Question 1

Because of product differentiation,firms

Accepted Answer

A) do not have to compete because their products are unique. 
B) cannot compete on price. 
C) can compete on the basis of quality. 
D) are unable to compete by using advertising. 
E) must compete on only price. 
A) do not have to compete because their products are unique. 
B) cannot compete on price. 
C) can compete on the basis of quality. 
D) are unable to compete by using advertising. 
E) must compete on only price.

Question 2

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

Accepted Answer

A) greater than 
B) less than 
C) not comparable to 
D) equal to or less than 
E) None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development. 
A) greater than 
B) less than 
C) not comparable to 
D) equal to or less than 
E) None of the above because a monopolistically competitive firm undertakes product development if the marginal cost of the development is less than or equal to the marginal revenue to the firm from the development.

Question 3

In monopolistic competition,there is inefficiency because price is greater than marginal cost.What brings about this inefficiency?

Accepted Answer

A) high concentration,as indicated by the large concentration ratio 
B) product differentiation 
C) freedom of entry and exit 
D) marginal cost rises as more output is produced 
E) the fact there are many firms in the market 
A) high concentration,as indicated by the large concentration ratio 
B) product differentiation 
C) freedom of entry and exit 
D) marginal cost rises as more output is produced 
E) the fact there are many firms in the market

Question 4

Why does a firm in monopolistic competition earn zero economic profit rather than an economic profit in the long run?

Accepted Answer

Entry into monopolistically competitive

Question 5

How do advertising and other selling costs affect a firm?

Accepted Answer

A) They shift the marginal cost curve upward. 
B) The only effect is that the excess capacity is reduced. 
C) The only effect is that the demand for the product increases. 
D) They shift the average total cost curve upward. 
E) The do not change demand and shift the average total cost curve downward. 
A) They shift the marginal cost curve upward. 
B) The only effect is that the excess capacity is reduced. 
C) The only effect is that the demand for the product increases. 
D) They shift the average total cost curve upward. 
E) The do not change demand and shift the average total cost curve downward.

Question 6

-The above figure shows the market demand curve for long-distance telephone calls.Suppose the marginal cost of a long-distance telephone call is 2¢ a minute for a call no matter how many minutes of calls are made and there are 3 firms in the industry.If the firms in the industry operate as perfect competitors,the price of a call is ________ per minute and if the firms in the industry operate as a monopoly,the price of a call is ________ per minute.

Accepted Answer

A) 2 cents;more than 3 cents and less than 4 cents 
B) more than 3 cents and less than 4 cents;more than 3 cents and less than 4 cents 
C) 1 cents;2 cents 
D) 2 cents;either equal to 4 cents or more than 4 cents 
E) either equal to 4 cents or more than 4 cents;2 cents 
A) 2 cents;more than 3 cents and less than 4 cents 
B) more than 3 cents and less than 4 cents;more than 3 cents and less than 4 cents 
C) 1 cents;2 cents 
D) 2 cents;either equal to 4 cents or more than 4 cents 
E) either equal to 4 cents or more than 4 cents;2 cents

Question 7

If an oligopolistic game is repeatedly played,which of the following can occur?

Accepted Answer

A) Players can learn ways to cooperate and earn an economic profit. 
B) The competitive price and output consistently is the final result. 
C) Firms can learn how to cheat more effectively on the other player. 
D) One firm will be driven out of business. 
E) An implicit agreement is reached in which one firm constantly cheats on the cartel and the other firm complies with it. 
A) Players can learn ways to cooperate and earn an economic profit. 
B) The competitive price and output consistently is the final result. 
C) Firms can learn how to cheat more effectively on the other player. 
D) One firm will be driven out of business. 
E) An implicit agreement is reached in which one firm constantly cheats on the cartel and the other firm complies with it.

Question 8

Because economic profits are eliminated in the long run in monopolistic competition,to earn an economic profit firms continuously

Accepted Answer

A) shut down. 
B) exit the industry. 
C) innovate and develop new products. 
D) declare bankruptcy. 
E) decrease their costs by decreasing their selling costs. 
A) shut down. 
B) exit the industry. 
C) innovate and develop new products. 
D) declare bankruptcy. 
E) decrease their costs by decreasing their selling costs.

