Question 1

The long run outcome of the monopolistically competitive firm:

Accepted Answer

A)  occurs where price equals marginal cost.
B)  maximizes total surplus.
C)  creates welfare loss.
D)  does not maximize profits.E) A) and C)
F) A) and B)

Question 2

An oligopoly with two firms is known as:

Accepted Answer

A)  a duopoly.
B)  a two-opoly.
C)  a double market.
D)  duopolistic competition.E) A) and B)
F) None of the above

Question 3

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:

Accepted Answer

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

Question 4

If we were to compare the monopolistically competitive firm's long run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

Accepted Answer

A)  produces less.
B)  creates more total surplus.
C)  charges less.
D)  earns greater profits.E) B) and C)
F) B) and D)

Question 5

When one strategy is always the best for a player to choose,regardless of what other players do,it is called:

Accepted Answer

A)  a dominant strategy.
B)  a Nash equilibrium.
C)  collusion.
D)  the prisoner's dilemma.E) A) and C)
F) C) and D)

Question 6

A duopoly is:

Accepted Answer

A)  an oligopoly with two firms.
B)  a strategy that benefits both firms.
C)  an agreement,explicit or implied,between two firms.
D)  two firms agreeing to act like a joint monopolist.E) C) and D)
F) None of the above

Question 7

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

Accepted Answer

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

Question 8

Collusion is:

Accepted Answer

A)  the act of firms working together to make decisions about price and quantity.
B)  buyers acting in unison against a company in efforts to change its practices.
C)  the act of firms undercutting one another in competition until zero profits are earned.
D)  None of these statements is true.E) B) and C)
F) C) and D)

Question 9

Economists usually believe that:

Accepted Answer

A)  competition encourages innovation.
B)  innovation encourages competition.
C)  innovation leads to market power and should be regulated.
D)  market power leads to innovation.E) A) and B)
F) None of the above

Question 10

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

Accepted Answer

A)  produce Q1 and charge P3.
B)  cause deadweight loss.
C)  earn zero economic profits.
D)  All of these statements are true.E) A) and B)
F) None of the above

Question 11

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

Accepted Answer

A)  firms have no incentive to enter the market.
B)  the price is equal to the firm's average total cost.
C)  the firm is earning zero economic profit.
D)  All of these statements are true.E) B) and C)
F) All of the above

Question 12

Understanding the market structure is important for:

Accepted Answer

A)  businesses.
B)  consumers.
C)  policy-makers.
D)  All of these statements are true.E) A) and B)
F) B) and C)

Question 13

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) B) and D)
F) All of the above

Question 14

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. 
Given the situation in the matrix shown,the two firms are likely to collude only if:

Accepted Answer

A)  it is a repeated game.
B)  they will only make the decision once.
C)  The two firms will always choose to compete.
D)  they are the only two firms with dominant market share.E) A) and D)
F) B) and D)

Question 15

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

Accepted Answer

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

Question 16

The welfare loss associated with the outcome in a competitive oligopoly is:

Accepted Answer

A)  bigger than that of a monopoly.
B)  smaller than that of a monopoly.
C)  the same as that of a monopoly.
D)  the same as that of colluding oligopolists.E) A) and B)
F) A) and D)

Question 17

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

Accepted Answer

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

Question 18

Advertising:

Accepted Answer

A)  can cause price competition and drive prices down.
B)  can cause perceived differences that don't exist and drive prices up.
C)  and its effects are a hotly debated topic.
D)  All of these statements are true.E) B) and D)
F) None of the above

Question 19

Monopolistically competitive firms have an incentive to:

Accepted Answer

A)  create products that are easily substituted for the competition's products.
B)  create products that have a unique feature that makes it difficult to substitute.
C)  create products that are exactly like the competitor's products.
D)  None of these statements is true.E) A) and D)
F) B) and D)

Question 20

A defining characteristic of an oligopoly is:

Accepted Answer

A)  firms in the industry know they are competing with a few large firms with market power.
B)  barriers to entry prevent newcomers to such an industry.
C)  easy entry and exit prevent long-run profits from being possible.
D)  all firms sell a standardized product.E) None of the above
F) C) and D)

Exam 15: Monopolistic Competition and Oligopoly

When one strategy is always the best for a player to choose,regardless of what other players do,it is called:

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Collusion is:

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

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A defining characteristic of an oligopoly is:

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Economists usually believe that:

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

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If we were to compare the monopolistically competitive firm's long run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

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Understanding the market structure is important for:

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An oligopoly with two firms is known as:

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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. Given the situation in the matrix shown,the two firms are likely to collude only if:

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The long run outcome of the monopolistically competitive firm:

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Advertising:

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

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Monopolistically competitive firms have an incentive to:

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A duopoly is:

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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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The welfare loss associated with the outcome in a competitive oligopoly is:

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

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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:

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

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___ is about the number of firms,and is about the variety of products.

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