Question 1

Unlike a perfectly competitive firm, a monopolistically competitive firm

Accepted Answer

A)  faces a perfectly inelastic demand curve. 
B)  can earn positive economic profit in the short run and in the long run. 
C)  cannot earn positive economic profit even in the short run. 
D)  does not have the same marginal revenue at every output level. 
A)  faces a perfectly inelastic demand curve. 
B)  can earn positive economic profit in the short run and in the long run. 
C)  cannot earn positive economic profit even in the short run. 
D)  does not have the same marginal revenue at every output level.

Question 2

Here is an excerpt form an editorial praising capitalism in The Economist: "It is competition that delivers choice, holds prices down, encourages invention and service, and (through all these things) delivers economic growth." To what type of competition does the writer refer? Is it the sort of competition that economists study? Explain.

Accepted Answer

The competition here seems to be monopol

Question 3

Sticky prices are a direct result of the kinked demand curve.

Accepted Answer

A) True 
 B)False

Question 4

Figure 12-3
  
-In Figure 12-3, according to economic theory, the kink in the demand curve will occur at point

Accepted Answer

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

Question 5

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Accepted Answer

A) True 
 B)False

Question 6

The theory of the kinked demand curve is that

Accepted Answer

A)  although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm's behavior. 
B)  freedom of entry will reduce profits to zero. 
C)  a firm's competitors will follow it in a price decrease but not follow it in a price increase. 
D)  firms are all seeking the position of joint profit maximization. 
A)  although the firm sells a differentiated product, too many competitors exist to make it worthwhile speculating on responses to the firm's behavior. 
B)  freedom of entry will reduce profits to zero. 
C)  a firm's competitors will follow it in a price decrease but not follow it in a price increase. 
D)  firms are all seeking the position of joint profit maximization.

Question 7

Which of the following is never true for a sales revenue maximizer with an upward-sloping supply curve?

Accepted Answer

A)  MR = 0 
B)  MR = MC 
C)  Economic profits are positive. 
D)  P = MC 
A)  MR = 0 
B)  MR = MC 
C)  Economic profits are positive. 
D)  P = MC

Question 8

Demand for a firm has been reliably measured as P = 100- 5Q where Q is output and P is price in dollars.Total cost is in the table below.Complete the table and indicate the level of output and price which a profit-maximizing firm would select and indicate the same for a sales-maximizing firm.
 \[\begin{array} { c c c c } 
\underline{\text { Quantity }} & \underline { \text { Price } } & \underline { \text { Revenue } } & \underline{ \text { Cost } }&\underline{\text { Profit }}  \
1 & \underline {\quad\quad }& \underline {  \quad\quad   }&200& \underline { \quad\quad }  \
2 & \underline {\quad\quad }& \underline {  \quad\quad   }&210& \underline { \quad\quad } \
3 & \underline {\quad\quad }& \underline {  \quad\quad   }&220 & \underline { \quad\quad } \

4 & \underline {\quad\quad }& \underline {  \quad\quad   }&231 & \underline { \quad\quad } \
5 & \underline {\quad\quad }& \underline {  \quad\quad   }&243 & \underline { \quad\quad } \
6 & \underline {\quad\quad }& \underline {  \quad\quad   }&256 & \underline { \quad\quad } \
7 & \underline {\quad\quad }& \underline {  \quad\quad   }&270 & \underline { \quad\quad } \
8 & \underline {\quad\quad }& \underline {  \quad\quad   }&285 & \underline { \quad\quad } \
9 & \underline {\quad\quad }& \underline {  \quad\quad   }&301 & \underline { \quad\quad } \
10 & \underline {\quad\quad }& \underline {  \quad\quad   }&320 & \underline { \quad\quad } \
11 & \underline {\quad\quad }& \underline {  \quad\quad   }&345 & \underline { \quad\quad } \
12 & \underline {\quad\quad }& \underline {  \quad\quad   }&375& \underline { \quad\quad } \
\end{array}\]

Accepted Answer

From the table, the profit-max

Question 9

Sales maximization by a firm most often serves the interests of the firm's

Accepted Answer

A)  stockholders. 
B)  creditors. 
C)  managers. 
D)  unskilled laborers. 
A)  stockholders. 
B)  creditors. 
C)  managers. 
D)  unskilled laborers.

