Question 1

Which of the following would not be an example of an oligopolistic industry?

Accepted Answer

A) light bulbs 
B) convenience stores 
C) aircraft 
D) breweries 
E) small arms ammunition 
A) light bulbs 
B) convenience stores 
C) aircraft 
D) breweries 
E) small arms ammunition

Question 2

In a monopolistically competitive industry, the competitive element results from ____ and the monopoly element results from ____.

Accepted Answer

A) product differentiation; substantial barriers to entry. 
B) a large number of firms and free entry; product differentiation. 
C) advertising; product differentiation. 
D) product differentiation; the small number of large producers. 
A) product differentiation; substantial barriers to entry. 
B) a large number of firms and free entry; product differentiation. 
C) advertising; product differentiation. 
D) product differentiation; the small number of large producers.

Question 3

In a collusive oligopoly, joint profits are maximized when a price leader establishes price based on:

Accepted Answer

A) its own demand and cost schedules. 
B) the market demand for the product and the marginal costs of the various firms. 
C) the market demand for the product and its own marginal cost schedule. 
D) the demand curve faced by a typical competitor and its own marginal cost curve. 
E) its own demand and the marginal costs of the various firms. 
A) its own demand and cost schedules. 
B) the market demand for the product and the marginal costs of the various firms. 
C) the market demand for the product and its own marginal cost schedule. 
D) the demand curve faced by a typical competitor and its own marginal cost curve. 
E) its own demand and the marginal costs of the various firms.

Question 4

In long-run equilibrium in a monopolistically competitive market, firms typically:

Accepted Answer

A) earn a normal profit. 
B) charge a price equal to marginal cost. 
C) earn an above-normal profit. 
D) charge a price equal to marginal revenue. 
E) suffer losses. 
A) earn a normal profit. 
B) charge a price equal to marginal cost. 
C) earn an above-normal profit. 
D) charge a price equal to marginal revenue. 
E) suffer losses.

Question 5

An example of an oligopoly is:

Accepted Answer

A) the commercial airline industry. 
B) a stock market. 
C) the video rental industry. 
D) the market for eyeglasses. 
A) the commercial airline industry. 
B) a stock market. 
C) the video rental industry. 
D) the market for eyeglasses.

Question 6

The restaurant market in San Francisco is probably best categorized as:

Accepted Answer

A) perfectly competitive. 
B) monopolistic. 
C) monopolistically competitive. 
D) oligopolistic. 
A) perfectly competitive. 
B) monopolistic. 
C) monopolistically competitive. 
D) oligopolistic.

Question 7

As new firms enter a monopolistically competitive market, profits of existing firms ____ and product diversity in the market ____.

Accepted Answer

A) decline; decreases 
B) rise; decreases 
C) rise; increases 
D) decline; increases 
A) decline; decreases 
B) rise; decreases 
C) rise; increases 
D) decline; increases

Question 8

Figure 9-C
The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves.  
-Refer to Figure 9-C.A profit-maximizing (or loss-minimizing) firm in this situation:

Accepted Answer

A) earns a profit of $360 each week. 
B) earns a profit of $240 each week. 
C) suffers a loss of $360 each week. 
D) suffers a loss of $240 each week. 
E) will shut down. 
A) earns a profit of $360 each week. 
B) earns a profit of $240 each week. 
C) suffers a loss of $360 each week. 
D) suffers a loss of $240 each week. 
E) will shut down.

Question 9

Exhibit 9-A
The following diagram depicts monopolistically competitive firms.  
-Refer to Exhibit 9-A.In Graph B, the profit-maximizing (loss-minimizing) firm is making a ____ shown by the area ____.

Accepted Answer

A) profit; P1 V R S 
B) loss; P2 P1 S T 
C) profit; P2 P1 S T 
D) loss; P1 V R S 
A) profit; P1 V R S 
B) loss; P2 P1 S T 
C) profit; P2 P1 S T 
D) loss; P1 V R S

Question 10

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of their rooms are full).This excess capacity is indicative of a(n) ____ industry.

