Deck 15: Monopolistic Competition and Oligopoly

Question 1

The fewer the number of firms present in a market,the:

A) more competition is likely to be present.
B) less likely barriers to entry are present.
C) more likely market power will exist.
D) less like a monopoly it will behave.

Answer 1

C

Question 2

When a market consists of a few large firms and barriers to entry exist,it:

A) must be perfectly competitive.
B) is likely an oligopoly.
C) must be monopolistically competitive.
D) is likely a monopoly.

Answer 2

B

Question 3

In practice,monopolistically competitive markets are:

A) very rare.
B) very common.
C) virtually nonexistent.
D) the only type of market that truly exists.

Answer 3

B

Question 4

In practice,oligopolistic markets are:

A) fairly common.
B) very rare.
C) forbidden by the government.
D) usually protected by the government.

Question 5

The two types of market structures that are imperfectly competitive are:

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

Question 6

When a market consists of many small firms,it:

A) cannot be a monopoly.
B) must be a perfectly competitive market.
C) cannot be a monopolistically competitive market.
D) can only be an oligopoly.

Question 7

One of the defining characteristics of an oligopoly is that:

A) one firm's behavior can affect the others' profits.
B) all firms act independently to create a perfectly competitive outcome.
C) all firms act independently to create a monopoly outcome.
D) None of these statements is true.

Question 8

A market that has no barriers to entry and many small firms selling products that are slightly different from one another is best described as:

A) monopolistic competition.
B) monopoly.
C) perfect competition.
D) oligopoly.

Question 9

Large barriers to entry exist in which of the following market structures?

A) Perfect competition only
B) Perfect competition and monopolistic competition
C) Oligopoly and monopoly
D) Monopoly only

Question 10

The more firms are present in a market,the:

A) more competition is likely to be present.
B) less competition is likely to be present.
C) more like a monopoly it will behave.
D) more collusion is likely to occur.

Question 11

Strategic behavior is key feature in which market structure?

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

Question 12

Oligopoly describes a market with:

A) many sellers.
B) one seller.
C) only a few sellers.
D) few or many sellers, but only one buyer.

Question 13

A monopolistically competitive market can also be:

A) perfectly competitive market.
B) a monopoly.
C) an oligopoly.
D) All of the above.

Question 14

The goods or services that firms in an oligopoly sell:

A) are not close substitutes.
B) are close substitutes.
C) are standardized.
D) are either standardized or close substitutes.

Question 15

Which of the following market structures is considered imperfectly competitive?

A) Perfect competition
B) Monopolistic competition
C) Monopoly
D) All of these are considered imperfectly competitive.

Question 16

Monopolistic competition describes a market with:

A) few firms that sell goods and services and some barriers to entry.
B) many firms that sell goods and services that are standardized.
C) many firms that sell goods and services that are similar, but slightly different.
D) few firms that sell goods and services that are standardized.

Question 17

A market with many firms that sell goods and services that are close substitutes for one another is called:

A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.

Question 18

A market that consists of only a few large firms is probably a(n):

A) monopoly.
B) perfectly competitive market.
C) monopolistically competitive market.
D) oligopoly.

Question 19

It is important for a business owner to understand the market structure in which they operate because:

A) it defines how much freedom they have to set prices.
B) it will tell how much attention to pay to competitors' behavior.
C) it can help in deciding whether to advertise.
D) All of these statements are true.

Question 20

One of the defining characteristics of an oligopoly is that:

A) the strategic interactions between a firm and its rivals have a major impact on its profits.
B) no single firm has an impact on the market as a whole.
C) there are only a few buyers in the market.
D) there are no barriers to entry to the market.

Question 21

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm will charge a price:

A) P3 in the short run, and earn positive profits.
B) P2 in the long run, and earn zero profits.
C) P3 in the long run, and earn zero profits.
D) P2 in the short run, and earn positive profits.

Question 22

Long-run economic profits are possible in which of the following market structures?

A) Monopolistic competition
B) Oligopoly and monopoly
C) Perfect competition
D) Only monopoly

Question 23

In the short run,product differentiation enables firms in monopolistically competitive markets to:

A) act like a monopolist.
B) sell a standardized good.
C) collude with competing firms to set prices.
D) act like perfectly competitive firms.

