits than if it was not part of the cartel. 
C)  To completely insulate itself from competition. 
D)  To produce a larger amount of output than if it was not part of the cartel. 
A)  To be able to earn profits in the long run but not in the short run. 
B)  To be able to earn larger profits than if it was not part of the cartel. 
C)  To completely insulate itself from competition. 
D)  To produce a larger amount of output than if it was not part of the cartel.

Question 11

The key characteristics of a monopolistically competitive market structure include

Accepted Answer

A)  many small (relative to the total market) sellers acting independently. 
B)  all sellers sell a homogeneous product. 
C)  barriers to entry are strong. 
D)  sellers have no incentive to advertise their products. 
A)  many small (relative to the total market) sellers acting independently. 
B)  all sellers sell a homogeneous product. 
C)  barriers to entry are strong. 
D)  sellers have no incentive to advertise their products.

Question 12

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

Accepted Answer

A)  Fixed costs in the airline industry are very large, but the marginal cost of flying one more passenger is very low. 
B)  Airlines receive a subsidy from the government for each flight that is fully booked and departs on time. 
C)  The Civil Aviation Authority ranks each airline based on the percentage of flights that are fully booked. These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings. 
D)  Cutting prices makes the airlines more popular with their customers, who may fly with the same airline in the future as the result of buying low-price tickets. 
A)  Fixed costs in the airline industry are very large, but the marginal cost of flying one more passenger is very low. 
B)  Airlines receive a subsidy from the government for each flight that is fully booked and departs on time. 
C)  The Civil Aviation Authority ranks each airline based on the percentage of flights that are fully booked. These rankings affect the decisions of firms to use a particular airline to fly their employees to business meetings. 
D)  Cutting prices makes the airlines more popular with their customers, who may fly with the same airline in the future as the result of buying low-price tickets.

Question 13

A monopolistically competitive firm that earns an accounting profit in the short run

Accepted Answer

A)  must also earn an economic profit in the short run. 
B)  does not earn enough to earn an economic profit in the short run. 
C)  could earn an economic profit, break even or suffer an economic loss in the short run. 
D)  could earn an economic profit or break even, but could not suffer an economic loss in the short run. 
A)  must also earn an economic profit in the short run. 
B)  does not earn enough to earn an economic profit in the short run. 
C)  could earn an economic profit, break even or suffer an economic loss in the short run. 
D)  could earn an economic profit or break even, but could not suffer an economic loss in the short run.

Question 14

When an oligopoly market is in Nash equilibrium,

Accepted Answer

A)  firms have colluded to set their prices. 
B)  firms will not behave as profit maximisers. 
C)  a firm will not take into account the strategies of its rivals. 
D)  a firm will choose its best pricing strategy, given the strategies that it observes other firms have taken. 
A)  firms have colluded to set their prices. 
B)  firms will not behave as profit maximisers. 
C)  a firm will not take into account the strategies of its rivals. 
D)  a firm will choose its best pricing strategy, given the strategies that it observes other firms have taken.

Question 15

In an oligopoly market

Accepted Answer

A)  the pricing decisions of all other firms have no effect on an individual firm. 
B)  individual firms pay no attention to the behaviour of other firms. 
C)  the advertising of one firm has no effect on all other firms. 
D)  one firm's pricing decision affects all the other firms. 
A)  the pricing decisions of all other firms have no effect on an individual firm. 
B)  individual firms pay no attention to the behaviour of other firms. 
C)  the advertising of one firm has no effect on all other firms. 
D)  one firm's pricing decision affects all the other firms.

Question 16

A Nash equilibrium is

Accepted Answer

A)  reached when an oligopoly's market demand and supply intersect. 
B)  reached when each player chooses the best strategy for himself and for the group. 
C)  reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. 
D)  an equilibrium comprising non-dominant strategies only. 
A)  reached when an oligopoly's market demand and supply intersect. 
B)  reached when each player chooses the best strategy for himself and for the group. 
C)  reached when each player chooses the best strategy for himself, given the other strategies chosen by the other players in the group. 
D)  an equilibrium comprising non-dominant strategies only.

Question 17

Who won a Nobel Prize in economics for his work in the development of game theory?

Accepted Answer

A)  John von Neuman 
B)  Oskar Morgenstern 
C)  John Nash 
D)  Howard Schultz 
A)  John von Neuman 
B)  Oskar Morgenstern 
C)  John Nash 
D)  Howard Schultz

Question 18

In the short run,a profit-maximising firm's decision to produce should be guided by whether

Accepted Answer

A)  it makes a profit. 
B)  its marginal profit is maximised. 
C)  its total revenue exceeds its fixed cost. 
D)  its total revenue covers its variable cost. 
A)  it makes a profit. 
B)  its marginal profit is maximised. 
C)  its total revenue exceeds its fixed cost. 
D)  its total revenue covers its variable cost.

Question 19

When a monopolistically competitive firm lowers its price,one good thing happens to the firm.What is this 'one good thing' called?

Accepted Answer

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

Question 20

Table 9-6   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 whether to increase its advertising spending to compete for customers. Table 9-6 shows the payoff matrix for this advertising game.
-Refer to Table 9-6.What is the Nash equilibrium in this game?

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.

If price exceeds average variable cost but is less than average total cost,a firm

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

A monopolistically competitive firm maximises profit where

All of the following are characteristics of game theory except

For a monopolistically competitive firm,marginal revenue

What is an oligopoly? Give two examples of oligopolistic industries in Australia.

Figure 9-3 -Refer to Figure 9-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Complete the following table.

What is the incentive for a firm to join a cartel?

The key characteristics of a monopolistically competitive market structure include

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

A monopolistically competitive firm that earns an accounting profit in the short run

When an oligopoly market is in Nash equilibrium,

In an oligopoly market

A Nash equilibrium is

Who won a Nobel Prize in economics for his work in the development of game theory?

In the short run,a profit-maximising firm's decision to produce should be guided by whether

When a monopolistically competitive firm lowers its price,one good thing happens to the firm.What is this 'one good thing' called?

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

If price exceeds average variable cost but is less than average total cost,a firm

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

A monopolistically competitive firm maximises profit where

All of the following are characteristics of game theory except

For a monopolistically competitive firm,marginal revenue

What is an oligopoly? Give two examples of oligopolistic industries in Australia.

Figure 9-3 -Refer to Figure 9-3.The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit.Based on the diagram in the figure,

Complete the following table.

What is the incentive for a firm to join a cartel?

The key characteristics of a monopolistically competitive market structure include

Which of the following best explains why airlines often cut their ticket prices at the last-minute in order to fill the remaining empty seats on their flights?

A monopolistically competitive firm that earns an accounting profit in the short run

When an oligopoly market is in Nash equilibrium,

In an oligopoly market

A Nash equilibrium is

Who won a Nobel Prize in economics for his work in the development of game theory?

In the short run,a profit-maximising firm's decision to produce should be guided by whether

When a monopolistically competitive firm lowers its price,one good thing happens to the firm.What is this 'one good thing' called?

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