Deck 11: Imperfect Competition

Question 1

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. What area graphically represents a profit-maximizing firm's total cost?

A) 0P₅FQ₁.
B) 0P₄JQ₁.
C) 0P₃GQ₁.
D) 0P₂IQ₂.
E) 0P₁HQ₁.

Answer 1

C

Question 2

What measures the percentage of an industry's total sales that is controlled by the few largest firms?

A) Concentration ratio.
B) Market concentration.
C) Concentration of scale.
D) Economy of scale advantage.

Answer 2

A

Question 3

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. At what price and quantity, respectively, would this firm sell its product in order to maximize profits?

A) P₁ and Q₁.
B) P₂ and Q_2.
C) P₃ and Q₁.
D) P₄ and Q_3.
E) P₅ and Q₁.

Answer 3

E

Question 4

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. Which of the following statements is correct?

A) This graph illustrates a short-run situation and some firms will soon exit from the industry.
B) This graph illustrates a short-run situation and new firms will soon enter the industry.
C) This graph illustrates a long-run situation and some firms will soon exit from the industry.
D) This graph illustrates a long-run situation and new firms will soon enter the industry.
E) This graph illustrates what could be either a short-run or a long-run situation.

Question 5

Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc. and Hobbs Ltd. Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.

Refer to the information above to answer this question. Which of the following statements is correct if no agreement between Calvin and Hobbs is in place and each is considering what to do in terms of its advertising budget?

A) If Calvin adopts a high advertising budget, then Hobbs should adopt a low budget.
B) If Calvin adopts a high advertising budget, then Hobbs should also.
C) If Calvin adopts a low advertising budget, then Hobbs should also.
D) If Hobbs adopts a low advertising budget, then Calvin should also.

Question 6

Suppose that the concentration ratio of an industry is high. Which of the following statements would be correct?

A) Increasing returns to scale are insignificant for the firms within the industry.
B) Increasing returns to scale are significant for the firms within the industry.
C) The industry will have many firms within it.
D) The firms within the industry will have all achieved their minimum efficient scale.
E) All the firms must be of a similar size.

Question 7

What is imperfect competition?

A) A market structure in which firms always collude.
B) A market structure in which producers are identifiable and have some control over price.
C) A market structure in which firms try to compete but find it impossible.
D) A market structure in which the government greatly intervenes.
E) A market structure in which producers are identifiable but have no control over price.

Question 8

All of the following, except one, are aspects of oligopoly that can be analyzed by game theory. Which is the exception?

A) Firm interdependence.
B) The advantages of successful collusion.
C) That pricing decisions based on the anticipated action of rival firms will lead to low prices.
D) The importance of trust between firms in order for collusion to be successful.
E) Concentration ratio.

Question 9

Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc. and Hobbs Ltd. Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.

Refer to the information above to answer this question. Which of the following statements is correct if no agreement between Calvin and Hobbs is in place and each is considering what to do in terms of its advertising budget?

A) If Calvin adopts a high advertising budget and Hobbs does not, then Calvin will earn $300 in profits.
B) If Calvin adopts a high advertising budget and Hobbs does not, then Hobbs will earn $800 in profits.
C) If Hobbs adopts a high advertising budget and Calvin does not, then Calvin will earn $800 in profits.
D) If Hobbs adopts a high advertising budget and Calvin does not, then Hobbs will earn $300 in profits.
E) Collusion and trust between Calvin and Hobbs is necessary if both are to adopt and maintain a low advertising budget.

Question 10

What is a concentration ratio?

A) A ratio that measures the percentage of an industry's total output that is produce by the largest few firms.
B) A ratio that measures the percentage of a firm's total output compared to its nearest rival.
C) A ratio that measures the percentage of the economy's total output that a particular industry produces.
D) A ratio that measures the size of each industry.

Question 11

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. What area graphically represents a profit-maximizing firm's total revenue?