Question 24

In the short run,monopolistically competitive firms behave like ________________,but in the long run,the profit of a firm is similar to that of ________________.

A) monopolies; perfectly competitive firms
B) perfectly competitive firms; monopolies
C) monopolies; oligopolies
D) oligopolies; perfectly competitive firms

Question 25

Just like a monopolist,a monopolistically competitive firm:

A) cannot sell additional units of output without lowering the price.
B) is a price taker.
C) sets the price according to marginal revenue and marginal cost; the demand curve doesn't matter.
D) faces a perfectly elastic demand curve.

Question 26

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,area A represents:

A) profits earned in the short and long run.
B) profits earned in the short run.
C) profits earned in the long run.
D) consumer surplus.

Question 27

Standardized products can appear:

A) only in perfectly competitive markets.
B) in perfectly competitive and monopolistically competitive markets.
C) in monopolistically competitive and oligopoly markets.
D) in perfectly competitive and oligopoly markets.

Question 28

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,area B represents:

A) profits earned in the short run.
B) consumer surplus.
C) producer surplus.
D) deadweight loss.

Question 29

Offering goods that are similar to competitors' products but more attractive in some ways is called:

A) product distinction.
B) product differentiation.
C) price-point pinning.
D) deceptive advertising.

Question 30

Oligopoly is about the ____________ and monopolistic competition is about the ______________.

A) number of firms; variety of products
B) variety of products; barriers to entry
C) barriers to entry; number of firms
D) variety of products; number of firms

Question 31

Firms who effectively differentiate their product from their competitors' products do so by having:

A) real, not just perceived, differences in product design.
B) perceived, but not real, differences in product design.
C) real or perceived differences in product design.
D) None of these statements is true.

Question 32

In the long-run,monopolistically competitive firms:

A) charge prices equal to marginal cost.
B) have excess capacity.
C) produce at the minimum of average total cost.
D) both B and C are true.

Question 33

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm will produce:

A)where MR = MC and will charge according to ATC.
B)where MR = MC and will charge according to D.
C)where D = MC and will charge according to MR.
D)where D = MC and will charge according to ATC.

Question 34

In the short run,product differentiation enables firms in monopolistically competitive markets to:

A) produce a good for which there are exact substitutes.
B) produce a good which is standardized.
C) price the good at marginal cost.
D) earn a positive economic profit.

Question 35

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,area C represents:

A) producer surplus.
B) consumer surplus.
C) deadweight loss.
D) profits.

Question 36

________________ and ______________ are often found together in a market.

A) Monopolistic competition; oligopoly
B) Perfect competition; oligopoly
C) Monopoly; oligopoly
D) Monopolistic competition; monopoly

Question 37

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm:

A)will cause deadweight loss equal to area C.
B)will earn profits equal to area B.
C)should act like a monopolist in the short run.
D)should leave the industry in the long run.

Question 38

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm:

A)will earn positive profits equal to area A.
B)will earn positive profits equal to area C.
C)will earn negative profits (a loss)equal to area A.
D)will earn negative profits (a loss)equal to area B.

Question 39

Product differentiation refers to:

A) firms who offer similar products to their competitors' products, but that are more attractive in some way.
B) the process of creating a standardized product with a lower-cost method than the competitors' method.
C) the process of informing the public of differences in products as a result of error.
D) consumers who sort and group goods based on similar characteristics.

Question 40

___________________ is about the number of firms,and ________________ is about the variety of products.

A) Monopolistic competition; oligopoly
B) Oligopoly; monopolistic competition
C) Perfect competition; monopoly
D) Monopoly; oligopoly

Question 41

Firms have incentive to enter a monopolistically competitive market if:

A) positive profits are being earned and the price is below MC.
B) zero profits are being made and they can duplicate the product exactly.
C) positive profits are being earned and they can create a similar product.
D) zero profits are being made and they can create a similar product.

Question 42

If a monopolistically competitive firm is earning profits in the short run:

A) the entry of competing firms will shift the firm's demand to the right.
B) the entry of competing firms will shift the firm's demand to the left.
C) the entry of competing firms will cause price to drop, but not affect the firm's demand curve.
D) the entry of competing firms will cause price to rise, but not affect the firm's demand curve.

