Question 1

Price wars occur more often in monopolistic competition than in other market structures.​

Accepted Answer

A) True 
 B)False  False

Question 2

Table 10.1 shows the output, price, and total cost for a monopolistic competitor. At the profit-maximizing output, the monopolistically competitive firm is in:​ ​
Table 10.1.
​

Accepted Answer

A) long-run equilibrium and price equals average total cost. 
B) long-run equilibrium and price is less than average total cost. 
C) short-run equilibrium and price is greater than average total cost. 
D) short-run equilibrium and incurs an economic loss. 
E) short-run equilibrium and there is zero economic profit. 
A) long-run equilibrium and price equals average total cost. 
B) long-run equilibrium and price is less than average total cost. 
C) short-run equilibrium and price is greater than average total cost. 
D) short-run equilibrium and incurs an economic loss. 
E) short-run equilibrium and there is zero economic profit. C

Question 3

Table 10.2 depicts the payoff matrix facing Eagle Tobacco and Dan'l Boone Tobacco with respect to their decisions to advertise or not. Eagle Tobacco has a dominant strategy.
​
Table 10.2
​
​

Accepted Answer

A) True 
 B)False  True

Question 4

Tacit collusion occurs in industries that:​

Accepted Answer

A) are monopolistically competitive. 
B) have price leaders. 
C) experience rapid technological change. 
D) are regulated. 
E) produce public goods. 
A) are monopolistically competitive. 
B) have price leaders. 
C) experience rapid technological change. 
D) are regulated. 
E) produce public goods.

Question 5

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The monopolistic competitor's total economic profit at the profit-maximizing level of output is:​ ​
Figure 10.1.
​

Accepted Answer

A) $0. 
B) $4. 
C) $600. 
D) $6. 
E) $750. 
A) $0. 
B) $4. 
C) $600. 
D) $6. 
E) $750.

Question 6

The term "strategy" in terms of game theory refers to:​

Accepted Answer

A) the tendency of firms to earn zero economic profit in the long run. 
B) the tendency of firms in an oligopoly to exit the market in the long run. 
C) each firm's game plan for making decisions. 
D) each firm's decision to charge a higher price than the price charged by the rival firm in an industry. 
E) the tendency for collusive firms to generate normal profits. 
A) the tendency of firms to earn zero economic profit in the long run. 
B) the tendency of firms in an oligopoly to exit the market in the long run. 
C) each firm's game plan for making decisions. 
D) each firm's decision to charge a higher price than the price charged by the rival firm in an industry. 
E) the tendency for collusive firms to generate normal profits.

Question 7

An oligopolist that cheats on a collusive agreement by reducing price will quickly be forced out of the industry by its competitors.​

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not considered a barrier to entry?​

Accepted Answer

A) Economies of scale 
B) Patents​ 
C) Control of a scarce resource​ 
D) Licensing​ 
E) Perfect price discrimination​ 
A) Economies of scale 
B) Patents​ 
C) Control of a scarce resource​ 
D) Licensing​ 
E) Perfect price discrimination​

Question 9

In the long run, the profit-maximizing output of a monopolistically competitive firm:​

Accepted Answer

A) exceeds that of an otherwise similar perfectly competitive firm. 
B) is less than that of an otherwise similar perfectly competitive firm. 
C) occurs where average revenue equals marginal revenue. 
D) equals that of an otherwise similar perfectly competitive firm. 
E) is less than its profit-maximizing output in the short run. 
A) exceeds that of an otherwise similar perfectly competitive firm. 
B) is less than that of an otherwise similar perfectly competitive firm. 
C) occurs where average revenue equals marginal revenue. 
D) equals that of an otherwise similar perfectly competitive firm. 
E) is less than its profit-maximizing output in the short run.

Question 10

Firms with market power offer differentiated products in order to:​

Accepted Answer

A) lower costs of production. 
B) increase profits. 
C) support their contractors in low-wage countries. 
D) fill up costly warehouses. 
E) increase social welfare. 
A) lower costs of production. 
B) increase profits. 
C) support their contractors in low-wage countries. 
D) fill up costly warehouses. 
E) increase social welfare.