A) 0P₅FQ₁.
B) 0P₄JQ₁.
C) 0P₃GQ₁.
D) 0P₂IQ₂.
E) 0P₁HQ₁.

Question 12

Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc. and Hobbs Ltd. Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.

Refer to the information above to answer this question. Which of the following statements is correct if Calvin and Hobbs reach a secret agreement between themselves concerning advertising budgets and this agreement holds because neither cheats?

A) Both will have a low advertising budget and both will earn profits of $600.
B) Both will have a low advertising budget and both will earn profits of $400.
C) Both will have a high advertising budget and both will earn profits of $800.
D) Both will have a high advertising budget and Calvin will earn a profit of $300 and Hobbs will earn a profit of $800.

Question 13

On which of the following does game theory focus?

A) Prices, revenues and costs.
B) Prices, elasticity and costs.
C) Entry, revenues and costs.
D) Entry, interdependence and strategies.
E) Interdependence, strategies and pay-offs.

Question 14

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. What area graphically represents a profit-maximizing firm's total profits or loss?

A) A profit of P₄P₅FJ.
B) A profit of P₃P₅FG.
C) A loss of Q₁FJQ₃.
D) A loss of P₄P₅FJ.

Question 15

All of the following, except one, could be used to support the position that advertising is wasteful?

A) The huge sums of money spent on advertising to try to persuade consumers could be better spent in more socially desirable ways.
B) The huge sums of money spent on advertising create barriers to entry in many industries and thus weaken competition.
C) The huge sums of money spent on advertising must raise the price of the advertised products.
D) The huge sums of money spent on advertising

Question 16

Which term best describes the attempt by firms to distinguish their products from those of their competitors?

A) Product differentiation.
B) Competition.
C) Mutual interdependence.
D) Franchising.
E) Entry.

Question 17

What is product differentiation?

A) Charging different customers different prices for the same product.
B) The attempt by a firm to distinguish its product from the competition by charging a different price.
C) The attempt by a firm to distinguish its product from the competition using non-price methods.
D) Charging customers different prices for different products.

Question 18

Below is a profit pay-off matrix for two oligopoly firms: Calvin Inc. and Hobbs Ltd. Calvin's profits are shown in the upper portion of each box and Hobb's are in the lower portion.

Refer to the information above to answer this question. All of the following statements expect one, is correct if no agreement between Calvin and Hobbs is in place and each is considering what to do in terms of its advertising budget?

A) Collusion and trust between Calvin and Hobbs is necessary if both are to adopt and maintain a low advertising budget.
B) Without collusion and trust between Calvin and Hobbs, both will adopt a high advertising budget.
C) If Calvin adopts a low advertising budget, then Hobbs will be in a position to profit from this.
D) If Hobbs adopts a low advertising budget, then Calvin will be in a position to profit from this.
E) If Hobbs adopts a high advertising budget and Calvin does not, then Hobbs will earn $300 in profits.

Question 19

What is the term for a market structure in which there are many firms who sell a differentiated product and have some control over the price of the products they sell?

A) Oligopoly.
B) Perfect Competition.
C) Monopoly.
D) Monopolistic competition.
E) Duopoly.

Question 20

All of the following, except one, are examples of product differentiation. Which is the exception?

A) The use of a logo.
B) Advertising.
C) Establishing a brand name.
D) The use of marketing boards.
E) Product development.

Question 21

Which of the following statements is correct concerning a typical firm operating under conditions of monopolistic competition in the long run?

A) Excess capacity is lowered as demand becomes less elastic.
B) It operates on the rising portion of its average cost curve because of excess capacity.
C) The greater the product differentiation the lower will be the amount of excess capacity.
D) None of the choices are correct.

Question 22

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.

Refer to the graph above to answer this question. Which of the following statements is correct?

A) This firm will charge price 0A and make no economic profits.
B) This firm will charge price 0A and make economic profits.
C) This firm will charge price 0B and make only normal profits.
D) This firm will charge price 0B and make economic profits.

