Question 1

-The profit-maximizing (or loss-minimizing)  price the firm would charge in Exhibit 10-12 is

Accepted Answer

A)   nonexistent,since the firm should shut down
B)   $3.25
C)   $3.00
D)   $2.50
E)   between $2.50 and $3.00

Question 2

The principal advantage of the game theory approach is that it allows us to

Accepted Answer

A)   take all possible information into consideration before developing a theory
B)   better understand why the firm in a competitive industry avoids games
C)   better understand how the government should regulate a natural monopoly
D)   better understand decision making when one person's choices affect another person's choices
E)   understand the relationship between the firm and the industry demand curves

Question 3

Game theory is used in a number of areas in economics.What is the primary reason that it is used in analyzing oligopoly type market structures?

Accepted Answer

A)   The firms are producing a similar product
B)   The firms are producing differentiated products
C)   The demand curve facing the oligopolistic firms is perfectly inelastic
D)   The mutual interdependence of firms in industries with a small number of firms
E)   The demand curve the oligopolistic firm faces is downward sloping

Question 4

Price wars occur more often in monopolistic competition than in other market structures.

Accepted Answer

A) True 
 B)False

Question 5

The steel,cigarettes,and personal computers industries are examples of:

Accepted Answer

A)   Monopoly
B)   Monopsony
C)   Perfect competition
D)   Monopolistic competition
E)   Oligopoly

Question 6

In oligopoly,minimum efficient scale is large relative to the market.

Accepted Answer

A) True 
 B)False

Question 7

If a monopolistically competitive firm can earn a profit,it will adjust production until

Accepted Answer

A)   MR > AVC
B)   MR = ATC
C)   MC > MR
D)   MR = AR
E)   MR = MC

Question 8

Three firms that are successful in colluding to raise their prices must

Accepted Answer

A)   lose profits
B)   announce any price changes to the government
C)   restrict output
D)   increase advertising to earn a profit
E)   expand production

Question 9

A permanent decrease in demand for convenience store services is likely to cause which of the following in the long run?

Accepted Answer

A)   an economic loss for each firm
B)   a higher price for each firm's output
C)   fewer firms in the industry
D)   more firms in the industry
E)   economic profit for each firm

Question 10

A monopolistically competitive firm produces where demand is inelastic.

Accepted Answer

A) True 
 B)False

Question 11

Historically,the U.S.steel industry has been a good example of

Accepted Answer

A)   monopolistic competition
B)   a cartel
C)   a pure monopoly
D)   the kinked demand curve model of oligopoly
E)   the price leadership model of oligopoly

Question 12

What do monopolistic competition,pure monopoly,and perfect competition have in common?

Accepted Answer

A)   free entry
B)   long-run economic profits
C)   differentiated product
D)   price taking
E)   the rule of profit maximization

Question 13

Monopolistic competitors are protected by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 14

In which market structure(s)  might firms produce an undifferentiated product?

Accepted Answer

A)   perfect competition only
B)   perfect competition and oligopoly
C)   monopolistic competition only
D)   perfect competition and monopolistic competition
E)   monopoly only

Question 15

Monopolistically competitive firms

Accepted Answer

A)   are guaranteed to earn short-run economic profit
B)   may earn short-run economic profits,although long-run economic profit is typically zero
C)   may earn economic profit both in the short run and in the long run
D)   earn zero economic profit both in the short run and in the long run
E)   can only earn an economic profit in the inelastic portion of their demand curves

Question 16

Firms in monopoly or monopolistically competitive market structures do not have traditional supply curves as firms in perfect competition do.

Accepted Answer

A) True 
 B)False

Question 17

Monopolistically competitive firms do not achieve productive efficiency because

Accepted Answer

A)   entry of firms raises production costs in the long run
B)   barriers to entry allow profit to be earned in the long run
C)   price is greater than marginal cost at the profit maximizing output level
D)   profit is maximized at a quantity where average total cost is not minimized
E)   there is no threat of entry in the long run

Question 18

-At the profit-maximizing output level,the firm in Exhibit 10-11 is

Accepted Answer

A)   earning economic profit of $400
B)   earning economic profit of $200
C)   earning zero economic profit
D)   suffering a loss of $200
E)   suffering a loss of $400

Question 19

Exhibit 10-6
 
-In Exhibit 10-6,what is the maximum profit this monopolistic competitor can earn in the short run?

Accepted Answer

A)   $40
B)   $4
C)   $48
D)   $8
E)   $0

Question 20

In a cartel,

Accepted Answer

A)   all firms produce the same amount of output and earn the same profit
B)   all firms produce the same amount of output but earn different amounts of profit because their costs differ
C)   firms produce different amounts of output but earn the same profit
D)   firms with higher average cost produce more so that all firms earn the same profit
E)   firms with lower average cost often earn higher profits

Exam 10: Monopolistic Competition and Oligopoly

The principal advantage of the game theory approach is that it allows us to

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Monopolistically competitive firms

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Historically,the U.S.steel industry has been a good example of

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Three firms that are successful in colluding to raise their prices must

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If a monopolistically competitive firm can earn a profit,it will adjust production until

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Price wars occur more often in monopolistic competition than in other market structures.

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A monopolistically competitive firm produces where demand is inelastic.

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In which market structure(s) might firms produce an undifferentiated product?

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A permanent decrease in demand for convenience store services is likely to cause which of the following in the long run?

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-At the profit-maximizing output level,the firm in Exhibit 10-11 is

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In a cartel,

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The steel,cigarettes,and personal computers industries are examples of:

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Monopolistic competitors are protected by barriers to entry.

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-The profit-maximizing (or loss-minimizing) price the firm would charge in Exhibit 10-12 is

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What do monopolistic competition,pure monopoly,and perfect competition have in common?

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In oligopoly,minimum efficient scale is large relative to the market.

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Firms in monopoly or monopolistically competitive market structures do not have traditional supply curves as firms in perfect competition do.

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Exhibit 10-6 -In Exhibit 10-6,what is the maximum profit this monopolistic competitor can earn in the short run?

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Monopolistically competitive firms do not achieve productive efficiency because

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Game theory is used in a number of areas in economics.What is the primary reason that it is used in analyzing oligopoly type market structures?

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