Question 1

Wal-Mart created a competitive advantage with its inventory system to reduce the ratio of cost of goods sold to sales expecting:

Accepted Answer

A) to enjoy huge economic profits forever. 
B) its rivals will never imitate their strategy and it will continue to enjoy positive economic profits. 
C) its rivals will immediately do the same thing and it will end earning zero profits. 
D) to enjoy economic profits for a few years before its rivals caught up. 
E) it will at least be able to cover its fixed costs. 
A) to enjoy huge economic profits forever. 
B) its rivals will never imitate their strategy and it will continue to enjoy positive economic profits. 
C) its rivals will immediately do the same thing and it will end earning zero profits. 
D) to enjoy economic profits for a few years before its rivals caught up. 
E) it will at least be able to cover its fixed costs. D

Question 2

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. B

Question 3

According to Figure 11.1, the profit-maximizing firm is making an average:

Accepted Answer

A) profit on each unit produced equal to the distance BG. 
B) loss on each unit produced equal to the distance BG. 
C) profit on each unit produced equal to the distance CE. 
D) loss on each unit produced equal to the distance DG. 
E) loss on each unit produced equal to the distance AC. 
A) profit on each unit produced equal to the distance BG. 
B) loss on each unit produced equal to the distance BG. 
C) profit on each unit produced equal to the distance CE. 
D) loss on each unit produced equal to the distance DG. 
E) loss on each unit produced equal to the distance AC. D

Question 4

In long-run equilibrium, the monopolistically competitive firm:

Accepted Answer

A) will break even. 
B) will cease to advertise. 
C) will earn a positive economic profit. 
D) will face a perfectly elastic demand curve. 
E) will no longer need to engage in non-price competition. 
A) will break even. 
B) will cease to advertise. 
C) will earn a positive economic profit. 
D) will face a perfectly elastic demand curve. 
E) will no longer need to engage in non-price competition.

Question 5

Consumers who are loyal to a brand will purchase products under that brand name even if their prices are above other competing brands.

Accepted Answer

A) True 
 B)False

Question 6

Actions that allow oligopoly firms to coordinate their pricing behavior without explicit collusion are referred to as _____.

Accepted Answer

A) strategic behavior 
B) differential pricing strategies 
C) facilitating practices 
D) duopoly price discrimination mechanisms 
E) independent practices 
A) strategic behavior 
B) differential pricing strategies 
C) facilitating practices 
D) duopoly price discrimination mechanisms 
E) independent practices

Question 7

A monopolistically competitive firm maximizes profit at the point at which price is equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 8

Strategic interdependence occurs in:

Accepted Answer

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

Question 9

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 10

Why is each firm in a monopolistically competitive industry considered as a "mini" monopoly?

Accepted Answer

A) There is a large number of sellers in the market 
B) Each firm in monopolistic competition is a price taker 
C) The product of each firm is unique in some way or the other 
D) Each firm faces a perfectly elastic demand curve 
E) There exists a large number of close substitutes of the products 
A) There is a large number of sellers in the market 
B) Each firm in monopolistic competition is a price taker 
C) The product of each firm is unique in some way or the other 
D) Each firm faces a perfectly elastic demand curve 
E) There exists a large number of close substitutes of the products

Question 11

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 12

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 13

The short-run equilibrium position for a firm in monopolistic competition is the point at which the firm's marginal-cost curve intersects its marginal-revenue curve from above.

Accepted Answer

A) True 
 B)False

Question 14

Monopolistic competition is similar to perfect competition in that:

Accepted Answer

A) there are only a few firms in the market. 
B) entry into and exit from the market is easy. 
C) there are significant barriers to entry in the market. 
D) each firm sells a homogeneous product. 
E) each firm differentiates its product through advertising. 
A) there are only a few firms in the market. 
B) entry into and exit from the market is easy. 
C) there are significant barriers to entry in the market. 
D) each firm sells a homogeneous product. 
E) each firm differentiates its product through advertising.

Question 15

In which market structure model(s)is product differentiation a significant feature?

Accepted Answer

A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Both perfect competition and monopolistic competition 
A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Both perfect competition and monopolistic competition

Question 16

Martin is in the market for a new television set.He is deciding between two sets: one is rather expensive but offers a guarantee;the other has a lower price but offers no guarantee.Martin's decision to buy the more expensive set would indicate that:

Accepted Answer

A) Martin does not know a good deal when he sees it. 
B) Martin interpreted the guarantee as a signal of the quality. 
C) Martin should have shopped around a bit more for a better deal. 
D) Martin is not maximizing his utility. 
E) Martin has a high income. 
A) Martin does not know a good deal when he sees it. 
B) Martin interpreted the guarantee as a signal of the quality. 
C) Martin should have shopped around a bit more for a better deal. 
D) Martin is not maximizing his utility. 
E) Martin has a high income.

Question 17

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 18

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 19

A deadweight loss arises in a perfectly competitive market as each firm is a price taker.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 18: Monopolistic Competition and Oligopoly

Wal-Mart created a competitive advantage with its inventory system to reduce the ratio of cost of goods sold to sales expecting:

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:

According to Figure 11.1, the profit-maximizing firm is making an average:

In long-run equilibrium, the monopolistically competitive firm:

Consumers who are loyal to a brand will purchase products under that brand name even if their prices are above other competing brands.

Actions that allow oligopoly firms to coordinate their pricing behavior without explicit collusion are referred to as _____.

A monopolistically competitive firm maximizes profit at the point at which price is equal to marginal cost.

Strategic interdependence occurs in:

Which of the following is true of product differentiation?

Why is each firm in a monopolistically competitive industry considered as a "mini" monopoly?

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:

The short-run equilibrium position for a firm in monopolistic competition is the point at which the firm's marginal-cost curve intersects its marginal-revenue curve from above.

Monopolistic competition is similar to perfect competition in that:

In which market structure model(s)is product differentiation a significant feature?

Martin is in the market for a new television set.He is deciding between two sets: one is rather expensive but offers a guarantee;the other has a lower price but offers no guarantee.Martin's decision to buy the more expensive set would indicate that:

Strategic behavior occurs when:

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

A deadweight loss arises in a perfectly competitive market as each firm is a price taker.

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

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

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

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Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

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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

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

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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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