Question 1

The monopolistically competitive firm will charge a price which is more than that charged by a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 2

Product differentiation:

Accepted Answer

A) is carried out by perfectly competitive and monopolistically competitive firms. 
B) is succesful if a firm faces a relatively inelastic demand curve. 
C) does not allow the firm to raise its price without losing all of its customers. 
D) cannot be accomplished through advertising or trivial product changes. 
E) if carried out successfully enables the firms to enjoy market power. 
A) is carried out by perfectly competitive and monopolistically competitive firms. 
B) is succesful if a firm faces a relatively inelastic demand curve. 
C) does not allow the firm to raise its price without losing all of its customers. 
D) cannot be accomplished through advertising or trivial product changes. 
E) if carried out successfully enables the firms to enjoy market power.

Question 3

A cartel is an organization of firms in which there is a dominant firm which dictates price and output decisions to the other member firms.

Accepted Answer

A) True 
 B)False

Question 4

The oligopoly market structure model is characterized by:

Accepted Answer

A) many firms in the industry producing differentiated products. 
B) many firms in the industry producing identical products. 
C) few firms in an industry with natural barriers to entry. 
D) a single firm in an industry with barriers to entry. 
E) many firms in an industry with barriers to entry. 
A) many firms in the industry producing differentiated products. 
B) many firms in the industry producing identical products. 
C) few firms in an industry with natural barriers to entry. 
D) a single firm in an industry with barriers to entry. 
E) many firms in an industry with barriers to entry.

Question 5

In a monopolistically competitive industry, firms which enter the market in the long run produce a close substitute and not a standardized product.

Accepted Answer

A) True 
 B)False

Question 6

If a monopolistically competitive industry is in long-run equilibrium and suddenly the cost of resources increases, then:

Accepted Answer

A) the demand and average-revenue curves will shift to the right. 
B) the demand and average-revenue curves will shift to the left. 
C) some firms will eventually leave the industry. 
D) new firms will eventually enter the industry. 
E) the cost structure of the firm will shift down. 
A) the demand and average-revenue curves will shift to the right. 
B) the demand and average-revenue curves will shift to the left. 
C) some firms will eventually leave the industry. 
D) new firms will eventually enter the industry. 
E) the cost structure of the firm will shift down.

Question 7

The firms in an oligopoly market structure agree to collude because:

Accepted Answer

A) acting jointly helps them to earn more profits. 
B) each firm wants to know the strategy of its rivals. 
C) each firm wants to charge a lower price for its product than its rivals. 
D) the firms want to maintain a healthy relationship with each other. 
E) it helps them to enjoy economies of scale. 
A) acting jointly helps them to earn more profits. 
B) each firm wants to know the strategy of its rivals. 
C) each firm wants to charge a lower price for its product than its rivals. 
D) the firms want to maintain a healthy relationship with each other. 
E) it helps them to enjoy economies of scale.

Question 8

Perfect competition is the only market structure in which firms are economically efficient in the long run.

Accepted Answer

A) True 
 B)False

Question 9

The figure below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.2   In the figure,
D: Demand curve
MR: Marginal revenue curve
ATC1 and ATC2: Average total cost curves
MC: Marginal cost curve
In Figure 11.2, 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 10

Collusion of firms is legal in the United States.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The figure given below shows the revenue and cost curves of a monopolistically competitive firm. Figure: 11.3   In the figure,
D: Demand curve
MR: Marginal revenue curve
MC: Marginal cost curve
ATC: Average total cost curve
The monopolistically competitive firm in Figure 11.3 will maximize profits (or minimize losses)by producing _____ and charging _____.

Accepted Answer

A) Q2;P6 
B) Q1;P1 
C) Q2;P2 
D) Q3;P3 
E) Q4;P5 
A) Q2;P6 
B) Q1;P1 
C) Q2;P2 
D) Q3;P3 
E) Q4;P5

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

Which of the following is true of a successful cartel?

Accepted Answer

A) A successful cartel offers consumers the lowest possible price for a product. 
B) A successful cartel minimizes profits for its members. 
C) A successful cartel behaves as a monopolist in the market. 
D) A successful cartel produces a quantity greater than that produced in a competitive market. 
E) A successful cartel is always stable. 
A) A successful cartel offers consumers the lowest possible price for a product. 
B) A successful cartel minimizes profits for its members. 
C) A successful cartel behaves as a monopolist in the market. 
D) A successful cartel produces a quantity greater than that produced in a competitive market. 
E) A successful cartel is always stable.

Question 16

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 17

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 18

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 11.2   Refer to Table 11.2.If firm both firm A and firm B choose their dominant strategies then:

Accepted Answer

A) firm A makes a profit of $40 and firm B makes a profit of $45. 
B) firm A makes a profit of $50 and firm B makes a profit of $45. 
C) firm A makes a profit of $50 and firm B makes a profit of $40. 
D) firm A makes a profit of $42 and firm B makes a profit of $40. 
E) firm A makes a profit of $40 and firm B makes a profit of $20. 
A) firm A makes a profit of $40 and firm B makes a profit of $45. 
B) firm A makes a profit of $50 and firm B makes a profit of $45. 
C) firm A makes a profit of $50 and firm B makes a profit of $40. 
D) firm A makes a profit of $42 and firm B makes a profit of $40. 
E) firm A makes a profit of $40 and firm B makes a profit of $20.

Question 19

A monopolistically competitive firm faces a relatively less elastic demand curve than a monopolist.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 18: Monopolistic Competition and Oligopoly

The monopolistically competitive firm will charge a price which is more than that charged by a perfectly competitive firm.

Product differentiation:

A cartel is an organization of firms in which there is a dominant firm which dictates price and output decisions to the other member firms.

The oligopoly market structure model is characterized by:

In a monopolistically competitive industry, firms which enter the market in the long run produce a close substitute and not a standardized product.

If a monopolistically competitive industry is in long-run equilibrium and suddenly the cost of resources increases, then:

The firms in an oligopoly market structure agree to collude because:

Perfect competition is the only market structure in which firms are economically efficient in the long run.

Collusion of firms is legal in the United States.

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

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

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

Which of the following is true of a successful cartel?

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

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:

A monopolistically competitive firm faces a relatively less elastic demand curve than a monopolist.

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

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

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

Monopolistic Competition and Oligopoly

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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