Question 43

As long as firms currently in a monopolistically competitive market are earning profits:

A) more firms will leave the market before the profits are competed away.
B) the government will step in to regulate prices to ensure they stay competitive.
C) the firm will lower its price to keep out competitors.
D) more firms will enter the market with products that are close substitutes.

Question 44

If firms in a monopolistically competitive market are earning negative economic profits,it is likely that:

A) firms will enter the market.
B) firms will exit the market.
C) the firms in the market will shut down immediately.
D) the firms in the market will expand to try to capture lower costs per unit.

Question 45

If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting only when:

A) firms stop leaving the industry.
B) firms stop entering the industry.
C) the firm raises its price.
D) the firm lowers its price.

Question 46

These are the cost and revenue curves associated with a monopolistically competitive firm in the short run. According to the graph shown,in the long run we can expect that

A) firms will enter the market.
B) firms will exit the market.
C) price will increase.
D) profits will increase.

Question 47

In the short run,monopolistically competitive firms will maximize profits by:

A) acting like perfectly competitive firms.
B) acting like monopolists.
C) playing strategic games like oligopolists.
D) None of these statements is true.

Question 48

In the short run,monopolistically competitive firms:

A) can earn positive economic profits by acting like a monopolist.
B) can earn positive economic profits by acting like a perfectly competitive firm.
C) will earn zero economic profits by acting like a monopolist.
D) will earn zero economic profits by acting like a perfectly competitive firm.

Question 49

Once a monopolistically competitive firm innovates,it is likely that:

A) it will enjoy long-run profits.
B) other firms will rush to create similar, highly substitutable goods.
C) it will need government protection to earn enough to cover its R & D costs.
D) None of these is likely to happen.

Question 50

For the monopolistically competitive firm,the demand curve it faces will be flatter:

A) the more differentiated the good is.
B) the less differentiated the good is.
C) the more complementary the good is.
D) the less complementary the good is.

Question 51

If a monopolistically competitive firm is earning profits in the short run:

A) barriers to entry will allow the firm to enjoy them in the long run as well.
B) it is acting like a perfectly competitive firm.
C) other firms have an incentive to enter the market.
D) it should leave the industry before it gets competed away.

Question 52

For the monopolistically competitive firm,the steepness of the demand curve depends on:

A) the steepness of the MC curve.
B) the number of consumers in the market.
C) the availability of close substitutes.
D) None of these statements is correct.

Question 53

The demand curve facing the monopolistically competitive firm is:

A) flat.
B) vertical.
C) U-shaped.
D) None of these statements is true.

Question 54

If a firm's demand curve in a monopolistically competitive market is shifting left:

A) competition is likely entering with similar products.
B) firms must be exiting the industry.
C) economic profits must be increasing.
D) None of these statements is true.

Question 55

Like the monopolist,the monopolistically competitive firm:

A) faces a downward sloping demand curve.
B) is a price taker.
C) sets the price where marginal cost equals marginal revenue; the demand curve doesn't matter.
D) All of these statements are true.

Question 56

The primary difference between a monopolistically competitive firm and a monopoly is:

A) the ability for competition to enter the market in the long run.
B) the ability for competition to enter the market in the short run.
C) only the monopolistically competitive firm is a price taker.
D) only the monopolist can set his price equal to demand.

Question 57

If a monopolistically competitive firm is suffering losses in the short run:

A) the exit of competing firms will shift the firm's demand to the right.
B) the exit of competing firms will shift the firm's demand to the left.
C) the exit of competing firms will cause price to drop, but not affect the firm's demand curve.
D) the exit of competing firms will cause price to rise, but not affect the firm's demand curve.

Question 58

If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting when:

A) the price is equal to the firm's marginal cost.
B) the price is equal to the firm's average total cost.
C) the price is the same as what a perfectly competitive firm's price would be.
D) there is no deadweight loss.

Question 59

If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting when:

A) firms are positive but not large economic profit.
B) the firm is earning negative economic profit.
C) the firm is earning zero economic profit.
D) price falls to marginal cost.

Question 60

For the monopolistically competitive firm,the demand curve it faces will be steeper the:

A) more easily the good can be substituted.
B) less easily the good can be substituted.
C) more complement goods are available.
D) less complement goods are available.