Question 11

Monopolistically competitive industries consist of:​

Accepted Answer

A) one firm selling several products. 
B) one firm selling one product. 
C) many firms, all selling identical products. 
D) many firms, each selling a slightly different product. 
E) many firms, each selling a completely different product. 
A) one firm selling several products. 
B) one firm selling one product. 
C) many firms, all selling identical products. 
D) many firms, each selling a slightly different product. 
E) many firms, each selling a completely different product.

Question 12

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The price that the monopolistic competitor will charge at the profit-maximizing level of output is _____.​ ​
Figure 10.1.
​

Accepted Answer

A) $2 
B) $4​ 
C) $8​ 
D) $9​ 
E) $10​ 
A) $2 
B) $4​ 
C) $8​ 
D) $9​ 
E) $10​

Question 13

A cartel's marginal cost curve is the:​

Accepted Answer

A) highest of all the individual firms' marginal cost curves. 
B) lowest of all the individual firms' marginal cost curves. 
C) horizontal sum of all the individual firms' marginal cost curves. 
D) same as the market supply curve. 
E) same as the marginal cost curve faced by all firms in the market. 
A) highest of all the individual firms' marginal cost curves. 
B) lowest of all the individual firms' marginal cost curves. 
C) horizontal sum of all the individual firms' marginal cost curves. 
D) same as the market supply curve. 
E) same as the marginal cost curve faced by all firms in the market.

Question 14

Which of the following factors makes a monopolistically competitive firm a price maker?​

Accepted Answer

A) Product differentiation 
B) Barriers to entry​ 
C) Product similarity​ 
D) Its homogeneous product​ 
E) High tariffs​ 
A) Product differentiation 
B) Barriers to entry​ 
C) Product similarity​ 
D) Its homogeneous product​ 
E) High tariffs​

Question 15

In the long run, the demand curve facing a monopolistically competitive firm:​

Accepted Answer

A) is perfectly elastic. 
B) slopes upward. 
C) is tangent to the firm's average total cost curve. 
D) lies above the firm's average total cost curve. 
E) is perfectly inelastic. 
A) is perfectly elastic. 
B) slopes upward. 
C) is tangent to the firm's average total cost curve. 
D) lies above the firm's average total cost curve. 
E) is perfectly inelastic.

Question 16

The advantage of game theory is that it allows us to focus on:​

Accepted Answer

A) each firm's incentives to cooperate or not to cooperate. 
B) the relationship between business and ethics in a market​ 
C) the costs and benefits of government regulation in a market. 
D) the market share of each firm in a market. 
E) each firm's incentive to charge a higher price for its product. 
A) each firm's incentives to cooperate or not to cooperate. 
B) the relationship between business and ethics in a market​ 
C) the costs and benefits of government regulation in a market. 
D) the market share of each firm in a market. 
E) each firm's incentive to charge a higher price for its product.

Question 17

The dominant-strategy equilibrium in a game implies that each firm:​

Accepted Answer

A) ignores the reactions of competitors. 
B) colludes with competitors to maximize industry profits. 
C) ignores the decisions of the other firms. 
D) takes all potential bits of information into consideration before making a decision. 
E) selects the optimal solution to a game. 
A) ignores the reactions of competitors. 
B) colludes with competitors to maximize industry profits. 
C) ignores the decisions of the other firms. 
D) takes all potential bits of information into consideration before making a decision. 
E) selects the optimal solution to a game.

Question 18

One difference between perfect competition and monopolistic competition is that:​

Accepted Answer

A) firms in perfect competition cannot earn a long-run economic profit, whereas firms in monopolistic competition can earn a long-run economic profit. 
B) firms in perfect competition take full advantage of economies of scale in long-run equilibrium, whereas firms in monopolistic competition do not take advantage of economies of scale in long-run equilibrium. 
C) firms in perfect competition can easily exit the market, whereas firms in monopolistic competition find it difficult to exit the market. 
D) firms in perfect competition face a downward-sloping demand curve, whereas firms in monopolistic competition face a horizontal demand curve. 
E) there are many firms in a perfectly competitive market, whereas there are a few firms in a monopolistically competitive market. 
A) firms in perfect competition cannot earn a long-run economic profit, whereas firms in monopolistic competition can earn a long-run economic profit. 
B) firms in perfect competition take full advantage of economies of scale in long-run equilibrium, whereas firms in monopolistic competition do not take advantage of economies of scale in long-run equilibrium. 
C) firms in perfect competition can easily exit the market, whereas firms in monopolistic competition find it difficult to exit the market. 
D) firms in perfect competition face a downward-sloping demand curve, whereas firms in monopolistic competition face a horizontal demand curve. 
E) there are many firms in a perfectly competitive market, whereas there are a few firms in a monopolistically competitive market.

