Question 1

The "prisoner's dilemma" game illustrates a case in which

Accepted Answer

A) individually rational behavior leads to a collectively inefficient outcome. 
B) what is irrational individual behavior turns out to be ultra-irrational group behavior. 
C) the whole is greater than the sum of the parts. 
D) the sum of the parts is greater than the whole. 
A) individually rational behavior leads to a collectively inefficient outcome. 
B) what is irrational individual behavior turns out to be ultra-irrational group behavior. 
C) the whole is greater than the sum of the parts. 
D) the sum of the parts is greater than the whole.

Question 2

The demand curve facing a firm in monopolistic competition is downward sloping, because the firm

Accepted Answer

A) sells a differentiated product. 
B) is the entire industry by itself. 
C) is small relative to the market. 
D) sells a homogeneous product. 
A) sells a differentiated product. 
B) is the entire industry by itself. 
C) is small relative to the market. 
D) sells a homogeneous product.

Question 3

Exhibit 24-9 ​   Refer to Exhibit 24-9. There ___________ barriers to entry in a perfectly competitive market.  There ____________  barriers to entry in monopolistic competition.  There ____________  barriers to entry in oligopoly. There ____________ barriers to entry in monopoly.  [Your answers should fill in blanks (H), (I), (J)and (K), respectively.]

Accepted Answer

A) are; are; are no; are no 
B) are no; are; are; are no 
C) are no; are no; are; are 
D) are no; are; are; are 
A) are; are; are no; are no 
B) are no; are; are; are no 
C) are no; are no; are; are 
D) are no; are; are; are

Question 4

A monopolistic competitive firm faces a horizontal demand curve for its product.

Accepted Answer

A) True 
 B)False

Question 5

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face exactly the same demand and cost curves, then there is high probability that

Accepted Answer

A) the former will earn zero economic profits, but the latter will earn positive economic profits. 
B) both will earn zero economic profits, but the former will attain lower unit costs than the latter. 
C) both will earn zero economic profits, but the latter will attain lower unit costs than the former. 
D) both firms will earn zero economic profits, and attain the lowest possible unit costs. 
E) neither firm will earn zero economic profits, but both will attain the lowest possible unit costs. 
A) the former will earn zero economic profits, but the latter will earn positive economic profits. 
B) both will earn zero economic profits, but the former will attain lower unit costs than the latter. 
C) both will earn zero economic profits, but the latter will attain lower unit costs than the former. 
D) both firms will earn zero economic profits, and attain the lowest possible unit costs. 
E) neither firm will earn zero economic profits, but both will attain the lowest possible unit costs.

Question 6

"In equilibrium, a monopolistic competitor will produce an output level that is less than the level that would minimize its average total costs." This is a statement of the

Accepted Answer

A) law of diminishing returns. 
B) law of second best. 
C) law of variable proportions. 
D) excess capacity theorem. 
A) law of diminishing returns. 
B) law of second best. 
C) law of variable proportions. 
D) excess capacity theorem.

Question 7

Exhibit 24-7   Refer to Exhibit 24-7. Total fixed costs are equal to

Accepted Answer

A) $0. 
B) $10. 
C) $60. 
D) $40. 
E) There is not enough information given to answer the question. 
A) $0. 
B) $10. 
C) $60. 
D) $40. 
E) There is not enough information given to answer the question.

Question 8

The excess capacity theorem holds for a (n)__________, and states that in the long run the firm produces an output __________.

Accepted Answer

A) perfectly competitive firm; that is resource-allocative efficient 
B) monopoly firm; that is not resource-allocative efficient 
C) monopolistic competitor; smaller than the one that would minimize its costs of production 
D) oligopoly firm; larger than the one that would minimize its costs of production 
A) perfectly competitive firm; that is resource-allocative efficient 
B) monopoly firm; that is not resource-allocative efficient 
C) monopolistic competitor; smaller than the one that would minimize its costs of production 
D) oligopoly firm; larger than the one that would minimize its costs of production

Question 9

What  does the demand curve faced by a monopolistic competitive firm look like?  Explain why it is sloped this way, and what this implies about the relationship that exists between price and marginal revenue under monopolistic competition.

Accepted Answer

The monopolistic competitor faces a down

Question 10

One of the key assumptions of the theory of oligopoly is that firms act interdependently.

Accepted Answer

A) True 
 B)False

Question 11

Suppose an industry is made up of four firms, all with equal sales. The four-firm concentration ratio of that industry is

Accepted Answer

A) 0.125. 
B) 0.50. 
C) 1.00. 
D) This cannot be determined without more information. 
A) 0.125. 
B) 0.50. 
C) 1.00. 
D) This cannot be determined without more information.

Question 12

Exhibit 24-6
 
Refer to Exhibit 24-6. Excess capacity refers to the distance between

Accepted Answer

A) P2 and P1. 
B) Q1 and point C. 
C) Q2 and Q1. 
D) P3 and P1. 
E) P2 and point C. 
A) P2 and P1. 
B) Q1 and point C. 
C) Q2 and Q1. 
D) P3 and P1. 
E) P2 and point C.

Question 13

Exhibit 24-6
 
Refer to Exhibit 24-6. The monopolistic competitor is producing __________ quantity of output and charging a price of __________.

