Question 1

OnWheels and Speedstar are the only two manufacturers of sports cars.The cars manufactured by these companies are considered to be close substitutes,but not identical.How should each firm determine its price in this case?

Accepted Answer

The answer of OnWheels and Speedstar are the only two...

Question 2

An industry is composed of four firms: Firms A,B,C,and D.Firm D is twice as large as C.Firm C is twice as large as B.Firm B is twice as large as A.This industry is likely to have a Herfindahl-Hirschman Index of ________.

Accepted Answer

A)  3,000 
B)  3,750 
C)  2,800 
D)  2,500

Question 3

A monopolistic competitor exits the industry in the long run if ________.

Accepted Answer

A)  total revenue exceeds total cost 
B)  total costs exceed total revenue 
C)  marginal revenue exceeds marginal cost 
D)  marginal revenue equals marginal cost

Question 4

Which of the following is true?

Accepted Answer

A)  The price charged by a monopolistically competitive firm is equal to the price charged by a perfectly competitive firm in the long run. 
B)  The price charged by each firm in a monopolistically competitive market is identical in the long run. 
C)  The profit earned by a firm in a monopolistically competitive market is equal to the profit earned by a firm in a perfectly competitive market in the long run. 
D)  The profit earned by a firm in a monopolistically competitive market is equal to the profit earned by a monopolist in the long run.

Question 5

Scenario: There are several pen manufacturers in Corinthia. However, the pens sold by each manufacturer have a unique design.
-Refer to the scenario above.How will the demand for pens faced by the existing pen manufacturers in Corinthia be affected if new firms enter the industry in the long run?

Accepted Answer

A)  The demand curve faced by the existing firms will become perfectly inelastic. 
B)  The demand curve faced by the existing firms will become perfectly elastic. 
C)  The demand faced by the existing firms will increase. 
D)  The demand faced by the existing firms will decrease.

Question 6

The formula used for calculating the total profit of a monopolistic competitor is ________.

Accepted Answer

A)  (Price ‒ Average Total Cost) × Quantity 
B)  (Price ‒ Marginal Cost) 
C)  (Price ‒ Average Total Cost)/Quantity 
D)  (Price ‒ Average variable cost)

Question 7

The following figure shows the cost curves of firm that operates in a monopolistic competition market, as well as the demand (D) facing this firm and its marginal revenue (MR).
 
-Refer to the figure above.In the long run,this firm's MR curve is likely to ________.

Accepted Answer

A)  shift right 
B)  shift left 
C)  remain unchanged 
D)  become more elastic

Question 8

In the short run,a monopolistically competitive firm ________.

Accepted Answer

A)  will always earn positive economic profits 
B)  may earn positive or negative profits 
C)  will always earn zero economic profits 
D)  does none of the above

Question 9

The residual demand curve facing a firm in a monopolistically competitive industry is ________.

Accepted Answer

A)  identical to the market demand curve 
B)  identical to the demand curve facing a perfectly competitive firm 
C)  the firm's marginal revenue schedule 
D)  the demand that is not satisfied by other producers

Question 10

A ________ is a plan by one firm to price a good at marginal cost forever if the other cheats on an agreement.

Accepted Answer

A)  pure strategy 
B)  grim strategy 
C)  price discrimination 
D)  collusion

Question 11

Which of the following applies to both perfect competition and oligopoly without product differentiation?

Accepted Answer

A)  Firms produce a differentiated product 
B)  Absence of barriers to entry 
C)  P = MR = MC 
D)  Large number of firms

Question 12

Consider the following table.Which option correctly fills the blanks in the table?

Accepted Answer

A)  1 = horizontal; 2 = downward-sloping; 3 = downward-sloping; 4 = downward-sloping 
B)  1 = horizontal; 2 = horizontal; 3 = downward-sloping; 4 = downward-sloping 
C)  1 = horizontal; 2 = horizontal; 3 = horizontal; 4 = downward-sloping 
D)  1 = downward-sloping; 2 = downward-sloping; 3 = downward-sloping; 4 = downward-sloping

Question 13

The following figure depicts one among ten identical firms in a monopolistically competitive market.Let the social surplus be valued in dollars.For the government,the benefit of regulating a market is the value of the total social surplus gained from regulation.It costs the government $100 to force all firms to produce at the socially optimal quantity of output.
  
a)What is the gain to the government of implementing such a regulation?
b)Should the government implement such a regulation?

Accepted Answer

The answer of The following figure depicts one among ten...

Question 14

The IT industry in Argonesia has a Herfindahl-Hirschman Index of 1,320.This implies that the IT industry in Argonesia is ________.

Accepted Answer

A)  not concentrated 
B)  moderately concentrated 
C)  highly concentrated 
D)  dominated by a few large buyers

Question 15

Scenario: The market demand for soccer balls in a small town is 2,500 units, and there are two rival sports brands selling soccer balls in this town, Sporty and Go! The products of the two brands are identical.
-Refer to the scenario above.If ________,the demand for Go!'s soccer balls will be 2,500 units.

Accepted Answer

A)  the price charged by Sporty is higher than the price charged by Go! 
B)  the price charged by Go! is higher than the price charged by Sporty 
C)  the price charged by Sporty is equal to the price charged by Go! 
D)  the price charged by Go! is higher than the cost of producing a ball

Question 16

The difference between an oligopoly with differentiated products and a monopolistic competition is ________.

Accepted Answer

A)  how many inputs firms use 
B)  how many products firms produce 
C)  how many firms there are in the market 
D)  how much influence firms have over prices

Question 17

The cost of producing a tube of tooth paste is $0.05.If the market for tooth paste is monopolistically competitive,a manufacturer who charges $0.05 for each bottle will ________.

Accepted Answer

A)  shut down production in the short run 
B)  exit the industry in the long run 
C)  incur a loss in the short run 
D)  earn zero economic profits in the short run

Question 18

There are about 2,000 nail salons in New York City.Most salons are small businesses and offer a wide array of services.Based on this information,which of the following best describes the structure of this market in New York City?

Accepted Answer

A)  A monopoly 
B)  A monopolistic competition 
C)  An oligopoly with differentiated products 
D)  An oligopoly with homogeneous products

Question 19

If new firms enter a monopolistically competitive market structure in the long run,________.

Accepted Answer

A)  the demand curves faced by the existing firms shift to the right 
B)  the demand curves faced by the existing firms become perfectly inelastic 
C)  the demand curves faced by the existing firms become more elastic 
D)  the supply curves of the existing firms become relatively more elastic

Question 20

La Dila and Swiss Pro are the only two firms in an industry.The firms charge equal prices for their products,which are perfect substitutes.La Dila decides to lower its price slightly.Swiss Pro responds by cutting its price further.This price cutting will continue as long as each firm's ________.

Accepted Answer

A)  price is lower than its marginal cost 
B)  price is higher than its marginal cost 
C)  price is higher than zero 
D)  price is higher than its average fixed cost

Exam 14: Oligopoly and Monopolistic Competition