Question 1

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Accepted Answer

A) Selling price equals average total cost. 
B) Production is at minimum average total cost. 
C) Marginal revenue equals marginal cost. 
D) Selling price is greater than marginal cost. 
A) Selling price equals average total cost. 
B) Production is at minimum average total cost. 
C) Marginal revenue equals marginal cost. 
D) Selling price is greater than marginal cost.

Question 2

A Nash equilibrium is

Accepted Answer

A) reached when an oligopoly's market demand and supply intersect. 
B) reached when each player chooses the best strategy for himself and for the group. 
C) reached when each player chooses the best strategy for himself,given the other strategies chosen by the other players in the group. 
D) an equilibrium comprising non-dominant strategies only. 
A) reached when an oligopoly's market demand and supply intersect. 
B) reached when each player chooses the best strategy for himself and for the group. 
C) reached when each player chooses the best strategy for himself,given the other strategies chosen by the other players in the group. 
D) an equilibrium comprising non-dominant strategies only.

Question 3

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

Accepted Answer

A cooperative equilibrium is one in whic

Question 4

In monopolistic competition,if a firm produces a highly desirable product relative to its competitors,the firm will be able to raise its price without losing any customers.

Accepted Answer

A) True 
 B)False

Question 5

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

Accepted Answer

A) new entrants into the market are more likely to have cutting edge products. 
B) as the firm raises its price in the long run,it will lose some customers to new entrants in the market. 
C) some of its customers have switched to purchasing the products of new entrants in the market. 
D) its costs of production rises. 
A) new entrants into the market are more likely to have cutting edge products. 
B) as the firm raises its price in the long run,it will lose some customers to new entrants in the market. 
C) some of its customers have switched to purchasing the products of new entrants in the market. 
D) its costs of production rises.

Question 6

If economies of scale are significant,the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

Accepted Answer

A) True 
 B)False

Question 7

Figure 11-6  
-Refer to Figure 11-6.The firm represented in the diagram

Accepted Answer

A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale. 
A) makes zero economic profit. 
B) makes zero accounting profit. 
C) should exit the industry. 
D) should expand its output to take advantage of economies of scale.

Question 8

Figure 11-6  
-Refer to Figure 11-6.What is the amount of excess capacity?

Accepted Answer

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

Question 9

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

Accepted Answer

A) True 
 B)False

Question 10

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Accepted Answer

A) True 
 B)False

Question 11

Consumers benefit from monopolistic competition by

Accepted Answer

A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices. 
A) being able to choose from products more closely suited to their tastes. 
B) paying the lowest possible price for the product. 
C) paying the same price as everyone else. 
D) being able to purchase high-quality products at low prices.

Question 12

OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has

Accepted Answer

A) a cooperative equilibrium. 
B) a noncooperative equilibrium. 
C) new potential entrants. 
D) a threat of substitute goods. 
A) a cooperative equilibrium. 
B) a noncooperative equilibrium. 
C) new potential entrants. 
D) a threat of substitute goods.

Question 13

Producing a differentiated product occurs in which of the following industries?

Accepted Answer

A) oligopoly,monopolistic competition and perfect competition. 
B) monopolistic competition only. 
C) oligopoly only 
D) monopolistic competition and oligopoly 
A) oligopoly,monopolistic competition and perfect competition. 
B) monopolistic competition only. 
C) oligopoly only 
D) monopolistic competition and oligopoly

Question 14

Figure 11-9  
-Refer to Figure 11-9 to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.What is the average total cost at the profit-maximizing output level?
d.What area represents the firm's profit?
e.At which output level are economies of scale exhausted?
f.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit maximizing level of output

Question 15

Some of the advantages Netflix had over companies like Blockbuster and Wal-Mart in successfully competing in the mail order DVD rental business include all of the following except

Accepted Answer

A) a quick turnaround of mailing out the customer's next DVD once the previous one was returned. 
B) an extensive system of storefront operations where customers could rent DVDs in person. 
C) an efficient system of processing DVDs returned from customers. 
D) a national system of warehouses allowing for quick customer delivery. 
A) a quick turnaround of mailing out the customer's next DVD once the previous one was returned. 
B) an extensive system of storefront operations where customers could rent DVDs in person. 
C) an efficient system of processing DVDs returned from customers. 
D) a national system of warehouses allowing for quick customer delivery.

