Question 1

What one good thing happens when a monopolistically competitive firm lowers it price?

Accepted Answer

A)   The output effect
B)   The price effect
C)   The income effect
D)   The substitution effectE) A) and B)
F) B) and C)

Question 2

Which of the following is an example of implicit collusion?

Accepted Answer

A)   Product differentiation
B)   A retaliation strategy
C)   A second-price auction
D)   Price leadershipE) A) and B)
F) A) and C)

Question 3

Why are oligopolies difficult to analyse?

Accepted Answer

A)   The firms are so large.
B)   Demand and cost curves do not exist for these types of industries.
C)   How firms respond to a price change by a rival is uncertain.
D)   Oligopolies are a recent development so economists have not had time to develop models.E) A) and B)
F) B) and D)

Question 4

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Accepted Answer

A) True 
 B)False

Question 5

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Accepted Answer

A)   higher; lower
B)   lower; lower
C)   lower; higher
D)   higher; higherE) A) and D)
F) A) and C)

Question 6

Which of the following is not part of an oligopolist's business strategy?

Accepted Answer

A)   Deciding on how to manage relations with suppliers
B)   Choosing what new technologies to adopt
C)   Selecting which new markets to enter
D)   Independently setting a product's price without consideration of its rivals' pricing policiesE) B) and C)
F) B) and D)

Question 7

A patent is an example of ________.

Accepted Answer

A)   how ownership of a key input creates a barrier to entry
B)   a government-imposed barrier to entry
C)   occupational licensing
D)   how market failure can lead to oligopolyE) All of the above
F) C) and D) B

Question 8

One reason why the coffeehouse market is competitive is that _______.

Accepted Answer

A)   demand for specialty coffee is very high
B)   it is trendy and therefore is likely to have a customer following
C)   barriers to entry are low
D)   consumption takes place in publicE) None of the above
F) B) and C)

Question 9

Figure 9.13  Figure 9.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 9.13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

Accepted Answer

A)   Some firms will exit the market causing the demand to increase for firms remaining in the market.
B)   The firms that are incurring losses will be purchased by their more successful rivals.
C)   Inefficient firms will exit the market, and new cost efficient firms will enter the market.
D)   Firms will have to raise their prices to cover costs of production.E) A) and B)
F) B) and C)

Question 10

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called ____________.

Accepted Answer

A)   an earnings table
B)   a payoff table
C)   a payoff matrix
D)   a strategic matrixE) B) and C)
F) A) and D)

Question 11

For the monopolistically competitive firm,_______.

Accepted Answer

A)   Price (P)  = Marginal Revenue (MR)  = Average Revenue (AR) 
B)   P = MR > AR
C)   P = AR > MR
D)   P > MR = ARE) C) and D)
F) B) and D) C

Question 12

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price.The cells of the payoff matrix show ________.

Accepted Answer

A)   the profit that each producer can expect to earn by pursuing a single strategy
B)   the profit that each producer can expect to earn from every combination of strategies by the firms in the market
C)   the strategy that a firm must pursue to earn various levels of profit
D)   the expected profits of rival firmsE) All of the above
F) A) and C)

Question 13

Figure 9.17 f units B)  Qg units C)  Qh units D)  Qj units" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 9.17.The allocatively efficient output for the firm represented in the diagram is _____.

Accepted Answer

A)   Qf units
B)   Qg units
C)   Qh units
D)   Qj unitsE) All of the above
F) A) and D)

Question 14

Table 9.3  Firm A(Alistair's)  and Firm B (Baine's)  are the only firms selling luggage in the upscale town of Adelaide. Each firm must decide on whether to increase its advertising spending to compete for customers. If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 9.3 shows the payoff matrix for this advertising game.
-Refer to Table 9.3.The Nash equilibrium in this game is:

Accepted Answer

A)   There is no Nash equilibrium.
B)   Baine increases its advertising budget, but Alistair does not.
C)   Alistair increases its advertising budget, but Baine does not.
D)   Both Alistair and Baine increase their advertising budgets.E) All of the above
F) B) and C)

Question 15

Figure 9.8  Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 9.8.Based on the diagram,one can conclude that _______.

Accepted Answer

A)   some existing firms will exit the market
B)   new firms will enter the market
C)   the industry is in long-run equilibrium
D)   firms achieve productive efficiencyE) B) and C)
F) A) and C)

Question 16

Figure 9.8  Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea.
-Refer to Figure 9.8.The profit-maximising output level is ______.

