Question 1

Probably the simplest approach to the problem of oligopolistic interdependence is to

Accepted Answer

A) conduct market experiments. 
B) assume that rivals will pursue a course most detrimental to the firm concerned. 
C) ignore the actions of rivals. 
D) increase the firm's advertising outlay considerably. 
A) conduct market experiments. 
B) assume that rivals will pursue a course most detrimental to the firm concerned. 
C) ignore the actions of rivals. 
D) increase the firm's advertising outlay considerably.

Question 2

Game theory may be used to solve problems of interdependent decision making by large firms.

Accepted Answer

A) True 
 B)False

Question 3

Monopolistically competitive markets and monopoly market have a common characteristic: high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 4

Oligopolists behave independently of each other.

Accepted Answer

A) True 
 B)False

Question 5

If a player in a game has a dominant strategy, her choice will depend upon the strategy that another player has chosen.

Accepted Answer

A) True 
 B)False

Question 6

A firm in monopolistically competitive market is producing 30 units of output. At this level of production, the firm charges $50 per unit. Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit. Given this information, this firm should

Accepted Answer

A) maintain its current output, since it is maximizing profits. 
B) decrease output to increase profits. 
C) increase output to increase profits. 
D) shut down. 
A) maintain its current output, since it is maximizing profits. 
B) decrease output to increase profits. 
C) increase output to increase profits. 
D) shut down.

Question 7

The demand curve for a monopolistic competitor is likely to be flatter than that of a monopolist.

Accepted Answer

A) True 
 B)False

Question 8

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor's skill are worse than those from overestimating it.

Accepted Answer

A) True 
 B)False

Question 9

An article in The Economist reported that prices of CDs in Britain were much higher than prices in the United States or other European countries. There were only a few major companies, and a report from a Parliament committee said there was no serious price competition. The best explanation for this is that

Accepted Answer

A) the industry was a contestable market. 
B) there were entry barriers in production and distribution of CDs. 
C) firms were avoiding profit opportunities. 
D) there was substantial differentiation of products. 
A) the industry was a contestable market. 
B) there were entry barriers in production and distribution of CDs. 
C) firms were avoiding profit opportunities. 
D) there was substantial differentiation of products.

Question 10

For collusion to make sense, the payoff matrix must be a

Accepted Answer

A) positive-sum game. 
B) zero-sum game. 
C) negative-sum game. 
D) negative-positive-sum game. 
A) positive-sum game. 
B) zero-sum game. 
C) negative-sum game. 
D) negative-positive-sum game.

Question 11

Suppose that Bill and Steve are duopolists in the smartphone apps industry. At the beginning of the year, the two agree to work jointly as a monopoly, producing the monopoly level of output and the monopoly price for their apps. Halfway through the year each app firm is seriously considering breaking this agreement. Given these facts, what's likely to happen next?

Accepted Answer

A) Both Bill and Steve realize that their best outcome is to maintain the agreement. 
B) Both Bill and Steve will break the agreement, the profits each of them will fall. 
C) Both Bill and Steve will break the agreement, and each sees an increase in profits. 
D) Both Bill and Steve will break the agreement, output of apps goes up and prices rise. 
A) Both Bill and Steve realize that their best outcome is to maintain the agreement. 
B) Both Bill and Steve will break the agreement, the profits each of them will fall. 
C) Both Bill and Steve will break the agreement, and each sees an increase in profits. 
D) Both Bill and Steve will break the agreement, output of apps goes up and prices rise.

Question 12

If, in a given market of multiple producers, there is a positive gap between price and average cost (P > AC)for an extended period of time, this would suggest that

Accepted Answer

A) there are many sellers in the industry. 
B) there exists an oligopoly or cartel in the industry. 
C) this is a contestable market. 
D) the firm cannot be a monopolistic competitor. 
A) there are many sellers in the industry. 
B) there exists an oligopoly or cartel in the industry. 
C) this is a contestable market. 
D) the firm cannot be a monopolistic competitor.

Question 13

Deviations from the perfectly competitive market can lead to

Accepted Answer

A) inefficiently high production costs. 
B) higher prices and smaller outputs. 
C) less efficient resource allocation. 
D) All of the responses are correct. 
A) inefficiently high production costs. 
B) higher prices and smaller outputs. 
C) less efficient resource allocation. 
D) All of the responses are correct.

