Question 1

Firms in oligopoly markets are unable to collude effectively because cooperation is difficult with a large number of firms.

Accepted Answer

A) True 
 B)False  False

Question 2

Here is an excerpt form an editorial praising capitalism in The Economist: "It is competition that delivers choice, holds prices down, encourages invention and service, and (through all these things)delivers economic growth." To what type of competition does the writer refer? Is it the sort of competition that economists study? Explain.

Accepted Answer

The competition here seems to be monopolistic competition (because it allows choice)or perfect competition (keeps prices down). More broadly, it could be the competition that occurs whenever another firm enters a market and begins to compete. This points out the difference in what economists mean by "competition," and what most others mean by the term.

Question 3

At any given airport, the airlines hold long-term leases for passenger loading gates. New gates cannot be added without approval of the airlines. Frequent flier programs are also common in the industry. It is, therefore, more difficult for a new airline to enter a given airport (market). Such factors: (i)are called barriers to entry.
(ii)tend to decrease the contestability of the air travel market.

Accepted Answer

A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii 
A) i and ii 
B) i not ii 
C) ii not i 
D) neither i nor ii A

Question 4

Figure 13-2 ​
 
In Figure 13-2, which of the graphs represents a monopolistic competitor in long-run equilibrium?

Accepted Answer

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

Question 5

Tacit collusion is

Accepted Answer

A) collusion that is carried out without any explicit agreement among firms. 
B) collusion about tactics, rather than strategy. 
C) agreements that are sponsored by government. 
D) similar to pure competition. 
A) collusion that is carried out without any explicit agreement among firms. 
B) collusion about tactics, rather than strategy. 
C) agreements that are sponsored by government. 
D) similar to pure competition.

Question 6

Explain how short-run and long-run equilibrium in monopolistic competition differ. Use graphs to illustrate your answer. Be sure that your graphs are completely and correctly labeled.

Accepted Answer

Figures 13-1 and 13-2 in the text are th

Question 7

In Figure 13-3, demand curve CAD represents a market in which oligopolists will match the price changes of rivals and demand curve EAB represents a market in which oligopolists will ignore the price changes of rivals. According to the kinked demand model, the relevant demand curve will be

Accepted Answer

A) demand curve CAB. 
B) demand curve CAD. 
C) demand curve EAD. 
D) demand curve EAB. 
A) demand curve CAB. 
B) demand curve CAD. 
C) demand curve EAD. 
D) demand curve EAB.

Question 8

Since firms in both monopolistic competition and perfect competition earn zero economic profit, price must be equal to average cost for both types of firms.

Accepted Answer

A) True 
 B)False

Question 9

Jimmy's java shop operates in a monopolistically competitive market. Jimmy's current output is where average costs are minimized. If this is the case, we would expect Jimmy to

Accepted Answer

A) increase output and lower price. 
B) decrease output and Jimmy's average costs would increase. 
C) continue production at the current level as Jimmy's is operating at his best outcome. 
D) increase output and Jimmy's average costs would decrease. 
A) increase output and lower price. 
B) decrease output and Jimmy's average costs would increase. 
C) continue production at the current level as Jimmy's is operating at his best outcome. 
D) increase output and Jimmy's average costs would decrease.

Question 10

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

Accepted Answer

A) monopolistic competition and oligopoly. 
B) monopoly and oligopoly. 
C) monopolistic competition and monopoly. 
D) perfect competition and perfectly contestable. 
A) monopolistic competition and oligopoly. 
B) monopoly and oligopoly. 
C) monopolistic competition and monopoly. 
D) perfect competition and perfectly contestable.

Question 11

What are the advantages and disadvantages of resource allocation under monopolistic competition compared to perfect competition?

Accepted Answer

The disadvantage is that monopolisticall

Question 12

In the long run, zero economic profit exists in monopolistic competition and perfect competition.

Accepted Answer

A) True 
 B)False

Question 13

Game theory is not useful for analyzing perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Firms that practice tacit collusion may receive some of the benefits of a cartel without explicitly organizing a group of firms.