Question 16

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

Accepted Answer

A) anything greater than 10 percent. 
B) anything greater than 20 percent. 
C) anything greater than 30 percent. 
D) anything greater than 40 percent. 
A) anything greater than 10 percent. 
B) anything greater than 20 percent. 
C) anything greater than 30 percent. 
D) anything greater than 40 percent.

Question 17

A market comprised of only two firms is called a

Accepted Answer

A) competitive market. 
B) duopoly. 
C) monopoly. 
D) monopolistically competitive market. 
A) competitive market. 
B) duopoly. 
C) monopoly. 
D) monopolistically competitive market.

Question 18

Is a monopolistically competitive firm allocatively efficient?

Accepted Answer

A) No,because it does not produce at minimum average total cost. 
B) Yes,because it produces where marginal cost equals marginal revenue. 
C) No,because price is greater than marginal cost. 
D) Yes,because price equals average total cost. 
A) No,because it does not produce at minimum average total cost. 
B) Yes,because it produces where marginal cost equals marginal revenue. 
C) No,because price is greater than marginal cost. 
D) Yes,because price equals average total cost.

Question 19

Figure 11-5   Figure 11-5 shows cost and demand curves for a monopolistically competitive producer of iced-tea.
-Refer to Figure 11-5.to answer the following questions.
a.What is the profit-maximizing output level?
b.What is the profit-maximizing price?
c.At the profit-maximizing output level,how much profit will be realized?
d.Does this graph most likely represent the long run or the short run? Why?

Accepted Answer

a.The profit-maximizing output

Question 20

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 Godrickporter and if so,what is it?

Accepted Answer

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

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

A Nash equilibrium is

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

In monopolistic competition,if a firm produces a highly desirable product relative to its competitors,the firm will be able to raise its price without losing any customers.

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

If economies of scale are significant,the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

Figure 11-6 -Refer to Figure 11-6.The firm represented in the diagram

Figure 11-6 -Refer to Figure 11-6.What is the amount of excess capacity?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Consumers benefit from monopolistic competition by

OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has

Producing a differentiated product occurs in which of the following industries?

Some of the advantages Netflix had over companies like Blockbuster and Wal-Mart in successfully competing in the mail order DVD rental business include all of the following except

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

A market comprised of only two firms is called a

Is a monopolistically competitive firm allocatively efficient?

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

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Exam 11: Monopolistic Competition and Oligopoly

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

A Nash equilibrium is

Explain the difference between a cooperative equilibrium and a noncooperative equilibrium in game theory.

In monopolistic competition,if a firm produces a highly desirable product relative to its competitors,the firm will be able to raise its price without losing any customers.

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because

If economies of scale are significant,the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.

Figure 11-6 -Refer to Figure 11-6.The firm represented in the diagram

Figure 11-6 -Refer to Figure 11-6.What is the amount of excess capacity?

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.

An entry barrier exists when firms in an industry charge the lowest price possible for their products.

Consumers benefit from monopolistic competition by

OPEC periodically meets to agree to restrict the cartel's oil output,and yet almost every member of OPEC produces more than its own output quota.This suggests that OPEC has

Producing a differentiated product occurs in which of the following industries?

Some of the advantages Netflix had over companies like Blockbuster and Wal-Mart in successfully competing in the mail order DVD rental business include all of the following except

The value of the four-firm concentration ratio that many economists consider indicative of the existence of an oligopoly in a particular industry is

A market comprised of only two firms is called a

Is a monopolistically competitive firm allocatively efficient?

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