Question 1

The profit-maximizing oligopolist produces where

Accepted Answer

A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) price is greater than average total cost. 
D) a and b 
E) b and c 
A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) price is greater than average total cost. 
D) a and b 
E) b and c

Question 2

How does contestable markets theory challenge orthodox market structure theory?

Accepted Answer

A) Contestable markets theory argues that firms do not maximize sales; orthodox market structure theory argues that they do. 
B) Orthodox market structure theory places much greater weight than contestable markets theory on the number of firms in an industry as a major factor in determining a firm's behavior. 
C) Contestable markets theory emphasizes product differentiation; orthodox market structure theory does not. 
D) Contestable markets theory emphasizes nonprice competition; orthodox market structure theory does not. 
A) Contestable markets theory argues that firms do not maximize sales; orthodox market structure theory argues that they do. 
B) Orthodox market structure theory places much greater weight than contestable markets theory on the number of firms in an industry as a major factor in determining a firm's behavior. 
C) Contestable markets theory emphasizes product differentiation; orthodox market structure theory does not. 
D) Contestable markets theory emphasizes nonprice competition; orthodox market structure theory does not.

Question 3

Suppose an industry is made up of 22 firms. Two firms each sell 10.5 percent of the industry's total output; another three firms each sell 9 percent; another six firms each sell 5 percent; and the last eleven firms each sell 2 percent. What is the eight-firm concentration ratio in this industry?

Accepted Answer

A) 0.45 
B) 0.50 
C) 0.39 
D) 0.63 
E) 1.40 
A) 0.45 
B) 0.50 
C) 0.39 
D) 0.63 
E) 1.40

Question 4

Total industry sales are $100 billion. The four largest firms have sales of $35 billion, $17 billion, $6.8 billion, and $2.2 billion. The industry's approximate four-firm concentration ratio is

Accepted Answer

A) 0.61. 
B) 0.88. 
C) 0.39. 
D) 0.06. 
A) 0.61. 
B) 0.88. 
C) 0.39. 
D) 0.06.

Question 5

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

Accepted Answer

A) There is easy entry into the market. 
B) There is costless exit from the market. 
C) New firms entering the market can produce the product at lower cost than current firms. 
D) Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
E) None of the above; that is, all of the above are conditions of a contestable market. 
A) There is easy entry into the market. 
B) There is costless exit from the market. 
C) New firms entering the market can produce the product at lower cost than current firms. 
D) Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
E) None of the above; that is, all of the above are conditions of a contestable market.

Question 6

Which of the following statements is false?

Accepted Answer

A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces a product that differs slightly from the products of the other firms in the industry. 
C) The monopolistic competitor faces a horizontal demand curve. 
D) The monopolistic competitor produces an output at which price is greater than marginal cost. 
A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces a product that differs slightly from the products of the other firms in the industry. 
C) The monopolistic competitor faces a horizontal demand curve. 
D) The monopolistic competitor produces an output at which price is greater than marginal cost.

Question 7

The percentage of sales accounted for by X number of firms in the industry is called the

Accepted Answer

A) concentration ratio. 
B) oligopoly rate. 
C) interdependence rate. 
D) market power index. 
A) concentration ratio. 
B) oligopoly rate. 
C) interdependence rate. 
D) market power index.

Question 8

In recent years, which of the following industries has had high four- and eight-firm concentration ratios?

Accepted Answer

A) tires 
B) soap 
C) retail clothing 
D) a and b 
E) all of the above 
A) tires 
B) soap 
C) retail clothing 
D) a and b 
E) all of the above

Question 9

One of the assumptions of the theory of monopolistic competition is that all firms in the industry produce and sell a homogenous product.

Accepted Answer

A) True 
 B)False

Question 10

One of the ways in which monopolistic competitors differ from perfect competitors is that

Accepted Answer

A) perfect competitors produce the quantity of output at which marginal revenue equals marginal cost and monopolistic competitors do not. 
B) perfect competitors produce a homogeneous product and monopolistic competitors do not. 
C) there is easy entry and exit for a perfect competitor, but not for a monopolistic competitor. 
D) a and c 
E) b and c 
A) perfect competitors produce the quantity of output at which marginal revenue equals marginal cost and monopolistic competitors do not. 
B) perfect competitors produce a homogeneous product and monopolistic competitors do not. 
C) there is easy entry and exit for a perfect competitor, but not for a monopolistic competitor. 
D) a and c 
E) b and c

Question 11

The major economic objective of cartels is to

Accepted Answer

A) impose their political will on others. 
B) restrict output, push up price, and increase profits. 
C) reduce costs. 
D) develop new ways of doing things. 
E) b and d 
A) impose their political will on others. 
B) restrict output, push up price, and increase profits. 
C) reduce costs. 
D) develop new ways of doing things. 
E) b and d

Question 12

Exhibit 24-6
  
-Refer to Exhibit 24-6. The monopolistic competitor is producing __________ quantity of output and charging a price of __________.

Accepted Answer

A) Q1; P3 
B) Q2; P3 
C) Q1; P2 
D) Q1; P1 
E) Q2; P1 
A) Q1; P3 
B) Q2; P3 
C) Q1; P2 
D) Q1; P1 
E) Q2; P1

Question 13

Exhibit 24-8
  
-Refer to Exhibit 24-8. The maximum profits earned by a monopolistic competitive firm will be

Accepted Answer

A) $0. 
B) $300. 
C) $350. 
D) $80. 
A) $0. 
B) $300. 
C) $350. 
D) $80.

