Question 1

Does the monopolistic competitive firm exhibit resource-allocative efficiency?

Accepted Answer

A) No, because at its chosen quantity of output, price does not equal the lowest possible average total cost. 
B) Yes, because at its chosen quantity of output, price equals marginal cost. 
C) No, because at its chosen quantity of output, price is greater than marginal cost. 
D) Yes, because at its chosen quantity of output, price is less than marginal cost. 
A) No, because at its chosen quantity of output, price does not equal the lowest possible average total cost. 
B) Yes, because at its chosen quantity of output, price equals marginal cost. 
C) No, because at its chosen quantity of output, price is greater than marginal cost. 
D) Yes, because at its chosen quantity of output, price is less than marginal cost.

Question 2

Which of the following statements is false ?

Accepted Answer

A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces a product that differs slightly from the products of the other firms in the industry. 
C) The monopolistic competitor faces a horizontal demand curve. 
D) The monopolistic competitor produces an output at which price is greater than marginal cost. 
A) The monopolistic competitor is a price searcher. 
B) The monopolistic competitor produces a product that differs slightly from the products of the other firms in the industry. 
C) The monopolistic competitor faces a horizontal demand curve. 
D) The monopolistic competitor produces an output at which price is greater than marginal cost.

Question 3

If you were to rank the four market structures in terms of lowest concentration ratio to highest concentration ratio, which of the following rankings would be correct?

Accepted Answer

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

Question 4

There are few sellers and many buyers in the

Accepted Answer

A) perfectly competitive market structure. 
B) monopolistic competitive market structure. 
C) oligopoly market structure. 
D) monopoly market structure. 
A) perfectly competitive market structure. 
B) monopolistic competitive market structure. 
C) oligopoly market structure. 
D) monopoly market structure.

Question 5

The profit-maximizing perfectly competitive firm charges a price equal to __________ while the profit-maximizing monopolistic competitive firm charges a price __________.

Accepted Answer

A) marginal revenue; equal to marginal cost 
B) marginal cost; greater than marginal cost 
C) marginal revenue; less than marginal revenue 
D) average fixed cost; greater than average total cost 
A) marginal revenue; equal to marginal cost 
B) marginal cost; greater than marginal cost 
C) marginal revenue; less than marginal revenue 
D) average fixed cost; greater than average total cost

Question 6

In an oligopolistic market, the product being produced can be either homogeneous or differentiated.

Accepted Answer

A) True 
 B)False

Question 7

If a market is contestable, then

Accepted Answer

A) a cartel will form in the industry. 
B) economic profits are small or zero. 
C) firms face a vertical demand curve. 
D) there is a dominant firm in the market. 
A) a cartel will form in the industry. 
B) economic profits are small or zero. 
C) firms face a vertical demand curve. 
D) there is a dominant firm in the market.

Question 8

Exhibit 24-7   Refer to Exhibit 24-7. A monopolistic competitive firm earns a total profit of __________ when it produces and sells 20 units of its good.

Accepted Answer

A) $40. 
B) $65. 
C) $200. 
D) $80. 
E) $50. 
A) $40. 
B) $65. 
C) $200. 
D) $80. 
E) $50.

Question 9

In which market structure is the interdependence of firms a key characteristic?

Accepted Answer

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

Question 10

Grade inflation in colleges may possibly be a result of college professors being in a prisoner's dilemma setting.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 24-8   Refer to Exhibit 24-8. Assuming that total fixed costs are $80, the average variable cost of producing 2 units of output is

Accepted Answer

A) $19.50. 
B) $155. 
C) $145. 
D) $55. 
E) There is not enough information given to answer this question. 
A) $19.50. 
B) $155. 
C) $145. 
D) $55. 
E) There is not enough information given to answer this question.

Question 12

The demand curve facing a monopolistic competitive firm will be __________ than the demand curve facing a perfectly competitive firm because the price elasticity of demand for the monopolistic competitive firm's product is __________ than that for the perfectly competitive firm.

Accepted Answer

A) steeper; higher 
B) flatter; higher 
C) steeper; lower 
D) flatter; lower 
A) steeper; higher 
B) flatter; higher 
C) steeper; lower 
D) flatter; lower

Question 13

Which of the following assumptions do the market structures of monopolistic competition and perfect competition share?

