Question 1

A cartel is:

Accepted Answer

A) a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B) a government-approved organization for the exchange of technical information among firms. 
C) an industry trade group formed to lobby political leaders. 
D) a regulated industry manufacturers association that is officially permitted to set the price of its product above long-run average total cost. 
A) a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B) a government-approved organization for the exchange of technical information among firms. 
C) an industry trade group formed to lobby political leaders. 
D) a regulated industry manufacturers association that is officially permitted to set the price of its product above long-run average total cost.

Question 2

In the "Prisoners' Dilemma" game:

Accepted Answer

A) each player would be better off if he confessed and the other player did not confess. 
B) each player would be better off if he did not confess and the other player confessed. 
C) each player would be better off if both he and the other player confessed. 
D) each player would be better off if neither he nor the other player confessed. 
A) each player would be better off if he confessed and the other player did not confess. 
B) each player would be better off if he did not confess and the other player confessed. 
C) each player would be better off if both he and the other player confessed. 
D) each player would be better off if neither he nor the other player confessed.

Question 3

Which of the following is true for a typical firm in a typical cartel?

Accepted Answer

A) "I can never do better for myself than by following agreed-upon cartel policies." 
B) "If everyone cheats, I'm better off, and so is everyone else in the cartel." 
C) "If I alone cheat, I'm better off; if everyone cheats, I'm worse off." 
D) "If I suspect others are planning to cheat, I'll do best for myself by refraining from cheating." 
A) "I can never do better for myself than by following agreed-upon cartel policies." 
B) "If everyone cheats, I'm better off, and so is everyone else in the cartel." 
C) "If I alone cheat, I'm better off; if everyone cheats, I'm worse off." 
D) "If I suspect others are planning to cheat, I'll do best for myself by refraining from cheating."

Question 4

Since a monopolistically competitive firm faces a ____ demand curve, it will always operate ____ in long-run equilibrium.

Accepted Answer

A) perfectly elastic; with excess capacity 
B) downward-sloping; with excess capacity 
C) downward-sloping; at an economically efficient scale 
D) perfectly inelastic; at an economically efficient scale 
A) perfectly elastic; with excess capacity 
B) downward-sloping; with excess capacity 
C) downward-sloping; at an economically efficient scale 
D) perfectly inelastic; at an economically efficient scale

Question 5

Monopolistic competition is common in:

Accepted Answer

A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation. 
A) retail selling. 
B) farming. 
C) basic manufacturing. 
D) electric power generation.

Question 6

Individual members of a cartel have an incentive to ____ the cartel agreement because pursuit of ____ will maximize individual profit.

Accepted Answer

A) adhere to; self-interest 
B) cheat on; collective interest 
C) cheat on; self-interest 
D) adhere to; collective interest 
A) adhere to; self-interest 
B) cheat on; collective interest 
C) cheat on; self-interest 
D) adhere to; collective interest

Question 7

Characteristics of a monopolistically competitive market include all of the following except:

Accepted Answer

A) some influence over price. 
B) a large number of sellers. 
C) barriers to entry. 
D) differentiated products. 
A) some influence over price. 
B) a large number of sellers. 
C) barriers to entry. 
D) differentiated products.

Question 8

In monopolistically competitive markets in long-run equilibrium:

Accepted Answer

A) more than the efficient level of output will be produced because price exceeds marginal cost. 
B) less than the efficient level of output will be produced because price exceeds marginal cost. 
C) more than the efficient level of output will be produced because marginal revenue exceeds marginal cost. 
D) less than the efficient level of output will be produced because marginal revenue exceeds marginal cost. 
A) more than the efficient level of output will be produced because price exceeds marginal cost. 
B) less than the efficient level of output will be produced because price exceeds marginal cost. 
C) more than the efficient level of output will be produced because marginal revenue exceeds marginal cost. 
D) less than the efficient level of output will be produced because marginal revenue exceeds marginal cost.

Question 9

If there were five firms in an industry each with a 20% market share, what would the Herfindahl-Hirschman Index equal?

Accepted Answer

A) 80% 
B) 800 
C) 1,600 
D) 2,000 
A) 80% 
B) 800 
C) 1,600 
D) 2,000

Question 10

Which of the following characterizes an oligopolistic industry?

