Question 1

Figure 13-2
​  
-In Figure 13-2, 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 2

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 3

Oligopolists almost always cooperate in making price and output decisions.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Suppose that two drug manufacturers represent the only two producers in the industry and further suppose that the companies can spend a lot of money on research to develop new drug treatment.If only one develops a product, they make very high profits, but if they produce similar drugs, their profits are lower given the high research costs and they split the market for their products.But if they both sell their current products and spend little on research, they can still make good profits.This description sounds like a

Accepted Answer

A) credible threat. 
B) monopolistically competitive market. 
C) prisoner's dilemma. 
D) Nash equilibrium. 
A) credible threat. 
B) monopolistically competitive market. 
C) prisoner's dilemma. 
D) Nash equilibrium.

Question 6

The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of

Accepted Answer

A) AC and the demand curve occurs along the negatively sloped part of AC. 
B) the demand curve and AC occurs at the minimum point of the AC curve. 
C) AC and the demand curve occurs along the positively sloped part of AC. 
D) MC and MR at the optimum output. 
A) AC and the demand curve occurs along the negatively sloped part of AC. 
B) the demand curve and AC occurs at the minimum point of the AC curve. 
C) AC and the demand curve occurs along the positively sloped part of AC. 
D) MC and MR at the optimum output.

Question 7

The demand curve facing a monopolistically competitive firm is generally

Accepted Answer

A) steeper than the demand curve that would face a perfectly competitive firm in the same industry. 
B) less elastic than the demand curve that would face a monopoly in the same industry. 
C) steeper and more elastic than the demand curve that would face a perfectly competitive firm in the same industry. 
D) flatter than the demand curve that would face a monopoly in the same industry. 
A) steeper than the demand curve that would face a perfectly competitive firm in the same industry. 
B) less elastic than the demand curve that would face a monopoly in the same industry. 
C) steeper and more elastic than the demand curve that would face a perfectly competitive firm in the same industry. 
D) flatter than the demand curve that would face a monopoly in the same industry.

Question 8

Firms in a perfectly contestable market will be forced to operate as efficiently as possible and to charge prices as low as long-run financial survival permits.Why?

Accepted Answer

The freedom of entry eliminates any exce

Question 9

A profit-maximizing, monopolistically competitive restaurant serves 60 burgers a day at a total cost of $180 and earns a total profit of $180.In the long run, everything else equal, the

Accepted Answer

A) restaurant will charge more than $6 per burger. 
B) restaurant's average total cost will rise and its total revenue will fall. 
C) restaurant will sell more burgers at a lower average profit per burger. 
D) All of the responses are correct. 
A) restaurant will charge more than $6 per burger. 
B) restaurant's average total cost will rise and its total revenue will fall. 
C) restaurant will sell more burgers at a lower average profit per burger. 
D) All of the responses are correct.

Question 10

In the long run, which of the following conditions is true for a monopolistically competitive firm?

Accepted Answer

A) P > AC and MR = MC. 
B) P = MC and MR > AC. 
C) P = AC and MR = MC. 
D) P > MR and P > AC. 
A) P > AC and MR = MC. 
B) P = MC and MR > AC. 
C) P = AC and MR = MC. 
D) P > MR and P > AC.

Question 11

Which of the following conditions distinguishes the monopolistic competitor from the monopolist?

Accepted Answer

A) Profit-maximizing rule 
B) Downward slope of demand curve 
C) Entry of rivals 
D) Short-run economic profits 
A) Profit-maximizing rule 
B) Downward slope of demand curve 
C) Entry of rivals 
D) Short-run economic profits

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

In the long run, the prices charged by a firm in monopolistic competition will be

Accepted Answer

A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost, including the opportunity cost of capital. 
A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost, including the opportunity cost of capital.

Question 14

Figure 13-3
​  
-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 13-3, 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 15

Game theory applies to problems that arise in

Accepted Answer

A) perfect competition. 
B) monopolies. 
C) oligopolies. 
D) pure competition. 
A) perfect competition. 
B) monopolies. 
C) oligopolies. 
D) pure competition.

Question 16

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 17

Monopolistic competition in long-run equilibrium is characterized by

Accepted Answer

A) excess capacity. 
B) higher cost per unit of output than under perfect competition. 
C) inefficiency in use of resources. 
D) All of the responses are correct. 
A) excess capacity. 
B) higher cost per unit of output than under perfect competition. 
C) inefficiency in use of resources. 
D) All of the responses are correct.

Question 18

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 19

The market structure that is associated with big business in developed economies is

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) monopoly. 
D) oligopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) monopoly. 
D) oligopoly.

Question 20

Monopolistically competitive markets feature high barriers to entry.

Accepted Answer

A) True 
 B)False

Exam 13: Between Competition and Monopoly

Figure 13-2 ​ -In Figure 13-2, which of the graphs represents a firm that is a sales revenue maximizer?

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

Oligopolists almost always cooperate in making price and output decisions.

A duopoly is

The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of

The demand curve facing a monopolistically competitive firm is generally

Firms in a perfectly contestable market will be forced to operate as efficiently as possible and to charge prices as low as long-run financial survival permits.Why?

A profit-maximizing, monopolistically competitive restaurant serves 60 burgers a day at a total cost of $180 and earns a total profit of $180.In the long run, everything else equal, the

In the long run, which of the following conditions is true for a monopolistically competitive firm?

Which of the following conditions distinguishes the monopolistic competitor from the monopolist?

The excess capacity theorem implies that

In the long run, the prices charged by a firm in monopolistic competition will be

Figure 13-3 ​ -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 13-3, oligopolist A will move from point A to which point?

Game theory applies to problems that arise in

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.

Monopolistic competition in long-run equilibrium is characterized by

A monopolistically competitive firm

The market structure that is associated with big business in developed economies is

Monopolistically competitive markets feature high barriers to entry.

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

Filters

Figure 13-2 -In Figure 13-2, which of the graphs represents a firm that is a sales revenue maximizer?

Figure 13-3 -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 13-3, oligopolist A will move from point A to which point?

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.