Question 1

The major economic objective of cartels is to

Accepted Answer

A) impose their political will on others. 
B) restrict output, push up price, and increase profits. 
C) reduce costs. 
D) develop new ways of doing things. 
A) impose their political will on others. 
B) restrict output, push up price, and increase profits. 
C) reduce costs. 
D) develop new ways of doing things. B

Question 2

Exhibit 24-7   Refer to Exhibit 24-7. At the profit-maximizing level of output, the marginal cost of the last unit produced is _________ and the marginal revenue of the last unit sold is ____________.

Accepted Answer

A) $15; $15 
B) $3; $3 
C) $2; $2 
D) $6; $6 
E) $7: $7 
A) $15; $15 
B) $3; $3 
C) $2; $2 
D) $6; $6 
E) $7: $7 B

Question 3

The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following statements is false ?

Accepted Answer

A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces an output at which price is greater than marginal cost. 
C) The demand curve facing a monopolistic competitor is less elastic than the demand curve facing a monopolist. 
D) There are many substitutes in a monopolistic competitive industry. 
A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces an output at which price is greater than marginal cost. 
C) The demand curve facing a monopolistic competitor is less elastic than the demand curve facing a monopolist. 
D) There are many substitutes in a monopolistic competitive industry.

Question 5

In which market structure can the good being produced be either homogeneous or differentiated?

Accepted Answer

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

Question 6

Exhibit 24-9 ​   Refer to Exhibit 24-9. The type of product sold in a perfectly competitive market is ___________ [blank (D)].  The type of product sold in a monopolistic competitive market is ____________ [blank (E)].  The type of product sold in an oligopoly is _________ [blank (F)]. The type of product sold in a monopoly is ___________ [blank (G)].

Accepted Answer

A) unique; homogeneous or differentiated; differentiated; homogeneous 
B) differentiated; homogeneous; homogeneous or differentiated; unique 
C) homogeneous; homogeneous; differentiated; unique 
D) homogeneous; differentiated; homogeneous or differentiated; unique 
A) unique; homogeneous or differentiated; differentiated; homogeneous 
B) differentiated; homogeneous; homogeneous or differentiated; unique 
C) homogeneous; homogeneous; differentiated; unique 
D) homogeneous; differentiated; homogeneous or differentiated; unique

Question 7

The demand curve facing a monopolistic competitor will be more elastic than the demand curve facing a monopolist because

Accepted Answer

A) there are barriers to exit for the monopolist, but not for the monopolistic competitor. 
B) the monopolistic competitor attains resource-allocative efficiency, but the monopolist does not. 
C) there are substitute goods for what the monopolistic competitor produces, but not for what the monopolist produces. 
D) the monopolist is a price searcher, but the monopolistic competitor is not. 
A) there are barriers to exit for the monopolist, but not for the monopolistic competitor. 
B) the monopolistic competitor attains resource-allocative efficiency, but the monopolist does not. 
C) there are substitute goods for what the monopolistic competitor produces, but not for what the monopolist produces. 
D) the monopolist is a price searcher, but the monopolistic competitor is not.

Question 8

In monopolistic competition,a firm produces 10,000 units when its marginal revenue equals its marginal cost. At this level of output, the firms average variable cost is $4.30 and its average fixed cost is $2.10. If the firm sells the product for $5 each, at best it is earning

Accepted Answer

A) a profit of $14,000. 
B) losses of $14,000. 
C) a profit of $7,000. 
D) losses of $7,000. 
E) There is not enough information provided to answer this question. 
A) a profit of $14,000. 
B) losses of $14,000. 
C) a profit of $7,000. 
D) losses of $7,000. 
E) There is not enough information provided to answer this question.

Question 9

Which of the following is not an assumption of oligopoly?

Accepted Answer

A) There are few sellers. 
B) There are few buyers. 
C) Firms produce and sell either homogeneous or differentiated products. 
D) There are significant barriers to entry. 
A) There are few sellers. 
B) There are few buyers. 
C) Firms produce and sell either homogeneous or differentiated products. 
D) There are significant barriers to entry.

Question 10

If the four-firm concentration ratio is 0.55, and the top four firms account for $25 million in sales, it follows that total industry sales equal

Accepted Answer

A) $28.57 million. 
B) $12.00 million. 
C) $35.00 million. 
D) $55.56 million. 
E) $45.45 million. 
A) $28.57 million. 
B) $12.00 million. 
C) $35.00 million. 
D) $55.56 million. 
E) $45.45 million.

Question 11

Exhibit 24-3  
Refer to Exhibit 24-3. Total revenue of this profit maximizing monopolistic competitor is represented by the area

Accepted Answer

A) 0P1AQ2. 
B) 0P5EQ2. 
C) P3P1AC. 
D) 0P4DQ3. 
A) 0P1AQ2. 
B) 0P5EQ2. 
C) P3P1AC. 
D) 0P4DQ3.

Question 12

Exhibit 24-9 ​   Refer to Exhibit 24-9. The number of sellers in a perfectly competitive market is ___________ [blank (A)], the number of sellers in a monopolistic competitive market is ____________ [blank (B)], and the number of sellers in an oligopoly is _________ [blank (C)].

