Question 1

In a kinked demand curve model, competitors _____ by a rival firm.

Accepted Answer

A)  follow any price change 
B)  ignore any price change 
C)  match any price increase and ignore any price decrease 
D)  ignore any price increase and match any price decrease 
A)  follow any price change 
B)  ignore any price change 
C)  match any price increase and ignore any price decrease 
D)  ignore any price increase and match any price decrease

Question 2

Oligopolies maximize profits by setting MR equal to the minimum of the average cost curve.

Accepted Answer

A) True 
 B)False

Question 3

(Table) In the game table, the Nash equilibrium is
$\begin{array}{c}
\quad\quad\quad\quad\quad\quad\quad\text { Katy }\
\begin{array}{ccc} 
\text { Jesse }&& \text { Left } & \text { Right } \
&\text { U }_{\mathbf{P}} & 4,8 & 3,7 \
&\text { Down } & 6,5 & 5,2
\end{array}\end{array}$

Accepted Answer

A)  Up, Left = (4, 8). 
B)  Up, Right = (3, 7). 
C)  Down, Left = (6, 5). 
D)  Down, Right = (5, 2). 
A)  Up, Left = (4, 8). 
B)  Up, Right = (3, 7). 
C)  Down, Left = (6, 5). 
D)  Down, Right = (5, 2).

Question 4

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand for each individual firm until each firm earns a normal profit.

Accepted Answer

A)  exit; reducing 
B)  enter; reducing 
C)  enter; increasing 
D)  exit; increasing 
A)  exit; reducing 
B)  enter; reducing 
C)  enter; increasing 
D)  exit; increasing

Question 5

In which situation can a prisoner's dilemma outcome MOST likely be avoided?

Accepted Answer

A)  if the game is repeated over and over under the same conditions 
B)  if the players involved choose not to cooperate with one another 
C)  if each player plays his or her best-response strategy 
D)  if the game is only played once with no opportunity for retaliation 
A)  if the game is repeated over and over under the same conditions 
B)  if the players involved choose not to cooperate with one another 
C)  if each player plays his or her best-response strategy 
D)  if the game is only played once with no opportunity for retaliation

Question 6

What are some ways firms can differentiate their products? How does successful differentiation affect the firm? Why does brand loyalty in a monopolistically competitive market not create a perfectly inelastic demand for the product?

Accepted Answer

Firms can differentiate their product or

Question 7

Prisoner's dilemma outcomes lead to higher prices for goods.

Accepted Answer

A) True 
 B)False

Question 8

At a price of $8, the marginal revenue of a monopolistically competitive firm is $5. If the marginal cost is $7 and average total cost is $4, what should the firm do to maximize profits?

Accepted Answer

A)  reduce output and increase price 
B)  increase output and decrease price 
C)  reduce both output and price 
D)  increase both output and price 
A)  reduce output and increase price 
B)  increase output and decrease price 
C)  reduce both output and price 
D)  increase both output and price

Question 9

Which of these will contribute to a cartel's stability?

Accepted Answer

A)  brand differentiation 
B)  ease of entry into an industry 
C)  having few members with similar goals 
D)  a copyright 
A)  brand differentiation 
B)  ease of entry into an industry 
C)  having few members with similar goals 
D)  a copyright

Question 10

Assume that a monopolistically competitive firm faces the following situation: P = $14; output = 9,000 units; MC = $11; ATC = $16; AVC = $7; and MR = $11. Which statement is correct regarding profit maximization?

Accepted Answer

A)  The firm is maximizing profit. 
B)  The firm would minimize its losses by shutting down in the short run. 
C)  The firm is minimizing its losses. 
D)  The firm would minimize its losses by decreasing output. 
A)  The firm is maximizing profit. 
B)  The firm would minimize its losses by shutting down in the short run. 
C)  The firm is minimizing its losses. 
D)  The firm would minimize its losses by decreasing output.

Question 11

As a result of the assumptions of a kinked demand curve model

Accepted Answer

A)  the portion of the demand curve above the kink is less elastic than below the kink. 
B)  the portion of the demand curve above the kink is more elastic than below the kink. 
C)  the MR curve is a continuous line. 
D)  oligopoly prices are unstable. 
A)  the portion of the demand curve above the kink is less elastic than below the kink. 
B)  the portion of the demand curve above the kink is more elastic than below the kink. 
C)  the MR curve is a continuous line. 
D)  oligopoly prices are unstable.

Question 12

A company that produces computer operating systems is likely to be classified as monopolistically competitive.

Accepted Answer

A) True 
 B)False

Question 13

A lot of advertising dollars are shifting away from conventional media and moving to

Accepted Answer

A)  the radio. 
B)  newspapers. 
C)  the Internet. 
D)  magazines. 
A)  the radio. 
B)  newspapers. 
C)  the Internet. 
D)  magazines.

Question 14

In the long run, easy entry and exit within a monopolistically competitive market cause firms to earn normal profit.

Accepted Answer

A) True 
 B)False

Question 15

In the coffee shop industry, product differentiation is reflected by all these practices EXCEPT

Accepted Answer

A)  enhancement of ambiance and customer experience. 
B)  fair-trade sourcing of coffee beans. 
C)  implementing order-ahead service using a mobile app. 
D)  creating frequent buyer programs. 
A)  enhancement of ambiance and customer experience. 
B)  fair-trade sourcing of coffee beans. 
C)  implementing order-ahead service using a mobile app. 
D)  creating frequent buyer programs.

