Question 1

Which statement concerning monopolistic competition is false?

Accepted Answer

A)   Long-run equilibrium under monopolistic competition is achieved where economic profits are zero.
B)   Monopolistic competition is likely to result in a greater variety of product brands than pure competition.
C)   The monopolistically competitive demand curve is more elastic than the demand curve facing a monopolistic firm.
D)   Monopolistic competition does not lead to any economic inefficiency since firms in this industry cannot sustain economic profits.E) B) and C)
F) A) and B)

Question 2

- Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy while firm A maintains a high-price strategy. Compared to the results from a high-price strategy for both firms, firm B will now:

Accepted Answer

A)   lose $75 million in profit and firm A will gain $50 million in profit.
B)   gain $50 million in profit and firm A will lose $50 million in profit.
C)   gain $75 million in profit and firm A will lose $50 million in profit.
D)   gain $50 million in profit and firm A will lose $75 million in profit.E) A) and D)
F) B) and D) C

Question 3

- Refer to the above payoff matrix. Which of the following statements is most accurate?

Accepted Answer

A)   If the two firms collude to price high, given the opportunity, firm B will cheat on the agreement and price low to increase profits.
B)   The competitive equilibrium for this game is for both firms to price high.
C)   There is no incentive for the firms in this industry to collude.
D)   The most likely outcome of this game is that one firm will price high and the other will price low.E) A) and B)
F) C) and D)

Question 4

-Refer to the above graph of the representative firm in monopolistic competition. The long-run equilibrium price and output for this firm will be:

Accepted Answer

A)   A and C.
B)   B and D.
C)   A and D.
D)   B and C.E) B) and C)
F) A) and B) C

Question 5

The Organization of Petroleum Exporting Countries (OPEC)  operates as an international cartel. If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for this monitoring is to:

Accepted Answer

A)   make sure that each member country is producing at an output level at which price equals marginal cost.
B)   make sure all the member countries produce at least their quotas so that there will be no oil shortage.
C)   detect those member countries that are depressing prices by producing more than their assigned quotas.
D)   make sure that the marginal revenue for the last barrel of oil sold by each member country is less than its price.E) A) and D)
F) A) and C)

Question 6

1 units at a price of B. B)  Q1 units at a price of C. C)  Q2 units at a price of C. D)  Q2 units at a price of B." class="answers-bank-image d-inline" rel="preload" >
- Based on the graph above, we would expect this firm to sell:

Accepted Answer

A)   Q1 units at a price of B.
B)   Q1 units at a price of C.
C)   Q2 units at a price of C.
D)   Q2 units at a price of B.E) A) and B)
F) A) and C)

Question 7

Which industry would be considered to be monopolistically competitive?

Accepted Answer

A)   Fast food restaurants along rural interstate highways.
B)   Agriculture products sold at farmers' market.
C)   Locally owned restaurants in large cities.
D)   Groceries in a small remote town.E) None of the above
F) B) and D) C

Question 8

Among the various Internet and tech industries such as search, social networking, and operating systems:

Accepted Answer

A)   firms like Google, Facebook, and Microsoft each dominate a particular market, yet remain active in the other markets to keep pressure on the dominant rivals in those markets.
B)   government antitrust regulations keep these markets highly competitive.
C)   firms such as Google, Facebook, Apple, and Microsoft have colluded so that each has a monopoly in its respective market.
D)   competitive pressures keep prices and profits relatively low.E) A) and D)
F) B) and D)

Question 9

Refer to the above graph. It represents a monopolistically competitive firm in a constant-cost industry. In long-run equilibrium this firm will:

Accepted Answer

A)   continue to earn economic profits because it has monopolistic power to set its price.
B)   become a perfectly competitive firm because there are no significant barriers to entry.
C)   break even because average total cost (AT
C)   and marginal cost (M
C)   will increase as more firms enter the market.
D)   break even because its demand curve will fall and become more elastic as it loses sales to other firms entering the market.E) None of the above
F) A) and B)

Question 10

1 to MC2, the firm will charge: A)  a higher price and total revenue will increase. B)  the same price and sell more output; total revenue will increase. C)  the same price and sell the same amount of output; total revenue will remain the same. D)  a higher price and sell less output; it can't be determined whether total revenue will increase." class="answers-bank-image d-inline" rel="preload" > 
-On the above graph, if the oligopolist's MC curve shifts from MC1 to MC2, the firm will charge:

Accepted Answer

A)   a higher price and total revenue will increase.
B)   the same price and sell more output; total revenue will increase.
C)   the same price and sell the same amount of output; total revenue will remain the same.
D)   a higher price and sell less output; it can't be determined whether total revenue will increase.E) None of the above
F) C) and D)

Question 11

While oligopolies are generally inefficient, limit pricing may keep prices closer to competitive levels.

Accepted Answer

A) True 
 B)False

Question 12

Refer to the above graph. Assume that in long-run equilibrium a purely competitive firm has the same cost curves as that of the monopolistically competitive firm shown. It can be concluded that the:

Accepted Answer

A)   purely competitive firm would have lower economic profits.
B)   purely competitive firm would have higher economic profits.
C)   purely competitive producer would produce less at a higher ATC.
D)   monopolistically competitive producer would produce less at a higher ATC.E) A) and D)
F) B) and D)

Question 13

Which of the following statements is most accurate about the Internet and tech companies?