Question 23

Why is it impossible for a monopolistically competitive firm to achieve productive efficiency?

A) All monopolistically competitive firms are too small.
B) All monopolistically competitive firms make economic profits.
C) The market demand curve is perfectly elastic.
D) The firm's demand curve is not perfectly elastic.
E) The firm's marginal cost curve is upward-sloping.

Question 24

Refer to the graph above to answer this question. Which one of the following statements is correct in the long run?

A) Firms will enter the industry and the firm's demand curve will shift to the right.
B) Firms will enter the industry and the firm's demand curve will shift to the left.
C) Firms will leave the industry and the firm's demand curve will shift to the left.
D) Firms will leave the industry and the firm's demand curve will shift to the right.

Question 25

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.

Refer to the graph above to answer this question. Which of the following statements is correct?

A) This firm is making economic profits of 0ADQ.
B) This firm is making economic profits of ABCD.
C) This firm is making a loss.
D) This firm is making no economic profits.

Question 26

Which of the following statements concerning a monopolistically competitive industry is correct?

A) If there are short-run losses, firms will exit from the industry and the demand of the remaining firms will decrease.
B) If there are short-run losses, firms will exit from the industry and the demand of the remaining firms will increase.
C) If there are short-run profits, firms will exit from the industry and the demand of the remaining firms will increase.
D) If there are short-run profits, firms will enter the industry and the demand of the remaining firms will increase.

Question 27

What does excess capacity mean?

A) The situation where a firm's output is below economic capacity.
B) The situation where a firm's output is above economic capacity.
C) The situation where a firm is producing an output below equilibrium.
D) The situation where a firm is producing an output above equilibrium.

Question 28

Refer to the graph above to answer this question. What is the firm's profit-maximizing price?

A) $30.
B) $38.
C) $40.
D) $55.
E) $72.

Question 29

Refer to the graph above to answer this question. What is the firm's profit-maximizing output?

A) 45.
B) 90.
C) 132.
D) 145.
E) 157.

Question 30

Which one of the following statements is true about a monopolistically competitive firm in long-run equilibrium?

A) Its output is larger than it would be under conditions of perfect competition.
B) Its average cost is lower that it would be under conditions of perfect competition.
C) It is producing at economic capacity just as it would be under conditions of perfect competition.
D) Its price is equal to its marginal cost just as it would be under conditions of perfect competition.
E) None of the choices are correct.

Question 31

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. Which of the following will be a result of the situation illustrated in the graph above?

A) The market demand curve will shift to the left.
B) The market demand curve will shift to the right.
C) The market supply curve will shift to the left.
D) The market supply curve will shift the right.

Question 32

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.

What is true about the long-run equilibrium price of a monopolistically competitive firm?

A) It will equal average cost and exceed marginal cost.
B) It will equal both average cost and marginal cost.
C) It will equal marginal cost and exceed average cost.
D) It will exceed both average cost and marginal cost.
E) It will equal both marginal cost and marginal revenue.

Question 33

What is the root cause of excess capacity in a monopolistically competitive industry?

A) Inefficient producers.
B) Product differentiation.
C) Free entry.
D) Rising marginal cost.

Question 34

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.

Refer to the graph above to answer this question. Which of the following statements is correct?

A) This is a short-run situation and the firm is making economic profits.
B) This is a short-run situation and the firm is experiencing a loss.
C) This is a long-run situation and the firm is making economic profits.
D) This is a long-run situation but the firm is making no economic profits.
E) This is a long-run situation but no comment on profits is possible.

Question 35

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.

What is the profit maximization criterion for a monopolistically competitive firm?

A) An output level that is equal to capacity output.
B) Price equals average cost.
C) Price equals marginal cost.
D) Marginal revenue equals average cost.
E) Marginal revenue equals marginal cost.

