Question 1

Which of the following is not necessarily a consequence of occupational licensing laws?

Accepted Answer

A) They restrict competition. 
B) Consumers pay higher prices for the services of licensed professions. 
C) They result in a higher quality of service. 
D) They ensure that licensed professionals meet some minimum qualifications. 
A) They restrict competition. 
B) Consumers pay higher prices for the services of licensed professions. 
C) They result in a higher quality of service. 
D) They ensure that licensed professionals meet some minimum qualifications.

Question 2

What is the difference between zero accounting profit and zero economic profit?

Accepted Answer

Economic profits take into account oppor

Question 3

A major difference between monopolistic competition and perfect competition is

Accepted Answer

A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardized in monopolistic competition unlike in perfect competition. 
D) the barriers to entry in the two markets. 
A) the number of sellers in the markets. 
B) the degree by which the market demand curves slope downwards. 
C) that products are not standardized in monopolistic competition unlike in perfect competition. 
D) the barriers to entry in the two markets.

Question 4

Figure 11-3   Figure 11-3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-3.What is the area that represents the total revenue made by the firm?

Accepted Answer

A) 0P0aQa 
B) 0P1bQa 
C) 0P2cQa 
D) 0P3dQa 
A) 0P0aQa 
B) 0P1bQa 
C) 0P2cQa 
D) 0P3dQa

Question 5

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Accepted Answer

A) substitution effect. 
B) income effect. 
C) price effect. 
D) output effect. 
A) substitution effect. 
B) income effect. 
C) price effect. 
D) output effect.

Question 6

A prisoner's dilemma leads to a noncooperative equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

Table 11-4   Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow.Each firm must decide on whether to increase its advertising spending to compete for customers.Table 11-4 shows the payoff matrix for this advertising game.
-Refer to Table 11-4.Is there a dominant strategy for Star Connections and if so,what is it?

Accepted Answer

A) No,its outcome depends on what Godrickporter does. 
B) Yes,Star Connections should increase its advertising spending. 
C) Yes,Star Connections should reduce its advertising spending. 
D) Yes,Star Connections' dominant strategy is to collude with Godrickporter. 
A) No,its outcome depends on what Godrickporter does. 
B) Yes,Star Connections should increase its advertising spending. 
C) Yes,Star Connections should reduce its advertising spending. 
D) Yes,Star Connections' dominant strategy is to collude with Godrickporter.

Question 8

One reason why the coffeehouse market is competitive is that

Accepted Answer

A) demand for specialty coffee is very high. 
B) it is trendy and therefore is likely to have a customer following. 
C) barriers to entry are low. 
D) consumption takes place in public. 
A) demand for specialty coffee is very high. 
B) it is trendy and therefore is likely to have a customer following. 
C) barriers to entry are low. 
D) consumption takes place in public.

Question 9

In an oligopoly,firms can increase their market power by

Accepted Answer

A) selling to buyers who have market power. 
B) pursuing dominant strategies. 
C) colluding to set prices. 
D) undertaking heavy advertising expenditure. 
A) selling to buyers who have market power. 
B) pursuing dominant strategies. 
C) colluding to set prices. 
D) undertaking heavy advertising expenditure.

Question 10

Which of the following is not a shortcoming of the concentration ratio as a measure of the extent of competition in an industry?

Accepted Answer

A) Concentration ratios do not include sales in the United States by foreign firms. 
B) Concentration ratios are calculated for the national market,even though the competition in some industries is mainly local. 
C) Concentration ratios assign weights to only the four largest firms in an industry. 
D) Concentration ratios do not address the fact that competition sometimes exists between firms in different industries. 
A) Concentration ratios do not include sales in the United States by foreign firms. 
B) Concentration ratios are calculated for the national market,even though the competition in some industries is mainly local. 
C) Concentration ratios assign weights to only the four largest firms in an industry. 
D) Concentration ratios do not address the fact that competition sometimes exists between firms in different industries.

Question 11

A member of a cartel like OPEC has an incentive to

Accepted Answer

A) argue for larger production quotas for each member of the cartel. 
B) agree to a low cartel production level and then produce more than its quota. 
C) abide by its individual production quota. 
D) support equal production quotas for each member. 
A) argue for larger production quotas for each member of the cartel. 
B) agree to a low cartel production level and then produce more than its quota. 
C) abide by its individual production quota. 
D) support equal production quotas for each member.

Question 12

Table 11-1
  
-Refer to Table 11-1.The Table shows

Accepted Answer

A) an elastic segment of the demand curve. 
B) an inelastic segment of the demand curve. 
C) a demand curve with an elastic segment of the demand curve from $7.50 to $6.50 followed by an inelastic segment. 
D) a demand curve with an inelastic segment of the demand curve from $7.50 to $6.50 followed by an elastic segment. 
A) an elastic segment of the demand curve. 
B) an inelastic segment of the demand curve. 
C) a demand curve with an elastic segment of the demand curve from $7.50 to $6.50 followed by an inelastic segment. 
D) a demand curve with an inelastic segment of the demand curve from $7.50 to $6.50 followed by an elastic segment.

Question 13

Figure 11-6  
-Refer to Figure 11-6.What is the productively efficient output for the firm represented in the diagram?

Accepted Answer

A) Q1 units 
B) Q2 units 
C) Q3 units 
D) Q4 units 
A) Q1 units 
B) Q2 units 
C) Q3 units 
D) Q4 units

Question 14

Figure 11-6  
-Refer to Figure 11-6.The diagram depicts a firm

Accepted Answer

A) in a constant cost industry. 
B) in an increasing cost industry. 
C) in long run equilibrium. 
D) that is making short run losses. 
A) in a constant cost industry. 
B) in an increasing cost industry. 
C) in long run equilibrium. 
D) that is making short run losses.

