Question 1

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

Accepted Answer

A)  The industry would produce more output and charge a lower price after the change. 
B)  The industry would produce at decreasing returns to scale. 
C)  Elasticity of demand for the firm's product would remain the same after this change occurred. 
D)  This industry would produce the same level of output at lower prices in the long run than before the change. 
A)  The industry would produce more output and charge a lower price after the change. 
B)  The industry would produce at decreasing returns to scale. 
C)  Elasticity of demand for the firm's product would remain the same after this change occurred. 
D)  This industry would produce the same level of output at lower prices in the long run than before the change. A

Question 2

In the Cournot model,if the products are differentiated

Accepted Answer

A)  this reduces the pressure of one firm's decisions on the other. 
B)  this increases the pressure of one firm's decisions on the other. 
C)  there is no difference between this model and one with homogeneous goods. 
D)  marginal costs are necessarily different. 
A)  this reduces the pressure of one firm's decisions on the other. 
B)  this increases the pressure of one firm's decisions on the other. 
C)  there is no difference between this model and one with homogeneous goods. 
D)  marginal costs are necessarily different. A

Question 3

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

Accepted Answer

A)  oil monopoly. 
B)  cartel. 
C)  competitive arrangement. 
D)  prisoner's dilemma. 
A)  oil monopoly. 
B)  cartel. 
C)  competitive arrangement. 
D)  prisoner's dilemma. B

Question 4

In the Cournot model,if the products are differentiated

Accepted Answer

A)  the firm can shift its demand curve to the right and make it less elastic. 
B)  the firms' demand curve shifts to the left and becomes less elastic. 
C)  the firms' demand curve shifts to the right and becomes more elastic. 
D)  None of the above. 
A)  the firm can shift its demand curve to the right and make it less elastic. 
B)  the firms' demand curve shifts to the left and becomes less elastic. 
C)  the firms' demand curve shifts to the right and becomes more elastic. 
D)  None of the above.

Question 5

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

Accepted Answer

A)  Bertrand Oligopoly 
B)  Cournot Oligopoly 
C)  Cartel 
D)  All are equally preferable. 
A)  Bertrand Oligopoly 
B)  Cournot Oligopoly 
C)  Cartel 
D)  All are equally preferable.

Question 6

In a Bertrand model with differentiated products

Accepted Answer

A)  firms can set price above marginal cost. 
B)  firms set price at marginal cost. 
C)  price is independent of marginal cost. 
D)  firms set price independently of one another. 
A)  firms can set price above marginal cost. 
B)  firms set price at marginal cost. 
C)  price is independent of marginal cost. 
D)  firms set price independently of one another.

Question 7

If,holding the strategies of all other firms constant,no firm can obtain a higher profit by choosing a different strategy,then

Accepted Answer

A)  the firms are using the Cournot model. 
B)  the firms' strategies are a Nash equilibrium. 
C)  the firms must have formed a cartel. 
D)  the firms are using the Bertrand model. 
A)  the firms are using the Cournot model. 
B)  the firms' strategies are a Nash equilibrium. 
C)  the firms must have formed a cartel. 
D)  the firms are using the Bertrand model.

Question 8

In a sense,a cartel is self-destructive because

Accepted Answer

A)  it reduces consumer surplus. 
B)  it sets price above marginal cost. 
C)  each cartel member has the incentive to cheat on the cartel. 
D)  each cartel member earns economic profit. 
A)  it reduces consumer surplus. 
B)  it sets price above marginal cost. 
C)  each cartel member has the incentive to cheat on the cartel. 
D)  each cartel member earns economic profit.

Question 9

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Accepted Answer

A)  the member firms will each act as price setters. 
B)  the cartel will prosper in the long run. 
C)  the market will become a monopoly. 
D)  the cartel will fail. 
A)  the member firms will each act as price setters. 
B)  the cartel will prosper in the long run. 
C)  the market will become a monopoly. 
D)  the cartel will fail.

Question 10

Minimum efficient scale refers to the lowest level of output at which

Accepted Answer

A)  the firm can earn a profit. 
B)  average cost is minimized. 
C)  the firm will operate. 
D)  the average cost curve is downward sloping. 
A)  the firm can earn a profit. 
B)  average cost is minimized. 
C)  the firm will operate. 
D)  the average cost curve is downward sloping.

Question 11

Monopolistically competitive firms

Accepted Answer

A)  have market power because they face downward sloping demand curves. 
B)  have no market power because they earn zero economic profit. 
C)  have no market power because of free entry. 
D)  have no market power because price equals marginal cost. 
A)  have market power because they face downward sloping demand curves. 
B)  have no market power because they earn zero economic profit. 
C)  have no market power because of free entry. 
D)  have no market power because price equals marginal cost.

Question 12

A cartel is a group of firms that attempts to

Accepted Answer

A)  maximize joint revenue. 
B)  maximize joint profit. 
C)  behave independently. 
D)  increase consumer surplus. 
A)  maximize joint revenue. 
B)  maximize joint profit. 
C)  behave independently. 
D)  increase consumer surplus.