Question 14

Why is an oligopolist more likely to be able to earn a profit in the long run compared to a monopolistic competitive firm?

Accepted Answer

There are significant barriers to entry

Question 15

The profit-maximizing monopolistic competitive firm produces the level of output at which

Accepted Answer

A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) there is resource allocative efficiency. 
D) average total cost is at a minimum. 
A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) there is resource allocative efficiency. 
D) average total cost is at a minimum.

Question 16

The monopolistic competitive firm will most likely earn a normal profit in the long run because of

Accepted Answer

A) product differentiation. 
B) many buyers and sellers. 
C) easy entry and exit. 
D) b and c 
A) product differentiation. 
B) many buyers and sellers. 
C) easy entry and exit. 
D) b and c

Question 17

Which of the following statements is false?

Accepted Answer

A) A perfectly competitive firm is resource-allocative efficient, but a monopolistic competitive firm is not. 
B) An oligopolistic firm is not resource-allocative efficient. 
C) An oligopolist produces that quantity of output at which price is equal to marginal cost. 
D) A monopolistic competitive firm produces a quantity of output at which price is greater than marginal cost. 
A) A perfectly competitive firm is resource-allocative efficient, but a monopolistic competitive firm is not. 
B) An oligopolistic firm is not resource-allocative efficient. 
C) An oligopolist produces that quantity of output at which price is equal to marginal cost. 
D) A monopolistic competitive firm produces a quantity of output at which price is greater than marginal cost.

Question 18

Which of the following statements is false?

Accepted Answer

A) On occasion, governments have helped to create and maintain cartels. 
B) Once a cartel agreement has been made, cartel members have an incentive to cheat on the agreement. 
C) A single cartel member may be better off with a cartel agreement that all members abide by (including itself) than with no cartel agreement at all. 
D) Cartels are easy to form and to maintain. 
A) On occasion, governments have helped to create and maintain cartels. 
B) Once a cartel agreement has been made, cartel members have an incentive to cheat on the agreement. 
C) A single cartel member may be better off with a cartel agreement that all members abide by (including itself) than with no cartel agreement at all. 
D) Cartels are easy to form and to maintain.

Question 19

Interdependence implies that each firm in an industry

Accepted Answer

A) is independent of one another and are essentially price takers. 
B) is aware that its actions influence the others and that the actions of the other firms affect it. 
C) is so large and powerful that they do not need to consider how their actions will affect their rivals. 
D) must depend on the other firms to maintain consumers' interest in their "mutual" product. 
A) is independent of one another and are essentially price takers. 
B) is aware that its actions influence the others and that the actions of the other firms affect it. 
C) is so large and powerful that they do not need to consider how their actions will affect their rivals. 
D) must depend on the other firms to maintain consumers' interest in their "mutual" product.

Question 20

Which of the following is one of the assumptions upon which the theory of monopolistic competition is built?

Accepted Answer

A) There are many sellers. 
B) There are few buyers. 
C) It is difficult to enter the industry. 
D) Each firm in the industry produces a homogeneous product. 
A) There are many sellers. 
B) There are few buyers. 
C) It is difficult to enter the industry. 
D) Each firm in the industry produces a homogeneous product.

Exam 24: Monopolistic Competition Oligopoly and Game Theory

The profit-maximizing oligopolist produces where

How does contestable markets theory challenge orthodox market structure theory?

Suppose an industry is made up of 22 firms. Two firms each sell 10.5 percent of the industry's total output; another three firms each sell 9 percent; another six firms each sell 5 percent; and the last eleven firms each sell 2 percent. What is the eight-firm concentration ratio in this industry?

Total industry sales are $100 billion. The four largest firms have sales of $35 billion, $17 billion, $6.8 billion, and $2.2 billion. The industry's approximate four-firm concentration ratio is

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

Which of the following statements is false?

The percentage of sales accounted for by X number of firms in the industry is called the

In recent years, which of the following industries has had high four- and eight-firm concentration ratios?

One of the assumptions of the theory of monopolistic competition is that all firms in the industry produce and sell a homogenous product.

One of the ways in which monopolistic competitors differ from perfect competitors is that

The major economic objective of cartels is to

Exhibit 24-6 -Refer to Exhibit 24-6. The monopolistic competitor is producing __________ quantity of output and charging a price of __________.

Exhibit 24-8 -Refer to Exhibit 24-8. The maximum profits earned by a monopolistic competitive firm will be

Why is an oligopolist more likely to be able to earn a profit in the long run compared to a monopolistic competitive firm?

The profit-maximizing monopolistic competitive firm produces the level of output at which

The monopolistic competitive firm will most likely earn a normal profit in the long run because of

Which of the following statements is false?

Which of the following statements is false?

Interdependence implies that each firm in an industry

Which of the following is one of the assumptions upon which the theory of monopolistic competition is built?

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

Exhibit 24-6 -Refer to Exhibit 24-6. The monopolistic competitor is producing quantity of output and charging a price of .