Accepted Answer

A) Q1; P3 
B) Q2; P3 
C) Q1; P2 
D) Q1; P1 
E) Q2; P1 
A) Q1; P3 
B) Q2; P3 
C) Q1; P2 
D) Q1; P1 
E) Q2; P1

Question 14

An industry is composed of 10 firms, all with equal sales. The four-firm concentration ratio in this industry is

Accepted Answer

A) 0.40. 
B) 0.80. 
C) 10.00. 
D) There is not enough information provided to answer this question. 
A) 0.40. 
B) 0.80. 
C) 10.00. 
D) There is not enough information provided to answer this question.

Question 15

In a monopolistic competitive market, which of the following factors probably does not give rise to product differentiation?

Accepted Answer

A) packaging of the product 
B) brand names 
C) loyalty of customers to a particular producer 
D) quality difference 
E) the small number of sellers 
A) packaging of the product 
B) brand names 
C) loyalty of customers to a particular producer 
D) quality difference 
E) the small number of sellers

Question 16

A monopolistic competitor has a demand curve that is ___________ elastic than a perfectly competitive firm's demand curve and ______________ a monopolistic firm's demand curve.

Accepted Answer

A) less; more elastic than 
B) less; less elastic than 
C) more; more elastic than 
D) less: equally as elastic as 
A) less; more elastic than 
B) less; less elastic than 
C) more; more elastic than 
D) less: equally as elastic as

Question 17

One of the key characteristics of oligopoly is that

Accepted Answer

A) firms are independent of each other. 
B) firms face different cost conditions. 
C) each firm is aware that its actions will influence other firms and that the actions of the other firms affect it. 
D) it is easy to enter the industry. 
A) firms are independent of each other. 
B) firms face different cost conditions. 
C) each firm is aware that its actions will influence other firms and that the actions of the other firms affect it. 
D) it is easy to enter the industry.

Question 18

The profit-maximizing monopolistic competitor produces at the level of output where

Accepted Answer

A) price equals marginal cost and marginal revenue. 
B) marginal cost equals marginal revenue, but not price. 
C) price equals marginal revenue, but not marginal cost. 
D) price equals marginal cost, but not marginal revenue. 
A) price equals marginal cost and marginal revenue. 
B) marginal cost equals marginal revenue, but not price. 
C) price equals marginal revenue, but not marginal cost. 
D) price equals marginal cost, but not marginal revenue.

Question 19

According to the textbook, in recent years which of the following industries has had high four- and eight-firm concentration ratios?

Accepted Answer

A) tires 
B) restaurants 
C) retail clothing 
D) computer software 
A) tires 
B) restaurants 
C) retail clothing 
D) computer software

Question 20

If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost curves, then

Accepted Answer

A) the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm will not. 
B) the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm may or may not, depending upon the demand for its product. 
C) the perfectly competitive firm will not attain resource-allocative efficiency, but the monopolistic competitive firm will. 
D) both the perfectly competitive firm and the monopolistic competitive firm will attain resource-allocative efficiency. 
E) neither the perfectly competitive firm nor the monopolistic competitive firm will attain resource-allocative efficiency. 
A) the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm will not. 
B) the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm may or may not, depending upon the demand for its product. 
C) the perfectly competitive firm will not attain resource-allocative efficiency, but the monopolistic competitive firm will. 
D) both the perfectly competitive firm and the monopolistic competitive firm will attain resource-allocative efficiency. 
E) neither the perfectly competitive firm nor the monopolistic competitive firm will attain resource-allocative efficiency.

Exam 11: Monopolistic Competition, Oligopoly, and Game Theory

The "prisoner's dilemma" game illustrates a case in which

The demand curve facing a firm in monopolistic competition is downward sloping, because the firm

A monopolistic competitive firm faces a horizontal demand curve for its product.

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face exactly the same demand and cost curves, then there is high probability that

"In equilibrium, a monopolistic competitor will produce an output level that is less than the level that would minimize its average total costs." This is a statement of the

Exhibit 24-7 Refer to Exhibit 24-7. Total fixed costs are equal to

The excess capacity theorem holds for a (n)__________, and states that in the long run the firm produces an output __________.

What does the demand curve faced by a monopolistic competitive firm look like? Explain why it is sloped this way, and what this implies about the relationship that exists between price and marginal revenue under monopolistic competition.

One of the key assumptions of the theory of oligopoly is that firms act interdependently.

Suppose an industry is made up of four firms, all with equal sales. The four-firm concentration ratio of that industry is

Exhibit 24-6 Refer to Exhibit 24-6. Excess capacity refers to the distance between

Exhibit 24-6 Refer to Exhibit 24-6. The monopolistic competitor is producing __________ quantity of output and charging a price of __________.

An industry is composed of 10 firms, all with equal sales. The four-firm concentration ratio in this industry is

In a monopolistic competitive market, which of the following factors probably does not give rise to product differentiation?

A monopolistic competitor has a demand curve that is ___________ elastic than a perfectly competitive firm's demand curve and ______________ a monopolistic firm's demand curve.

One of the key characteristics of oligopoly is that

The profit-maximizing monopolistic competitor produces at the level of output where

According to the textbook, in recent years which of the following industries has had high four- and eight-firm concentration ratios?

If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost curves, then

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

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The excess capacity theorem holds for a (n), and states that in the long run the firm produces an output .

Exhibit 24-6 Refer to Exhibit 24-6. The monopolistic competitor is producing quantity of output and charging a price of .

A monopolistic competitor has a demand curve that is _ elastic than a perfectly competitive firm's demand curve and ____ a monopolistic firm's demand curve.