Question 1

Most industries experience only economies of scale.

Accepted Answer

A) True 
 B)False

Question 2

If a differentiated product is produced, it would cause a shared firm or cartel to be unstable.

Accepted Answer

A) True 
 B)False

Question 3

A cartel is

Accepted Answer

A)   implicit collusion.
B)   explicit collusion.
C)   a facilitating practice.
D)   a merger of firms into a monopoly.
E)   legal in the United States.

Question 4

When increasing size leads to lower per unit costs, we say there are

Accepted Answer

A)   Diseconomies of scale
B)   Economies of scale
C)   Untapped resources
D)   Unique resources
E)   Sunk costs

Question 5

If a cartel is successful, it will behave as a monopolist and maximize profit at the point at which MR = MC.

Accepted Answer

A) True 
 B)False

Question 6

When firms in an industry jointly make pricing and output decisions, they are

Accepted Answer

A)   dumping.
B)   colluding.
C)   arbitrating.
D)   regulating.
E)   trying to irritate the government.

Question 7

One factor that distinguishes oligopoly from other market structures is

Accepted Answer

A)   the ease of entry into the market.
B)   the interdependence of firms.
C)   the slope of the demand curve.
D)   the degree of product differentiation.
E)   the amount of advertising expenditures.

Question 8

Without policing authority, a cartel will fall apart.

Accepted Answer

A) True 
 B)False

Question 9

Cartels and collusion are illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 10

A Nash equilibrium occurs

Accepted Answer

A)   when a unilateral move by a participant does not make the participant better off.
B)   when a unilateral move by a participant makes the participant better off.
C)   when a unilateral move by a participant does not make the other participant better off.
D)   when a unilateral move by a participant makes the other participant worse off.
E)   None of these choices.

Question 11

Which of the following would not be likely to result in diseconomies of scale?

Accepted Answer

A)   Low worker morale
B)   Low productivity
C)   Administration overhead
D)   Specialization of labor
E)   Managerial problems

Question 12

A dominant strategy is

Accepted Answer

A)   a strategy that every firm likes to choose.
B)   a strategy the rival firms do not choose.
C)   the only strategy a firm has.
D)   a strategy that produces the best results no matter what strategy the opposing player follows.
E)   None of these choices.

Question 13

Which of the following is not a signal of information that consumers associate with a specific firm?

Accepted Answer

A)   The name on a bottle of Paul Mitchell hair styling product
B)   Television
C)   The Calvin Klein name on jeans
D)   The Nike name on shoes
E)   The golden arches

Question 14

In the long run, if a perfectly competitive firm is incurring an economic loss, the firm

Accepted Answer

A)   is earning greater than normal profit but not an economic profit.
B)   will minimize opportunity costs by staying in business.
C)   will have some long-run fixed costs.
D)   will leave the industry.
E)   will produce as long as total revenue exceeds total fixed cost.

Question 15

Diseconomies of scale typically arise because of the growth of bureaucracy.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true?

Accepted Answer

A)   Mrs. Fields cookie company trains all of its store managers in one place to achieve economies of scale, and producing all of its cookie dough at one location results in economies of scale.
B)   Mrs. Fields cookie company trains all of its store managers in one place to achieve diseconomies of scale, and producing all of its cookie dough at one location results in economies of scale.
C)   Mrs. Fields cookie company trains all of its store managers in one place to achieve economies of scale, and producing all of its cookie dough at one location results in diseconomies of scale.
D)   Mrs. Fields cookie company trains all of its store managers in one place to achieve diseconomies of scale, and producing all of its cookie dough at one location results in diseconomies of scale.
E)   Mrs. Fields cookie company headquarters is in New York City.

Question 17

As competitors enter and provide substitutes, competition increases.

Accepted Answer

A) True 
 B)False

Question 18

If a firm can limit competition, it will likely be able to charge higher prices.

Accepted Answer

A) True 
 B)False

Question 19

In the long run, if a perfectly competitive firm cannot cover its costs, the profit-maximizing firm will

Accepted Answer

A)   continue to produce as long as total revenue exceeds total fixed cost.
B)   continue to produce as long as total revenue exceeds total variable cost.
C)   continue to produce to maximize its opportunity costs.
D)   seek more rewarding opportunities in some other industry.
E)   increase output and lower price.

Question 20

One could argue that advertising

Accepted Answer

A)   creates diseconomies of scale.
B)   creates barriers to entry.
C)   is a waste of resources.
D)   makes demand curves more elastic.
E)   enables firms to take advantage of diseconomies of scale.

Exam 6: Competition

Diseconomies of scale typically arise because of the growth of bureaucracy.

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If a cartel is successful, it will behave as a monopolist and maximize profit at the point at which MR = MC.

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One factor that distinguishes oligopoly from other market structures is

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Cartels and collusion are illegal in the United States.

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A cartel is

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Which of the following statements is true?

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Without policing authority, a cartel will fall apart.

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When increasing size leads to lower per unit costs, we say there are

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A dominant strategy is

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As competitors enter and provide substitutes, competition increases.

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If a differentiated product is produced, it would cause a shared firm or cartel to be unstable.

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Most industries experience only economies of scale.

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One could argue that advertising

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If a firm can limit competition, it will likely be able to charge higher prices.

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Which of the following would not be likely to result in diseconomies of scale?

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In the long run, if a perfectly competitive firm is incurring an economic loss, the firm

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In the long run, if a perfectly competitive firm cannot cover its costs, the profit-maximizing firm will

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When firms in an industry jointly make pricing and output decisions, they are

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A Nash equilibrium occurs

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Which of the following is not a signal of information that consumers associate with a specific firm?

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