Accepted Answer

A) perfectly competitive 
B) monopoly 
C) monopolistically competitive 
D) oligopoly 
A) perfectly competitive 
B) monopoly 
C) monopolistically competitive 
D) oligopoly

Question 11

The maximum possible profit that could be earned by a cartel is:

Accepted Answer

A) greater than the monopoly profit. 
B) equal to the monopoly profit. 
C) less than the monopoly profit. 
D) unrelated to the level of monopoly profit. 
A) greater than the monopoly profit. 
B) equal to the monopoly profit. 
C) less than the monopoly profit. 
D) unrelated to the level of monopoly profit.

Question 12

A small number of firms competing with each other is characteristic of:

Accepted Answer

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

Question 13

Which of the following is uncharacteristic of monopolistic competition in the long run?

Accepted Answer

A) a large number of sellers in the industry 
B) zero economic profits 
C) price in excess of marginal cost 
D) equilibrium on the declining portion of the average total cost curve 
E) firms have no excess capacity 
A) a large number of sellers in the industry 
B) zero economic profits 
C) price in excess of marginal cost 
D) equilibrium on the declining portion of the average total cost curve 
E) firms have no excess capacity

Question 14

At a Nash equilibrium:

Accepted Answer

A) each firm is said to be doing as well as it can, regardless of the actions of its competitor. 
B) each firm is said to be doing as well as it can, given the actions of its competitor. 
C) firms always choose strategies in order to maximize the social welfare. 
D) firms always choose strategies to avoid the worst possible outcome. 
A) each firm is said to be doing as well as it can, regardless of the actions of its competitor. 
B) each firm is said to be doing as well as it can, given the actions of its competitor. 
C) firms always choose strategies in order to maximize the social welfare. 
D) firms always choose strategies to avoid the worst possible outcome.

Question 15

Which of the following statements characterize an oligopoly market?

Accepted Answer

A) Oligopoly firms are guaranteed profits due to the lack of competition. 
B) Firms are aware that their own economic behavior will influence the decisions of rivals. 
C) There are few barriers to entry. 
D) Firms choose price and output independently from the decisions made by competitors. 
A) Oligopoly firms are guaranteed profits due to the lack of competition. 
B) Firms are aware that their own economic behavior will influence the decisions of rivals. 
C) There are few barriers to entry. 
D) Firms choose price and output independently from the decisions made by competitors.

Question 16

An example of an oligopoly is:

Accepted Answer

A) the book industry. 
B) the music CD industry. 
C) the automobile industry. 
D) the market for soybeans. 
A) the book industry. 
B) the music CD industry. 
C) the automobile industry. 
D) the market for soybeans.

Question 17

Figure 9-F
Prior to the year 2000, the United States considered renewal of Most Favored Nation (MFN) trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations). Historically, legislators made threats of not renewing MFN status because of alleged human rights abuses in China. The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China. The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U. S. firms and the United States chooses whether to renew MFN status with China.
  
-Refer to Figure 9-F.When this game reaches a Nash equilibrium, the gains from trade will be:

Accepted Answer

A) United States $140; China $5. 
B) United States $65; China $75. 
C) United States $35; China $285. 
D) United States $130; China $275. 
A) United States $140; China $5. 
B) United States $65; China $75. 
C) United States $35; China $285. 
D) United States $130; China $275.

Question 18

Figure 9-F
Prior to the year 2000, the United States considered renewal of Most Favored Nation (MFN) trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations). Historically, legislators made threats of not renewing MFN status because of alleged human rights abuses in China. The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China. The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U. S. firms and the United States chooses whether to renew MFN status with China.
  
-Refer to Figure 9-F.Assume that trade negotiators meet to discuss trade policy between the United States and China.If neither party to the negotiation is able to trust the other party, then:

Accepted Answer

A) it is rational for each to follow their dominant strategy. 
B) each should assume that the other will choose a strategy that optimizes the combined total value of the trade relationship. 
C) the Nash equilibrium will provide the largest possible gains to each party. 
D) Chinese negotiators should assume that United States negotiators will implement a policy that is in the mutual best interest of both countries. 
A) it is rational for each to follow their dominant strategy. 
B) each should assume that the other will choose a strategy that optimizes the combined total value of the trade relationship. 
C) the Nash equilibrium will provide the largest possible gains to each party. 
D) Chinese negotiators should assume that United States negotiators will implement a policy that is in the mutual best interest of both countries.

