Question 1

The objective of creating a brand name is:

Accepted Answer

A) to reduce the price of the product. 
B) to ensure a steady supply of the good in the market. 
C) to reduce the price elasticity of demand. 
D) to reduce the cost of production of the firm. 
E) to attract rival firms into the market. 
A) to reduce the price of the product. 
B) to ensure a steady supply of the good in the market. 
C) to reduce the price elasticity of demand. 
D) to reduce the cost of production of the firm. 
E) to attract rival firms into the market.

Question 2

The table below shows the payoff (profit)matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms). Table 25.2   According to Table 25.2, if firm A follows its dominant strategy but firm B does not, firm A earns a profit of:

Accepted Answer

A) $50. 
B) $40. 
C) $60. 
D) $45. 
E) $42. 
A) $50. 
B) $40. 
C) $60. 
D) $45. 
E) $42.

Question 3

A consumer becomes loyal to a product when:

Accepted Answer

A) the good is available at a very low price. 
B) the product is as good as its substitutes. 
C) the product comes with a gift occasionally. 
D) he/she has had a positive experience with that good. 
E) discounts are offered periodically. 
A) the good is available at a very low price. 
B) the product is as good as its substitutes. 
C) the product comes with a gift occasionally. 
D) he/she has had a positive experience with that good. 
E) discounts are offered periodically.

Question 4

In a certain monopolistically competitive market that is characterized by high prices and equally high-quality merchandise, if a firm's competitors begin to successfully introduce new products that cut into the firm's market share, the firm's best counter-strategy is to:

Accepted Answer

A) raise price in order to increase the revenue. 
B) introduce its own new products in order to meet competitors head on. 
C) reduce its advertising budget in order to save costs. 
D) ignore its competitors and hope its customers' loyalty carry it through the threat. 
E) look to the government for protection. 
A) raise price in order to increase the revenue. 
B) introduce its own new products in order to meet competitors head on. 
C) reduce its advertising budget in order to save costs. 
D) ignore its competitors and hope its customers' loyalty carry it through the threat. 
E) look to the government for protection.

Question 5

As new firms enter a monopolistically competitive industry, the demand for a typical firm's product will most likely:

Accepted Answer

A) increase and become less elastic. 
B) decrease and become more elastic. 
C) increase and become more elastic. 
D) decrease and become less elastic. 
E) remain unaffected. 
A) increase and become less elastic. 
B) decrease and become more elastic. 
C) increase and become more elastic. 
D) decrease and become less elastic. 
E) remain unaffected.

Question 6

A strategy that produces the best result no matter what strategy the opposing player follows is known as the dominated strategy.

Accepted Answer

A) True 
 B)False

Question 7

Compared with a perfectly competitive firm in long-run equilibrium, a monopolistically competitive firm will operate on the upward-sloping portion of the average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 8

The major similarity between a monopolist and a monopolistically competitive firm is:

Accepted Answer

A) both are price takers. 
B) both face a horizontal demand curve. 
C) both are the sole producers of a particular good. 
D) both face a negatively sloped demand curve. 
E) both are affected by the decision of their rivals. 
A) both are price takers. 
B) both face a horizontal demand curve. 
C) both are the sole producers of a particular good. 
D) both face a negatively sloped demand curve. 
E) both are affected by the decision of their rivals.

Question 9

Advertising, brand names, packaging, and celebrity endorsements all occur in monopolistically competitive markets because:

Accepted Answer

A) significant barriers to entry exist in the real world. 
B) in the real world, there are very few markets with many firms. 
C) that gives the producer some command over the prices of their products. 
D) product differentiation seldom occurs in the real world. 
E) monopolistically competitive firms have an incentive to spend as much money as possible compared to their rivals. 
A) significant barriers to entry exist in the real world. 
B) in the real world, there are very few markets with many firms. 
C) that gives the producer some command over the prices of their products. 
D) product differentiation seldom occurs in the real world. 
E) monopolistically competitive firms have an incentive to spend as much money as possible compared to their rivals.

Question 10

Firms develop brand names in order to make the demand for their product more elastic.

Accepted Answer

A) True 
 B)False

Question 11

The figure below shows the revenue and cost curves of a monopolistically competitive firm. Figure 25.2   In the figure,
D: Demand curve
MR: Marginal revenue curve
ATC1 and ATC2: Average total cost curves
MC: Marginal cost curve
In Figure 25.2, if the market is monopolistically competitive, which quantity represents long-run equilibrium for the firm?

Accepted Answer

A) 15 
B) Between 15 and 40 
C) 40 
D) 55 
E) 60 
A) 15 
B) Between 15 and 40 
C) 40 
D) 55 
E) 60

Question 12

A monopolistically competitive firm may earn above normal profits or may incur losses in the short run.

Accepted Answer

A) True 
 B)False

Question 13

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure 25.3   In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
The profit per unit of output for the firm in the Figure 25.3 is:

Accepted Answer

A) P5 - P3. 
B) P6 - P3. 
C) P3 - P2. 
D) P6 - P2. 
E) P4 - P2. 
A) P5 - P3. 
B) P6 - P3. 
C) P3 - P2. 
D) P6 - P2. 
E) P4 - P2.

Question 14

Which of the following is a characteristic of an oligopoly market?