Question 36

Below is a graphical illustration of a typical firm operating in a monopolistically competitive industry:

Refer to the graph above to answer this question. Which of the following statements is correct?

A) This graph illustrates a short-run situation and the firm will soon be producing more.
B) This graph illustrates a short-run situation and the firm will soon be charging a higher price.
C) This graph illustrates a short-run situation and the firm will soon be producing less.
D) This graph illustrates a long-run situation the and firm will soon be producing more.
E) This graph illustrates a long-run situation and the and firm will soon be charging a higher price.

Question 37

How are a typical monopolistically competitive firm and a typical perfectly competitive firm alike?

A) Both face perfectly elastic demand.
B) Both experience zero economic profits in the long run.
C) Both achieve allocative efficiency only.
D) Both achieve productive efficiency only.
E) Both achieve allocative and productive efficiency.

Question 38

What is true about both perfectly competitive and monopolistically competitive firms in long-run equilibrium?

A) They produce at minimum average cost.
B) They earn economic profits.
C) They achieve allocative efficiency.
D) They achieve productive efficiency.
E) They equate marginal cost and marginal revenue.

Question 39

The following graph shows the costs and revenues of a typical firm operating in a monopolistically competitive industry.

Refer to the graph above to answer this question. Which of the following will be the result of the situation illustrated in the graph?

A) New firms will enter the industry and this will shift the market supply curve to the right.
B) New firms will enter the industry and this will shift the market supply curve to the left.
C) Some firms will exit from the industry and this will shift the market supply curve to the right.
D) Some firms will exit from the industry and this will shift the market supply curve to the left.
E) Long run equilibrium has been achieved and no new entry or exit of firms will occur.

Question 40

Refer to the graph above to answer this question. What is the firm's profit or loss at its optimum price and output?

A) A loss of $1,015.
B) A loss of $1,350.
C) $0.
D) A profit of $1,350.
E) A profit of $1,584.

Question 41

What is the term for an industry which is dominated by a few large firms?

A) Monopoly.
B) Oligopoly.
C) Monopolistic competition.
D) Perfect competition.

Question 42

All of the following, except one, could be a barrier to entry into an oligopoly industry. Which is the exception?

A) The existence of economies of scale.
B) Patents and copyrights.
C) The restricted ownership of crucial natural resources.
D) Natural monopoly.

Question 43

Of which of the following is OPEC an example?

A) A non-colluding oligopoly.
B) A cartel.
C) A differentiated oligopoly.
D) A duopoly.

Question 44

The home appliance, automotive, brewing and computer hardware industries are all examples of what kind of industry structure?

A) Perfect competition.
B) Monopolistic competition.
C) Monopoly.
D) Differentiated oligopoly.
E) Undifferentiated oligopoly.

Question 45

Which of the following variants of oligopoly theory assume that there is no collusion between firms?

A) The price leadership variant only.
B) Both the price leadership and the kinked-demand curve variant.
C) The price leadership, kinked-demand curve and cartel variants.
D) The kinked-demand curve variant only.

Question 46

Refer to the graph above to answer this question. What type of market is portrayed in this graph?

A) Monopoly.
B) Collusive oligopoly.
C) Imperfect competition.
D) Perfect competition.
E) Non-collusive oligopoly.

Question 47

Canada Cement, Canadian General Electric and American Airlines are all examples of which variant of oligopoly theory?

A) Price Leadership.
B) Kinked-demand curve.
C) Cartel.
D) None of the choices are correct.

Question 48

Why is it difficult for colluding firms to maintain a cartel?

A) Because the large profits made by existing firms result in new firms entering the industry.
B) Because cartels are illegal.
C) Because cartels always end up producing too little with the result that at least one member firm will find it profitable to raise its price and the other firms will follow.
D) Because member firms find the prospect of cheating too attractive to resist.