Question 14

Under monopolistic competition, profits cannot persist because new firms will be attracted to the market.

Accepted Answer

A) True 
 B)False

Question 15

There are a smaller number of firms that operate in both monopolistic competition and perfect competition.

Accepted Answer

A) True 
 B)False

Question 16

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

Accepted Answer

A) each has many buyers and sellers. 
B) firms sell homogeneous products in both markets. 
C) in having perfect information. 
D) for freedom of exit and entry. 
A) each has many buyers and sellers. 
B) firms sell homogeneous products in both markets. 
C) in having perfect information. 
D) for freedom of exit and entry.

Question 17

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

Accepted Answer

A) excess capacity. 
B) price wars among firms. 
C) entry by new firms. 
D) excessive advertising. 
A) excess capacity. 
B) price wars among firms. 
C) entry by new firms. 
D) excessive advertising.

Question 18

If firms meet together to decide on prices and outputs, there is

Accepted Answer

A) overt collusion. 
B) tacit collusion. 
C) price leadership. 
D) None of the above are correct. 
A) overt collusion. 
B) tacit collusion. 
C) price leadership. 
D) None of the above are correct.

Question 19

In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities. The concept the dot used to allow mergers where there was obvious concentration was most likely

Accepted Answer

A) the good trust principle. 
B) contestability. 
C) the efficient market principle. 
D) the monopolistic competition principle. 
A) the good trust principle. 
B) contestability. 
C) the efficient market principle. 
D) the monopolistic competition principle.

Question 20

In the short run, firms in monopolistically competitive markets

Accepted Answer

A) produce the output level where marginal revenue equals marginal cost. 
B) can earn economic profits. 
C) face a downward-sloping demand curve. 
D) All of these responses are correct. 
A) produce the output level where marginal revenue equals marginal cost. 
B) can earn economic profits. 
C) face a downward-sloping demand curve. 
D) All of these responses are correct.

Probably the simplest approach to the problem of oligopolistic interdependence is to

Game theory may be used to solve problems of interdependent decision making by large firms.

Monopolistically competitive markets and monopoly market have a common characteristic: high barriers to entry.

Oligopolists behave independently of each other.

If a player in a game has a dominant strategy, her choice will depend upon the strategy that another player has chosen.

A firm in monopolistically competitive market is producing 30 units of output. At this level of production, the firm charges $50 per unit. Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit. Given this information, this firm should

The demand curve for a monopolistic competitor is likely to be flatter than that of a monopolist.

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor's skill are worse than those from overestimating it.

For collusion to make sense, the payoff matrix must be a

If, in a given market of multiple producers, there is a positive gap between price and average cost (P > AC)for an extended period of time, this would suggest that

Deviations from the perfectly competitive market can lead to

Under monopolistic competition, profits cannot persist because new firms will be attracted to the market.

There are a smaller number of firms that operate in both monopolistic competition and perfect competition.

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

If firms meet together to decide on prices and outputs, there is

In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities. The concept the dot used to allow mergers where there was obvious concentration was most likely

In the short run, firms in monopolistically competitive markets

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

Probably the simplest approach to the problem of oligopolistic interdependence is to

Game theory may be used to solve problems of interdependent decision making by large firms.

Monopolistically competitive markets and monopoly market have a common characteristic: high barriers to entry.

Oligopolists behave independently of each other.

If a player in a game has a dominant strategy, her choice will depend upon the strategy that another player has chosen.

A firm in monopolistically competitive market is producing 30 units of output. At this level of production, the firm charges $50 per unit. Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit. Given this information, this firm should

The demand curve for a monopolistic competitor is likely to be flatter than that of a monopolist.

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor's skill are worse than those from overestimating it.

For collusion to make sense, the payoff matrix must be a

If, in a given market of multiple producers, there is a positive gap between price and average cost (P > AC)for an extended period of time, this would suggest that

Deviations from the perfectly competitive market can lead to

Under monopolistic competition, profits cannot persist because new firms will be attracted to the market.

There are a smaller number of firms that operate in both monopolistic competition and perfect competition.

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

The force that leads to zero economic profits for monopolistically competitive firms in the long run is

If firms meet together to decide on prices and outputs, there is

In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities. The concept the dot used to allow mergers where there was obvious concentration was most likely

In the short run, firms in monopolistically competitive markets

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