Question 1

If a firm is earning a large economic profit and the firm operates in a fairly competitive market, then, over time:

Accepted Answer

A)   old firms will exit and prices will rise.
B)   old firms will exit and prices will fall.
C)   new firms will enter and prices will rise.
D)   new firms will enter and prices will fall.E) B) and D)
F) All of the above

Question 2

In the Cournot equilibrium, the price that each firm accepts is:

Accepted Answer

A)   slightly higher than a monopoly price.
B)   the same as the monopoly price.
C)   lower than a monopoly price, but higher than a competitive price.
D)   the same as a competitive price.E) A) and B)
F) A) and C)

Question 3

Explain why OPEC cannot always maintain the high price of oil by restricting production?

Accepted Answer

OPEC members face a prisoners' dilemma p...

Question 4

While very few markets are 'purely competitive' according to the strict economics definition, market analysts often use competition as the:

Accepted Answer

A)   benchmark from which to judge other market settings.
B)   standard of an inefficient market structure.
C)   market with poor entry and exit conditions.
D)   one market with typical asymmetry in information.E) All of the above
F) A) and C)

Question 5

Always Round Tire is the only producer of tires for the new British import, the Maxi Copper. Demand for a set of four tires is P = 800 - 5Q while the costs to Always Round are: MC = 15Q. What would be the monopoly price and quantity? What would happen to price and quantity if the market were perfectly competitive (assuming the same costs)?

Accepted Answer

A monopoly would maximize its profits by...

Question 6

For the perfectly or purely competitive firm, profit maximization occurs at an output level where:

Accepted Answer

A)   P = MC.
B)   MC = ATC.
C)   P = AVC.
D)   P < AVC.E) C) and D)
F) A) and D)

Question 7

In a monopolistically competitive market, the seller maximizes profits by:

Accepted Answer

A)   maximizing price.
B)   setting MC = ATC.
C)   setting price where MR = MC.
D)   setting price where P = MC.E) All of the above
F) C) and D)

Question 8

Two firms agree to set a single high price for their products, and reap high profits. What is the problem here?

Accepted Answer

A)   One firm is afraid that its profit might fall drastically since it might secretly cut price.
B)   One firm is afraid that its profit might fall drastically since the other might secretly cut price.
C)   One firm is afraid that its profit might fall drastically since the other might raise price.
D)   One firm is afraid that its profit might fall drastically since oil prices may go up.E) A) and D)
F) A) and C)

Question 9

Elmer's Glue has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called:

Accepted Answer

A)   pure or perfect competition.
B)   oligopoly.
C)   monopolistic competition.
D)   monopoly.E) B) and C)
F) A) and C)

Question 10

A market where a few firms produce most of the output or sales is called:

Accepted Answer

A)   oligopolistic.
B)   monopolistically competitive.
C)   perfectly competitive.
D)   monopolistic.E) B) and C)
F) A) and D)

Question 11

In the Cournot equilibrium, each firm assumes that the other's ______ is/are being held constant.

Accepted Answer

A)   price
B)   costs
C)   output or sales
D)   marketing strategyE) B) and C)
F) A) and D)

Question 12

In a purely competitive market, a company selling in the market views its demand curve as:

Accepted Answer

A)   completely price insensitive.
B)   horizontal (flat) .
C)   vertical.
D)   convex.E) None of the above
F) A) and B)

Question 13

The market for micro-computers (PCs)  is fairly competitive, the products are somewhat homogeneous, and, over time, firms have entered looking to make profits on new configurations of the micro-computer. Over time, profits:

Accepted Answer

A)   have risen dramatically.
B)   have stayed about the same for most firms.
C)   have become razor thin for many producers.
D)   are not important since this industry is in the nonprofit sector.E) A) and C)
F) B) and C)

Question 14

Recently American Airlines started charging $15 for each checked baggage. Why did the company simply not charge $15 to $20 more per ticket, and quietly avoid this publicity?

Accepted Answer

This is a very good example of strategic...

Question 15

The key to the importance of the marginal cost curve of a company is that it is its:

Accepted Answer

A)   supply curve of product to the marketplace.
B)   demand curve for its product to the marketplace.
C)   average cost of product in both the short and long run.
D)   fixed cost.E) A) and B)
F) A) and C)

Question 16

Always Round Tire has been in the tire business since 1963. They have several plants with different levels of technology. They are organized by the United Rubber Workers union. Over the years, the company has worked with its employees to figure out how to produce a tire for less. This incumbent advantage over potential newcomers is the:

Accepted Answer

A)   result of scale economies.
B)   impact of licenses and patents.
C)   clear threat of using its excess capacity.
D)   effect of its learning curve.E) None of the above
F) A) and B)

Question 17

The market environment heavily influences corporate decision-making ability. Discuss the differences in executive decisions concerning pricing, product design, and advertising between a company that exists in a perfectly competitive market and a company that lives a monopolistically competitive market.

Accepted Answer

In a perfectly competitive market consum...