Question 49

Each spring, Firm A brings out the new model of its product and announces the price. Rival firms B, C and D soon follow with their new models and announce prices similar to A's. What is this an example of?

A) Mark-up pricing.
B) A cartel.
C) Collusion.
D) Price leadership.
E) A kinked-demand curve.

Question 50

If the firms in an oligopoly industry are able to successfully form a cartel we would expect the price and output of the cartel to approximate that of which of the following?

A) A perfectly competitive industry.
B) A monopolistically competitive industry.
C) An oligopolistic industry that is similar to the price leadership variant.
D) A monopoly.

Question 51

All of the following, except one, are benefits of product differentiation. Which is the exception?

A) There is a wide variety of products for consumers to choice from.
B) There are a large number of sellers from which consumers can choose.
C) Goods are produced at the minimum average cost.
D) Consumers benefit in terms of the locations and hours of operation of sellers.

Question 52

Which of the following characteristics most distinguishes an oligopoly industry from the other three types of market structures?

A) Difficult entry.
B) The possibility of differentiated products.
C) Control of price by individual firms.
D) Mutual interdependence.

Question 53

Below is a profit pay-off matrix for two oligopoly firms: North and South. North's profits are shown in the upper portion of each box and South's are in the lower portion.

Refer to the information above to answer this question. If North and South have agreed through illegal collusion to both follow a low output policy, the temptation to cheat is demonstrated by which of the following?

A) The fact that North can gain if South raises output and it doesn't.
B) The fact that South can gain if North raises output and it doesn't.
C) The fact that North can gain if it raises output and South does not.
D) The fact that South can gain if it raises output and North does not.
E) Both c and d.

Question 54

Below is a profit pay-off matrix for two oligopoly firms: North and South. North's profits are shown in the upper portion of each box and South's are in the lower portion.

Refer to the information above to answer this question. What will be the profit for North and South respectively if they successfully collude with each other?

A) $180 and $180.
B) $200 and $80.
C) $80 and $200.
D) $100 and $100.

Question 55

Suppose that it requires a special license in order to operate a firm in a certain type of industry. In addition, suppose that firms that hold such licenses are able to sell them for a high price. Which of the following statements is true?

A) The firms in this industry must all be franchised.
B) This is a typical monopolistically competitive market in which there are no economic profits in the long run.
C) The government that issued the original licenses will be willing to issue more.
D) There is free entry by new firms into this industry.
E) Most firms currently in the industry are earning economic profits.

Question 56

Below are data for a monopolistically competitive firm.
$\begin{array} { l r l c } \text { Quantity } & \text { \$MC } & \text { \$AC } & \text { \$MR } \\1 & 60 & 82 & 72 \\2 & 50 & 71 & 64 \\3 & 44 & 64 & 56 \\4 & 48 & 59 & 48 \\5 & 50 & 57.2 & 40 \\6 & 52 & 56.3 & 32 \\7 & 54 & 56 & 24 \\8 & 60 & 56.5 & 16\end{array}$

-Refer to the information above to answer this question. What is true if the firm is producing at the profit-maximizing output?

A) It is producing at economic capacity
B) It is achieving allocative efficiency.
C) It is achieving both economic and allocative efficiency
D) It is experiencing excess capacity

Question 57

Suppose an industry has one or two successful franchises and there is a government policy which limits the number of firms in the industry. What is the likely result?

A) Consumer choice will be maximized.
B) Productive efficiency will be achieved by most firms.
C) Entry by new firms will be easy.
D) The existing franchises can be sold for a price that reflects the economic profits that are being earned by the existing firms.
E) Most existing firms will be earning normal profits only.

Question 58

What is the name for the condition where a firm will not take action without considering the reactions of rival firms?

A) Perfect competition.
B) Productive efficiency.
C) Mutual interdependence.
D) Duopoly.