Question 19

In the long run a perfectly competitive firm operates ____ and a monopolistically competitive firm operates ____.

Accepted Answer

A) at the efficient scale; with excess capacity 
B) at the efficient scale; at the efficient scale 
C) with excess capacity; with excess capacity 
D) with excess capacity; at the efficient scale 
A) at the efficient scale; with excess capacity 
B) at the efficient scale; at the efficient scale 
C) with excess capacity; with excess capacity 
D) with excess capacity; at the efficient scale

Question 20

A successful cartel ____ supply so that member firms earn ____ profits.

Accepted Answer

A) restricts; monopoly 
B) expands; monopoly 
C) restricts; no economic 
D) expands; no economic 
A) restricts; monopoly 
B) expands; monopoly 
C) restricts; no economic 
D) expands; no economic

Which of the following would not be an example of an oligopolistic industry?

In a monopolistically competitive industry, the competitive element results from and the monopoly element results from .

In a collusive oligopoly, joint profits are maximized when a price leader establishes price based on:

In long-run equilibrium in a monopolistically competitive market, firms typically:

An example of an oligopoly is:

The restaurant market in San Francisco is probably best categorized as:

As new firms enter a monopolistically competitive market, profits of existing firms and product diversity in the market .

Figure 9-C The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves. -Refer to Figure 9-C.A profit-maximizing (or loss-minimizing) firm in this situation:

Exhibit 9-A The following diagram depicts monopolistically competitive firms. -Refer to Exhibit 9-A.In Graph B, the profit-maximizing (loss-minimizing) firm is making a shown by the area .

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of their rooms are full).This excess capacity is indicative of a(n) ____ industry.

The maximum possible profit that could be earned by a cartel is:

A small number of firms competing with each other is characteristic of:

Which of the following is uncharacteristic of monopolistic competition in the long run?

At a Nash equilibrium:

Which of the following statements characterize an oligopoly market?

An example of an oligopoly is:

In the long run a perfectly competitive firm operates and a monopolistically competitive firm operates .

A successful cartel supply so that member firms earn profits.

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

Which of the following would not be an example of an oligopolistic industry?

In a monopolistically competitive industry, the competitive element results from ____ and the monopoly element results from ____.

In a collusive oligopoly, joint profits are maximized when a price leader establishes price based on:

In long-run equilibrium in a monopolistically competitive market, firms typically:

An example of an oligopoly is:

The restaurant market in San Francisco is probably best categorized as:

As new firms enter a monopolistically competitive market, profits of existing firms ____ and product diversity in the market ____.

Figure 9-C The graph depicts a monopolistically competitive firm's demand, marginal revenue, and cost curves. -Refer to Figure 9-C.A profit-maximizing (or loss-minimizing) firm in this situation:

Exhibit 9-A The following diagram depicts monopolistically competitive firms. -Refer to Exhibit 9-A.In Graph B, the profit-maximizing (loss-minimizing) firm is making a ____ shown by the area ____.

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of their rooms are full).This excess capacity is indicative of a(n) ____ industry.

The maximum possible profit that could be earned by a cartel is:

A small number of firms competing with each other is characteristic of:

Which of the following is uncharacteristic of monopolistic competition in the long run?

At a Nash equilibrium:

Which of the following statements characterize an oligopoly market?

An example of an oligopoly is:

In the long run a perfectly competitive firm operates ____ and a monopolistically competitive firm operates ____.

A successful cartel ____ supply so that member firms earn ____ profits.

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

In a monopolistically competitive industry, the competitive element results from and the monopoly element results from .

As new firms enter a monopolistically competitive market, profits of existing firms and product diversity in the market .

Exhibit 9-A The following diagram depicts monopolistically competitive firms. -Refer to Exhibit 9-A.In Graph B, the profit-maximizing (loss-minimizing) firm is making a shown by the area .

In the long run a perfectly competitive firm operates and a monopolistically competitive firm operates .

A successful cartel supply so that member firms earn profits.