Question 1

An oligopolist cares very much about what other firms in her industry are doing.

Accepted Answer

A) True 
 B)False  True

Question 2

An oligopoly is a market structure in which a few large firms dominate the sale of a single product.

Accepted Answer

A) True 
 B)False  True

Question 3

An oligopoly is a market dominated by a few sellers.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following characteristics of perfect competition does not apply in monopolistic competition?

Accepted Answer

A)  free entry and exit 
B)  homogeneous products 
C)  numerous participants 
D)  perfect information 
A)  free entry and exit 
B)  homogeneous products 
C)  numerous participants 
D)  perfect information

Question 5

Cartels are relatively rare because

Accepted Answer

A)  they are illegal in some countries, including the United States. 
B)  members find it difficult to agree on key decisions. 
C)  members frequently have an incentive to cheat on the cartel. 
D)  All of the above are correct. 
A)  they are illegal in some countries, including the United States. 
B)  members find it difficult to agree on key decisions. 
C)  members frequently have an incentive to cheat on the cartel. 
D)  All of the above are correct.

Question 6

Explain how short-run and long-run equilibrium in monopolistic competition differ.Use graphs to illustrate your answer.Be sure that your graphs are completely and correctly labeled.

Accepted Answer

Figures 12-1 and 12-2 in the text are th

Question 7

Game theory is based on the idea that each participant makes decisions based on how she believes the competition will react.

Accepted Answer

A) True 
 B)False

Question 8

One indication that an industry might be oligopolistic is that prices change

Accepted Answer

A)  infrequently. 
B)  frequently. 
C)  in rhythmic patterns. 
D)  on a regular, periodic basis. 
A)  infrequently. 
B)  frequently. 
C)  in rhythmic patterns. 
D)  on a regular, periodic basis.

Question 9

To maximize its profit, a monopolistically competitive firm produces at the output level at which

Accepted Answer

A)  its price elasticity of demand equals one. 
B)  MR = MC. 
C)  its D curve is tangent to its ATC curve. 
D)  MR = AVC. 
A)  its price elasticity of demand equals one. 
B)  MR = MC. 
C)  its D curve is tangent to its ATC curve. 
D)  MR = AVC.

Question 10

The kinked demand curve model explains pricing in monopoly markets.

Accepted Answer

A) True 
 B)False

Question 11

Figure 12-2
  
-In Figure 12-2, which of the graphs represents a firm that is a sales revenue maximizer?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 12

A market is contestable if

Accepted Answer

A)  the number of firms is larger than oligopoly. 
B)  firms spend a lot on advertising. 
C)  there is free entry and exit. 
D)  firms have kinked demand curves. 
A)  the number of firms is larger than oligopoly. 
B)  firms spend a lot on advertising. 
C)  there is free entry and exit. 
D)  firms have kinked demand curves.

Question 13

The reason firms often choose sales maximization as a goal is because

Accepted Answer

A)  that is where profits are maximized. 
B)  it is impossible to maximize profits. 
C)  firms are managed and owned by different groups of people with different goals. 
D)  owners believe setting price/output to maximize profits is unfair to consumers. 
A)  that is where profits are maximized. 
B)  it is impossible to maximize profits. 
C)  firms are managed and owned by different groups of people with different goals. 
D)  owners believe setting price/output to maximize profits is unfair to consumers.

Question 14

A cartel is

Accepted Answer

A)  a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B)  a government-approved organization for the exchange of technical information among firms. 
C)  a form of competition among oligopolists. 
D)  a regulated industry that is officially permitted to set the price of its product above long-run average total cost. 
A)  a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B)  a government-approved organization for the exchange of technical information among firms. 
C)  a form of competition among oligopolists. 
D)  a regulated industry that is officially permitted to set the price of its product above long-run average total cost.

Question 15

The theory of the kinked demand curve is used to explain

Accepted Answer

A)  bizarre corporate behavior. 
B)  sales maximization. 
C)  the maximin criterion. 
D)  sticky prices in oligopolies. 
A)  bizarre corporate behavior. 
B)  sales maximization. 
C)  the maximin criterion. 
D)  sticky prices in oligopolies.

Question 16

An oligopoly is a market

Accepted Answer

A)  with few buyers. 
B)  with one buyer. 
C)  dominated by a few sellers. 
D)  under the control of a few politically powerful individuals. 
A)  with few buyers. 
B)  with one buyer. 
C)  dominated by a few sellers. 
D)  under the control of a few politically powerful individuals.

Question 17

The payoff matrix is a fundamental tool of

Accepted Answer

A)  monopolistic competition. 
B)  game theory. 
C)  corporate finance theory. 
D)  regulatory oversight. 
A)  monopolistic competition. 
B)  game theory. 
C)  corporate finance theory. 
D)  regulatory oversight.

Question 18

The models of perfect competition and monopoly are the most realistic.

Accepted Answer

A) True 
 B)False

Question 19

Long-run equilibrium under monopolistic competition requires that

Accepted Answer

A)  the demand curve intersect the average cost curve. 
B)  the demand curve be tangent to the average cost curve. 
C)  price be equal to marginal cost. 
D)  quantity produced be at the point where average cost is at a minimum. 
A)  the demand curve intersect the average cost curve. 
B)  the demand curve be tangent to the average cost curve. 
C)  price be equal to marginal cost. 
D)  quantity produced be at the point where average cost is at a minimum.

Question 20

To understand most of today's economic activity in the U.S.economy, we should look at which of the following models?

Accepted Answer

A)  perfect competition and pure monopoly 
B)  perfect competition and oligopoly 
C)  oligopoly and monopolistic competition 
D)  monopolistic competition and monopoly 
A)  perfect competition and pure monopoly 
B)  perfect competition and oligopoly 
C)  oligopoly and monopolistic competition 
D)  monopolistic competition and monopoly

Exam 12: Between Competition and Monopoly

An oligopolist cares very much about what other firms in her industry are doing.

An oligopoly is a market structure in which a few large firms dominate the sale of a single product.

An oligopoly is a market dominated by a few sellers.

Which of the following characteristics of perfect competition does not apply in monopolistic competition?

Cartels are relatively rare because

Explain how short-run and long-run equilibrium in monopolistic competition differ.Use graphs to illustrate your answer.Be sure that your graphs are completely and correctly labeled.

Game theory is based on the idea that each participant makes decisions based on how she believes the competition will react.

One indication that an industry might be oligopolistic is that prices change

To maximize its profit, a monopolistically competitive firm produces at the output level at which

The kinked demand curve model explains pricing in monopoly markets.

Figure 12-2 -In Figure 12-2, which of the graphs represents a firm that is a sales revenue maximizer?

A market is contestable if

The reason firms often choose sales maximization as a goal is because

A cartel is

The theory of the kinked demand curve is used to explain

An oligopoly is a market

The payoff matrix is a fundamental tool of

The models of perfect competition and monopoly are the most realistic.

Long-run equilibrium under monopolistic competition requires that

To understand most of today's economic activity in the U.S.economy, we should look at which of the following models?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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