Question 1

A duopoly is a market structure in which:

Accepted Answer

A)  two consumers buy the product. 
B)  two firms sell the product. 
C)  one firm sells the product and one consumer buys the product. 
D)  two firms sell the product and two consumers buy the product. 
A)  two consumers buy the product. 
B)  two firms sell the product. 
C)  one firm sells the product and one consumer buys the product. 
D)  two firms sell the product and two consumers buy the product.

Question 2

The demand equation for a good produced by a monopolistically competitive firm is P = 10 - Q. If the firm has no fixed costs and variable costs of $2 per unit, what is the value of the firm's monopoly profits when it sets a price that maximizes its monopoly profits?

Accepted Answer

A)  $7 
B)  $12 
C)  $15 
D)  $16 
A)  $7 
B)  $12 
C)  $15 
D)  $16

Question 3

A monopolistic competitor has fixed costs of $100 and marginal costs of $10 per unit. What is its marginal revenue at its equilibrium price and quantity?

Accepted Answer

A)  $10 
B)  $11 
C)  $1,100 
D)  $2,000 
A)  $10 
B)  $11 
C)  $1,100 
D)  $2,000

Question 4

Adjustment costs include:

Accepted Answer

A)  dealing with child labor issues. 
B)  human rights. 
C)  getting used to foreign products. 
D)  short-term unemployment. 
A)  dealing with child labor issues. 
B)  human rights. 
C)  getting used to foreign products. 
D)  short-term unemployment.

Question 5

What will happen when a firm raises the price of a differentiated product in an imperfectly competitive market?

Accepted Answer

A)  It will see lower sales but will not lose all its sales. 
B)  It will lose all its sales to competitor firms. 
C)  It will actually get new customers from other firms. 
D)  It will see an increase in revenues. 
A)  It will see lower sales but will not lose all its sales. 
B)  It will lose all its sales to competitor firms. 
C)  It will actually get new customers from other firms. 
D)  It will see an increase in revenues.

Question 6

(Figure: Costs and Demand for a Monopolistic Competitor) The profits for the firm are:

Accepted Answer

A)  $320. 
B)  $480. 
C)  $160. 
D)  $420. 
A)  $320. 
B)  $480. 
C)  $160. 
D)  $420.

Question 7

In a duopoly, each firm faces:

Accepted Answer

A)  a more elastic demand curve if it raises its price. 
B)  a more elastic demand curve if it lowers its price. 
C)  a perfectly elastic demand curve. 
D)  a perfectly inelastic demand curved. 
A)  a more elastic demand curve if it raises its price. 
B)  a more elastic demand curve if it lowers its price. 
C)  a perfectly elastic demand curve. 
D)  a perfectly inelastic demand curved.

Question 8

When firms charge different prices for differentiated products in imperfect competition, each firm faces a demand curve that is ___________ than would be the case if the market was perfectly competitive.

Accepted Answer

A)  flatter 
B)  farther to the left 
C)  farther to the right 
D)  less elastic 
A)  flatter 
B)  farther to the left 
C)  farther to the right 
D)  less elastic

Question 9

If a firm has a total fixed cost of $75 and an average variable cost of $35 for producing 10 units of output, the average total cost would be:

Accepted Answer

A)  $425. 
B)  $42.50. 
C)  $110. 
D)  $350. 
A)  $425. 
B)  $42.50. 
C)  $110. 
D)  $350.

Question 10

A monopolist maximizes its profits by selling up to the point at which:

Accepted Answer

A)  its price equals its marginal cost. 
B)  its price equals its marginal revenue. 
C)  its marginal revenue equals its marginal costs. 
D)  the difference between its price and average cost is maximized. 
A)  its price equals its marginal cost. 
B)  its price equals its marginal revenue. 
C)  its marginal revenue equals its marginal costs. 
D)  the difference between its price and average cost is maximized.

Question 11

Intra-industry trade refers to:

Accepted Answer

A)  imports and exports within the same industry. 
B)  imports and exports originating in different industries. 
C)  international trade patterns predicted by the Heckscher-Ohlin model. 
D)  Ricardian comparative advantage. 
A)  imports and exports within the same industry. 
B)  imports and exports originating in different industries. 
C)  international trade patterns predicted by the Heckscher-Ohlin model. 
D)  Ricardian comparative advantage.

Question 12

If the index of intra-industry trade is high, products are probably ______, and costs in both nations are ______.

Accepted Answer

A)  identical; different 
B)  differentiated; similar 
C)  identical; similar 
D)  differentiated; different 
A)  identical; different 
B)  differentiated; similar 
C)  identical; similar 
D)  differentiated; different

Question 13

Consumers gain from trade within a monopolistically competitive industry because:

Accepted Answer

A)  prices fall and product varieties decrease. 
B)  prices rise and product varieties increase. 
C)  prices rise and product varieties decrease. 
D)  prices fall and product varieties increase. 
A)  prices fall and product varieties decrease. 
B)  prices rise and product varieties increase. 
C)  prices rise and product varieties decrease. 
D)  prices fall and product varieties increase.

Question 14

What is the value of the intra-industry trade index for an industry in which exports are $100 million and imports are $100 million?

