Question 1

A monopolistically competitive firm in the long run will

Accepted Answer

A)  have a demand curve tangent to its AC. 
B)  have a demand curve below its AC. 
C)  have a demand curve above its AC. 
D)  operate where excessive profit can be achieved. 
A)  have a demand curve tangent to its AC. 
B)  have a demand curve below its AC. 
C)  have a demand curve above its AC. 
D)  operate where excessive profit can be achieved.

Question 2

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

Accepted Answer

A) True 
 B)False

Question 3

One of the most famous cartels is OPEC.

Accepted Answer

A) True 
 B)False

Question 4

A firm now produces its sales-maximizing level of output.If the firm increased its output by one unit, its marginal revenue would become

Accepted Answer

A)  negative. 
B)  smaller but still positive. 
C)  larger but still negative. 
D)  larger but still positive. 
A)  negative. 
B)  smaller but still positive. 
C)  larger but still negative. 
D)  larger but still positive.

Question 5

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Accepted Answer

A)  number of sellers 
B)  freedom of entry and exit 
C)  perfect information 
D)  homogeneity of the product 
A)  number of sellers 
B)  freedom of entry and exit 
C)  perfect information 
D)  homogeneity of the product

Question 6

According to the kinked demand curve model, an oligopolist may face

Accepted Answer

A)  more elastic demand than a monopolistic competitor. 
B)  less elastic demand than a monopolistic competitor. 
C)  more elastic demand if she raises her price than if she lowers her price. 
D)  less elastic demand if she raises her price than if she lowers her price. 
A)  more elastic demand than a monopolistic competitor. 
B)  less elastic demand than a monopolistic competitor. 
C)  more elastic demand if she raises her price than if she lowers her price. 
D)  less elastic demand if she raises her price than if she lowers her price.

Question 7

Identify the market structure characterized by many small firms selling somewhat different products.

Accepted Answer

A)  Monopoly 
B)  Monopolistic competition 
C)  Perfect competition 
D)  Duopoly 
A)  Monopoly 
B)  Monopolistic competition 
C)  Perfect competition 
D)  Duopoly

Question 8

Monopolistically competitive firms can earn large profits in the long run.

Accepted Answer

A) True 
 B)False

Question 9

A firm in a monopolistically competitive market makes no economic profit in the long run because

Accepted Answer

A)  long-run marginal cost will be too high to make any economic profit. 
B)  long-run price will be equal to long run marginal cost. 
C)  long-run marginal cost will be equal to long run marginal revenue. 
D)  long-run price will be equal to long run average cost. 
A)  long-run marginal cost will be too high to make any economic profit. 
B)  long-run price will be equal to long run marginal cost. 
C)  long-run marginal cost will be equal to long run marginal revenue. 
D)  long-run price will be equal to long run average cost.

Question 10

Price leadership works only if there is a single, dominant firm in the oligopoly.

Accepted Answer

A) True 
 B)False

Question 11

A common characteristic in oligopolistic markets is

Accepted Answer

A)  consideration of rivals' reactions. 
B)  standardized products. 
C)  high profits. 
D)  unused capacity. 
A)  consideration of rivals' reactions. 
B)  standardized products. 
C)  high profits. 
D)  unused capacity.

Question 12

The excess capacity theorem implies that

Accepted Answer

A)  consumers would be better off if some monopolistically competitive firms left their markets. 
B)  consumers would be better off with more standardization of products. 
C)  monopolistic competition benefits society by eliminating excess capacity in production. 
D)  monopolistic competition wastes some of society's resources but the elimination of this waste does not necessarily benefit consumers. 
A)  consumers would be better off if some monopolistically competitive firms left their markets. 
B)  consumers would be better off with more standardization of products. 
C)  monopolistic competition benefits society by eliminating excess capacity in production. 
D)  monopolistic competition wastes some of society's resources but the elimination of this waste does not necessarily benefit consumers.

Question 13

Monopolistically competitive markets feature high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 14

A monopolistically competitive firm

Accepted Answer

A)  tries to differentiate its product from competitors' products. 
B)  faces a perfectly elastic demand curve for its product. 
C)  has more monopoly power in the long run than does a perfectly competitive firm. 
D)  is always a retail establishment. 
A)  tries to differentiate its product from competitors' products. 
B)  faces a perfectly elastic demand curve for its product. 
C)  has more monopoly power in the long run than does a perfectly competitive firm. 
D)  is always a retail establishment.

Question 15

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

Accepted Answer

A)  each has many buyers and sellers. 
B)  firms sell homogeneous products in both markets. 
C)  in having perfect information. 
D)  for freedom of exit and entry. 
A)  each has many buyers and sellers. 
B)  firms sell homogeneous products in both markets. 
C)  in having perfect information. 
D)  for freedom of exit and entry.

Question 16

Figure 12-3
  
-Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors fail to retaliate with price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?

Accepted Answer

A)  B 
B)  C 
C)  D 
D)  E 
A)  B 
B)  C 
C)  D 
D)  E

Question 17

Society definitely benefits by reducing the number of monopolistically competitive firms.

Accepted Answer

A) True 
 B)False

Question 18

Oligopoly occurs when

Accepted Answer

A)  a few firms sell many different products. 
B)  a few firms sell to a few large buyers. 
C)  many firms dominate a single market. 
D)  a few firms dominate a single market. 
A)  a few firms sell many different products. 
B)  a few firms sell to a few large buyers. 
C)  many firms dominate a single market. 
D)  a few firms dominate a single market.

Question 19

Which of the following is not a requirement for the existence of monopolistic competition in a market?

Accepted Answer

A)  numerous small sellers 
B)  full information about the market among buyers and sellers 
C)  product homogeneity 
D)  freedom of entry into the market 
A)  numerous small sellers 
B)  full information about the market among buyers and sellers 
C)  product homogeneity 
D)  freedom of entry into the market

Question 20

Firms have the option of maximizing sales revenue or maximizing profits.If a firm chooses to maximize sales, then it will produce

Accepted Answer

A)  more output and charge a lower price. 
B)  the same output and charge a lower price. 
C)  less output and charge a higher price. 
D)  less output and charge a lower price. 
A)  more output and charge a lower price. 
B)  the same output and charge a lower price. 
C)  less output and charge a higher price. 
D)  less output and charge a lower price.

Exam 12: Between Competition and Monopoly

A monopolistically competitive firm in the long run will

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

One of the most famous cartels is OPEC.

A firm now produces its sales-maximizing level of output.If the firm increased its output by one unit, its marginal revenue would become

Which of the following conditions distinguishes monopolistic competition from perfect competition?

According to the kinked demand curve model, an oligopolist may face

Identify the market structure characterized by many small firms selling somewhat different products.

Monopolistically competitive firms can earn large profits in the long run.

A firm in a monopolistically competitive market makes no economic profit in the long run because

Price leadership works only if there is a single, dominant firm in the oligopoly.

A common characteristic in oligopolistic markets is

The excess capacity theorem implies that

Monopolistically competitive markets feature high barriers to entry.

A monopolistically competitive firm

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

Figure 12-3 -Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors fail to retaliate with price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?

Society definitely benefits by reducing the number of monopolistically competitive firms.

Oligopoly occurs when

Which of the following is not a requirement for the existence of monopolistic competition in a market?

Firms have the option of maximizing sales revenue or maximizing profits.If a firm chooses to maximize sales, then it will produce

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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