Question 1

The market structure called monopolistic competition is named using both monopoly and perfect competition.Why?

Accepted Answer

A) There are few firms in the market all producing the same product. 
B) There is just one firm whose product can be easily differentiated. 
C) There are a huge number of firms selling identical products at a constant price. 
D) There are many firms with easy entry and exit but each firm sells a unique product. 
E) Firms spend very little on advertising and promotion and thus are price takers. 
A) There are few firms in the market all producing the same product. 
B) There is just one firm whose product can be easily differentiated. 
C) There are a huge number of firms selling identical products at a constant price. 
D) There are many firms with easy entry and exit but each firm sells a unique product. 
E) Firms spend very little on advertising and promotion and thus are price takers.

Question 2

The market structure in which the largest quantity of output is sold at the minimum possible price is:

Accepted Answer

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

Question 3

One major similarity between perfect competition and monopolistic competition is that:

Accepted Answer

A) the firms earn above normal profits in the long run. 
B) the firms are price makers. 
C) the firms produce identical products. 
D) the firms just break even in the long run. 
E) entry of firms is barred in the long run. 
A) the firms earn above normal profits in the long run. 
B) the firms are price makers. 
C) the firms produce identical products. 
D) the firms just break even in the long run. 
E) entry of firms is barred in the long run.

Question 4

Because of their brand names, Kodak, IBM, Honda, Daimler-Chrysler, and other well-known firms are able to charge significantly higher prices for their products than their competitors without losing any business.Expenditures made by firms to create brand names:

Accepted Answer

A) are always inefficient. 
B) provide reliability to consumers. 
C) lead to monopolies. 
D) necessarily lead to deadweight losses. 
E) would not exist if information was less costly for firms to obtain than consumers. 
A) are always inefficient. 
B) provide reliability to consumers. 
C) lead to monopolies. 
D) necessarily lead to deadweight losses. 
E) would not exist if information was less costly for firms to obtain than consumers.

Question 5

Oligopolies can arise as a result of both natural barriers and governmentally created barriers.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true of product differentiation?

Accepted Answer

A) Product differentiation is the first order derivative of the production function. 
B) Product differentiation exists only when the products are actually different from each other. 
C) Product differentiation exists when consumers perceive the products to be different. 
D) Product differentiation exists when producers perceive the products to be different. 
E) Product differentiation exists when similar goods are sold in geographically segregated markets. 
A) Product differentiation is the first order derivative of the production function. 
B) Product differentiation exists only when the products are actually different from each other. 
C) Product differentiation exists when consumers perceive the products to be different. 
D) Product differentiation exists when producers perceive the products to be different. 
E) Product differentiation exists when similar goods are sold in geographically segregated markets.

Question 7

A Nash equilibrium occurs when:

Accepted Answer

A) a unilateral move by a participant makes him better off. 
B) one can deviate from the equilibrium and improve the outcome. 
C) no one can move from the equilibrium and improve the outcome. 
D) participants have an incentive to deviate from the equilibrium. 
E) no one is better off. 
A) a unilateral move by a participant makes him better off. 
B) one can deviate from the equilibrium and improve the outcome. 
C) no one can move from the equilibrium and improve the outcome. 
D) participants have an incentive to deviate from the equilibrium. 
E) no one is better off.

Question 8

In monopolistic competition, firms may differentiate their products in many ways except on the basis of:

Accepted Answer

A) quality. 
B) style. 
C) price. 
D) packaging. 
E) guarantees. 
A) quality. 
B) style. 
C) price. 
D) packaging. 
E) guarantees.

Question 9

The condition under which a cartel can maintain its stability is that:

Accepted Answer

A) the barriers to entry should be relaxed. 
B) an identical product should be produced by the colluding firms. 
C) there should be a large number of firms in the market. 
D) there should be legal barriers to share agreements. 
E) the products of the colluding firms should be highly differentiated. 
A) the barriers to entry should be relaxed. 
B) an identical product should be produced by the colluding firms. 
C) there should be a large number of firms in the market. 
D) there should be legal barriers to share agreements. 
E) the products of the colluding firms should be highly differentiated.

Question 10

Which of the following is not an example of nonprice competition?

Accepted Answer

A) Kellogg's introduces Froot Loops with Lemonberry Swirls. 
B) Sterling Planet provides consumers the opportunity to purchase renewable electricity in upstate New York. 
C) Mountain Dew sells "Livewire" orange soda in the summer of 2003. 
D) Nissan lowers the interest rate charged for new automobile financing. 
E) Honda produces a hybrid version of its Civic. 
A) Kellogg's introduces Froot Loops with Lemonberry Swirls. 
B) Sterling Planet provides consumers the opportunity to purchase renewable electricity in upstate New York. 
C) Mountain Dew sells "Livewire" orange soda in the summer of 2003. 
D) Nissan lowers the interest rate charged for new automobile financing. 
E) Honda produces a hybrid version of its Civic.

Question 11

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1   According to the Table 25.1, if the firms collude and decide not to advertise their combined payoff is:

Accepted Answer

A) $250. 
B) $260. 
C) $330. 
D) $300. 
E) $280 
A) $250. 
B) $260. 
C) $330. 
D) $300. 
E) $280

Question 12

Which of the following theories applies to strategic behavior?