Question 59

Below are data for a monopolistically competitive firm.
$\begin{array} { l r l c } \text { Quantity } & \text { \$MC } & \text { \$AC } & \text { \$MR } \\1 & 60 & 82 & 72 \\2 & 50 & 71 & 64 \\3 & 44 & 64 & 56 \\4 & 48 & 59 & 48 \\5 & 50 & 57.2 & 40 \\6 & 52 & 56.3 & 32 \\7 & 54 & 56 & 24 \\8 & 60 & 56.5 & 16\end{array}$

-Refer to the information above to answer this question. What output will this profit-maximizing firm produce?

A) 3.
B) 4.
C) 5.
D) 6.
E) 7.

Question 60

Below is a profit pay-off matrix for two oligopoly firms: North and South. North's profits are shown in the upper portion of each box and South's are in the lower portion.

Refer to the information above to answer this question. If both North and South are independently following a low output policy and North assumes that South will stay with its policy, what is North's best course of action?

A) Remain with a low output policy.
B) To try to convince South to adopt a high output policy.
C) Adopt a high output policy independent of South.
D) It is better for North to ignore South's actions when making its decisions.

Question 61

Refer to the graph above to answer this question. According to what assumption is the demand curve drawn?

A) That rival firms will match any price increase but ignore any price decrease.
B) That rival firms will match any price decrease but ignore any price increase.
C) That rival firms will ignore any price increase or decrease.
D) That rival firms will match any price increase or decrease.

Question 62

In which of the following market structures is entry easiest?

A) Monopolistic competition.
B) Oligopoly.
C) Monopoly.
D) Duopoly.

Question 63

Which of the following statements best describes the significance of the kink in the demand curve under this variant of oligopoly theory?

A) It proves the existence of collusion.
B) It illustrates the only variant that does not assume firm interdependence.
C) It illustrates the effect of rival firms each engaging in massive advertising efforts.
D) It is the best explanation of how price wars can occur.
E) It explains why firms with different marginal costs might nonetheless maximize profits at the same price and output.

Question 64

What price does a monopolistically-competitive firm charge?

A) A price equal to marginal cost.
B) A price greater than marginal cost.
C) A price equal to average cost.
D) A price less than average cost.

Question 65

Faced with a kinked demand curve, what action will an oligopolist take if the costs of production increase?

A) Increase the price
B) Decrease the price, but only if the demand is elastic.
C) Decrease the price, but only if the demand is inelastic.
D) Decrease the price but only if it is a big increase in costs.
E) Nothing, unless it is a very big increase in costs.

Question 66

Refer to the graph above to answer this question All of the following statements, except one, are true regarding this firm. Which is the exception?

A) The firm is realizing an economic profit.
B) The firm will be reluctant to increase the price.
C) The firm will pass on any increase in costs by increasing the price.
D) The firm will be reluctant to decrease the price.
E) The present price exceeds the average cost.

Question 67

Refer to the graph above to answer this question. What will be the profit maximizing price?

A) P₁.
B) P₂.
C) P₃.
D) P₄.
E) P₅.

Question 68

In the kinked-demand curve variant of oligopoly theory, what output will the firm produce?

A) Where marginal cost equals marginal revenue.
B) Where demand is elastic.
C) Where demand is inelastic.
D) Where marginal cost equals average cost.

Question 69

Who challenged the fundament assumption of profit maximization?

A) John Galbraith.
B) George Stigler.
C) Adam Smith.
D) John Maynard Keynes.

Question 70

Which of the following statements is correct for an oligopoly firm with a kinked-demand curve?

A) It will increase its total revenue by raising its price but lower it by decreasing its price.
B) It will decrease its total revenue by raising its price but raise it by decreasing its price.
C) It will increase its total revenue by either raising or lowering its price.
D) It will decrease its total revenue by either raising or lowering its price.
E) Its total revenue will not change regardless of whether it raises or lowers its price.

Question 71

In what type of market does the gumnut industry operate?

