Question 1

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

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 2

The more firms there are in a market,the:

Accepted Answer

A)   larger will be the price effect of one firm's output decision.
B)   smaller will be the price effect of one firm's output decision.
C)   more collusion is likely to happen.
D)   None of these statements is true.E) C) and D)
F) None of the above

Question 3

This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not.  According to the matrix shown,the profit-maximizing outcome for the firms is:

Accepted Answer

A)   to act like a monopolist and both collude.
B)   to both compete.
C)   for Firm A to compete and Firm B to collude.
D)   for Firm B to compete and Firm A to collude.E) None of the above
F) A) and B)

Question 4

One of the defining characteristics of an oligopoly is that:

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 5

A number of firms who collude to make collective production decisions about quantities or prices is called:

Accepted Answer

A)   a cartel.
B)   a duopoly.
C)   market power.
D)   a joint monopoly.E) A) and C)
F) All of the above

Question 6

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

Accepted Answer

A)   acting like perfectly competitive firms.
B)   acting like monopolists.
C)   playing strategic games like oligopolists.
D)   None of these statements is true.E) All of the above
F) A) and B)

Question 7

When a market consists of many small firms,it:

Accepted Answer

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.E) B) and C)
F) A) and B)

Question 8

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

Accepted Answer

A)   profits earned in the short run.
B)   consumer surplus.
C)   producer surplus.
D)   deadweight loss.E) A) and C)
F) All of the above

Question 9

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

Accepted Answer

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.E) A) and D)
F) A) and B)

Question 10

When firms are faced with repeating games,such as the prisoner's dilemma,they:

Accepted Answer

A)   are more likely to collude.
B)   are less likely to collude.
C)   will tend to act more like perfectly competitive firms.
D)   will be more likely to renege on agreements.E) A) and B)
F) B) and C)

Question 11

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:

Accepted Answer

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.E) A) and B)
F) C) and D)

Question 12

Most countries:

Accepted Answer

A)   protect cartels.
B)   have laws against firms making agreements about prices or quantities.
C)   protect oligopoly markets.
D)   force monopolists to become duopolists.E) C) and D)
F) None of the above

Question 13

This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not.  According to the matrix shown,how much will be produced if both firms collude?

Accepted Answer

A)   50 million units
B)   65 million units
C)   70 million units
D)   85 million unitsE) A) and B)
F) All of the above

Question 14

A cartel is:

Accepted Answer

A)   a duopoly with more than two firms.
B)   a firm that always has a dominant strategy.
C)   a number of firms who collude to make collective production decisions about quantities or prices.
D)   the "leader" of an industry, typically the firm with the largest market share.E) A) and D)
F) A) and C)

Question 15

In the long run,a profit-maximizing monopolistically competitive firm sells at a price that is:

Accepted Answer

A)   equal to average total cost, but higher than marginal cost.
B)   equal to marginal cost and marginal revenue.
C)   equal to average total cost, but lower than marginal cost.
D)   equal to demand, but higher than average total cost and marginal cost.E) None of the above
F) All of the above

Question 16

A financial services company may hire a professional athlete as a spokesperson because:

Accepted Answer

A)   the athlete is more informed about financial services than the general public.
B)   this can act as a credible signal to consumers that the company has a high quality product they are willing to spend money advertising.
C)   does not serve as a credible signal to consumers, since athletes are not often financial service experts.
D)   can signal to customers that the services are worse than they actually are.E) None of the above
F) A) and B)

Question 17

In an oligopoly,when the quantity effect outweighs the price effect:

Accepted Answer

A)   an increase in output may increase the firm's profits.
B)   a decrease in output may increase the firm's profits.
C)   keeping output constant and raising price will increase the firm's profits.
D)   keeping output constant and lowering price will increase the firm's profits.E) All of the above
F) C) and D)

Question 18

________________ and ______________ are often found together in a market.

Accepted Answer

A)   Monopolistic competition; oligopoly
B)   Perfect competition; oligopoly
C)   Monopoly; oligopoly
D)   Monopolistic competition; monopolyE) None of the above
F) B) and C)

Question 19

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

Accepted Answer

A)   at lowest average total costs possible.
B)   at full capacity.
C)   at less than full capacity.
D)   on an efficient scale.E) A) and C)
F) C) and D)

Question 20

Cartels:

Accepted Answer

A)   can effectively sustain large profits in the long run.
B)   are usually illegal.
C)   can act as if they are a single monopoly.
D)   All of these statements are true.E) None of the above
F) B) and D)

Exam 15: Monopolistic Competition and Oligopoly

Cartels:

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

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The more firms there are in a market,the:

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

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In the long run,a profit-maximizing monopolistically competitive firm sells at a price that is:

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When a market consists of many small firms,it:

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Most countries:

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This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not. According to the matrix shown,the profit-maximizing outcome for the firms is:

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In an oligopoly,when the quantity effect outweighs the price effect:

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This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not. According to the matrix shown,how much will be produced if both firms collude?

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

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One of the defining characteristics of an oligopoly is that:

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When firms are faced with repeating games,such as the prisoner's dilemma,they:

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

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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:

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A cartel is:

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A financial services company may hire a professional athlete as a spokesperson because:

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________________ and ______________ are often found together in a market.

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

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A number of firms who collude to make collective production decisions about quantities or prices is called:

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__ and are often found together in a market.

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