Question 1

The demand curve for a monopolistic competitor slopes downward because

Accepted Answer

A) demand drops to zero after a slight price increase. 
B) there are close but not perfect substitutes for the product. 
C) customers have no loyalty to the product. 
D) the product is undifferentiated. 
A) demand drops to zero after a slight price increase. 
B) there are close but not perfect substitutes for the product. 
C) customers have no loyalty to the product. 
D) the product is undifferentiated.

Question 2

The most widely used approach for the analysis of oligopoly behavior is

Accepted Answer

A) game theory. 
B) role-playing. 
C) strategic engineering. 
D) input-output analysis. 
A) game theory. 
B) role-playing. 
C) strategic engineering. 
D) input-output analysis.

Question 3

Economists would describe cartels as

Accepted Answer

A) the opposite of ignoring interdependence. 
B) a collusive arrangement. 
C) an undesirable form of market organization that may charge a monopoly price. 
D) All of the responses are correct. 
A) the opposite of ignoring interdependence. 
B) a collusive arrangement. 
C) an undesirable form of market organization that may charge a monopoly price. 
D) All of the responses are correct.

Question 4

All players have dominant strategies.

Accepted Answer

A) True 
 B)False

Question 5

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Accepted Answer

A) True 
 B)False

Question 6

Economists tend to be concerned about entry barriers. Why are entry barriers so important?

Accepted Answer

Economists see barriers as the primary r

Question 7

In the long run, a monopolistically competitive industry is characterized by all of the following, except

Accepted Answer

A) firms earning zero economic profits. 
B) production that would exhibit lower costs per unit at higher output levels. 
C) an efficient use of resources. 
D) firms producing where price is above marginal cost. 
A) firms earning zero economic profits. 
B) production that would exhibit lower costs per unit at higher output levels. 
C) an efficient use of resources. 
D) firms producing where price is above marginal cost.

Question 8

Suppose that two drug manufacturers represent the only two producers in the industry and further suppose that the companies can spend a lot of money on research to develop new drug treatment. If only one develops a product, they make very high profits, but if they produce similar drugs, their profits are lower given the high research costs and they split the market for their products. But if they both sell their current products and spend little on research, they can still make good profits. The best outcome that they could achieve would be for the two firms to

Accepted Answer

A) ignore each other's behavior. 
B) always conduct research activities. 
C) form a cartel. 
D) reach a Nash equilibrium. 
A) ignore each other's behavior. 
B) always conduct research activities. 
C) form a cartel. 
D) reach a Nash equilibrium.

Question 9

Society definitely benefits by reducing the number of monopolistically competitive firms.

Accepted Answer

A) True 
 B)False

Question 10

An oligopolist's effective demand curve will be kinked if the firm

Accepted Answer

A) is acting as a price leader in the industry. 
B) expects other firms to match price cuts but not price increases. 
C) expects other firms to match all price changes. 
D) fears new entry into the industry. 
A) is acting as a price leader in the industry. 
B) expects other firms to match price cuts but not price increases. 
C) expects other firms to match all price changes. 
D) fears new entry into the industry.

Question 11

Excess capacity and inefficiency result under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 12

An oligopoly is a market dominated by a few sellers.

Accepted Answer

A) True 
 B)False

Question 13

Displayed below is the payoff matrix of firm B for four different strategies, B1, B2, B3, and B4, and the potential retaliatory responses of firm A (A1, A2, A3, A4).
Table 12-2
  If firm B uses the maximin criterion, which strategy will it choose?
​

Accepted Answer

A) B1 
B) B2 
C) B3 
D) B4 
A) B1 
B) B2 
C) B3 
D) B4

Question 14

After its early success in the 1970s, OPEC experienced a drop in world oil prices and a corresponding drop in oil revenues for its members, due to

Accepted Answer

A) the fall of the elasticity of demand for oil. 
B) the growth in the number of oil buyers. 
C) OPEC members failing to produce the output that was agreed upon. 
D) a sharp rise in the demand for oil. 
A) the fall of the elasticity of demand for oil. 
B) the growth in the number of oil buyers. 
C) OPEC members failing to produce the output that was agreed upon. 
D) a sharp rise in the demand for oil.

Question 15

The development of game theory was the work of

Accepted Answer

A) Joan Robinson and Edward Chamberlin. 
B) John von Neumann and Oskar Morgenstern. 
C) Wassily Leontief and Joseph Schumpeter. 
D) John Maynard Keynes. 
A) Joan Robinson and Edward Chamberlin. 
B) John von Neumann and Oskar Morgenstern. 
C) Wassily Leontief and Joseph Schumpeter. 
D) John Maynard Keynes.

Question 16

Which market is most likely to witness such actions and reactions as frequent new-product introductions, free samples, and aggressive advertising campaigns?

Accepted Answer

A) Oligopoly 
B) Perfect competition 
C) Monopoly 
D) Monopolistic competition 
A) Oligopoly 
B) Perfect competition 
C) Monopoly 
D) Monopolistic competition

Question 17

A cartel is

Accepted Answer

A) a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B) a government-approved organization for the exchange of technical information among firms. 
C) a form of competition among oligopolists. 
D) a regulated industry that is officially permitted to set the price of its product above long-run average total cost. 
A) a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves. 
B) a government-approved organization for the exchange of technical information among firms. 
C) a form of competition among oligopolists. 
D) a regulated industry that is officially permitted to set the price of its product above long-run average total cost.

Question 18

Why is oligopoly more difficult to model than competition or monopoly?

Accepted Answer

Oligopolistic firms make interdependent

Question 19

Identify the market structure characterized by many small firms selling somewhat different products.

Accepted Answer

A) Monopoly 
B) Monopolistic competition 
C) Perfect competition 
D) Duopoly 
A) Monopoly 
B) Monopolistic competition 
C) Perfect competition 
D) Duopoly

Question 20

Monopolistic competition is characterized by

Accepted Answer

A) one firm selling several products. 
B) many firms selling the same product. 
C) many firms selling slightly different products. 
D) one firm selling one product. 
A) one firm selling several products. 
B) many firms selling the same product. 
C) many firms selling slightly different products. 
D) one firm selling one product.

Exam 13: Between Competition and Monopoly

The demand curve for a monopolistic competitor slopes downward because

The most widely used approach for the analysis of oligopoly behavior is

Economists would describe cartels as

All players have dominant strategies.

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Economists tend to be concerned about entry barriers. Why are entry barriers so important?

In the long run, a monopolistically competitive industry is characterized by all of the following, except

Society definitely benefits by reducing the number of monopolistically competitive firms.

An oligopolist's effective demand curve will be kinked if the firm

Excess capacity and inefficiency result under monopolistic competition.

An oligopoly is a market dominated by a few sellers.

Displayed below is the payoff matrix of firm B for four different strategies, B1, B2, B3, and B4, and the potential retaliatory responses of firm A (A1, A2, A3, A4). Table 12-2 If firm B uses the maximin criterion, which strategy will it choose? ​

After its early success in the 1970s, OPEC experienced a drop in world oil prices and a corresponding drop in oil revenues for its members, due to

The development of game theory was the work of

Which market is most likely to witness such actions and reactions as frequent new-product introductions, free samples, and aggressive advertising campaigns?

A cartel is

Why is oligopoly more difficult to model than competition or monopoly?

Identify the market structure characterized by many small firms selling somewhat different products.

Monopolistic competition is characterized by

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

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Displayed below is the payoff matrix of firm B for four different strategies, B1, B2, B3, and B4, and the potential retaliatory responses of firm A (A1, A2, A3, A4). Table 12-2 If firm B uses the maximin criterion, which strategy will it choose?