Question 9

Game theory reveals that

Accepted Answer

A) the equilibrium might not be the best solution for the parties involved. 
B) firms in oligopoly are not interdependent. 
C) each player looks after what is best for the industry. 
D) if all firms in an oligopoly take the action that maximizes their profit,then the equilibrium will have the largest possible combined profit of all the firms. 
E) firms in an oligopoly choose their actions without regard for what the other firms might do. 
A) the equilibrium might not be the best solution for the parties involved. 
B) firms in oligopoly are not interdependent. 
C) each player looks after what is best for the industry. 
D) if all firms in an oligopoly take the action that maximizes their profit,then the equilibrium will have the largest possible combined profit of all the firms. 
E) firms in an oligopoly choose their actions without regard for what the other firms might do.

Question 10

Oligopoly is a market structure in which

Accepted Answer

A) many firms each produce a slightly differentiated product. 
B) one firm produces a unique product. 
C) a small number of firms compete. 
D) many firms produce an identical product. 
E) the number of firms is so small that they do not compete with each other. 
A) many firms each produce a slightly differentiated product. 
B) one firm produces a unique product. 
C) a small number of firms compete. 
D) many firms produce an identical product. 
E) the number of firms is so small that they do not compete with each other.

Question 11

Which of the following statements about product development in monopolistic competition is correct?
I.Firms in monopolistic competition undertake too much product development for efficiency.
Ii.Firms in monopolistic competition undertake too little product development for efficiency.
Iii.Product development might allow the firm to temporarily earn an economic profit.

Accepted Answer

A) i only 
B) ii only 
C) ii and iii 
D) i and iii 
E) iii only 
A) i only 
B) ii only 
C) ii and iii 
D) i and iii 
E) iii only

Question 12

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the Nash equilibrium,Firm A will set a price of ________ and Firm B will set a price of ________.

Accepted Answer

A) $10;$20 
B) $20;$10 
C) $10;$10 
D) $20;$20 
E) $20;something,but more information is needed to determine Firm B's price 
A) $10;$20 
B) $20;$10 
C) $10;$10 
D) $20;$20 
E) $20;something,but more information is needed to determine Firm B's price

Question 13

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

Accepted Answer

The efficient scale of output is the lev

Question 14

Why is collusion about the price and amount of output impossible in monopolistic competition?

Accepted Answer

The smaller the number of firm

Question 15

A Nash equilibrium in the duopoly game

Accepted Answer

A) means that one player has greater market power. 
B) occurs when each player takes the best possible action regardless of the strategy chosen by other firms. 
C) will always lead to equilibrium in which the firms' total profit is the largest. 
D) can occur only if firms cooperate with each other. 
E) means that a firm must be able to determine its actions and the actions of its competitor. 
A) means that one player has greater market power. 
B) occurs when each player takes the best possible action regardless of the strategy chosen by other firms. 
C) will always lead to equilibrium in which the firms' total profit is the largest. 
D) can occur only if firms cooperate with each other. 
E) means that a firm must be able to determine its actions and the actions of its competitor.

Question 16

What type of profit can a firm in monopolistic competition earn in the long run? Explain your answer.

Accepted Answer

In the long run,a firm in monopolistic c

Question 17

The figure above shows the market for airplanes.
-Suppose the airplane market is an oligopoly.According to the figure above,the quantity produced can range as high as ________ planes per week and as low as ________ planes per week.

Accepted Answer

A) 10;4 
B) 12;6 
C) 6;0 
D) 12;0 
E) None of the above answers is correct. 
A) 10;4 
B) 12;6 
C) 6;0 
D) 12;0 
E) None of the above answers is correct.

Question 18

-The table above shows the payoff matrix offered to two suspected criminals,Bonnie and Clyde.The payoffs are the years they will spend in prison.The suspected criminals are not allowed to communicate.Given the information in the payoff matrix,the Nash equilibrium is

Accepted Answer

A) Bonnie confesses only if she thinks Clyde denies committing the crime. 
B) Clyde confesses only if he thinks Bonnie denies committing the crime. 
C) both Bonnie and Clyde confess to the crime. 
D) both Bonnie and Clyde deny committing the crime. 
E) Clyde confesses and Bonnie might either confess or not confess;either outcome is consistent with the Nash equilibrium. 
A) Bonnie confesses only if she thinks Clyde denies committing the crime. 
B) Clyde confesses only if he thinks Bonnie denies committing the crime. 
C) both Bonnie and Clyde confess to the crime. 
D) both Bonnie and Clyde deny committing the crime. 
E) Clyde confesses and Bonnie might either confess or not confess;either outcome is consistent with the Nash equilibrium.

Question 19

In monopolistic competition,there are ________ barriers to entry and so firms in monopolistic competition ________ earn an economic profit in the long run.