Question 13

In the long run,a monopolistically competitive firm

Accepted Answer

A)  earns zero economic profit. 
B)  produces at minimum average cost. 
C)  operates at full capacity. 
D)  All of the above. 
A)  earns zero economic profit. 
B)  produces at minimum average cost. 
C)  operates at full capacity. 
D)  All of the above.

Question 14

Product differentiation

Accepted Answer

A)  may allow firms to price above a competitive level. 
B)  generates value as consumers value more choices. 
C)  depends on perceived differences between products. 
D)  All of the above. 
A)  may allow firms to price above a competitive level. 
B)  generates value as consumers value more choices. 
C)  depends on perceived differences between products. 
D)  All of the above.

Question 15

An example of a market where a Bertrand model would be not be plausible is the market for

Accepted Answer

A)  pizza. 
B)  beer. 
C)  motorcycles. 
D)  toothpicks. 
A)  pizza. 
B)  beer. 
C)  motorcycles. 
D)  toothpicks.

Question 16

In a Bertrand model with identical products

Accepted Answer

A)  price is the same as in a competitive market equilibrium. 
B)  price and quantity are the same as in a monopoly. 
C)  price and quantity are the same as in a duopoly. 
D)  None of the above. 
A)  price is the same as in a competitive market equilibrium. 
B)  price and quantity are the same as in a monopoly. 
C)  price and quantity are the same as in a duopoly. 
D)  None of the above.

Question 17

In a Bertrand model with identical products

Accepted Answer

A)  price is set above marginal cost. 
B)  marginal revenue is above marginal cost. 
C)  price is equal to marginal cost. 
D)  None of the above. 
A)  price is set above marginal cost. 
B)  marginal revenue is above marginal cost. 
C)  price is equal to marginal cost. 
D)  None of the above.

Question 18

In the Cournot model,a firm maximizes profit by selecting

Accepted Answer

A)  its output, assuming that other firms keep their output constant. 
B)  its price, assuming that other firms keep their price constant. 
C)  its output, assuming that other firms will retaliate. 
D)  its price, assuming that other firms will retaliate. 
A)  its output, assuming that other firms keep their output constant. 
B)  its price, assuming that other firms keep their price constant. 
C)  its output, assuming that other firms will retaliate. 
D)  its price, assuming that other firms will retaliate.

Question 19

Which of the following conditions can help prolong the life of a cartel?

Accepted Answer

A)  There are only a few firms in the market and they all belong to the cartel. 
B)  There are many firms in the market that are not members of the cartel. 
C)  It is difficult to know what price any cartel member is actually charging. 
D)  The cartel has no ability to punish members who cheat on the cartel. 
A)  There are only a few firms in the market and they all belong to the cartel. 
B)  There are many firms in the market that are not members of the cartel. 
C)  It is difficult to know what price any cartel member is actually charging. 
D)  The cartel has no ability to punish members who cheat on the cartel.

Question 20

The Cournot model assumes that firm A maximizes its profit,holding firm B's output constant.

Accepted Answer

A) True 
 B)False

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

In the Cournot model,if the products are differentiated

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

In the Cournot model,if the products are differentiated

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

In a Bertrand model with differentiated products

If,holding the strategies of all other firms constant,no firm can obtain a higher profit by choosing a different strategy,then

In a sense,a cartel is self-destructive because

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Minimum efficient scale refers to the lowest level of output at which

Monopolistically competitive firms

A cartel is a group of firms that attempts to

In the long run,a monopolistically competitive firm

Product differentiation

An example of a market where a Bertrand model would be not be plausible is the market for

In a Bertrand model with identical products

In a Bertrand model with identical products

In the Cournot model,a firm maximizes profit by selecting

Which of the following conditions can help prolong the life of a cartel?

The Cournot model assumes that firm A maximizes its profit,holding firm B's output constant.

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 11: Oligopoly and Monopolistic Competition

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

In the Cournot model,if the products are differentiated

The Organization of Petroleum Exporting Countries (OPEC)is an example of a(n)

In the Cournot model,if the products are differentiated

Two identical firms that share a market and produce a homogeneous good will find which of the following market outcomes LEAST desirable?

In a Bertrand model with differentiated products

If,holding the strategies of all other firms constant,no firm can obtain a higher profit by choosing a different strategy,then

In a sense,a cartel is self-destructive because

If a cartel is unable to monitor its members and punish those firms that violate the agreement,then

Minimum efficient scale refers to the lowest level of output at which

Monopolistically competitive firms

A cartel is a group of firms that attempts to

In the long run,a monopolistically competitive firm

Product differentiation

An example of a market where a Bertrand model would be not be plausible is the market for

In a Bertrand model with identical products

In a Bertrand model with identical products

In the Cournot model,a firm maximizes profit by selecting

Which of the following conditions can help prolong the life of a cartel?

The Cournot model assumes that firm A maximizes its profit,holding firm B's output constant.

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters