Question 1

-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 that Bonnie ________ and Clyde ________.

Accepted Answer

A) confesses;denies 
B) confesses;confesses 
C) denies;denies 
D) denies;confesses 
E) denies;either confess or denies,either outcome is consistent with the Nash equilibrium.

Question 2

"Because firms in an oligopoly are so large,they do not need to consider each other's actions." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The answer of "Because firms in an oligopoly are so...

Question 3

For a firm in monopolistic competition,innovation and product development are

Accepted Answer

A) senseless because economic profit is always zero in the long run. 
B) necessary in order to have a chance of earning at least a short-run economic profit. 
C) inconsequential because each firm produces a different product. 
D) necessary to allow new firms to enter. 
E) uncommon because other firms already produce similar products.

Question 4

What is the conclusion in the prisoners' dilemma?

Accepted Answer

A) Firms should not enter a legal duopoly. 
B) Two prisoners acting in their own best interest harm their joint interest. 
C) There is no Nash equilibrium available to the prisoners. 
D) Prisoners do not act interdependently. 
E) Duopolies almost always reach their best outcome.

Question 5

A cartel is a group of firms

Accepted Answer

A) acting separately to limit output,lower price,and decrease economic profit. 
B) acting together to limit output,raise price,and increase economic profit. 
C) legally fixing prices. 
D) acting together to erect barriers to entry. 
E) that compete primarily with each other rather than the other firms in the market.

Question 6

In which of the following ways do advertising and other selling costs affect a firm's cost curves?
I.Advertising expenditures increase total fixed costs.
Ii.Selling costs increase total fixed costs.
Iii.Advertising and other selling costs per unit of output decrease as output increases.

Accepted Answer

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

Question 7

-Kevin owns a personal training gymnasium in Orlando.The above figure shows the demand and cost curves for his firm,which competes in a monopolistically competitive market.What price will Kevin charge per session?

Accepted Answer

A) $100 
B) $60 
C) $40 
D) $20 
E) $80

Question 8

What is a cartel?

Accepted Answer

The answer of What is a cartel?...

Question 9

Which market structure is characterized by the following characteristics?
I.A large number of firms compete.
Ii.Each firm produces a differentiated product.
Iii.Firms are free to enter and exit.

Accepted Answer

A) perfect competition 
B) duopoly 
C) oligopoly 
D) monopolistic competition 
E) monopoly

Question 10

If a firm has excess capacity,it

Accepted Answer

A) produces less than its efficient scale. 
B) should advertise to maximize profits. 
C) should decrease its markup to increase its profit. 
D) is a perfectly competitive firm. 
E) must face a horizontal demand curve.

Question 11

Which of the following four-firm concentration ratios is consistent with monopolistic competition?

Accepted Answer

A) 100 percent 
B) 75 percent 
C) 25 percent 
D) 0 percent 
E) 91 percent

Question 12

"If firms in an oligopoly operate as a monopoly,the industry produces the most output and if they operate as perfect competitors,the industry produces the least output." Is the previous statement correct or incorrect? Why?

Accepted Answer

The answer of "If firms in an oligopoly operate as...

Question 13

One of the main tools economists use to analyze strategic behavior is

Accepted Answer

A) the Herfindahl-Hirschman Index. 
B) game theory. 
C) cartel theory. 
D) the collusion index. 
E) dual theory,which is used to study duopolies.

Question 14

If a large number of firms are competing,the market could be

Accepted Answer

A) perfect competition or monopolistic competition. 
B) perfect competition or monopoly. 
C) monopolistic competition or oligopoly. 
D) monopolistic competition or monopoly. 
E) oligopoly or monopoly.

Question 15

An industry with a large number of firms,differentiated products,and free entry and exit is called

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
E) monopolistic oligopoly.

Question 16

The absence of barriers to entry in monopolistic competition means that in the long run,firms

Accepted Answer

A) earn an economic profit. 
B) earn zero economic profit. 
C) incur an economic loss. 
D) earn either an economic profit or zero economic profit. 
E) earn either zero economic profit or suffer an economic profit.

Question 17

Why would a firm in a monopolistically competitive industry advertise?

Accepted Answer

The answer of Why would a firm in a monopolistically...

Question 18

What is game theory and what light does it shed on the duopolists' dilemma?

Accepted Answer

The answer of What is game theory and what light...

Question 19

The figure above illustrates a firm's demand and marginal revenue curves and its cost curves.
-If the firm in the figure above attempted to minimize its average total cost by producing 100 pairs of Tommy jeans per day at an average total cost of $20 per pair and it sold those jeans for $80 per pair,the firm would ________.

Accepted Answer

A) earn zero economic profit 
B) earn a larger economic profit that a firm that produced 125 jeans because the ATC of producing 125 jeans is higher than the ATC of producing 100 jeans 
C) incur an economic loss 
D) earn a smaller economic profit than a firm that produced 125 jeans 
E) achieve an efficient use of resources

Question 20

-The above figure definitely shows

Accepted Answer

A) a long-run equilibrium for a monopolistically competitive firm. 
B) an industry with few firms. 
C) a long-run equilibrium for a perfectly competitive firm. 
D) a long-run equilibrium for a perfectly competitive market. 
E) a short-run equilibrium for a monopoly.

Exam 13: Monopolistic Competition and Oligopoly

-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 that Bonnie and Clyde .