Accepted Answer

A) mutual interdependence 
B) low barriers to entry 
C) small output of individual firms relative to the total market 
D) a large number of competing firms 
A) mutual interdependence 
B) low barriers to entry 
C) small output of individual firms relative to the total market 
D) a large number of competing firms

Question 11

Which of the following is a correct listing of industry models ordered from most competitive to least competitive?

Accepted Answer

A) perfect competition - monopolistic competition - oligopoly - monopoly 
B) perfect competition - oligopoly - monopolistic competition - monopoly 
C) perfect competition - oligopoly - monopoly - monopolistic competition 
D) oligopoly - perfect competition -monopoly - monopolistic competition 
A) perfect competition - monopolistic competition - oligopoly - monopoly 
B) perfect competition - oligopoly - monopolistic competition - monopoly 
C) perfect competition - oligopoly - monopoly - monopolistic competition 
D) oligopoly - perfect competition -monopoly - monopolistic competition

Question 12

For a time, either R.J.Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton.The other firms in the industry raised their prices by the same amount.Economists call this:

Accepted Answer

A) predatory pricing. 
B) a price war. 
C) price leadership. 
D) producer sovereignty. 
A) predatory pricing. 
B) a price war. 
C) price leadership. 
D) producer sovereignty.

Question 13

Collusion among oligopolists would generally be easiest to achieve in which of the following situations?

Accepted Answer

A) very few producers, producing differentiated products. 
B) very few producers, producing homogeneous products. 
C) a larger number of producers, producing differentiated products. 
D) a larger number of producers, producing homogeneous products. 
A) very few producers, producing differentiated products. 
B) very few producers, producing homogeneous products. 
C) a larger number of producers, producing differentiated products. 
D) a larger number of producers, producing homogeneous products.

Question 14

Which of the following will not generally be true of a monopolistic competitor operating in the long run?

Accepted Answer

A) It will be earning normal profits. 
B) Its marginal revenue = marginal cost. 
C) Its average total cost will be minimized. 
D) Its price will be greater than its marginal cost. 
A) It will be earning normal profits. 
B) Its marginal revenue = marginal cost. 
C) Its average total cost will be minimized. 
D) Its price will be greater than its marginal cost.

Question 15

Based on the graph below, what is the maximum amount of profit this firm could earn?

Accepted Answer

A) $150 
B) $210 
C) $245 
D) $315 
A) $150 
B) $210 
C) $245 
D) $315

Question 16

A profit-maximizing oligopolist:

Accepted Answer

A) chooses price and output independently from the decisions of rivals. 
B) faces a demand curve that is more elastic than that faced by perfect competitors. 
C) can earn only a normal profit in the long run. 
D) chooses the output level where the demand curve intersects the average total cost curve. 
E) is characterized by none of the above. 
A) chooses price and output independently from the decisions of rivals. 
B) faces a demand curve that is more elastic than that faced by perfect competitors. 
C) can earn only a normal profit in the long run. 
D) chooses the output level where the demand curve intersects the average total cost curve. 
E) is characterized by none of the above.

Question 17

Figure 9-I
  
-Refer to Figure 9-I.The Nash equilibrium outcome of the game depicted is:

Accepted Answer

A) neither firm will conduct new advertising campaigns. 
B) both firms will conduct new advertising campaigns. 
C) Pepsi will conduct a new advertising campaign, and Coca-Cola will not. 
D) Coca-Cola will conduct a new advertising campaign and Pepsi will not. 
A) neither firm will conduct new advertising campaigns. 
B) both firms will conduct new advertising campaigns. 
C) Pepsi will conduct a new advertising campaign, and Coca-Cola will not. 
D) Coca-Cola will conduct a new advertising campaign and Pepsi will not.

Question 18

Product differentiation in monopolistically competitive markets ensures that ____ in equilibrium.

Accepted Answer

A) marginal cost will exceed average revenue 
B) price will exceed marginal cost 
C) average variable cost will be declining 
D) marginal revenue will equal average total cost 
A) marginal cost will exceed average revenue 
B) price will exceed marginal cost 
C) average variable cost will be declining 
D) marginal revenue will equal average total cost

Question 19

In the "Prisoners' Dilemma" game:

Accepted Answer

A) both players have a dominant strategy not to confess. 
B) only one player has a dominant strategy to confess. 
C) both players have a dominant strategy to confess. 
D) neither player has a dominant strategy. 
A) both players have a dominant strategy not to confess. 
B) only one player has a dominant strategy to confess. 
C) both players have a dominant strategy to confess. 
D) neither player has a dominant strategy.