Question 16

A Nash equilibrium occurs when

Accepted Answer

A)  no optimal strategies are possible. 
B)  each player takes the best possible action, given the actions of the other players. 
C)  players select the mutually beneficial strategy, given the actions of the other players. 
D)  market supply intersects market demand. 
A)  no optimal strategies are possible. 
B)  each player takes the best possible action, given the actions of the other players. 
C)  players select the mutually beneficial strategy, given the actions of the other players. 
D)  market supply intersects market demand.

Question 17

Which condition will NOT contribute to a cartel's stability?

Accepted Answer

A)  significant barriers to entry 
B)  few members 
C)  government protection 
D)  nonprice discounts 
A)  significant barriers to entry 
B)  few members 
C)  government protection 
D)  nonprice discounts

Question 18

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is

Accepted Answer

A)  pure competition. 
B)  monopolistic competition. 
C)  an oligopoly. 
D)  a monopoly. 
A)  pure competition. 
B)  monopolistic competition. 
C)  an oligopoly. 
D)  a monopoly.

Question 19

An oligopoly differs from a monopoly in that an oligopolist

Accepted Answer

A)  produces where price is greater than marginal revenue. 
B)  maximizes profits where marginal revenue equals marginal cost. 
C)  has significant control over its price. 
D)  must consider the behavior of its rivals when it makes decisions. 
A)  produces where price is greater than marginal revenue. 
B)  maximizes profits where marginal revenue equals marginal cost. 
C)  has significant control over its price. 
D)  must consider the behavior of its rivals when it makes decisions.

Question 20

The kinked demand curve model assumes that competitors will match a price increase but not a price decrease.

Accepted Answer

A) True 
 B)False

In a kinked demand curve model, competitors _____ by a rival firm.

Oligopolies maximize profits by setting MR equal to the minimum of the average cost curve.

(Table) In the game table, the Nash equilibrium is Katy Jesse Left Right 4,8 3,7 Down 6,5 5,2

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _ the industry, _ demand for each individual firm until each firm earns a normal profit.

In which situation can a prisoner's dilemma outcome MOST likely be avoided?

What are some ways firms can differentiate their products? How does successful differentiation affect the firm? Why does brand loyalty in a monopolistically competitive market not create a perfectly inelastic demand for the product?

Prisoner's dilemma outcomes lead to higher prices for goods.

At a price of $8, the marginal revenue of a monopolistically competitive firm is $5. If the marginal cost is $7 and average total cost is $4, what should the firm do to maximize profits?

Which of these will contribute to a cartel's stability?

Assume that a monopolistically competitive firm faces the following situation: P = $14; output = 9,000 units; MC = $11; ATC = $16; AVC = $7; and MR = $11. Which statement is correct regarding profit maximization?

As a result of the assumptions of a kinked demand curve model

A company that produces computer operating systems is likely to be classified as monopolistically competitive.

A lot of advertising dollars are shifting away from conventional media and moving to

In the long run, easy entry and exit within a monopolistically competitive market cause firms to earn normal profit.

In the coffee shop industry, product differentiation is reflected by all these practices EXCEPT

A Nash equilibrium occurs when

Which condition will NOT contribute to a cartel's stability?

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is

An oligopoly differs from a monopoly in that an oligopolist

The kinked demand curve model assumes that competitors will match a price increase but not a price decrease.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Elasticity

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters

Exam 10: Monopolistic Competition, Oligopoly, and Game Theory

In a kinked demand curve model, competitors _____ by a rival firm.

Oligopolies maximize profits by setting MR equal to the minimum of the average cost curve.

(Table) In the game table, the Nash equilibrium is Katy Jesse Left Right 4,8 3,7 Down 6,5 5,2

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand for each individual firm until each firm earns a normal profit.

In which situation can a prisoner's dilemma outcome MOST likely be avoided?

What are some ways firms can differentiate their products? How does successful differentiation affect the firm? Why does brand loyalty in a monopolistically competitive market not create a perfectly inelastic demand for the product?

Prisoner's dilemma outcomes lead to higher prices for goods.

At a price of $8, the marginal revenue of a monopolistically competitive firm is $5. If the marginal cost is $7 and average total cost is $4, what should the firm do to maximize profits?

Which of these will contribute to a cartel's stability?

Assume that a monopolistically competitive firm faces the following situation: P = $14; output = 9,000 units; MC = $11; ATC = $16; AVC = $7; and MR = $11. Which statement is correct regarding profit maximization?

As a result of the assumptions of a kinked demand curve model

A company that produces computer operating systems is likely to be classified as monopolistically competitive.

A lot of advertising dollars are shifting away from conventional media and moving to

In the long run, easy entry and exit within a monopolistically competitive market cause firms to earn normal profit.

In the coffee shop industry, product differentiation is reflected by all these practices EXCEPT

A Nash equilibrium occurs when

Which condition will NOT contribute to a cartel's stability?

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is

An oligopoly differs from a monopoly in that an oligopolist

The kinked demand curve model assumes that competitors will match a price increase but not a price decrease.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Elasticity

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _ the industry, _ demand for each individual firm until each firm earns a normal profit.