Question 15

What is the profit-maximizing rule for a monopolistically competitive firm?

Accepted Answer

A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost 
A) to produce a quantity that maximizes market share 
B) to produce a quantity that maximizes total revenue 
C) to produce a quantity such that marginal revenue equals marginal cost 
D) to produce a quantity such that price equals marginal cost

Question 16

Oligopolies exist and do not attract new rivals because

Accepted Answer

A) of competition. 
B) of barriers to entry. 
C) the firms keep profits and prices so low that no rivals are attracted. 
D) there can be no product differentiation. 
A) of competition. 
B) of barriers to entry. 
C) the firms keep profits and prices so low that no rivals are attracted. 
D) there can be no product differentiation.

Question 17

Assume that two interior design companies,Alistair and Baine,are competing for customers and if they both advertise,they would each earn $30 million in profits.If neither advertises,they each earn $50 million in profits.If one advertises and the other doesn't,the firm that advertises earns $40 million in profit while the other earns $20 million in profit.
a.Present the information above in the form of a payoff matrix.Let Baine be the row player and Alistair the column player.
b.Does each firm have a dominant strategy and if so what is it?
c.What is the Nash equilibrium?

Accepted Answer

a.Please see the table below. @#IMG-DLM& b.No,ther

Question 18

In which of the following cartels is total cartel profit likely to be the highest?

Accepted Answer

A) a cartel made up of equal sized firms each producing different quantities of a differentiated product 
B) a cartel made up of firms of various sizes each producing different quantities of a homogeneous product 
C) a cartel made up of firms of various sizes each producing the same quantity of a differentiated product 
D) a cartel made up of identical firms each producing the same quantity of a homogeneous product 
A) a cartel made up of equal sized firms each producing different quantities of a differentiated product 
B) a cartel made up of firms of various sizes each producing different quantities of a homogeneous product 
C) a cartel made up of firms of various sizes each producing the same quantity of a differentiated product 
D) a cartel made up of identical firms each producing the same quantity of a homogeneous product

Question 19

In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

Accepted Answer

A) True 
 B)False

Question 20

Table 11-6   Suppose OPEC has only two producers,Saudi Arabia and Nigeria.Saudi Arabia has far more oil reserves and is the lower cost producer compared to Nigeria.The payoff matrix in Table 11-6 shows the profits earned per day by each country."Low output" corresponds to producing the OPEC assigned quota and "high output" corresponds to producing the maximum capacity beyond the assigned quota.
-Refer to Table 11-6.What is the Nash equilibrium in this game?

Accepted Answer

A) In the Nash equilibrium both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B) In the Nash equilibrium both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C) In the Nash equilibrium Saudi Arabia produces a low output and earns a profit of $80 million and Nigeria produces a high output and $30 million respectively. 
D) There is no Nash equilibrium. 
A) In the Nash equilibrium both Saudi Arabia and Nigeria produce a low output and earn a profit of $100 million and $20 million respectively. 
B) In the Nash equilibrium both Saudi Arabia and Nigeria produce a high output and earn a profit of $60 million and $20 million respectively. 
C) In the Nash equilibrium Saudi Arabia produces a low output and earns a profit of $80 million and Nigeria produces a high output and $30 million respectively. 
D) There is no Nash equilibrium.

Which of the following is not necessarily a consequence of occupational licensing laws?

What is the difference between zero accounting profit and zero economic profit?

A major difference between monopolistic competition and perfect competition is

Figure 11-3 Figure 11-3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-3.What is the area that represents the total revenue made by the firm?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

A prisoner's dilemma leads to a noncooperative equilibrium.

One reason why the coffeehouse market is competitive is that

In an oligopoly,firms can increase their market power by

Which of the following is not a shortcoming of the concentration ratio as a measure of the extent of competition in an industry?

A member of a cartel like OPEC has an incentive to

Table 11-1 -Refer to Table 11-1.The Table shows

Figure 11-6 -Refer to Figure 11-6.What is the productively efficient output for the firm represented in the diagram?

Figure 11-6 -Refer to Figure 11-6.The diagram depicts a firm

What is the profit-maximizing rule for a monopolistically competitive firm?

Oligopolies exist and do not attract new rivals because

In which of the following cartels is total cartel profit likely to be the highest?

In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 11: Monopolistic Competition and Oligopoly

Which of the following is not necessarily a consequence of occupational licensing laws?

What is the difference between zero accounting profit and zero economic profit?

A major difference between monopolistic competition and perfect competition is

Figure 11-3 Figure 11-3 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 11-3.What is the area that represents the total revenue made by the firm?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

A prisoner's dilemma leads to a noncooperative equilibrium.

One reason why the coffeehouse market is competitive is that

In an oligopoly,firms can increase their market power by

Which of the following is not a shortcoming of the concentration ratio as a measure of the extent of competition in an industry?

A member of a cartel like OPEC has an incentive to

Table 11-1 -Refer to Table 11-1.The Table shows

Figure 11-6 -Refer to Figure 11-6.What is the productively efficient output for the firm represented in the diagram?

Figure 11-6 -Refer to Figure 11-6.The diagram depicts a firm

What is the profit-maximizing rule for a monopolistically competitive firm?

Oligopolies exist and do not attract new rivals because

In which of the following cartels is total cartel profit likely to be the highest?

In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters