Question 1

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

Accepted Answer

A)   Price equals minimum average total cost.
B)   Marginal cost equals marginal revenue.
C)   Price is equal to average total cost.
D)   Price exceeds marginal cost.

Question 2

The less elastic a monopolistic competitor's long-run demand curve,the:

Accepted Answer

A)   less its excess capacity.
B)   higher its price relative to that of a pure competitor having the same cost curves.
C)   higher its long-run profits.
D)   lower its average total cost at its equilibrium level of output.

Question 3

Three major means of collusion by oligopolists are:

Accepted Answer

A)   cartels,informal understandings,and price leadership.
B)   market sharing,mutual interdependence,and product differentiation.
C)   cartels,kinked-demand pricing,and product differentiation.
D)   informal understandings,P = MC pricing,and mutual interdependence.

Question 4

A player is said to have a dominant strategy when one of the options available is superior,regardless of what strategy the other player chooses.

Accepted Answer

A) True 
 B)False

Question 5

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract.This best describes:

Accepted Answer

A)   cost-plus pricing.
B)   multiproduct pricing.
C)   a cartel.
D)   price leadership.

Question 6

Use your basic knowledge and your understanding of market structures to answer this question.Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Accepted Answer

A)   Kellogg's.
B)   Pittsburgh Plate Glass.
C)   Ford Motor Company.
D)   Starbucks Coffee.

Question 7

Other things equal,if more firms enter a monopolistically competitive industry:

Accepted Answer

A)   the demand curves facing existing firms would shift to the right.
B)   the demand curves facing existing firms would shift to the left.
C)   the demand curves facing existing firms would become less elastic.
D)   losses would necessarily occur.

Question 8

In the long run,monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

Accepted Answer

A) True 
 B)False

Question 9

In a zero-sum game,the gains by one player will be exactly offset by the losses of the other.

Accepted Answer

A) True 
 B)False  True

Question 10

(Last Word) Which market structure best characterizes the various Internet markets?

Accepted Answer

A)   Differentiated oligopoly.
B)   Homogeneous oligopoly.
C)   Monopolistic competition.
D)   Pure monopoly.

Question 11

If an oligopolist's several rivals exactly match any price changes it initiates,the demand curve will be less elastic than if its price changes are ignored by its rivals.

Accepted Answer

A) True 
 B)False

Question 12

The mutual interdependence that characterizes oligopoly arises because:

Accepted Answer

A)   the products of various firms are homogeneous.
B)   the products of various firms are differentiated.
C)   each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
D)   the demand curves of firms are kinked at the prevailing price.

Question 13

(Consider This) The prisoner's dilemma is generally demonstrated through:

Accepted Answer

A)   the kinked-demand model.
B)   game theory.
C)   monopolistic competition.
D)   a tightly knit cartel.

Question 14

Excess capacity refers to the:

Accepted Answer

A)   amount by which actual production falls short of the minimum ATC output.
B)   fact that entry barriers artificially reduce the number of firms in an industry.
C)   differential between price and marginal costs that characterizes monopolistically competitive firms.
D)   fact that most monopolistically competitive firms encounter diseconomies of scale.

Question 15

Concentration ratios:

Accepted Answer

A)   may overstate the degree of competition because they ignore imported products.
B)   may overstate the degree of competition because interindustry competition is ignored.
C)   may understate the degree of competition because they ignore imported products.
D)   provide detailed insights as to the price and output behavior of firms that comprise the various industries.

Question 16

Other things equal,cartels and similar collusive arrangements are easier to establish and maintain:

Accepted Answer

A)   when there are ample opportunities for the firms to make secret price concessions to selected buyers.
B)   during periods of business-cycle stability and full employment.
C)   when the demand and cost conditions of the participating firms differ substantially.
D)   when the number of firms is relatively large.

Question 17

In 2011,advertising expenditures in the United States were:

Accepted Answer

A)   10 to 12 percent of GDP.
B)   about $137 billion.
C)   about $103 billion.
D)   about $498 billion.

Question 18

If competing oligopolists completely ignore oligopolist X's price changes,then X's:

Accepted Answer

A)   demand curve will be less elastic than if the other oligopolists matched X's price changes.
B)   demand curve will be more elastic than if the other oligopolists matched X's price changes.
C)   marginal revenue curve will have a vertical gap.
D)   demand and marginal revenue curves will coincide. B

Question 19

Suppose that a particular industry has a four-firm concentration ratio of 85 and a Herfindahl index of 3,000.Most likely,this industry would achieve:

Accepted Answer

A)   both productive efficiency and allocative efficiency.
B)   allocative efficiency but not productive efficiency.
C)   neither productive efficiency nor allocative efficiency.
D)   productive efficiency but not allocative efficiency.

Question 20

Larry's Lizards and Ronaldo's Reptiles are competing pet store franchises.Both are considering opening a store in the small town of Turtleville.If Ronaldo's opens a profitable store in Turtleville and Larry's management determines that it is not profitable to also open a store,then:

Accepted Answer

A)   this is a simultaneous game.
B)   a Nash equilibrium is not possible in this game.
C)   Ronaldo's had a first-mover advantage in this game.
D)   this is a zero-sum game. C

Exam 13: Monopolistic Competition and Oligopoly

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

Correct AnswerverifiedShow Answer

The less elastic a monopolistic competitor's long-run demand curve,the:

Correct AnswerverifiedShow Answer

Three major means of collusion by oligopolists are:

Correct AnswerverifiedShow Answer

A player is said to have a dominant strategy when one of the options available is superior,regardless of what strategy the other player chooses.

Correct AnswerverifiedShow Answer

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract.This best describes:

Correct AnswerverifiedShow Answer

Use your basic knowledge and your understanding of market structures to answer this question.Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

Correct AnswerverifiedShow Answer

Other things equal,if more firms enter a monopolistically competitive industry:

Correct AnswerverifiedShow Answer

In the long run,monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve.

Correct AnswerverifiedShow Answer

In a zero-sum game,the gains by one player will be exactly offset by the losses of the other.

Correct AnswerverifiedTrue

(Last Word) Which market structure best characterizes the various Internet markets?

Correct AnswerverifiedShow Answer

If an oligopolist's several rivals exactly match any price changes it initiates,the demand curve will be less elastic than if its price changes are ignored by its rivals.

Correct AnswerverifiedShow Answer

The mutual interdependence that characterizes oligopoly arises because:

Correct AnswerverifiedShow Answer

(Consider This) The prisoner's dilemma is generally demonstrated through:

Correct AnswerverifiedShow Answer

Excess capacity refers to the:

Correct AnswerverifiedShow Answer

Concentration ratios:

Correct AnswerverifiedShow Answer

Other things equal,cartels and similar collusive arrangements are easier to establish and maintain:

Correct AnswerverifiedShow Answer

In 2011,advertising expenditures in the United States were:

Correct AnswerverifiedShow Answer

If competing oligopolists completely ignore oligopolist X's price changes,then X's:

Correct AnswerverifiedB

Suppose that a particular industry has a four-firm concentration ratio of 85 and a Herfindahl index of 3,000.Most likely,this industry would achieve:

Correct AnswerverifiedShow Answer

Larry's Lizards and Ronaldo's Reptiles are competing pet store franchises.Both are considering opening a store in the small town of Turtleville.If Ronaldo's opens a profitable store in Turtleville and Larry's management determines that it is not profitable to also open a store,then:

Correct AnswerverifiedC

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