Question 61

These are the cost and revenue curves associated with a firm. If the firm in the given graph were to produce Q1 and charge P3,the area A would represent:

A) consumer surplus.
B) producer surplus.
C) deadweight loss.
D) profits.

Question 62

In the long run,firms in a monopolistically competitive market operate at:

A) an efficient scale.
B) a less-than-efficient scale.
C) a more-than-efficient scale.
D) Any of these could be true, depending on the individual firm.

Question 63

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph is producing Q1 and charging P3,it is likely:

A) in long-run equilibrium.
B) an efficient outcome.
C) not maximizing profits.
D) operating at a loss.

Question 64

If a firm in a monopolistically competitive market has a demand curve that is shifting to the right,it will stop shifting when:

A) the firm raises its price.
B) the firm lowers its price.
C) firms stop entering the market.
D) firms stop leaving the market.

Question 65

If a firm in a monopolistically competitive market has a demand curve that is shifting to the right,it will only stop shifting when:

A) the firm is earning zero economic profits.
B) the firm's price is equal to its average total costs.
C) other firms have no incentive to leave the market.
D) All of these statements are true.

Question 66

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

A)making positive economic profits.
B)earning negative economic profits.
C)in long-run equilibrium.
D)All of these statements are true.

Question 67

These are the cost and revenue curves associated with a firm. If the firm in the given graph were to maximize profits,it would:

A) produce Q1 and charge P3.
B) cause deadweight loss.
C) earn zero economic profits.
D) All of these statements are true.

Question 68

The process of entry and exit into a monopolistically competitive market causes:

A) the firm's demand curve to shift left and/or right.
B) the firm's supply curve to shift left and/or right.
C) the firm's average total cost curve to shift left and/or right.
D) the firm's marginal cost curve to shift straight up and/or down.

Question 69

These are the cost and revenue curves associated with a firm. If the firm in the given graph were to produce Q1 and charge P3,the area C would represent:

A) producer surplus.
B) consumer surplus.
C) deadweight loss.
D) profits.

Question 70

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a firm in:

A) the long run, and economic profits are zero.
B) the short run, and accounting profits are negative.
C) the long run, and accounting profits are zero.
D) the short run, and economic profits are positive.

Question 71

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

A) making positive economic profits.
B) earning negative economic profits.
C) in long-run equilibrium.
D) All of these statements are true.

Question 72

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a firm in:

A) the short run, and firms will enter this market.
B) the long run, and firms will enter this market.
C) the short run, and firms will leave this market.
D) the long run, and no firms will enter or exit.

Question 73

These are the cost and revenue curves associated with a firm. If the firm in the given graph were to produce Q2 and charge P2,then:

A) economic profit would be negative.
B) deadweight loss would be positive.
C) producer surplus would be zero.
D) profits would be maximized.

Question 74

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

A) negative economic profits are being earned.
B) firms are leaving the market.
C) the selling price is less than the average total cost of the firm.
D) All of these statements are true.

Question 75

If firms in a monopolistically competitive market are earning negative economic profits,the demand curve of a single firm will likely:

A) shift right, as other firms leave the industry.
B) shift left, as other firms leave the industry.
C) shift right, as other firms enter the industry.
D) shift left, as other firms enter the industry.

Question 76

These are the cost and revenue curves associated with a firm. Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

A) earning positive economic profits.
B) earning negative economic profits.
C) earning zero economic profits.
D) It is impossible to tell from the graph provided.

Question 77

These are the cost and revenue curves associated with a firm. If the firm in the graph were producing Q2 and charging P2,it:

A) represents the perfectly competitive outcome.
B) is an efficient outcome.
C) is an outcome that eliminates deadweight loss.
D) All of these statements are true.

Question 78

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it is likely that:

A) positive economic profits are being earned.
B) firms are entering the market.
C) the selling price is less than the average total cost of the firm.
D) All of these statements are true.

Question 79

The process of entry and exit into a monopolistically competitive market continues until:

A) profits are zero.
B) long-run equilibrium is reached.
C) price is equal to average total cost.
D) All of these statements are true.

Question 80

The process of entry and exit into a monopolistically competitive market continues until:

A) profits are positive.
B) profits are negative.
C) profits are zero.
D) Any of these statements could be true.