Question 1

Profit maximization is not a useful concept for examining firms' decisions about how to configure and market their products.

Accepted Answer

A) True 
 B)False  False

Question 2

Product differentiation can be of value to a firm because

Accepted Answer

A) no other firm will be able to meet the same basic consumer need. 
B) the product will always be patented. 
C) some consumers with certain tastes will likely buy the product. 
D) money is often spent to develop a differentiated product. 
E) product differentiation lowers product prices for consumers. 
A) no other firm will be able to meet the same basic consumer need. 
B) the product will always be patented. 
C) some consumers with certain tastes will likely buy the product. 
D) money is often spent to develop a differentiated product. 
E) product differentiation lowers product prices for consumers. C

Question 3

Products may be differentiated in all of the following ways except

Accepted Answer

A) physical characteristics. 
B) method of production. 
C) time. 
D) convenience. 
E) service after the sale. 
A) physical characteristics. 
B) method of production. 
C) time. 
D) convenience. 
E) service after the sale. B

Question 4

A monopolistically competitive firm is said to produce with excess costs in the long run because

Accepted Answer

A) the average fixed cost of production is greater than the minimum average fixed cost. 
B) the firm will incur a loss and therefore needs to bring down costs. 
C) the average total cost of production is greater than the minimum average total cost. 
D) price is greater than marginal revenue. 
E) there are too many firms in the market. 
A) the average fixed cost of production is greater than the minimum average fixed cost. 
B) the firm will incur a loss and therefore needs to bring down costs. 
C) the average total cost of production is greater than the minimum average total cost. 
D) price is greater than marginal revenue. 
E) there are too many firms in the market.

Question 5

In the long run,economic profits in a monopolistically competitive market are zero.

Accepted Answer

A) True 
 B)False

Question 6

A cartel is needed when no explicit communication between firms is made to coordinate pricing decisions.

Accepted Answer

A) True 
 B)False

Question 7

An oligopolist's demand is partially determined by how other firms behave.

Accepted Answer

A) True 
 B)False

Question 8

The prisoner's dilemma

Accepted Answer

A) describes the results of a prisoner's decision regarding whether to confess or not confess. 
B) is best applied to the analysis of competition. 
C) illustrates how two individuals with similar interests come to form a monopoly. 
D) describes the results of a prisoner's decision regarding whether to display good behavior while serving his sentence. 
E) is best applied to the analysis of monopolistic competition. 
A) describes the results of a prisoner's decision regarding whether to confess or not confess. 
B) is best applied to the analysis of competition. 
C) illustrates how two individuals with similar interests come to form a monopoly. 
D) describes the results of a prisoner's decision regarding whether to display good behavior while serving his sentence. 
E) is best applied to the analysis of monopolistic competition.

Question 9

A market in which only two competing firms participate is called

Accepted Answer

A) a bilateral monopoly. 
B) a duopoly. 
C) limited monopolistic competition. 
D) a monopoly. 
E) a bilateral oligopoly. 
A) a bilateral monopoly. 
B) a duopoly. 
C) limited monopolistic competition. 
D) a monopoly. 
E) a bilateral oligopoly.

Question 10

Which of the following statements about monopolistic competition in the short run is false?

Accepted Answer

A) The firm always earns an economic profit. 
B) The firm maximizes profits. 
C) Price is greater than marginal cost. 
D) Demand is downward-sloping. 
E) Price is greater than marginal revenue. 
A) The firm always earns an economic profit. 
B) The firm maximizes profits. 
C) Price is greater than marginal cost. 
D) Demand is downward-sloping. 
E) Price is greater than marginal revenue.

Question 11

Advertising can help a monopolistically competitive firm differentiate its products.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 11-1  
-Refer to Exhibit 11-1.The profit-maximizing output is ____ units.

Accepted Answer

A) 15 
B) 10 
C) 40 
D) 45 
E) 30 
A) 15 
B) 10 
C) 40 
D) 45 
E) 30

Question 13

The difference between explicit and tacit collusion is the degree to which

Accepted Answer

A) the two firms are alike. 
B) the two firms serve the same markets. 
C) the products of the two firms are alike. 
D) the two firms consult each other. 
E) outside influences affect the firms. 
A) the two firms are alike. 
B) the two firms serve the same markets. 
C) the products of the two firms are alike. 
D) the two firms consult each other. 
E) outside influences affect the firms.

Question 14

Which of the following statements is true?