Question 18

Economists tend to focus on one structural aspect of market organization that is more important than the others. It is:

Accepted Answer

A)   the number of buyers and sellers.
B)   product homogeneity or differentiation.
C)   the quality of market information.
D)   entry and exit conditions.E) B) and D)
F) A) and D)

Question 19

In a perfectly competitive market, the price that the firm faces from supply and demand is also equal to:

Accepted Answer

A)   average variable cost.
B)   marginal revenue and average revenue.
C)   average revenue but never marginal revenue.
D)   long run average cost in the short run.E) A) and B)
F) All of the above

Question 20

Duds is a new laundry detergent trying to break into the market. What might be its big problem?

Accepted Answer

A)   Its health care costs
B)   Entry costs in terms of getting shelf space in the retail stores
C)   Its employment policy
D)   Its outsourcing policyE) A) and B)
F) A) and C)

Exam 6: Market Structure

Recently American Airlines started charging $15 for each checked baggage. Why did the company simply not charge $15 to $20 more per ticket, and quietly avoid this publicity?

Correct Answer
verified
This is a very good example of strategic...
View Answer

Elmer's Glue has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called:

Correct Answer
verified

For the perfectly or purely competitive firm, profit maximization occurs at an output level where:

Correct Answer
verified

The key to the importance of the marginal cost curve of a company is that it is its:

Correct Answer
verified

In the Cournot equilibrium, the price that each firm accepts is:

Correct Answer
verified

In a perfectly competitive market, the price that the firm faces from supply and demand is also equal to:

Correct Answer
verified

Two firms agree to set a single high price for their products, and reap high profits. What is the problem here?

Correct Answer
verified

If a firm is earning a large economic profit and the firm operates in a fairly competitive market, then, over time:

Correct Answer
verified

While very few markets are 'purely competitive' according to the strict economics definition, market analysts often use competition as the:

Correct Answer
verified

Duds is a new laundry detergent trying to break into the market. What might be its big problem?

Correct Answer
verified

The market for micro-computers (PCs) is fairly competitive, the products are somewhat homogeneous, and, over time, firms have entered looking to make profits on new configurations of the micro-computer. Over time, profits:

Correct Answer
verified

In the Cournot equilibrium, each firm assumes that the other's ______ is/are being held constant.

Correct Answer
verified

In a purely competitive market, a company selling in the market views its demand curve as:

Correct Answer
verified

Economists tend to focus on one structural aspect of market organization that is more important than the others. It is:

Correct Answer
verified

A market where a few firms produce most of the output or sales is called:

Correct Answer
verified

Explain why OPEC cannot always maintain the high price of oil by restricting production?

Correct Answer
verified
OPEC members face a prisoners' dilemma p...
View Answer

Correct Answer
verified
In a perfectly competitive market consum...
View Answer

In a monopolistically competitive market, the seller maximizes profits by:

Correct Answer
verified

Correct Answer
verified
A monopoly would maximize its profits by...
View Answer

Correct Answer
verified

Exam 6: Market Structure

Recently American Airlines started charging $15 for each checked baggage. Why did the company simply not charge $15 to $20 more per ticket, and quietly avoid this publicity?

Correct AnswerverifiedThis is a very good example of strategic...View AnswerShow Answer

Elmer's Glue has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called:

Correct AnswerverifiedShow Answer

For the perfectly or purely competitive firm, profit maximization occurs at an output level where:

Correct AnswerverifiedShow Answer

The key to the importance of the marginal cost curve of a company is that it is its:

Correct AnswerverifiedShow Answer

In the Cournot equilibrium, the price that each firm accepts is:

Correct AnswerverifiedShow Answer

In a perfectly competitive market, the price that the firm faces from supply and demand is also equal to:

Correct AnswerverifiedShow Answer

Two firms agree to set a single high price for their products, and reap high profits. What is the problem here?

Correct AnswerverifiedShow Answer

If a firm is earning a large economic profit and the firm operates in a fairly competitive market, then, over time:

Correct AnswerverifiedShow Answer

While very few markets are 'purely competitive' according to the strict economics definition, market analysts often use competition as the:

Correct AnswerverifiedShow Answer

Duds is a new laundry detergent trying to break into the market. What might be its big problem?

Correct AnswerverifiedShow Answer

The market for micro-computers (PCs) is fairly competitive, the products are somewhat homogeneous, and, over time, firms have entered looking to make profits on new configurations of the micro-computer. Over time, profits:

Correct AnswerverifiedShow Answer

In the Cournot equilibrium, each firm assumes that the other's ______ is/are being held constant.

Correct AnswerverifiedShow Answer

In a purely competitive market, a company selling in the market views its demand curve as:

Correct AnswerverifiedShow Answer

Economists tend to focus on one structural aspect of market organization that is more important than the others. It is:

Correct AnswerverifiedShow Answer

A market where a few firms produce most of the output or sales is called:

Correct AnswerverifiedShow Answer

Explain why OPEC cannot always maintain the high price of oil by restricting production?

Correct AnswerverifiedOPEC members face a prisoners' dilemma p...View AnswerShow Answer

Correct AnswerverifiedIn a perfectly competitive market consum...View AnswerShow Answer

In a monopolistically competitive market, the seller maximizes profits by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA monopoly would maximize its profits by...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
This is a very good example of strategic...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
OPEC members face a prisoners' dilemma p...
View Answer

Correct Answer
verified
In a perfectly competitive market consum...
View Answer

Correct Answer
verified

Correct Answer
verified
A monopoly would maximize its profits by...
View Answer

Correct Answer
verified