Question 1

Monopolistic competition is characterized by:

Accepted Answer

A) one firm selling several products. 
B) many firms selling the same product. 
C) many firms selling slightly different products. 
D) one firm selling one product. 
A) one firm selling several products. 
B) many firms selling the same product. 
C) many firms selling slightly different products. 
D) one firm selling one product.

Question 2

In a monopolistically competitive market:

Accepted Answer

A) there are significant barriers to the entry of new sellers. 
B) firms sell differentiated products. 
C) firms face horizontal demand curves. 
D) there are a few producers selling standardized products. 
A) there are significant barriers to the entry of new sellers. 
B) firms sell differentiated products. 
C) firms face horizontal demand curves. 
D) there are a few producers selling standardized products.

Question 3

If the ice cream industry is monopolistically competitive, then:

Accepted Answer

A) the price of ice cream equals marginal cost in equilibrium. 
B) the price of ice cream equals average cost in long-run equilibrium. 
C) the price of ice cream is less than marginal cost in equilibrium. 
D) there are significant barriers to entering the ice cream business. 
E) firms are price takers. 
A) the price of ice cream equals marginal cost in equilibrium. 
B) the price of ice cream equals average cost in long-run equilibrium. 
C) the price of ice cream is less than marginal cost in equilibrium. 
D) there are significant barriers to entering the ice cream business. 
E) firms are price takers.

Question 4

A cartel is a group of firms that:

Accepted Answer

A) agree to increase industry output in order to boost profits. 
B) agree to restrict industry output in order to boost profits. 
C) agree to differentiate their products from one another. 
D) together control a significant portion of an industry's output, but fail to consider the behavior of rivals when making decisions. 
A) agree to increase industry output in order to boost profits. 
B) agree to restrict industry output in order to boost profits. 
C) agree to differentiate their products from one another. 
D) together control a significant portion of an industry's output, but fail to consider the behavior of rivals when making decisions.

Question 5

When a monopolistically competitive firm is in long-run equilibrium:

Accepted Answer

A) the demand curve will be perfectly elastic. 
B) marginal cost must be falling. 
C) price exceeds marginal cost. 
D) marginal revenue exceeds marginal cost. 
A) the demand curve will be perfectly elastic. 
B) marginal cost must be falling. 
C) price exceeds marginal cost. 
D) marginal revenue exceeds marginal cost.

Question 6

When new firms choose to enter monopolistically competitive markets:

Accepted Answer

A) there must be little diversity of products in the market. 
B) they are guaranteed economic profits upon entry. 
C) some firms in the market must be making economic profits. 
D) the demand curve faced by an established firm will shift to the right as a result. 
A) there must be little diversity of products in the market. 
B) they are guaranteed economic profits upon entry. 
C) some firms in the market must be making economic profits. 
D) the demand curve faced by an established firm will shift to the right as a result.

Question 7

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

Accepted Answer

A) marginal cost exceeds average total cost 
B) marginal revenue = marginal cost 
C) production in the range of economies of scale 
D) price greater than marginal revenue 
A) marginal cost exceeds average total cost 
B) marginal revenue = marginal cost 
C) production in the range of economies of scale 
D) price greater than marginal revenue

Question 8

A large oligopolistic firm that unilaterally makes changes in price which competitors tend to follow is known as a:

Accepted Answer

A) price leader. 
B) price maker. 
C) dominant strategy firm. 
D) cartel leader. 
A) price leader. 
B) price maker. 
C) dominant strategy firm. 
D) cartel leader.

Question 9

A market situation where a small number of sellers compose the entire industry is called:

Accepted Answer

A) monopolistic competition. 
B) monopoly. 
C) oligopoly. 
D) perfect competition. 
E) none of the above. 
A) monopolistic competition. 
B) monopoly. 
C) oligopoly. 
D) perfect competition. 
E) none of the above.