Question 20

If the firm in the graph below represents the typical firm in a monopolistically competitive industry, what would be most likely to occur?

Accepted Answer

A) New firms would be likely to enter this industry. 
B) Existing firms would be likely to exit this industry. 
C) Firms would neither enter nor exit this industry. 
D) New firms would like to enter but since there are substantial barriers to entry they cannot do so. 
E) There is not sufficient information in this graph to draw a conclusion on entry or exit of firms. 
A) New firms would be likely to enter this industry. 
B) Existing firms would be likely to exit this industry. 
C) Firms would neither enter nor exit this industry. 
D) New firms would like to enter but since there are substantial barriers to entry they cannot do so. 
E) There is not sufficient information in this graph to draw a conclusion on entry or exit of firms.

A cartel is:

In the "Prisoners' Dilemma" game:

Which of the following is true for a typical firm in a typical cartel?

Since a monopolistically competitive firm faces a demand curve, it will always operate in long-run equilibrium.

Monopolistic competition is common in:

Individual members of a cartel have an incentive to the cartel agreement because pursuit of will maximize individual profit.

Characteristics of a monopolistically competitive market include all of the following except:

In monopolistically competitive markets in long-run equilibrium:

If there were five firms in an industry each with a 20% market share, what would the Herfindahl-Hirschman Index equal?

Which of the following characterizes an oligopolistic industry?

Which of the following is a correct listing of industry models ordered from most competitive to least competitive?

For a time, either R.J.Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton.The other firms in the industry raised their prices by the same amount.Economists call this:

Collusion among oligopolists would generally be easiest to achieve in which of the following situations?

Which of the following will not generally be true of a monopolistic competitor operating in the long run?

Based on the graph below, what is the maximum amount of profit this firm could earn?

A profit-maximizing oligopolist:

Figure 9-I -Refer to Figure 9-I.The Nash equilibrium outcome of the game depicted is:

Product differentiation in monopolistically competitive markets ensures that ____ in equilibrium.

In the "Prisoners' Dilemma" game:

If the firm in the graph below represents the typical firm in a monopolistically competitive industry, what would be most likely to occur?

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Exam 9: Monopolistic Competition and Oligopoly

A cartel is:

In the "Prisoners' Dilemma" game:

Which of the following is true for a typical firm in a typical cartel?

Since a monopolistically competitive firm faces a ____ demand curve, it will always operate ____ in long-run equilibrium.

Monopolistic competition is common in:

Individual members of a cartel have an incentive to ____ the cartel agreement because pursuit of ____ will maximize individual profit.

Characteristics of a monopolistically competitive market include all of the following except:

In monopolistically competitive markets in long-run equilibrium:

If there were five firms in an industry each with a 20% market share, what would the Herfindahl-Hirschman Index equal?

Which of the following characterizes an oligopolistic industry?

Which of the following is a correct listing of industry models ordered from most competitive to least competitive?

For a time, either R.J.Reynolds or Phillip Morris raised prices of cigarettes twice a year by about 50 cents per carton.The other firms in the industry raised their prices by the same amount.Economists call this:

Collusion among oligopolists would generally be easiest to achieve in which of the following situations?

Which of the following will not generally be true of a monopolistic competitor operating in the long run?

Based on the graph below, what is the maximum amount of profit this firm could earn?

A profit-maximizing oligopolist:

Figure 9-I -Refer to Figure 9-I.The Nash equilibrium outcome of the game depicted is:

Product differentiation in monopolistically competitive markets ensures that ____ in equilibrium.

In the "Prisoners' Dilemma" game:

If the firm in the graph below represents the typical firm in a monopolistically competitive industry, what would be most likely to occur?

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Since a monopolistically competitive firm faces a demand curve, it will always operate in long-run equilibrium.

Individual members of a cartel have an incentive to the cartel agreement because pursuit of will maximize individual profit.