Question 1

The excess capacity theorem holds for a (n) __________, and states that in the long run the firm produces an output __________.

Accepted Answer

A) perfectly competitive firm; that is resource-allocative efficient 
B) monopoly firm; that is not resource-allocative efficient 
C) monopolistic competitor; smaller than the one that would minimize its costs of production 
D) oligopoly firm; larger than the one that would minimize its costs of production 
E) none of the above 
A) perfectly competitive firm; that is resource-allocative efficient 
B) monopoly firm; that is not resource-allocative efficient 
C) monopolistic competitor; smaller than the one that would minimize its costs of production 
D) oligopoly firm; larger than the one that would minimize its costs of production 
E) none of the above

Question 2

An industry is composed of 20 firms, all with equal sales. The eight-firm concentration ratio in this industry is

Accepted Answer

A) 0.40. 
B) 0.32. 
C) 2.00. 
D) This cannot be determined from the information given. 
A) 0.40. 
B) 0.32. 
C) 2.00. 
D) This cannot be determined from the information given.

Question 3

In monopolistic competition, firms can compete in terms of

Accepted Answer

A) price. 
B) quality of product. 
C) service. 
D) location. 
E) all of the above 
A) price. 
B) quality of product. 
C) service. 
D) location. 
E) all of the above

Question 4

The cigarette industry is a good example of the oligopoly market structure.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an example of a monopolistic competitor?

Accepted Answer

A) General Motors 
B) a wheat farmer in Iowa 
C) a long-distance telephone company 
D) a family-owned Italian restaurant 
A) General Motors 
B) a wheat farmer in Iowa 
C) a long-distance telephone company 
D) a family-owned Italian restaurant

Question 6

A monopolistic competitive firm faces a horizontal demand curve for its product.

Accepted Answer

A) True 
 B)False

Question 7

In the prisoner's dilemma, each prisoner would be better off if neither one confesses.

Accepted Answer

A) True 
 B)False

Question 8

The theory of oligopoly assumes

Accepted Answer

A) a few sellers and many buyers. 
B) a few buyers and many sellers. 
C) significant barriers to entry. 
D) a and c 
E) b and c 
A) a few sellers and many buyers. 
B) a few buyers and many sellers. 
C) significant barriers to entry. 
D) a and c 
E) b and c

Question 9

A monopolistic competitive firm maximizes profits by producing at the point where

Accepted Answer

A) total revenue is at a maximum. 
B) marginal revenue equals average cost. 
C) marginal revenue equals marginal cost. 
D) price equals marginal revenue. 
E) b and d 
A) total revenue is at a maximum. 
B) marginal revenue equals average cost. 
C) marginal revenue equals marginal cost. 
D) price equals marginal revenue. 
E) b and d

Question 10

In a monopolistic competitive industry,

Accepted Answer

A) each firm in the industry produces a slightly differentiated product. 
B) there are significant barriers to entry. 
C) there are significant barriers to exit. 
D) there are few sellers. 
A) each firm in the industry produces a slightly differentiated product. 
B) there are significant barriers to entry. 
C) there are significant barriers to exit. 
D) there are few sellers.

Question 11

Exhibit 24-7
  
-Refer to Exhibit 24-7. A monopolistic competitive firm earns a total profit of __________ when it produces the profit maximizing level of output.

Accepted Answer

A) $50 
B) $65 
C) $20 
D) $40 
E) $200 
A) $50 
B) $65 
C) $20 
D) $40 
E) $200

Question 12

Compare and contrast the following market structures: oligopoly and monopolistic competition.

Accepted Answer

Monopolistic competitive firms face many

Question 13

Which of the following assumptions do the market structures of monopolistic competition and perfect competition share?

Accepted Answer

A) many buyers and sellers 
B) homogeneous products 
C) difficult entry into the market 
D) difficult exit from the market 
A) many buyers and sellers 
B) homogeneous products 
C) difficult entry into the market 
D) difficult exit from the market

Question 14

Which of the following is not a condition of a contestable market?

Accepted Answer

A) There is easy entry into and costless exit from the market. 
B) New firms entering the market can produce the product at the same cost as current firms. 
C) Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
D) New firms entering the market produce a higher-quality product than existing firms. 
A) There is easy entry into and costless exit from the market. 
B) New firms entering the market can produce the product at the same cost as current firms. 
C) Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
D) New firms entering the market produce a higher-quality product than existing firms.

Question 15

Exhibit 24-7
  
-Refer to Exhibit 24-7. A monopolistic competitive firm that seeks to maximize profits will sell __________ units and charge a price of __________ .