Question 10

When a firm's demand curve is tangent to its average total cost curve:

Accepted Answer

A) the firm must be operating in a monopolistically competitive market. 
B) economic profits are zero. 
C) the firm must be earning economic profits. 
D) the firm must be incurring economic losses. 
A) the firm must be operating in a monopolistically competitive market. 
B) economic profits are zero. 
C) the firm must be earning economic profits. 
D) the firm must be incurring economic losses.

Question 11

Which is the following is true of games, in interactions between oligopolists?

Accepted Answer

A) All games are cooperative in nature. 
B) Those in cooperative games are assumed to act independently. 
C) Interdependence is a facet of noncooperative games. 
D) Most games are noncooperative games. 
A) All games are cooperative in nature. 
B) Those in cooperative games are assumed to act independently. 
C) Interdependence is a facet of noncooperative games. 
D) Most games are noncooperative games.

Question 12

Three airlines account for most of the air traffic in and out of a local city.If the three airlines joined together in setting fares and air travel schedules, economists would say that they were acting as:

Accepted Answer

A) monopolistic competitors, as each firm would have to differentiate its airline services from its rivals. 
B) perfect competitors, as each firm would sell travel services at the same fares as the other airlines. 
C) a cartel, as the three airlines together would attempt to coordinate policies in the local market to jointly maximize profits. 
D) kinked demand curve oligopolists. 
A) monopolistic competitors, as each firm would have to differentiate its airline services from its rivals. 
B) perfect competitors, as each firm would sell travel services at the same fares as the other airlines. 
C) a cartel, as the three airlines together would attempt to coordinate policies in the local market to jointly maximize profits. 
D) kinked demand curve oligopolists.

Question 13

Cartels are:

Accepted Answer

A) difficult to organize. 
B) difficult to preserve. 
C) especially unlikely to succeed if the members sell many varied products. 
D) all of the above. 
A) difficult to organize. 
B) difficult to preserve. 
C) especially unlikely to succeed if the members sell many varied products. 
D) all of the above.

Question 14

____ is used in repeated games such that one player follows the other player's move in the previous round, leading to ____ cooperation.

Accepted Answer

A) Bandwagon effect; greater 
B) Bandwagon effect; lesser 
C) Tit-for-tat strategy; greater 
D) Tit-for-tat strategy; lesser 
A) Bandwagon effect; greater 
B) Bandwagon effect; lesser 
C) Tit-for-tat strategy; greater 
D) Tit-for-tat strategy; lesser

Question 15

Figure 9-G
  
-Refer to Figure 9-G.If Bonnie and Clyde could successfully collude regarding their decisions, how much time will each spend in jail?

Accepted Answer

A) Bonnie goes free; Clyde gets 20 years 
B) 1 year each 
C) 8 years each 
D) Bonnie gets 20 years; Clyde goes free 
A) Bonnie goes free; Clyde gets 20 years 
B) 1 year each 
C) 8 years each 
D) Bonnie gets 20 years; Clyde goes free

Question 16

The market for eyeglasses is monopolistically competitive.It follows that firms in the eyeglass industry:

Accepted Answer

A) can earn economic profit in long-run equilibrium. 
B) can earn economic profit in short-run equilibrium. 
C) charge a price equal to marginal cost. 
D) charge a price equal to the minimum average total cost. 
A) can earn economic profit in long-run equilibrium. 
B) can earn economic profit in short-run equilibrium. 
C) charge a price equal to marginal cost. 
D) charge a price equal to the minimum average total cost.

Question 17

The tools of "game theory" are most helpful to economists in markets characterized by:

Accepted Answer

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

Question 18

Figure 9-C
The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves.  
-Refer to Figure 9-D.The sentences of Suspect 1 and Suspect 2 under the Nash equilibrium of the prisoner's dilemma game are:

Accepted Answer

A) 2 years and 2 years, respectively. 
B) 6 years and 6 years, respectively. 
C) 10 years and 1 year, respectively. 
D) 1 year and 10 years, respectively. 
E) indeterminate. 
A) 2 years and 2 years, respectively. 
B) 6 years and 6 years, respectively. 
C) 10 years and 1 year, respectively. 
D) 1 year and 10 years, respectively. 
E) indeterminate.