Accepted Answer

A)   The markets they operate in are monopolistically competitive.
B)   Collusion among firms means that each industry is fully monopolized.
C)   Firms that dominate one market will use large profits from that industry to put competitive pressure on rivals in other markets.
D)   The most dominant firms in each market only hold about 30 percent of the market share.E) All of the above
F) A) and C)

Question 14

Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will:

Accepted Answer

A)   pursue a strategy to reduce advertising expenditures to maintain profits.
B)   decide to increase advertising expenditures even if it means a reduction in profits.
C)   make no changes in advertising expenditures because advertising is effective in the short run, but not the long run.
D)   increase the price of the product to improve profits and then increase advertising expenditures.E) C) and D)
F) A) and C)

Question 15

-Refer to the above graph of the representative firm in monopolistic competition. Excess capacity for this firm would be calculated by:

Accepted Answer

A)   D - 0.
B)   E - C.
C)   E - D.
D)   D - C.E) A) and D)
F) None of the above

Question 16

-The above graph represents a:

Accepted Answer

A)   collusive oligopoly firm.
B)   noncollusive oligopoly firm.
C)   monopoly firm.
D)   monopolistically competitive firm.E) C) and D)
F) B) and C)

Exam 9: Monopolistic Competition and Oligopoly

Which statement concerning monopolistic competition is false?

Correct Answer
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- Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy while firm A maintains a high-price strategy. Compared to the results from a high-price strategy for both firms, firm B will now:

Correct Answer
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C

- Refer to the above payoff matrix. Which of the following statements is most accurate?

Correct Answer
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-Refer to the above graph of the representative firm in monopolistic competition. The long-run equilibrium price and output for this firm will be:

Correct Answer
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C

The Organization of Petroleum Exporting Countries (OPEC) operates as an international cartel. If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for this monitoring is to:

Correct Answer
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- Based on the graph above, we would expect this firm to sell:

Correct Answer
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Which industry would be considered to be monopolistically competitive?

Correct Answer
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C

Among the various Internet and tech industries such as search, social networking, and operating systems:

Correct Answer
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Refer to the above graph. It represents a monopolistically competitive firm in a constant-cost industry. In long-run equilibrium this firm will:

Correct Answer
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-On the above graph, if the oligopolist's MC curve shifts from MC₁ to MC₂, the firm will charge:

Correct Answer
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While oligopolies are generally inefficient, limit pricing may keep prices closer to competitive levels.

Correct Answer
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Refer to the above graph. Assume that in long-run equilibrium a purely competitive firm has the same cost curves as that of the monopolistically competitive firm shown. It can be concluded that the:

Correct Answer
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Which of the following statements is most accurate about the Internet and tech companies?

Correct Answer
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Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will:

Correct Answer
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-Refer to the above graph of the representative firm in monopolistic competition. Excess capacity for this firm would be calculated by:

Correct Answer
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-The above graph represents a:

Correct Answer
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Exam 9: Monopolistic Competition and Oligopoly

Which statement concerning monopolistic competition is false?

Correct AnswerverifiedShow Answer

- Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy while firm A maintains a high-price strategy. Compared to the results from a high-price strategy for both firms, firm B will now:

Correct AnswerverifiedC

- Refer to the above payoff matrix. Which of the following statements is most accurate?

Correct AnswerverifiedShow Answer

-Refer to the above graph of the representative firm in monopolistic competition. The long-run equilibrium price and output for this firm will be:

Correct AnswerverifiedC

The Organization of Petroleum Exporting Countries (OPEC) operates as an international cartel. If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for this monitoring is to:

Correct AnswerverifiedShow Answer

- Based on the graph above, we would expect this firm to sell:

Correct AnswerverifiedShow Answer

Which industry would be considered to be monopolistically competitive?

Correct AnswerverifiedC

Among the various Internet and tech industries such as search, social networking, and operating systems:

Correct AnswerverifiedShow Answer

Refer to the above graph. It represents a monopolistically competitive firm in a constant-cost industry. In long-run equilibrium this firm will:

Correct AnswerverifiedShow Answer

-On the above graph, if the oligopolist's MC curve shifts from MC1 to MC2, the firm will charge:

Correct AnswerverifiedShow Answer

While oligopolies are generally inefficient, limit pricing may keep prices closer to competitive levels.

Correct AnswerverifiedShow Answer

Refer to the above graph. Assume that in long-run equilibrium a purely competitive firm has the same cost curves as that of the monopolistically competitive firm shown. It can be concluded that the:

Correct AnswerverifiedShow Answer

Which of the following statements is most accurate about the Internet and tech companies?

Correct AnswerverifiedShow Answer

Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will:

Correct AnswerverifiedShow Answer

-Refer to the above graph of the representative firm in monopolistic competition. Excess capacity for this firm would be calculated by:

Correct AnswerverifiedShow Answer

-The above graph represents a:

Correct AnswerverifiedShow Answer

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C

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C

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C

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-On the above graph, if the oligopolist's MC curve shifts from MC₁ to MC₂, the firm will charge:

Correct Answer
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