Question 1

An example of overt collusion is

Accepted Answer

A) a cartel. 
B) price leadership. 
C) tacit collusion. 
D) a perfectly contestable market. 
A) a cartel. 
B) price leadership. 
C) tacit collusion. 
D) a perfectly contestable market. A

Question 2

Economists place cartels among the least-desirable forms of market organization.

Accepted Answer

A) True 
 B)False  True

Question 3

For the monopolistic competitor, MR = P.

Accepted Answer

A) True 
 B)False  False

Question 4

If an oligopolist cuts the prices of its products,

Accepted Answer

A) customers will switch to a rival firm. 
B) customers will remain unchanged in number. 
C) customers will switch from rival firms to buy from them. 
D) rival firms will not react. 
A) customers will switch to a rival firm. 
B) customers will remain unchanged in number. 
C) customers will switch from rival firms to buy from them. 
D) rival firms will not react.

Question 5

There are a smaller number of firms that operate in both monopolistic competition and perfect competition.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The cost-revenue diagrams for a monopolist and a monopolistic competitor are similar except that the demand curve for the monopolistic competitor is flatter.

Accepted Answer

A) True 
 B)False

Question 8

Contestable markets improve the performance of imperfect markets with

Accepted Answer

A) government regulations. 
B) the threat of entry. 
C) advertising. 
D) tacit collusion. 
A) government regulations. 
B) the threat of entry. 
C) advertising. 
D) tacit collusion.

Question 9

In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities.The concept the dot used to allow mergers where there was obvious concentration was most likely

Accepted Answer

A) the good trust principle. 
B) contestability. 
C) the efficient market principle. 
D) the monopolistic competition principle. 
A) the good trust principle. 
B) contestability. 
C) the efficient market principle. 
D) the monopolistic competition principle.

Question 10

Long-run equilibrium under monopolistic competition requires that

Accepted Answer

A) the demand curve intersects 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 intersects 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 11

An oligopoly is a market dominated by a few sellers.

Accepted Answer

A) True 
 B)False

Question 12

An oligopoly will always use game theory to maximize sales rather than profits.

Accepted Answer

A) True 
 B)False

Question 13

Heavy advertising expenditures usually indicate

Accepted Answer

A) oligopoly. 
B) pure competition or monopolistic competition. 
C) oligopoly or monopoly. 
D) differentiated pure competition or monopoly. 
A) oligopoly. 
B) pure competition or monopolistic competition. 
C) oligopoly or monopoly. 
D) differentiated pure competition or monopoly.

Question 14

Game theory may be used to solve problems of interdependent decision making by large firms.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following attitudes will be held by a typical firm in a typical cartel?

Accepted Answer

A) If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
B) I can never do better for myself than by following agreed-upon cartel policies. 
C) If everyone cheats, I'm better off and so is everyone else in the cartel. 
D) If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat. 
A) If I alone cheat, I'm better off; if everyone cheats, I'm worse off. 
B) I can never do better for myself than by following agreed-upon cartel policies. 
C) If everyone cheats, I'm better off and so is everyone else in the cartel. 
D) If I suspect others are planning to cheat, I'll do best for myself by deciding not to cheat.

Question 16

A dominant strategy is one that is best for one player regardless of the strategy chosen by the other player.

Accepted Answer

A) True 
 B)False

Question 17

The excess capacity theorem states that

Accepted Answer

A) society is worse off with fewer monopolistic competitors. 
B) costs of production under monopolistic competition can be lowered by reducing the number of producers. 
C) lack of excess capacity leads to shortages during periods of unexpected growth in demand for goods produced by monopolistic competition. 
D) there is too much choice in our economy. 
A) society is worse off with fewer monopolistic competitors. 
B) costs of production under monopolistic competition can be lowered by reducing the number of producers. 
C) lack of excess capacity leads to shortages during periods of unexpected growth in demand for goods produced by monopolistic competition. 
D) there is too much choice in our economy.

Question 18

A dominant strategy

Accepted Answer

A) results in the best outcome for a player if other players also play the same strategy. 
B) is the best strategy for a player, regardless of the strategy chosen by other players. 
C) is present in every game. 
D) is identical to a Nash equilibrium. 
A) results in the best outcome for a player if other players also play the same strategy. 
B) is the best strategy for a player, regardless of the strategy chosen by other players. 
C) is present in every game. 
D) is identical to a Nash equilibrium.

Question 19

The difficulty in analyzing oligopolistic behavior arises from the

Accepted Answer

A) degree of government regulation of the market structure. 
B) interdependent nature of oligopolistic decisions. 
C) large number of firms in the industry. 
D) market power of consumers. 
A) degree of government regulation of the market structure. 
B) interdependent nature of oligopolistic decisions. 
C) large number of firms in the industry. 
D) market power of consumers.

Question 20

A firm in perfect competition and one in monopolistic competition are very similar in that MR = P for firms in both markets.

Accepted Answer

A) True 
 B)False

Exam 13: Between Competition and Monopoly

An example of overt collusion is

Economists place cartels among the least-desirable forms of market organization.

For the monopolistic competitor, MR = P.

If an oligopolist cuts the prices of its products,

There are a smaller number of firms that operate in both monopolistic competition and perfect competition.

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

The cost-revenue diagrams for a monopolist and a monopolistic competitor are similar except that the demand curve for the monopolistic competitor is flatter.

Contestable markets improve the performance of imperfect markets with

In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities.The concept the dot used to allow mergers where there was obvious concentration was most likely

Long-run equilibrium under monopolistic competition requires that

An oligopoly is a market dominated by a few sellers.

An oligopoly will always use game theory to maximize sales rather than profits.

Heavy advertising expenditures usually indicate

Game theory may be used to solve problems of interdependent decision making by large firms.

Which of the following attitudes will be held by a typical firm in a typical cartel?

A dominant strategy is one that is best for one player regardless of the strategy chosen by the other player.

The excess capacity theorem states that

A dominant strategy

The difficulty in analyzing oligopolistic behavior arises from the

A firm in perfect competition and one in monopolistic competition are very similar in that MR = P for firms in both markets.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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