Accepted Answer

A)   22 cases
B)   24 cases
C)   30 cases
D)   38 casesE) A) and C)
F) None of the above

Question 17

What happens when large firms in oligopoly markets cut their prices?

Accepted Answer

A)   Rival firms will also cut their prices to avoid losing sales.
B)   Rival firms will not change their prices because most of their customers have signed contracts that commit them to doing business with the same firms for the life of their contracts.
C)   We don't know for sure how rival firms will respond.
D)   Rival firms will not cut their prices because they fear that the federal government will accuse them of collusion.E) C) and D)
F) B) and C)

Question 18

When does collusion occur?

Accepted Answer

A)   When a firm chooses a level of output to maximise its own profit
B)   When two firms' price and output decisions come into conflict
C)   When there is an agreement among firms to charge the same price or otherwise not to compete
D)   When firms refuse to follow their price leadersE) C) and D)
F) A) and D)

Question 19

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Accepted Answer

A) True 
 B)False

Question 20

When a firm faces a downward-sloping demand curve,marginal revenue __________.

Accepted Answer

A)   must exceed price because the price effect outweighs the output effect
B)   is less than price because a firm must lower its price to sell more
C)   equals price because the firm sells a standardised product
D)   must exceed price because the output effect outweighs the price effectE) A) and B)
F) B) and D) B

Exam 9: Monopolistic Competition and Oligopoly

What one good thing happens when a monopolistically competitive firm lowers it price?

Correct Answer
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Which of the following is an example of implicit collusion?

Correct Answer
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Why are oligopolies difficult to analyse?

Correct Answer
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New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Correct Answer
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In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a level of output and charges a price.

Correct Answer
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Which of the following is not part of an oligopolist's business strategy?

Correct Answer
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A patent is an example of ________.

Correct Answer
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B

One reason why the coffeehouse market is competitive is that _______.

Correct Answer
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Figure 9.13 Figure 9.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

Correct Answer
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A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called ____________.

Correct Answer
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For the monopolistically competitive firm,_______.

Correct Answer
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C

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price.The cells of the payoff matrix show ________.

Correct Answer
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Figure 9.17 -Refer to Figure 9.17.The allocatively efficient output for the firm represented in the diagram is _____.

Correct Answer
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Correct Answer
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Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.Based on the diagram,one can conclude that _______.

Correct Answer
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Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.The profit-maximising output level is ______.

Correct Answer
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What happens when large firms in oligopoly markets cut their prices?

Correct Answer
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When does collusion occur?

Correct Answer
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A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Correct Answer
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When a firm faces a downward-sloping demand curve,marginal revenue __________.

Correct Answer
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B

Exam 9: Monopolistic Competition and Oligopoly

What one good thing happens when a monopolistically competitive firm lowers it price?

Correct AnswerverifiedShow Answer

Which of the following is an example of implicit collusion?

Correct AnswerverifiedShow Answer

Why are oligopolies difficult to analyse?

Correct AnswerverifiedShow Answer

New firms are able to enter monopolistically competitive markets because there are low barriers to entry.

Correct AnswerverifiedShow Answer

In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a ________ level of output and charges a ________ price.

Correct AnswerverifiedShow Answer

Which of the following is not part of an oligopolist's business strategy?

Correct AnswerverifiedShow Answer

A patent is an example of ________.

Correct AnswerverifiedB

One reason why the coffeehouse market is competitive is that _______.

Correct AnswerverifiedShow Answer

Figure 9.13 Figure 9.13 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. -Refer to Figure 9.13.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

Correct AnswerverifiedShow Answer

A table that shows the possible payoffs each firm earns from every combination of strategies by all firms is called ____________.

Correct AnswerverifiedShow Answer

For the monopolistically competitive firm,_______.

Correct AnswerverifiedC

Suppose we want to use game theory to analyse how an oligopolist selects its optimal price.The cells of the payoff matrix show ________.

Correct AnswerverifiedShow Answer

Figure 9.17 -Refer to Figure 9.17.The allocatively efficient output for the firm represented in the diagram is _____.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.Based on the diagram,one can conclude that _______.

Correct AnswerverifiedShow Answer

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.The profit-maximising output level is ______.

Correct AnswerverifiedShow Answer

What happens when large firms in oligopoly markets cut their prices?

Correct AnswerverifiedShow Answer

When does collusion occur?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Correct AnswerverifiedShow Answer

When a firm faces a downward-sloping demand curve,marginal revenue __________.

Correct AnswerverifiedB

Correct Answer
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In long-run equilibrium,compared to a perfectly competitive market,a monopolistically competitive industry produces a level of output and charges a price.

Correct Answer
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B

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C

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B