Accepted Answer

A) Field Theory 
B) Game Theory 
C) Theory of Consumers' Behavior 
D) Social Contract Theory 
E) Rational Choice Theory 
A) Field Theory 
B) Game Theory 
C) Theory of Consumers' Behavior 
D) Social Contract Theory 
E) Rational Choice Theory

Question 13

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1   According to Table 25.1, if both the firms follow their dominant strategies:

Accepted Answer

A) firm X earns $100 and firm Y earns $150. 
B) firm X earns $50and firm Y earns $200. 
C) firm X earns $180 and firm Y earns $150. 
D) firm X earns $180 and firm Y earns $100. 
E) firm X earns $150 and firm Y earns $180. 
A) firm X earns $100 and firm Y earns $150. 
B) firm X earns $50and firm Y earns $200. 
C) firm X earns $180 and firm Y earns $150. 
D) firm X earns $180 and firm Y earns $100. 
E) firm X earns $150 and firm Y earns $180.

Question 14

Successful product differentiation by a monopolistically competitive firm makes the demand curve faced by the firm steeper.

Accepted Answer

A) True 
 B)False

Question 15

For years, Intel was able to charge a higher price for microchips because:

Accepted Answer

A) it had a higher quality product than its rivals. 
B) it spent less on advertising than its rivals. 
C) consumers knew that Intel had the best employees. 
D) Intel relied more on foreign labor. 
E) of its successful product differentiation. 
A) it had a higher quality product than its rivals. 
B) it spent less on advertising than its rivals. 
C) consumers knew that Intel had the best employees. 
D) Intel relied more on foreign labor. 
E) of its successful product differentiation.

Question 16

A monopolistically competitive firm's demand curve slopes downward because:

Accepted Answer

A) other firms are free to enter the market. 
B) there are a large number of firms in the market. 
C) a differentiated product gives the firm some monopoly power. 
D) the firm has complete information about the market. 
E) the firm sells a standardized product. 
A) other firms are free to enter the market. 
B) there are a large number of firms in the market. 
C) a differentiated product gives the firm some monopoly power. 
D) the firm has complete information about the market. 
E) the firm sells a standardized product.

Question 17

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1   According to the payoffs in Table 25.1:

Accepted Answer

A) Firm X will not advertise, no matter what, if Firm Y does not advertise. 
B) Firm X will advertise only if Firm Y does not advertise. 
C) Firm X does not have a dominant strategy, but Firm Y does. 
D) Firm Y does not have a dominant strategy, but Firm X does. 
E) Both firms would be better off if neither advertised. 
A) Firm X will not advertise, no matter what, if Firm Y does not advertise. 
B) Firm X will advertise only if Firm Y does not advertise. 
C) Firm X does not have a dominant strategy, but Firm Y does. 
D) Firm Y does not have a dominant strategy, but Firm X does. 
E) Both firms would be better off if neither advertised.

Question 18

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1   According to Table 25.1, if firm X advertises and Y does not advertise:

Accepted Answer

A) Firm X earns $50 and firm Y earns $200. 
B) Firm X earns $150 and firm Y earns $200. 
C) Firm X earns $100 and firm Y earns $200. 
D) Firm X earns $50 and firm Y earns $180. 
E) Firm X earns $180 and firm Y earns $80. 
A) Firm X earns $50 and firm Y earns $200. 
B) Firm X earns $150 and firm Y earns $200. 
C) Firm X earns $100 and firm Y earns $200. 
D) Firm X earns $50 and firm Y earns $180. 
E) Firm X earns $180 and firm Y earns $80.

Question 19

Since only a few firms dominate the oligopoly market, cutthroat competition does not exist.

Accepted Answer

A) True 
 B)False

Question 20

In the short run, a monopolistically competitive firm:

Accepted Answer

A) can earn only a normal profit. 
B) will produce at the point where marginal revenue is greater than marginal cost, in order to maximize profits. 
C) will produce at the point at which price equals minimum ATC to maximize profits. 
D) will be able to enter another monopolistically competitive industry. 
E) will shut down temporarily if price is less than AVC. 
A) can earn only a normal profit. 
B) will produce at the point where marginal revenue is greater than marginal cost, in order to maximize profits. 
C) will produce at the point at which price equals minimum ATC to maximize profits. 
D) will be able to enter another monopolistically competitive industry. 
E) will shut down temporarily if price is less than AVC.

Exam 46: Monopolistic Competition and Oligopoly

The market structure called monopolistic competition is named using both monopoly and perfect competition.Why?

The market structure in which the largest quantity of output is sold at the minimum possible price is:

One major similarity between perfect competition and monopolistic competition is that:

Because of their brand names, Kodak, IBM, Honda, Daimler-Chrysler, and other well-known firms are able to charge significantly higher prices for their products than their competitors without losing any business.Expenditures made by firms to create brand names:

Oligopolies can arise as a result of both natural barriers and governmentally created barriers.

Which of the following is true of product differentiation?

A Nash equilibrium occurs when:

In monopolistic competition, firms may differentiate their products in many ways except on the basis of:

The condition under which a cartel can maintain its stability is that:

Which of the following is not an example of nonprice competition?

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1 According to the Table 25.1, if the firms collude and decide not to advertise their combined payoff is:

Which of the following theories applies to strategic behavior?

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1 According to Table 25.1, if both the firms follow their dominant strategies:

Successful product differentiation by a monopolistically competitive firm makes the demand curve faced by the firm steeper.

For years, Intel was able to charge a higher price for microchips because:

A monopolistically competitive firm's demand curve slopes downward because:

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1 According to the payoffs in Table 25.1:

The following table shows the payoff matrix of the two firms (Firm X and Firm Y)in dollars when they advertise and when they do not advertise. Table 25.1 According to Table 25.1, if firm X advertises and Y does not advertise:

Since only a few firms dominate the oligopoly market, cutthroat competition does not exist.

In the short run, a monopolistically competitive firm:

Economics: The World Around You

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Consumer Choice

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Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

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