Question 19

A payoff matrix is a list that shows:​

Accepted Answer

A) the price of each good a firm sells. 
B) the rewards and penalties associated with pursuing various strategies. 
C) the cost of production incurred by each firm in an industry. 
D) the quantity of resources owned by each firm in an industry. 
E) the revenue earned by each firm in an industry. 
A) the price of each good a firm sells. 
B) the rewards and penalties associated with pursuing various strategies. 
C) the cost of production incurred by each firm in an industry. 
D) the quantity of resources owned by each firm in an industry. 
E) the revenue earned by each firm in an industry.

Question 20

Collusion is most likely to occur in those oligopolies in which firms have vastly different cost structures.​

Accepted Answer

A) True 
 B)False

Exam 10: Monopolistic Competition and Oligopoly

Price wars occur more often in monopolistic competition than in other market structures.​

Table 10.1 shows the output, price, and total cost for a monopolistic competitor. At the profit-maximizing output, the monopolistically competitive firm is in:​ ​ Table 10.1. ​

Table 10.2 depicts the payoff matrix facing Eagle Tobacco and Dan'l Boone Tobacco with respect to their decisions to advertise or not. Eagle Tobacco has a dominant strategy. ​ Table 10.2 ​ ​

Tacit collusion occurs in industries that:​

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The monopolistic competitor's total economic profit at the profit-maximizing level of output is:​ ​ Figure 10.1. ​

The term "strategy" in terms of game theory refers to:​

An oligopolist that cheats on a collusive agreement by reducing price will quickly be forced out of the industry by its competitors.​

Which of the following is not considered a barrier to entry?​

In the long run, the profit-maximizing output of a monopolistically competitive firm:​

Firms with market power offer differentiated products in order to:​

Monopolistically competitive industries consist of:​

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The price that the monopolistic competitor will charge at the profit-maximizing level of output is _____.​ ​ Figure 10.1. ​

A cartel's marginal cost curve is the:​

Which of the following factors makes a monopolistically competitive firm a price maker?​

In the long run, the demand curve facing a monopolistically competitive firm:​

The advantage of game theory is that it allows us to focus on:​

The dominant-strategy equilibrium in a game implies that each firm:​

One difference between perfect competition and monopolistic competition is that:​

A payoff matrix is a list that shows:​

Collusion is most likely to occur in those oligopolies in which firms have vastly different cost structures.​

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Monopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, Entrepreneurship, and Corporate Finance

Transaction Costs, Asymmetric Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Poverty and Redistribution

International Trade

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Filters

Price wars occur more often in monopolistic competition than in other market structures.

Table 10.1 shows the output, price, and total cost for a monopolistic competitor. At the profit-maximizing output, the monopolistically competitive firm is in: Table 10.1.

Table 10.2 depicts the payoff matrix facing Eagle Tobacco and Dan'l Boone Tobacco with respect to their decisions to advertise or not. Eagle Tobacco has a dominant strategy. Table 10.2

Tacit collusion occurs in industries that:

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The monopolistic competitor's total economic profit at the profit-maximizing level of output is: Figure 10.1.

The term "strategy" in terms of game theory refers to:

An oligopolist that cheats on a collusive agreement by reducing price will quickly be forced out of the industry by its competitors.

Which of the following is not considered a barrier to entry?

In the long run, the profit-maximizing output of a monopolistically competitive firm:

Firms with market power offer differentiated products in order to:

Monopolistically competitive industries consist of:

Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The price that the monopolistic competitor will charge at the profit-maximizing level of output is _____. Figure 10.1.

A cartel's marginal cost curve is the:

Which of the following factors makes a monopolistically competitive firm a price maker?

In the long run, the demand curve facing a monopolistically competitive firm:

The advantage of game theory is that it allows us to focus on:

The dominant-strategy equilibrium in a game implies that each firm:

One difference between perfect competition and monopolistic competition is that:

A payoff matrix is a list that shows:

Collusion is most likely to occur in those oligopolies in which firms have vastly different cost structures.