Accepted Answer

A) Each firm in an oligopoly market can take independent pricing and output decisions. 
B) There are many firms in an oligopoly market hence a firm cannot influence the market price. 
C) In an oligopoly market, each firm's pricing and output decisions depend on those of its rivals. 
D) Firms in an oligopoly market always manufacture differentiated products. 
E) Barriers to entry does not exist in an oligopoly market. 
A) Each firm in an oligopoly market can take independent pricing and output decisions. 
B) There are many firms in an oligopoly market hence a firm cannot influence the market price. 
C) In an oligopoly market, each firm's pricing and output decisions depend on those of its rivals. 
D) Firms in an oligopoly market always manufacture differentiated products. 
E) Barriers to entry does not exist in an oligopoly market.

Question 15

An oligopoly market consists of:

Accepted Answer

A) many firms which produce a standardized product. 
B) at least five firm one of which dominates the market. 
C) firms that make independent pricing and output decisions. 
D) a group of firms that dominate the market. 
E) firms which face perfectly elastic demand curves. 
A) many firms which produce a standardized product. 
B) at least five firm one of which dominates the market. 
C) firms that make independent pricing and output decisions. 
D) a group of firms that dominate the market. 
E) firms which face perfectly elastic demand curves.

Question 16

Consumers who purchase brand-name pharmaceuticals because they believe the brand name has some value, may be right even if a brand-name pharmaceutical and a generic product are chemically identical.

Accepted Answer

A) True 
 B)False

Question 17

The short-run equilibrium position for a firm in monopolistic competition is the point at which:

Accepted Answer

A) price equals average variable cost. 
B) marginal revenue equals rising marginal cost. 
C) price equals marginal cost. 
D) marginal revenue equals average revenue. 
E) the firm's marginal-cost curve intersects its marginal-revenue curve from above. 
A) price equals average variable cost. 
B) marginal revenue equals rising marginal cost. 
C) price equals marginal cost. 
D) marginal revenue equals average revenue. 
E) the firm's marginal-cost curve intersects its marginal-revenue curve from above.

Question 18

If additional firms enter a monopolistically competitive industry, the demand facing a typical firm increases.

Accepted Answer

A) True 
 B)False

Question 19

Strategic behavior occurs when:

Accepted Answer

A) there are a large number of firms selling identical products. 
B) there is only one firm in the market. 
C) the firms have no command over the prices of the good they produce. 
D) the firms can take any decision irrespective of what their rival does. 
E) what is best for a firm depends on what his rival does. 
A) there are a large number of firms selling identical products. 
B) there is only one firm in the market. 
C) the firms have no command over the prices of the good they produce. 
D) the firms can take any decision irrespective of what their rival does. 
E) what is best for a firm depends on what his rival does.

Question 20

Which of the following is an example of price competition?

Accepted Answer

A) Nike signs LeBron James to a $90 million contract for endorsements. 
B) Kellogg's puts the images of Snap, Crackle, and Pop on boxes of Cocoa Krispies, linking the cereal with Rice Krispies. 
C) McDonald's introduces new garden McSalads. 
D) Tropicana introduces the Blue Raspberry Rush juice. 
E) Apple offers a 20% discount on its new range of iPhones. 
A) Nike signs LeBron James to a $90 million contract for endorsements. 
B) Kellogg's puts the images of Snap, Crackle, and Pop on boxes of Cocoa Krispies, linking the cereal with Rice Krispies. 
C) McDonald's introduces new garden McSalads. 
D) Tropicana introduces the Blue Raspberry Rush juice. 
E) Apple offers a 20% discount on its new range of iPhones.

Exam 46: Monopolistic Competition and Oligopoly

The objective of creating a brand name is:

A consumer becomes loyal to a product when:

In a certain monopolistically competitive market that is characterized by high prices and equally high-quality merchandise, if a firm's competitors begin to successfully introduce new products that cut into the firm's market share, the firm's best counter-strategy is to:

As new firms enter a monopolistically competitive industry, the demand for a typical firm's product will most likely:

A strategy that produces the best result no matter what strategy the opposing player follows is known as the dominated strategy.

Compared with a perfectly competitive firm in long-run equilibrium, a monopolistically competitive firm will operate on the upward-sloping portion of the average-total-cost curve.

The major similarity between a monopolist and a monopolistically competitive firm is:

Advertising, brand names, packaging, and celebrity endorsements all occur in monopolistically competitive markets because:

Firms develop brand names in order to make the demand for their product more elastic.

A monopolistically competitive firm may earn above normal profits or may incur losses in the short run.

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure 25.3 In the figure, D: Demand curve MR: Marginal revenue curve MC: Marginal cost curve ATC: Average total cost curve The profit per unit of output for the firm in the Figure 25.3 is:

Which of the following is a characteristic of an oligopoly market?

An oligopoly market consists of:

Consumers who purchase brand-name pharmaceuticals because they believe the brand name has some value, may be right even if a brand-name pharmaceutical and a generic product are chemically identical.

The short-run equilibrium position for a firm in monopolistic competition is the point at which:

If additional firms enter a monopolistically competitive industry, the demand facing a typical firm increases.

Strategic behavior occurs when:

Which of the following is an example of price competition?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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