Accepted Answer

A) 10; $10 
B) 25; $7 
C) 15; $9 
D) 30; $6 
E) 35; $5 
A) 10; $10 
B) 25; $7 
C) 15; $9 
D) 30; $6 
E) 35; $5

Question 16

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face exactly the same demand and cost curves, then there is high probability that

Accepted Answer

A) the former will earn zero economic profits, but the latter will earn positive economic profits. 
B) both will earn zero economic profits, but the former will attain lower unit costs than the latter. 
C) both will earn zero economic profits, but the latter will attain lower unit costs than the former. 
D) both firms will earn zero economic profits, and attain the lowest possible unit costs. 
E) neither firm will earn zero economic profits, but both will attain the lowest possible unit costs. 
A) the former will earn zero economic profits, but the latter will earn positive economic profits. 
B) both will earn zero economic profits, but the former will attain lower unit costs than the latter. 
C) both will earn zero economic profits, but the latter will attain lower unit costs than the former. 
D) both firms will earn zero economic profits, and attain the lowest possible unit costs. 
E) neither firm will earn zero economic profits, but both will attain the lowest possible unit costs.

Question 17

One of the key assumptions of the theory of oligopoly is that firms act interdependently.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 24-8
  
-Refer to Exhibit 24-8. A profit-maximizing monopolistic competitive firm that produces the level of output where MR = MC will produce ______________ units of output and charge a price of ______________.

Accepted Answer

A) 3; $260 
B) 4; $232.50 
C) 5; $210 
D) 6; $191.67 
E) 7; $175.71 
A) 3; $260 
B) 4; $232.50 
C) 5; $210 
D) 6; $191.67 
E) 7; $175.71

Question 19

Which of the following statements is false?

Accepted Answer

A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces an output at which price is greater than marginal cost. 
C) The demand curve facing a monopolistic competitor is less elastic than the demand curve facing a monopolist. 
D) There are many substitutes in a monopolistic competitive industry. 
A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces an output at which price is greater than marginal cost. 
C) The demand curve facing a monopolistic competitor is less elastic than the demand curve facing a monopolist. 
D) There are many substitutes in a monopolistic competitive industry.

Question 20

Total industry sales are $130 million. The top four firms (A, B, C, and D) account for sales of $38 million, $21 million, $13 million and $8 million, respectively. What is the approximate four-firm concentration ratio?

Accepted Answer

A) 0.80 
B) 0.62 
C) 0.38 
D) 0.40 
A) 0.80 
B) 0.62 
C) 0.38 
D) 0.40

Exam 24: Monopolistic Competition Oligopoly and Game Theory

The excess capacity theorem holds for a (n) __________, and states that in the long run the firm produces an output __________.

An industry is composed of 20 firms, all with equal sales. The eight-firm concentration ratio in this industry is

In monopolistic competition, firms can compete in terms of

The cigarette industry is a good example of the oligopoly market structure.

Which of the following is an example of a monopolistic competitor?

A monopolistic competitive firm faces a horizontal demand curve for its product.

In the prisoner's dilemma, each prisoner would be better off if neither one confesses.

The theory of oligopoly assumes

A monopolistic competitive firm maximizes profits by producing at the point where

In a monopolistic competitive industry,

Exhibit 24-7 -Refer to Exhibit 24-7. A monopolistic competitive firm earns a total profit of __________ when it produces the profit maximizing level of output.

Compare and contrast the following market structures: oligopoly and monopolistic competition.

Which of the following assumptions do the market structures of monopolistic competition and perfect competition share?

Which of the following is not a condition of a contestable market?

Exhibit 24-7 -Refer to Exhibit 24-7. A monopolistic competitive firm that seeks to maximize profits will sell __________ units and charge a price of __________ .

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face exactly the same demand and cost curves, then there is high probability that

One of the key assumptions of the theory of oligopoly is that firms act interdependently.

Exhibit 24-8 -Refer to Exhibit 24-8. A profit-maximizing monopolistic competitive firm that produces the level of output where MR = MC will produce ______________ units of output and charge a price of ______________.

Which of the following statements is false?

Total industry sales are $130 million. The top four firms (A, B, C, and D) account for sales of $38 million, $21 million, $13 million and $8 million, respectively. What is the approximate four-firm concentration ratio?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

The excess capacity theorem holds for a (n) , and states that in the long run the firm produces an output .

Exhibit 24-7 -Refer to Exhibit 24-7. A monopolistic competitive firm that seeks to maximize profits will sell units and charge a price of .

Exhibit 24-8 -Refer to Exhibit 24-8. A profit-maximizing monopolistic competitive firm that produces the level of output where MR = MC will produce units of output and charge a price of .