Deck 12: Between Competition and Monopoly

Question 1

A monopolistic competitor can expect to earn an economic profit in the long run.

Answer 1

False

Question 2

In the long run, zero economic profit exists in monopolistic competition and perfect competition.

Answer 2

True

Question 3

A monopolistic competitor faces a horizontal demand curve.

Answer 3

False

Question 4

Monopolistic competition is a market structure characterized by many small firms selling a homogeneous product.

Question 5

Monopolistically competitive firms can earn large profits in the long run.

Question 6

The demand curve for a monopolistic competitor is likely to be steeper than that of a monopolist.

Question 7

Most economic activity in the United States is carried out by monopolies.

Question 8

Monopolistic competition differs from perfect competition only in the number of firms participating in the market.

Question 9

Under monopolistic competition, profits cannot persist because new firms will be attracted to the market.

Question 10

Society definitely benefits by reducing the number of monopolistically competitive firms.

Question 11

The demand curve for a monopolistic competitor is likely to be flatter than that of a monopolist.

Question 12

The demand curve for a monopolistic competitor has a negative slope.

Question 13

For the monopolistic competitor, MR = P.

Question 14

Monopolistically competitive markets feature high barriers to entry.

Question 15

The entry of new firms into a monopolistically competitive industry will cause the long-run equilibrium price to rise.

Question 16

The cost-revenue diagrams for a monopolist and a monopolistic competitor are similar except that the demand curve for the monopolistic competitor is flatter.

Question 17

Monopolistically competitive markets feature heterogeneous products.

Question 18

Monopolistic competition has at least one similarity to perfect competition: firms are free to enter and leave the industry.

Question 19

In the long run, a monopolistically competitive firm earns small economic profits.

Question 20

In the long run, a monopolistically competitive firm's demand curve must be tangent to its average cost curve.

Question 21

Oligopolistic firms never collude because they have almost no incentive to do so.

Question 22

Average cost is higher with a monopolistically competitive firm than with a perfectly competitive firm.

Question 23

The key difference between oligopoly and other market structures is the interdependence among producers.

Question 24

An oligopolist cares very much about what other firms in her industry are doing.

Question 25

An oligopoly can be characterized by production of either identical goods or different goods.

Question 26

An oligopoly is a market in which at least some firms are large enough to influence market price.

Question 27

The short-run equilibrium of the firm under monopolistic competition has excess capacity.

Question 28

Oligopolists almost always cooperate in making price and output decisions.

Question 29

Oligopolies are difficult to analyze because of the interdependent nature of management decisions.

Question 30

Oligopolists use advertising as a way of differentiating their products.

Question 31

In the long run, a monopolistically competitive firm produces at minimum average cost.

Question 32

Oligopolists seldom change prices, because they don't like change.

Question 33

An oligopoly is a market structure in which a few large firms dominate the sale of a single product.

Question 34

An oligopoly is a market dominated by a few sellers.

Question 35

The excess capacity theorem states that society would clearly benefit from a reduction in the number of monopolistic competitors.

Question 36

Oligopolists behave independently of each other.

Question 37

When comparing industries, a monopolistically competitive industry is less competitive than an oligopoly.

Question 38

Advertising never makes sense for an oligopolistic firm.

Question 39

Society benefits from monopolistic competition because the firms are allocatively efficient.

Question 40

Excess capacity and inefficiency result under monopolistic competition.

Question 41

Game theory may be used to solve problems of interdependent decision making by large firms.

Question 42

Firms that maximize sales always produce more than profit-maximizing firms.

Question 43

One of the most famous cartels is OPEC.

Question 44

Cartels provide uniform management, but none of the advantages of economies of scale.

Question 45

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

Question 46

To maximize sales revenue, an oligopolist will expand output until the marginal revenue curve cuts the horizontal axis.

Question 47

An oligopolist who sets the price for the industry is a price leader.

Question 48

Sales maximization and profit maximization are essentially equivalent.

Question 49

The kinked demand curve model explains pricing in monopoly markets.

Question 50

Price leadership may sometimes be an example of covert collusive behavior by oligopolies.

Question 51

An oligopoly firm with a differentiated product will generally earn the largest profits without advertising.

Question 52

The kinked demand curve is an explanation of sticky prices.

Question 53

To maximize sales revenue, an oligopoly will expand output until the price is zero.

Question 54

Game theory is based on the idea that each participant makes decisions based on how she believes the competition will react.

Question 55

The kinked demand curve model is based on the assumption that rival firms will match a price cut but ignore a price increase.

Question 56

Price leadership is an example of explicit collusion by oligopolies.

Question 57

Economists place cartels among the least-desirable forms of market organization.

Question 58

Some oligopolies may try to maximize sales revenue rather than maximize profits.

Question 59

Sticky prices are a direct result of the kinked demand curve.

Question 60

Price leadership works only if there is a single, dominant firm in the oligopoly.

Question 61

A perfectly contestable market is one in which there are excessive costs to entry and exit.

Question 62

To understand most of today's economic activity in the U.S.economy, we should look at which of the following models?

A)perfect competition and pure monopoly 
B)perfect competition and oligopoly 
C)oligopoly and monopolistic competition 
D)monopolistic competition and monopoly

Question 63

A perfectly contestable market is one which a firm can enter and exit without losing its investment.

Question 64

Firms in a perfectly contestable market will earn higher profits than firms in markets that are not perfectly contestable.

Question 65

Repeated games can lead to tacit collusion.

Question 66

An oligopoly will always use game theory to maximize sales rather than profits.

Question 67

The models of perfect competition and monopoly are the most realistic.

Question 68

The maximin criterion seeks to minimize the maximum payoffs in order to win.

Question 69

Under perfect competition and monopolistic competition, profits are zero in long-run equilibrium.

Question 70

Which of the following is not a requirement for the existence of monopolistic competition in a market?

A)numerous small sellers 
B)full information about the market among buyers and sellers 
C)product homogeneity 
D)freedom of entry into the market

Question 71

Monopolies can misallocate resources by restricting output in an attempt to raise prices and profits.

Question 72

International trade can be correctly considered as an example of a zero-sum game.

Question 73

Identify the market structure characterized by many small firms selling somewhat different products.

A)Monopoly 
B)Monopolistic competition 
C)Perfect competition 
D)Duopoly

Question 74

A duopoly is a form of oligopoly with two firms.

Question 75

A monopolistically competitive firm

A)tries to differentiate its product from competitors' products.
B)faces a perfectly elastic demand curve for its product.
C)has more monopoly power in the long run than does a perfectly competitive firm.
D)is always a retail establishment.

Question 76

Perfect competition and pure monopoly are concepts useful primarily for realistic application.

Question 77

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

Question 78

An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor's skill are worse than those from overestimating it.

Question 79

All players have dominant strategies.

Question 80

A dominant strategy is one that is best for one player regardless of the strategy chosen by the other player.