Accepted Answer

A) many buyers and sellers 
B) homogeneous products 
C) difficult entry into the market 
D) difficult exit from the market 
A) many buyers and sellers 
B) homogeneous products 
C) difficult entry into the market 
D) difficult exit from the market

Question 14

In the prisoner's dilemma, both prisoners end up __________, which turns out to be __________ confessed.

Accepted Answer

A) confessing; better for them than if they had both not 
B) confessing; worse for them than if they had both not 
C) not confessing; better for them than if they had both 
D) not confessing; worse for them than if they had both 
A) confessing; better for them than if they had both not 
B) confessing; worse for them than if they had both not 
C) not confessing; better for them than if they had both 
D) not confessing; worse for them than if they had both

Question 15

Which of the following is an assumption of the theory of oligopoly?

Accepted Answer

A) There no significant barriers to entry. 
B) There are many sellers and many buyers. 
C) Firms produce and sell either homogeneous or differentiated products. 
D) There is a single seller in the market. 
A) There no significant barriers to entry. 
B) There are many sellers and many buyers. 
C) Firms produce and sell either homogeneous or differentiated products. 
D) There is a single seller in the market.

Question 16

What is a cartel?  Describe some of the problems inherent in forming and maintaining a cartel.

Accepted Answer

A cartel is an organization of firms tha

Question 17

The theory of monopolistic competition assumes

Accepted Answer

A) the production of a homogeneous product. 
B) significant barriers to entry. 
C) many buyers and sellers. 
D) a single seller in a market with no close substitutes. 
A) the production of a homogeneous product. 
B) significant barriers to entry. 
C) many buyers and sellers. 
D) a single seller in a market with no close substitutes.

Question 18

Exhibit 24-10
 
Suppose that the letter grade earned on a test for each student in a class depends upon how well he\she does relative to other students in the class.  This exhibit shows a prisoner's dilemma setting for two representative students in the class, George and Gina.
Refer to Exhibit 24-10.  If George and Gina are in a prisoner's dilemma setting, they are likely to end up in box ___________ in the diagram.

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 19

Concentration ratios are often used to determine the degree of oligopoly in an industry.

Accepted Answer

A) True 
 B)False

Question 20

The profit-maximizing oligopolist produces at the level of output where

Accepted Answer

A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) price is less than average total cost. 
D) price equals average total cost. 
A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) price is less than average total cost. 
D) price equals average total cost.

Exam 11: Monopolistic Competition, Oligopoly, and Game Theory

Does the monopolistic competitive firm exhibit resource-allocative efficiency?

Which of the following statements is false ?

If you were to rank the four market structures in terms of lowest concentration ratio to highest concentration ratio, which of the following rankings would be correct?

There are few sellers and many buyers in the

The profit-maximizing perfectly competitive firm charges a price equal to __________ while the profit-maximizing monopolistic competitive firm charges a price __________.

In an oligopolistic market, the product being produced can be either homogeneous or differentiated.

If a market is contestable, then

Exhibit 24-7 Refer to Exhibit 24-7. A monopolistic competitive firm earns a total profit of __________ when it produces and sells 20 units of its good.

In which market structure is the interdependence of firms a key characteristic?

Grade inflation in colleges may possibly be a result of college professors being in a prisoner's dilemma setting.

Exhibit 24-8 Refer to Exhibit 24-8. Assuming that total fixed costs are $80, the average variable cost of producing 2 units of output is

The demand curve facing a monopolistic competitive firm will be __________ than the demand curve facing a perfectly competitive firm because the price elasticity of demand for the monopolistic competitive firm's product is __________ than that for the perfectly competitive firm.

Which of the following assumptions do the market structures of monopolistic competition and perfect competition share?

In the prisoner's dilemma, both prisoners end up __________, which turns out to be __________ confessed.

Which of the following is an assumption of the theory of oligopoly?

What is a cartel? Describe some of the problems inherent in forming and maintaining a cartel.

The theory of monopolistic competition assumes

Concentration ratios are often used to determine the degree of oligopoly in an industry.

The profit-maximizing oligopolist produces at the level of output where

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

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The profit-maximizing perfectly competitive firm charges a price equal to while the profit-maximizing monopolistic competitive firm charges a price .

The demand curve facing a monopolistic competitive firm will be than the demand curve facing a perfectly competitive firm because the price elasticity of demand for the monopolistic competitive firm's product is than that for the perfectly competitive firm.

In the prisoner's dilemma, both prisoners end up , which turns out to be confessed.