Accepted Answer

A) many; many; few 
B) many; few, few 
C) few; many; many 
D) few; few many 
A) many; many; few 
B) many; few, few 
C) few; many; many 
D) few; few many

Question 13

Exhibit 24-8   Refer to Exhibit 24-8.  A profit-maximizing monopolistic competitive firm that produces at the level of output where MR = MC will set the price at

Accepted Answer

A) $210 per unit. 
B) $200 per unit. 
C) $120 per unit. 
D) $60 per unit. 
E) $50 per unit. 
A) $210 per unit. 
B) $200 per unit. 
C) $120 per unit. 
D) $60 per unit. 
E) $50 per unit.

Question 14

Total industry sales are $100 billion. The four largest firms have sales of $35 billion, $17 billion, $6.8 billion, and $2.2 billion. The industry's approximate four-firm concentration ratio is

Accepted Answer

A) 0.61. 
B) 0.88. 
C) 0.39. 
D) 0.06. 
A) 0.61. 
B) 0.88. 
C) 0.39. 
D) 0.06.

Question 15

A concentration ratio indicates the

Accepted Answer

A) number of firms in an industry. 
B) number of large firms in an industry compared to the number of large firms in another related industry. 
C) percentage of total sales accounted for by the (for example)four largest firms. 
D) percentage of sellers in an industry relative to the number of buyers. 
E) percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter. 
A) number of firms in an industry. 
B) number of large firms in an industry compared to the number of large firms in another related industry. 
C) percentage of total sales accounted for by the (for example)four largest firms. 
D) percentage of sellers in an industry relative to the number of buyers. 
E) percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter.

Question 16

It has been argued that as a result of not producing the quantity of output where unit cost is minimized, the monopolistic competitive firm charges too __________ a price and produces too __________ output.

Accepted Answer

A) high; little 
B) low; little 
C) high; much 
D) low; much 
A) high; little 
B) low; little 
C) high; much 
D) low; much

Question 17

Generally, the monopolistic competitor is in long run equilibrium when

Accepted Answer

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

Question 18

Which of the following is not a condition of a contestable market?

Accepted Answer

A) There is easy entry into and costless exit from the market. 
B) New firms entering the market can produce the product at the same cost as current firms. 
C) Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
D) New firms entering the market produce a higher-quality product than existing firms. 
A) There is easy entry into and costless exit from the market. 
B) New firms entering the market can produce the product at the same cost as current firms. 
C) Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. 
D) New firms entering the market produce a higher-quality product than existing firms.

Question 19

Which of the following industries is the best real-world example of monopolistic competition?

Accepted Answer

A) soft drinks 
B) electricity generation 
C) automobiles 
D) computer software 
A) soft drinks 
B) electricity generation 
C) automobiles 
D) computer software

Question 20

The monopolistic competitive firm faces a __________ demand curve and therefore is a price __________.

Accepted Answer

A) downward-sloping; searcher 
B) horizontal; taker 
C) downward-sloping; taker 
D) horizontal; searcher 
A) downward-sloping; searcher 
B) horizontal; taker 
C) downward-sloping; taker 
D) horizontal; searcher

Exam 11: Monopolistic Competition, Oligopoly, and Game Theory

The major economic objective of cartels is to

Exhibit 24-7 Refer to Exhibit 24-7. At the profit-maximizing level of output, the marginal cost of the last unit produced is _________ and the marginal revenue of the last unit sold is ____________.

The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost.

Which of the following statements is false ?

In which market structure can the good being produced be either homogeneous or differentiated?

The demand curve facing a monopolistic competitor will be more elastic than the demand curve facing a monopolist because

In monopolistic competition,a firm produces 10,000 units when its marginal revenue equals its marginal cost. At this level of output, the firms average variable cost is $4.30 and its average fixed cost is $2.10. If the firm sells the product for $5 each, at best it is earning

Which of the following is not an assumption of oligopoly?

If the four-firm concentration ratio is 0.55, and the top four firms account for $25 million in sales, it follows that total industry sales equal

Exhibit 24-3 Refer to Exhibit 24-3. Total revenue of this profit maximizing monopolistic competitor is represented by the area

Exhibit 24-9 ​ Refer to Exhibit 24-9. The number of sellers in a perfectly competitive market is ___________ [blank (A)], the number of sellers in a monopolistic competitive market is ____________ [blank (B)], and the number of sellers in an oligopoly is _________ [blank (C)].

Exhibit 24-8 Refer to Exhibit 24-8. A profit-maximizing monopolistic competitive firm that produces at the level of output where MR = MC will set the price at

Total industry sales are $100 billion. The four largest firms have sales of $35 billion, $17 billion, $6.8 billion, and $2.2 billion. The industry's approximate four-firm concentration ratio is

A concentration ratio indicates the

It has been argued that as a result of not producing the quantity of output where unit cost is minimized, the monopolistic competitive firm charges too __________ a price and produces too __________ output.

Generally, the monopolistic competitor is in long run equilibrium when

Which of the following is not a condition of a contestable market?

Which of the following industries is the best real-world example of monopolistic competition?

The monopolistic competitive firm faces a __________ demand curve and therefore is a price __________.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages, Union, and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Filters

Exhibit 24-7 Refer to Exhibit 24-7. At the profit-maximizing level of output, the marginal cost of the last unit produced is _ and the marginal revenue of the last unit sold is ____.

Exhibit 24-9 Refer to Exhibit 24-9. The number of sellers in a perfectly competitive market is ___ [blank (A)], the number of sellers in a monopolistic competitive market is [blank (B)], and the number of sellers in an oligopoly is _ [blank (C)].

It has been argued that as a result of not producing the quantity of output where unit cost is minimized, the monopolistic competitive firm charges too a price and produces too output.

The monopolistic competitive firm faces a demand curve and therefore is a price .