Accepted Answer

A) True 
 B)False

Question 16

The models of perfect competition and monopoly are the most realistic.

Accepted Answer

A) True 
 B)False

Question 17

Cartels usually succumb to divisive forces caused by

Accepted Answer

A) limited information. 
B) members cheating by giving secret discounts. 
C) entry by new rivals seeking profits. 
D) insufficient profits compared to independent operations. 
A) limited information. 
B) members cheating by giving secret discounts. 
C) entry by new rivals seeking profits. 
D) insufficient profits compared to independent operations.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Price leadership is an example of explicit collusion by oligopolies.

Accepted Answer

A) True 
 B)False

Question 20

Where interdependence is especially pronounced, competition among oligopolists will

Accepted Answer

A) resemble military tactics and strategies. 
B) disappear. 
C) lead to large increases in product output. 
D) entice more firms to enter the market. 
A) resemble military tactics and strategies. 
B) disappear. 
C) lead to large increases in product output. 
D) entice more firms to enter the market.

Firms in oligopoly markets are unable to collude effectively because cooperation is difficult with a large number of firms.

Figure 13-2 In Figure 13-2, which of the graphs represents a monopolistic competitor in long-run equilibrium?

Tacit collusion is

Explain how short-run and long-run equilibrium in monopolistic competition differ. Use graphs to illustrate your answer. Be sure that your graphs are completely and correctly labeled.

In Figure 13-3, demand curve CAD represents a market in which oligopolists will match the price changes of rivals and demand curve EAB represents a market in which oligopolists will ignore the price changes of rivals. According to the kinked demand model, the relevant demand curve will be

Since firms in both monopolistic competition and perfect competition earn zero economic profit, price must be equal to average cost for both types of firms.

Jimmy's java shop operates in a monopolistically competitive market. Jimmy's current output is where average costs are minimized. If this is the case, we would expect Jimmy to

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

What are the advantages and disadvantages of resource allocation under monopolistic competition compared to perfect competition?

In the long run, zero economic profit exists in monopolistic competition and perfect competition.

Game theory is not useful for analyzing perfectly competitive markets.

If an oligopolist cuts the prices of its products,

Firms that practice tacit collusion may receive some of the benefits of a cartel without explicitly organizing a group of firms.

The models of perfect competition and monopoly are the most realistic.

Cartels usually succumb to divisive forces caused by

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

Price leadership is an example of explicit collusion by oligopolies.

Where interdependence is especially pronounced, competition among oligopolists will

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

Exam 13: Between Competition and Monopoly

Firms in oligopoly markets are unable to collude effectively because cooperation is difficult with a large number of firms.

Figure 13-2 ​ In Figure 13-2, which of the graphs represents a monopolistic competitor in long-run equilibrium?

Tacit collusion is

Explain how short-run and long-run equilibrium in monopolistic competition differ. Use graphs to illustrate your answer. Be sure that your graphs are completely and correctly labeled.

In Figure 13-3, demand curve CAD represents a market in which oligopolists will match the price changes of rivals and demand curve EAB represents a market in which oligopolists will ignore the price changes of rivals. According to the kinked demand model, the relevant demand curve will be

Since firms in both monopolistic competition and perfect competition earn zero economic profit, price must be equal to average cost for both types of firms.

Jimmy's java shop operates in a monopolistically competitive market. Jimmy's current output is where average costs are minimized. If this is the case, we would expect Jimmy to

Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are

What are the advantages and disadvantages of resource allocation under monopolistic competition compared to perfect competition?

In the long run, zero economic profit exists in monopolistic competition and perfect competition.

Game theory is not useful for analyzing perfectly competitive markets.

If an oligopolist cuts the prices of its products,

Firms that practice tacit collusion may receive some of the benefits of a cartel without explicitly organizing a group of firms.

The models of perfect competition and monopoly are the most realistic.

Cartels usually succumb to divisive forces caused by

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

Price leadership is an example of explicit collusion by oligopolies.

Where interdependence is especially pronounced, competition among oligopolists will

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

Figure 13-2 In Figure 13-2, which of the graphs represents a monopolistic competitor in long-run equilibrium?