A) Perfect competition.
B) Monopolistic competition.
C) Oligopoly.
D) Monopoly

Question 72

In what way does the theory of the kinked-demand curve explain price stability in an oligopoly industry?

A) Because if the firm either raises or lowers its price, its total revenue will decrease.
B) It assumes that rival firms will match any price increase and ignore any price decrease.
C) It assumes that firms are in collusion with each other.
D) It assumes that demand is inelastic above the established price and elastic below it.

Question 73

All of the following except one are valid statements concerning the debate about oligopolies and efficiency. Which is the exception?

A) Oligopolies are often very large and this creates an environment that is conducive to research and technological change.
B) The barriers to entry in an oligopoly industry encourage research.
C) Oligopolies usually achieve productive efficiency.
D) Because of the barriers to entry in oligopoly industries, oligopolies are likely to become complacent and lose their competitive edge.

Question 74

The Canadian gumnut industry consists of 10 companies whose annual sales are as shown:
$\begin{array}{c}\begin{array}{c}\hline\text {Company}\\\hline\text {A}\\\text {B}\\\text {C}\\\text {D}\\\text {E}\\\text {Next five companies (total)}\\\hline \end{array}\begin{array}{c}\hline\text {Sales (in \$millions)}\\\hline57 \\34 \\27 \\11 \\9 \\34\\\hline \end{array}\end{array}$


-What is the four-firm concentration ratio for this industry?

A) 25%.
B) 65%.
C) 75%.
D) 80%

Question 75

What does product differentiation mean?

A) It is the attempt by the firm to offer a product similar to that of its rivals.
B) It is the attempt by the firm to offer a product seen to be different from that of its rivals.
C) It is the practice of many firms to sell more than one product.
D) It is the practice of many firms to sell the same product in more than one market.

Question 76

The Canadian gumnut industry consists of 10 companies whose annual sales are as shown:
$\begin{array}{c}\begin{array}{c}\hline\text {Company}\\\hline\text {A}\\\text {B}\\\text {C}\\\text {D}\\\text {E}\\\text {Next five companies (total)}\\\hline \end{array}\begin{array}{c}\hline\text {Sales (in \$millions)}\\\hline57 \\34 \\27 \\11 \\9 \\34\\\hline \end{array}\end{array}$


-What is the total sale of the four biggest firms for this industry?

A) $91 million.
B) $118 million
C) $129 million.
D) $172 million.

Question 77

All of the following, except one, are possible goals that a firm might have besides that of profit maximization.

A) Obtaining anatomy of decision making.
B) Developing state of the art technology.
C) Achieving a high rate of growth.
D) Lobbying the government for lower taxes.

Question 78

Which of the following statements is correct concerning the kinked-demand curve variant of oligopoly theory?

A) It assumes that the portion of the demand curve above the kink is elastic and the portion below the kink is inelastic.
B) It assumes that the portion of the demand curve above the kink is inelastic and the portion below the kink is elastic.
C) It assumes that the marginal costs of all firms are the same.
D) It assumes that while the some firms will charge the same price they may produce different outputs.
E) It assumes that while the some firms will produce the same output they will charge different prices.

Question 79

According to Galbraith, why might modern corporations not attempt to maximize profits?

A) Because the managers are more interested in maximizing their own incomes.
B) They are afraid of the reaction of their consumers.
C) They are afraid of the reaction of rival companies.
D) They are afraid of the reaction of the government.

Question 80

Which of the following statements best describes the thinking of a single firm in the kinked-demand curve variant of oligopoly theory?

A) If we raise our price our rivals will follow us, and if we lower our price our rivals will simply do nothing.
B) If we lower price our rivals will follow us, and if we raise our price our rivals will simply do nothing.
C) If we raise our output our rivals will follow us, and if we lower our output our rivals will simply do nothing.
D) If we lower our output our rivals will follow us, and if we raise our output our rivals will simply do nothing.