Accepted Answer

A)  100/200 = 0.50 
B)  (100 + 100)/100 = 2.00 
C)  100/[1/2 · (100 + 100)] = 1.00 
D)  (100 - 100)/100 = 0.00 
A)  100/200 = 0.50 
B)  (100 + 100)/100 = 2.00 
C)  100/[1/2 · (100 + 100)] = 1.00 
D)  (100 - 100)/100 = 0.00

Question 15

The demand curve facing a monopolistic competitor:

Accepted Answer

A)  is perfectly inelastic. 
B)  is perfectly elastic. 
C)  slopes downward to the right. 
D)  has a positive slope. 
A)  is perfectly inelastic. 
B)  is perfectly elastic. 
C)  slopes downward to the right. 
D)  has a positive slope.

Question 16

Which of the following probably slowed NAFTA's effect on the wages of Mexican workers?

Accepted Answer

A)  the Mexican peso crisis in which Mexico's currency fell greatly in value 
B)  the reluctance of the U.S. government to allow guest workers 
C)  the Iraq war 
D)  increases in illegal emigration to the United States 
A)  the Mexican peso crisis in which Mexico's currency fell greatly in value 
B)  the reluctance of the U.S. government to allow guest workers 
C)  the Iraq war 
D)  increases in illegal emigration to the United States

Question 17

The unemployment caused by NAFTA in the United States from 1994 to 2002:

Accepted Answer

A)  was permanent because most workers were not able to be reemployed within three years. 
B)  totaled 13% of manufacturing job losses in the United States during that period. 
C)  totaled 40% of the manufacturing job losses in the United States during that period. 
D)  totaled 75% of manufacturing job losses in the United States during that period. 
A)  was permanent because most workers were not able to be reemployed within three years. 
B)  totaled 13% of manufacturing job losses in the United States during that period. 
C)  totaled 40% of the manufacturing job losses in the United States during that period. 
D)  totaled 75% of manufacturing job losses in the United States during that period.

Question 18

Using a model of imperfect competition, economist Daniel Trefler concluded that the North American Free Trade Agreement:

Accepted Answer

A)  cost Canada more than 100,000 jobs that were never replaced. 
B)  caused no job loss in Canada. 
C)  caused Canada to lose 5% of jobs in manufacturing because Canadian tariffs had to be cut, but over time the trade agreement created higher productivity and more jobs to offset losses. 
D)  created new jobs in Canada from day one, as firms sold across the border and undercut U.S. firms. 
A)  cost Canada more than 100,000 jobs that were never replaced. 
B)  caused no job loss in Canada. 
C)  caused Canada to lose 5% of jobs in manufacturing because Canadian tariffs had to be cut, but over time the trade agreement created higher productivity and more jobs to offset losses. 
D)  created new jobs in Canada from day one, as firms sold across the border and undercut U.S. firms.

Question 19

When trade occurs among nations with similar tastes, technology, products, and costs, monopolistically competitive firms will have an incentive to:

Accepted Answer

A)  lower prices to get new customers and increase market share. 
B)  raise prices to take advantage of a lucrative situation. 
C)  cut corners in manufacturing to boost profits. 
D)  raise quality, so they can charge a higher price than the competition. 
A)  lower prices to get new customers and increase market share. 
B)  raise prices to take advantage of a lucrative situation. 
C)  cut corners in manufacturing to boost profits. 
D)  raise quality, so they can charge a higher price than the competition.

Question 20

Which of the following is the calculation that tells us the proportion of trade in a particular industry that involves both imports and exports?

Accepted Answer

A)  the index of overlapping production 
B)  the index of effective trade 
C)  the index of intra-industry trade 
D)  the index of displacement 
A)  the index of overlapping production 
B)  the index of effective trade 
C)  the index of intra-industry trade 
D)  the index of displacement

Exam 6: Increasing Returns to Scale and Monopolistic Competition

A duopoly is a market structure in which:

The demand equation for a good produced by a monopolistically competitive firm is P = 10 - Q. If the firm has no fixed costs and variable costs of $2 per unit, what is the value of the firm's monopoly profits when it sets a price that maximizes its monopoly profits?

A monopolistic competitor has fixed costs of $100 and marginal costs of $10 per unit. What is its marginal revenue at its equilibrium price and quantity?

Adjustment costs include:

What will happen when a firm raises the price of a differentiated product in an imperfectly competitive market?

(Figure: Costs and Demand for a Monopolistic Competitor) The profits for the firm are:

In a duopoly, each firm faces:

When firms charge different prices for differentiated products in imperfect competition, each firm faces a demand curve that is ___________ than would be the case if the market was perfectly competitive.

If a firm has a total fixed cost of $75 and an average variable cost of $35 for producing 10 units of output, the average total cost would be:

A monopolist maximizes its profits by selling up to the point at which:

Intra-industry trade refers to:

If the index of intra-industry trade is high, products are probably ______, and costs in both nations are ______.

Consumers gain from trade within a monopolistically competitive industry because:

What is the value of the intra-industry trade index for an industry in which exports are $100 million and imports are $100 million?

The demand curve facing a monopolistic competitor:

Which of the following probably slowed NAFTA's effect on the wages of Mexican workers?

The unemployment caused by NAFTA in the United States from 1994 to 2002:

Using a model of imperfect competition, economist Daniel Trefler concluded that the North American Free Trade Agreement:

When trade occurs among nations with similar tastes, technology, products, and costs, monopolistically competitive firms will have an incentive to:

Which of the following is the calculation that tells us the proportion of trade in a particular industry that involves both imports and exports?

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

The Global Macroeconomy

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

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If the index of intra-industry trade is high, products are probably , and costs in both nations are .