Question 19

Oligopoly firms:

Accepted Answer

A) usually act as if they were a monopoly producer. 
B) generally charge a price for goods and services equal to marginal cost. 
C) base their pricing and output decisions on the likely responses of rival firms. 
D) are isolated from competition by low barriers to entry. 
A) usually act as if they were a monopoly producer. 
B) generally charge a price for goods and services equal to marginal cost. 
C) base their pricing and output decisions on the likely responses of rival firms. 
D) are isolated from competition by low barriers to entry.

Question 20

Figure 9-I
  
-Refer to Figure 9-I.In this situation:

Accepted Answer

A) the interaction among firms resembles the "Prisoners' Dilemma." 
B) neither firm as a dominant strategy. 
C) Pepsi has a dominant strategy to introduce new ads, but Coca-Cola does not. 
D) if Pepsi begins a new advertising campaign, Coca-Cola is better off not beginning their own advertising campaign. 
A) the interaction among firms resembles the "Prisoners' Dilemma." 
B) neither firm as a dominant strategy. 
C) Pepsi has a dominant strategy to introduce new ads, but Coca-Cola does not. 
D) if Pepsi begins a new advertising campaign, Coca-Cola is better off not beginning their own advertising campaign.

Monopolistic competition is characterized by:

In a monopolistically competitive market:

If the ice cream industry is monopolistically competitive, then:

A cartel is a group of firms that:

When a monopolistically competitive firm is in long-run equilibrium:

When new firms choose to enter monopolistically competitive markets:

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

A large oligopolistic firm that unilaterally makes changes in price which competitors tend to follow is known as a:

A market situation where a small number of sellers compose the entire industry is called:

When a firm's demand curve is tangent to its average total cost curve:

Which is the following is true of games, in interactions between oligopolists?

Three airlines account for most of the air traffic in and out of a local city.If the three airlines joined together in setting fares and air travel schedules, economists would say that they were acting as:

Cartels are:

is used in repeated games such that one player follows the other player's move in the previous round, leading to cooperation.

Figure 9-G -Refer to Figure 9-G.If Bonnie and Clyde could successfully collude regarding their decisions, how much time will each spend in jail?

The market for eyeglasses is monopolistically competitive.It follows that firms in the eyeglass industry:

The tools of "game theory" are most helpful to economists in markets characterized by:

Figure 9-C The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves. -Refer to Figure 9-D.The sentences of Suspect 1 and Suspect 2 under the Nash equilibrium of the prisoner's dilemma game are:

Oligopoly firms:

Figure 9-I -Refer to Figure 9-I.In this situation:

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

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Exam 9: Monopolistic Competition and Oligopoly

Monopolistic competition is characterized by:

In a monopolistically competitive market:

If the ice cream industry is monopolistically competitive, then:

A cartel is a group of firms that:

When a monopolistically competitive firm is in long-run equilibrium:

When new firms choose to enter monopolistically competitive markets:

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

A large oligopolistic firm that unilaterally makes changes in price which competitors tend to follow is known as a:

A market situation where a small number of sellers compose the entire industry is called:

When a firm's demand curve is tangent to its average total cost curve:

Which is the following is true of games, in interactions between oligopolists?

Three airlines account for most of the air traffic in and out of a local city.If the three airlines joined together in setting fares and air travel schedules, economists would say that they were acting as:

Cartels are:

____ is used in repeated games such that one player follows the other player's move in the previous round, leading to ____ cooperation.

Figure 9-G -Refer to Figure 9-G.If Bonnie and Clyde could successfully collude regarding their decisions, how much time will each spend in jail?

The market for eyeglasses is monopolistically competitive.It follows that firms in the eyeglass industry:

The tools of "game theory" are most helpful to economists in markets characterized by:

Figure 9-C The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves. -Refer to Figure 9-D.The sentences of Suspect 1 and Suspect 2 under the Nash equilibrium of the prisoner's dilemma game are:

Oligopoly firms:

Figure 9-I -Refer to Figure 9-I.In this situation:

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

is used in repeated games such that one player follows the other player's move in the previous round, leading to cooperation.