Question 10

International trade can be correctly considered as an example of a zero-sum game.

Accepted Answer

A) True 
 B)False

Question 11

In oligopoly, one expects

Accepted Answer

A)  frequent introduction of new or redesigned products. 
B)  aggressive advertising campaigns. 
C)  intense marketing research into the impact of price changes. 
D)  All of the above are correct. 
A)  frequent introduction of new or redesigned products. 
B)  aggressive advertising campaigns. 
C)  intense marketing research into the impact of price changes. 
D)  All of the above are correct.

Question 12

Explain the prisoner's dilemma case in game theory and its relevance to the maximin criterion.

Accepted Answer

The scenario is of two burglary suspects

Question 13

A duopoly is

Accepted Answer

A)  a cartel in which all members try to cheat on the cartel. 
B)  an industry with only two sellers. 
C)  an industry with only two buyers. 
D)  a cartel with only two members. 
A)  a cartel in which all members try to cheat on the cartel. 
B)  an industry with only two sellers. 
C)  an industry with only two buyers. 
D)  a cartel with only two members.

Question 14

At any given airport, the airlines hold long-term leases for passenger loading gates.New gates cannot be added without approval of the airlines.Frequent flier programs are also common in the industry.It is, therefore, more difficult for a new airline to enter a given airport (market).Such factors:
(i)are called barriers to entry.
(ii)tend to decrease the contestability of the air travel market.

Accepted Answer

A)  i and ii 
B)  i not ii 
C)  ii not i 
D)  neither i nor ii 
A)  i and ii 
B)  i not ii 
C)  ii not i 
D)  neither i nor ii

Question 15

The kinked demand curve model is based on the assumption that rival firms will match a price cut but ignore a price increase.

Accepted Answer

A) True 
 B)False

Question 16

Which oligopoly model leads to price rigidity? Graphically show why.

Accepted Answer

The kinked demand curve model leads to p

Question 17

What are the assumptions of the kinked demand curve model? What is its main conclusion about oligopoly behavior?

Accepted Answer

The model has two main assumptions: The

Question 18

In what way is monopolistic competition more like competition, and in what way is it more like monopoly?

Accepted Answer

Like competition, there are many firms i

Question 19

If an oligopolistic manufacturer believes that he faces a kinked demand curve for his product, he thinks his competitors will ____ if he lowers his price and ____ if he raises his price.

Accepted Answer

A)  lower their prices; raise their prices. 
B)  lower their prices; not raise their prices 
C)  not lower their prices; raise their prices 
D)  not lower their prices; not raise their prices 
A)  lower their prices; raise their prices. 
B)  lower their prices; not raise their prices 
C)  not lower their prices; raise their prices 
D)  not lower their prices; not raise their prices

Question 20

Price leadership may sometimes be an example of covert collusive behavior by oligopolies.

Accepted Answer

A) True 
 B)False

Exam 12: Between Competition and Monopoly

Unlike a perfectly competitive firm, a monopolistically competitive firm

Sticky prices are a direct result of the kinked demand curve.

Figure 12-3 -In Figure 12-3, according to economic theory, the kink in the demand curve will occur at point

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

The theory of the kinked demand curve is that

Which of the following is never true for a sales revenue maximizer with an upward-sloping supply curve?

Sales maximization by a firm most often serves the interests of the firm's

International trade can be correctly considered as an example of a zero-sum game.

In oligopoly, one expects

Explain the prisoner's dilemma case in game theory and its relevance to the maximin criterion.

A duopoly is

The kinked demand curve model is based on the assumption that rival firms will match a price cut but ignore a price increase.

Which oligopoly model leads to price rigidity? Graphically show why.

What are the assumptions of the kinked demand curve model? What is its main conclusion about oligopoly behavior?

In what way is monopolistic competition more like competition, and in what way is it more like monopoly?

If an oligopolistic manufacturer believes that he faces a kinked demand curve for his product, he thinks his competitors will ____ if he lowers his price and ____ if he raises his price.

Price leadership may sometimes be an example of covert collusive behavior by oligopolies.

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

Filters

If an oligopolistic manufacturer believes that he faces a kinked demand curve for his product, he thinks his competitors will if he lowers his price and if he raises his price.