Accepted Answer

A) A cost of differentiating one's product from another is that some consumers will stop buying it. 
B) Economists are very good at identifying the proper amount of differentiation to bring about maximum benefit to society. 
C) There is no advantage to making one's product slightly different from another successful product. 
D) Product differentiation will succeed only if an existing firm is driven from the market. 
E) Most firms trying to establish themselves try to copy the competition. 
A) A cost of differentiating one's product from another is that some consumers will stop buying it. 
B) Economists are very good at identifying the proper amount of differentiation to bring about maximum benefit to society. 
C) There is no advantage to making one's product slightly different from another successful product. 
D) Product differentiation will succeed only if an existing firm is driven from the market. 
E) Most firms trying to establish themselves try to copy the competition.

Question 15

Exhibit 11-4  
-Refer to Exhibit 11-4.If the game is played only once,each firm will price so that

Accepted Answer

A) one charges the monopoly price and the other charges the competitive price. 
B) both charge the competitive price. 
C) both firms make economic profits. 
D) both charge the monopoly price. 
E) one charges a substantially lower price than the other. 
A) one charges the monopoly price and the other charges the competitive price. 
B) both charge the competitive price. 
C) both firms make economic profits. 
D) both charge the monopoly price. 
E) one charges a substantially lower price than the other.

Question 16

Product differentiation occurs with ____ goods.

Accepted Answer

A) final 
B) consumer 
C) intermediate 
D) capital 
E) all types of 
A) final 
B) consumer 
C) intermediate 
D) capital 
E) all types of

Question 17

A firm will work to differentiate its product up to the point that

Accepted Answer

A) it develops a product unlike anything else in the market. 
B) the increase in revenue equals the cost of development. 
C) revenue is maximized. 
D) all innovation is exhausted. 
E) the increase in product price as a result of research equals the price of the competition. 
A) it develops a product unlike anything else in the market. 
B) the increase in revenue equals the cost of development. 
C) revenue is maximized. 
D) all innovation is exhausted. 
E) the increase in product price as a result of research equals the price of the competition.

Question 18

In a cartel,

Accepted Answer

A) all firms are exactly alike. 
B) all firms have precisely the same interests. 
C) firms cooperate to form a competitive market. 
D) firms cooperate to form a monopoly arrangement. 
E) the government regulates firms to form a competitive market. 
A) all firms are exactly alike. 
B) all firms have precisely the same interests. 
C) firms cooperate to form a competitive market. 
D) firms cooperate to form a monopoly arrangement. 
E) the government regulates firms to form a competitive market.

Question 19

The prisoner's dilemma shows that

Accepted Answer

A) individual irrational behavior turns out to be rational group behavior. 
B) individual rational behavior always leads to the best outcome for the group. 
C) individual rational behavior can lead to an inefficient outcome for the group. 
D) individual irrational behavior always leads to the best outcome for the group. 
E) the outcome for the group is not affected by individual behavior. 
A) individual irrational behavior turns out to be rational group behavior. 
B) individual rational behavior always leads to the best outcome for the group. 
C) individual rational behavior can lead to an inefficient outcome for the group. 
D) individual irrational behavior always leads to the best outcome for the group. 
E) the outcome for the group is not affected by individual behavior.

Question 20

Monopolistic competitors can always prevent entry and exit of other firms over time.

Accepted Answer

A) True 
 B)False

Exam 11: Product Differentiation, monopolistic Competition, and Oligopoly

Profit maximization is not a useful concept for examining firms' decisions about how to configure and market their products.

Product differentiation can be of value to a firm because

Products may be differentiated in all of the following ways except

A monopolistically competitive firm is said to produce with excess costs in the long run because

In the long run,economic profits in a monopolistically competitive market are zero.

A cartel is needed when no explicit communication between firms is made to coordinate pricing decisions.

An oligopolist's demand is partially determined by how other firms behave.

The prisoner's dilemma

A market in which only two competing firms participate is called

Which of the following statements about monopolistic competition in the short run is false?

Advertising can help a monopolistically competitive firm differentiate its products.

Exhibit 11-1 -Refer to Exhibit 11-1.The profit-maximizing output is ____ units.

The difference between explicit and tacit collusion is the degree to which

Which of the following statements is true?

Exhibit 11-4 -Refer to Exhibit 11-4.If the game is played only once,each firm will price so that

Product differentiation occurs with ____ goods.

A firm will work to differentiate its product up to the point that

In a cartel,

The prisoner's dilemma shows that

Monopolistic competitors can always prevent entry and exit of other firms over time.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, transfers, and Income Distribution

Public Goods, externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

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