Accepted Answer

A) high;can 
B) high;cannot 
C) no;can 
D) no;cannot 
E) sometimes;can sometimes 
A) high;can 
B) high;cannot 
C) no;can 
D) no;cannot 
E) sometimes;can sometimes

Question 20

Which of the following statements is correct?

Accepted Answer

A) A firm in oligopoly will charge a price that is lower than the price charged in perfect competition. 
B) If firms in oligopoly look only at their own self-interest in deciding the output they should produce,the total market output will exceed that of a monopoly. 
C) If one oligopolist reduces the price of its product,its demand curve shifts leftward. 
D) Because many producers join to form a cartel,the market becomes monopolistic competition. 
E) It is in the self-interest of each firm in an oligopoly to take the actions that maximize all the firms' joint profit. 
A) A firm in oligopoly will charge a price that is lower than the price charged in perfect competition. 
B) If firms in oligopoly look only at their own self-interest in deciding the output they should produce,the total market output will exceed that of a monopoly. 
C) If one oligopolist reduces the price of its product,its demand curve shifts leftward. 
D) Because many producers join to form a cartel,the market becomes monopolistic competition. 
E) It is in the self-interest of each firm in an oligopoly to take the actions that maximize all the firms' joint profit.

Because of product differentiation,firms

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

In monopolistic competition,there is inefficiency because price is greater than marginal cost.What brings about this inefficiency?

Why does a firm in monopolistic competition earn zero economic profit rather than an economic profit in the long run?

How do advertising and other selling costs affect a firm?

If an oligopolistic game is repeatedly played,which of the following can occur?

Because economic profits are eliminated in the long run in monopolistic competition,to earn an economic profit firms continuously

Game theory reveals that

Oligopoly is a market structure in which

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the Nash equilibrium,Firm A will set a price of and Firm B will set a price of .

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

Why is collusion about the price and amount of output impossible in monopolistic competition?

A Nash equilibrium in the duopoly game

What type of profit can a firm in monopolistic competition earn in the long run? Explain your answer.

The figure above shows the market for airplanes. -Suppose the airplane market is an oligopoly.According to the figure above,the quantity produced can range as high as planes per week and as low as planes per week.

-The table above shows the payoff matrix offered to two suspected criminals,Bonnie and Clyde.The payoffs are the years they will spend in prison.The suspected criminals are not allowed to communicate.Given the information in the payoff matrix,the Nash equilibrium is

In monopolistic competition,there are barriers to entry and so firms in monopolistic competition earn an economic profit in the long run.

Which of the following statements is correct?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 13: Monopolistic Competition and Oligopoly

Because of product differentiation,firms

For a firm in monopolistic competition to undertake product development,the marginal cost of the development must be ________ the marginal benefit of the development to consumers.

In monopolistic competition,there is inefficiency because price is greater than marginal cost.What brings about this inefficiency?

Why does a firm in monopolistic competition earn zero economic profit rather than an economic profit in the long run?

How do advertising and other selling costs affect a firm?

If an oligopolistic game is repeatedly played,which of the following can occur?

Because economic profits are eliminated in the long run in monopolistic competition,to earn an economic profit firms continuously

Game theory reveals that

Oligopoly is a market structure in which

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the Nash equilibrium,Firm A will set a price of ________ and Firm B will set a price of ________.

What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?

Why is collusion about the price and amount of output impossible in monopolistic competition?

A Nash equilibrium in the duopoly game

What type of profit can a firm in monopolistic competition earn in the long run? Explain your answer.

The figure above shows the market for airplanes. -Suppose the airplane market is an oligopoly.According to the figure above,the quantity produced can range as high as ________ planes per week and as low as ________ planes per week.

-The table above shows the payoff matrix offered to two suspected criminals,Bonnie and Clyde.The payoffs are the years they will spend in prison.The suspected criminals are not allowed to communicate.Given the information in the payoff matrix,the Nash equilibrium is

In monopolistic competition,there are ________ barriers to entry and so firms in monopolistic competition ________ earn an economic profit in the long run.

Which of the following statements is correct?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

-The only two firms in a market are trying to decide what price to charge.The payoff matrix for this duopoly game is shown above.The payoffs are thousands of dollars of economic profit.In the Nash equilibrium,Firm A will set a price of and Firm B will set a price of .

The figure above shows the market for airplanes. -Suppose the airplane market is an oligopoly.According to the figure above,the quantity produced can range as high as planes per week and as low as planes per week.

In monopolistic competition,there are barriers to entry and so firms in monopolistic competition earn an economic profit in the long run.