Deck 13: Monopolistic Competition and Oligopoly

Question 1

In oligopoly equilibrium:

A)MC = AC.
B)MC < AC.
C)MC > AC.
D)MC = MR.

Answer 1

D

Question 2

Firms never face a downward sloping demand curve in markets characterized by:

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

Answer 2

A

Question 3

Monopolistically competitive firms earn a normal profit whenever price is set equal to:

A)minimum average cost.
B)average cost.
C)average variable cost.
D)average revenue.

Answer 3

B

Question 4

When prices in oligopoly markets exceed those in a perfectly competitive equilibrium, this difference is the cost of:

A)information.
B)inefficiency.
C)market power.
D)product differentiation.

Question 5

In an oligopoly market, firms always:

A)offer products that are not perfect substitutes.
B)make decisions in light of expected reactions from other firms.
C)set price equal to marginal cost.
D)are price takers.

Question 6

The Herfindahl Hirschmann Index (HHI) is a popular measure of competitor size inequality that reflects size differences among large and small firms.Which of the following is true?

A)HHI approaches zero for industries characterized by a large number of very small competitors.
B)Calculated in percentage terms, the HHI is the sum of the market shares for all n industry competitors.
C)A monopoly industry with a single dominant firm is described by a HHI = 100.
D)A vigorously competitive industry where each of the leading four firms enjoy market shares of 25% is described by a HHI = 100.

Question 7

For a firm in monopolistically competitive market equilibrium:

A)MC > AC.
B)MC = MR.
C)MR > AR.
D)AR > AC.

Question 8

Oligopoly is always characterized by:

A)homogeneous products.
B)barriers to entry or exit.
C)perfect dissemination of information.
D)differentiated products.

Question 9

If LRAC decline continuously, it is impossible to have:

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

Question 10

In neither monopolistic competition nor oligopoly market structures:

A)is there easy entry and exit.
B)do consumers perceive differences among the products of various competitors.
C)is there a single seller.
D)are economic profits earned in the long run.