Question 1

Each member of OPEC can increase its income by selling more oil than its output quota because

Accepted Answer

A) by selling more at OPEC's cartel price,a member will automatically earn more income. 
B) each member's demand is more elastic than the total demand for oil. 
C) the demand for oil is inelastic so total revenue increases. 
D) the demand for oil is perfectly elastic. 
A) by selling more at OPEC's cartel price,a member will automatically earn more income. 
B) each member's demand is more elastic than the total demand for oil. 
C) the demand for oil is inelastic so total revenue increases. 
D) the demand for oil is perfectly elastic.

Question 2

All of the following are examples of oligopolistic markets except

Accepted Answer

A) the broadcasting industry 
B) aircraft manufacture 
C) college bookstores 
D) seafood restaurant chains 
A) the broadcasting industry 
B) aircraft manufacture 
C) college bookstores 
D) seafood restaurant chains

Question 3

A dominant strategy

Accepted Answer

A) is one that is the best for a firm,no matter what strategies other firms use. 
B) is one that a firm is forced into following by government policy. 
C) involves colluding with rivals to maximize joint profits. 
D) involves deciding what to do after all rivals have chosen their own strategies. 
A) is one that is the best for a firm,no matter what strategies other firms use. 
B) is one that a firm is forced into following by government policy. 
C) involves colluding with rivals to maximize joint profits. 
D) involves deciding what to do after all rivals have chosen their own strategies.

Question 4

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19,then to maximize profits the firm should

Accepted Answer

A) continue to produce the same quantity. 
B) increase output. 
C) decrease output. 
D) shutdown. 
A) continue to produce the same quantity. 
B) increase output. 
C) decrease output. 
D) shutdown.

Question 5

An oligopoly firm is similar to a monopolistically competitive firm in that

Accepted Answer

A) both firms face the prisoner's dilemma. 
B) both operate in a market in which there are entry barriers. 
C) both firms have market power. 
D) both firms are in industries characterized by an interdependent firm. 
A) both firms face the prisoner's dilemma. 
B) both operate in a market in which there are entry barriers. 
C) both firms have market power. 
D) both firms are in industries characterized by an interdependent firm.

Question 6

A game in which each player adopts its dominant strategy

Accepted Answer

A) will not lead to an equilibrium. 
B) must be a cooperative game. 
C) could result in a Nash equilibrium. 
D) can never result in a Nash equilibrium. 
A) will not lead to an equilibrium. 
B) must be a cooperative game. 
C) could result in a Nash equilibrium. 
D) can never result in a Nash equilibrium.

Question 7

Productive efficiency does not hold for a profit-maximizing,monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 8

A monopolistically competitive industry that earns economic profits in the short run will

Accepted Answer

A) continue to earn economic profits in the long run. 
B) experience the entry of new rival firms into the industry in the long run. 
C) experience the exit of existing firms out of the industry in the long run. 
D) experience a rise in demand in the long run. 
A) continue to earn economic profits in the long run. 
B) experience the entry of new rival firms into the industry in the long run. 
C) experience the exit of existing firms out of the industry in the long run. 
D) experience a rise in demand in the long run.

Question 9

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.What is the Nash equilibrium in this game?

Accepted Answer

A) There is no Nash equilibrium. 
B) Godrickporter increases its advertising budget,but Star Connections does not. 
C) Star Connections increases its advertising budget,but Godrickporter does not. 
D) Both Godrickporter and Star Connections increase their advertising budgets. 
A) There is no Nash equilibrium. 
B) Godrickporter increases its advertising budget,but Star Connections does not. 
C) Star Connections increases its advertising budget,but Godrickporter does not. 
D) Both Godrickporter and Star Connections increase their advertising budgets.

Question 10

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Accepted Answer

A) impossible. 
B) very difficult. 
C) fairly easy. 
D) almost always guaranteed. 
A) impossible. 
B) very difficult. 
C) fairly easy. 
D) almost always guaranteed.

Question 11

Table 11-3
   Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What is its average variable cost of production at its optimal output level?

Accepted Answer

A) $0 (because its optimal output =0) 
B) $15 
C) $14.75 
D) $29 
A) $0 (because its optimal output =0) 
B) $15 
C) $14.75 
D) $29

Question 12

Which of the following is true of a typical firm in a monopolistically competitive industry?

Accepted Answer

A) Product differentiation allows a successful firm to emerge as a market leader in the industry. 
B) All firms have identical cost structures. 
C) The more successful firms have an incentive to merge in order to exert greater market power. 
D) Each firm acts independently. 
A) Product differentiation allows a successful firm to emerge as a market leader in the industry. 
B) All firms have identical cost structures. 
C) The more successful firms have an incentive to merge in order to exert greater market power. 
D) Each firm acts independently.

Question 13

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.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

Accepted Answer

A) P0 
B) P1 
C) P2 
D) P3 
A) P0 
B) P1 
C) P2 
D) P3

Question 14

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) Qf units 
B) Qg units 
C) Qh units 
D) Qj units 
A) Qf units 
B) Qg units 
C) Qh units 
D) Qj units

Question 16

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 variable cost of production?

Accepted Answer

A) 0P0aQa 
B) 0P1bQa 
C) P0abP1 
D) P1bdP3 
A) 0P0aQa 
B) 0P1bQa 
C) P0abP1 
D) P1bdP3

Question 17

Table 11-3
   Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What are the profit-maximizing/loss-minimizing output level and price?

Accepted Answer

A) Q=0 (firm should not produce) 
B) Q=3;P=$18 
C) Q=4;P=$17 
D) Q=5;P=$16 
A) Q=0 (firm should not produce) 
B) Q=3;P=$18 
C) Q=4;P=$17 
D) Q=5;P=$16

Question 18

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Accepted Answer

A) new rivals entering the market. 
B) a decrease in demand for its product. 
C) demand for the firm's product becomes more elastic. 
D) a decrease in the number of rival products. 
A) new rivals entering the market. 
B) a decrease in demand for its product. 
C) demand for the firm's product becomes more elastic. 
D) a decrease in the number of rival products.

Question 19

For allocative efficiency to hold,

Accepted Answer

A) price must equal marginal revenue of the last unit sold. 
B) price must equal the marginal cost of the last unit produced. 
C) average variable cost is minimized in production. 
D) average total cost is minimized in production. 
A) price must equal marginal revenue of the last unit sold. 
B) price must equal the marginal cost of the last unit produced. 
C) average variable cost is minimized in production. 
D) average total cost is minimized in production.

Question 20

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Accepted Answer

A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic. 
A) The demand curve will shift to the left and became more elastic. 
B) The demand curve will shift to the left and became less elastic. 
C) The demand curve will shift to the right and became more elastic. 
D) The demand curve will shift to the right and became less elastic.

Each member of OPEC can increase its income by selling more oil than its output quota because

All of the following are examples of oligopolistic markets except

A dominant strategy

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19,then to maximize profits the firm should

An oligopoly firm is similar to a monopolistically competitive firm in that

A game in which each player adopts its dominant strategy

Productive efficiency does not hold for a profit-maximizing,monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve.

A monopolistically competitive industry that earns economic profits in the short run will

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Table 11-3 Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 11-3.What is its average variable cost of production at its optimal output level?

Which of the following is true of a typical firm in a monopolistically competitive industry?

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.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

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

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 variable cost of production?

Table 11-3 Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 11-3.What are the profit-maximizing/loss-minimizing output level and price?

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

For allocative efficiency to hold,

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

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

Each member of OPEC can increase its income by selling more oil than its output quota because

All of the following are examples of oligopolistic markets except

A dominant strategy

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19,then to maximize profits the firm should

An oligopoly firm is similar to a monopolistically competitive firm in that

A game in which each player adopts its dominant strategy

Productive efficiency does not hold for a profit-maximizing,monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve.

A monopolistically competitive industry that earns economic profits in the short run will

The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is

Table 11-3 Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 11-3.What is its average variable cost of production at its optimal output level?

Which of the following is true of a typical firm in a monopolistically competitive industry?

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.If the firm represented in the diagram is currently producing and selling Qa units,what is the price charged?

Consumers in monopolistically competitive markets face a tradeoff between paying prices greater than marginal costs and purchasing products that are more closely suited to their tastes.

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

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 variable cost of production?

Table 11-3 Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 11-3.What are the profit-maximizing/loss-minimizing output level and price?

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

For allocative efficiency to hold,

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

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