Question 1

A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

Accepted Answer

A)   each has many buyers and sellers.
B)   firms sell homogeneous products in both markets.
C)   in having perfect information.
D)   for freedom of exit and entry.

Question 2

A firm in a monopolistically competitive market makes no economic profit in the long run because

Accepted Answer

A)   long-run marginal cost will be too high to make any economic profit.
B)   long-run price will be equal to long run marginal cost.
C)   long-run marginal cost will be equal to long run marginal revenue.
D)   long-run price will be equal to long run average cost.

Question 3

Monopolistically competitive firms can earn large profits in the long run.

Accepted Answer

A) True 
 B)False

Question 4

Society definitely benefits by reducing the number of monopolistically competitive firms.

Accepted Answer

A) True 
 B)False

Question 5

The excess capacity theorem implies that

Accepted Answer

A)   consumers would be better off if some monopolistically competitive firms left their markets.
B)   consumers would be better off with more standardization of products.
C)   monopolistic competition benefits society by eliminating excess capacity in production.
D)   monopolistic competition wastes some of society's resources but the elimination of this waste does not necessarily benefit consumers.

Question 6

Price leadership works only if there is a single, dominant firm in the oligopoly.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Accepted Answer

A)   number of sellers
B)   freedom of entry and exit
C)   perfect information
D)   homogeneity of the product

Question 8

Identify the market structure characterized by many small firms selling somewhat different products.

Accepted Answer

A)   Monopoly
B)   Monopolistic competition
C)   Perfect competition
D)   Duopoly

Question 9

Monopolistically competitive markets feature high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 10

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

Accepted Answer

A) True 
 B)False

Question 11

A common characteristic in oligopolistic markets is

Accepted Answer

A)   consideration of rivals' reactions.
B)   standardized products.
C)   high profits.
D)   unused capacity.

Question 12

Oligopoly occurs when

Accepted Answer

A)   a few firms sell many different products.
B)   a few firms sell to a few large buyers.
C)   many firms dominate a single market.
D)   a few firms dominate a single market.

Question 13

Which of the following is not a requirement for the existence of monopolistic competition in a market?

Accepted Answer

A)   numerous small sellers
B)   full information about the market among buyers and sellers
C)   product homogeneity
D)   freedom of entry into the market

Question 14

A monopolistically competitive firm in the long run will

Accepted Answer

A)   have a demand curve tangent to its AC.
B)   have a demand curve below its AC.
C)   have a demand curve above its AC.
D)   operate where excessive profit can be achieved.

Question 15

According to the kinked demand curve model, an oligopolist may face

Accepted Answer

A)   more elastic demand than a monopolistic competitor.
B)   less elastic demand than a monopolistic competitor.
C)   more elastic demand if she raises her price than if she lowers her price.
D)   less elastic demand if she raises her price than if she lowers her price.

Question 16

A monopolistically competitive firm

Accepted Answer

A)   tries to differentiate its product from competitors' products.
B)   faces a perfectly elastic demand curve for its product.
C)   has more monopoly power in the long run than does a perfectly competitive firm.
D)   is always a retail establishment.

Question 17

A firm now produces its sales-maximizing level of output.If the firm increased its output by one unit, its marginal revenue would become

Accepted Answer

A)   negative.
B)   smaller but still positive.
C)   larger but still negative.
D)   larger but still positive.

Question 18

Firms have the option of maximizing sales revenue or maximizing profits.If a firm chooses to maximize sales, then it will produce

Accepted Answer

A)   more output and charge a lower price.
B)   the same output and charge a lower price.
C)   less output and charge a higher price.
D)   less output and charge a lower price.

Question 19

Figure 12-3
 
-Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors fail to retaliate with price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?

Accepted Answer

A)   B
B)   C
C)   D
D)   E

Question 20

One of the most famous cartels is OPEC.

Accepted Answer

A) True 
 B)False

Exam 12: Between Competition and Monopoly

A common characteristic in oligopolistic markets is

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Which of the following conditions distinguishes monopolistic competition from perfect competition?

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Price leadership works only if there is a single, dominant firm in the oligopoly.

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According to the kinked demand curve model, an oligopolist may face

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The excess capacity theorem implies that

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Oligopoly occurs when

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A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.

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Figure 12-3 -Oligopolist A cuts price in an attempt to enlarge his share of the market.His competitors fail to retaliate with price cuts.In this case, in Figure 12-3, oligopolist A will move from point A to which point?

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Identify the market structure characterized by many small firms selling somewhat different products.

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Society definitely benefits by reducing the number of monopolistically competitive firms.

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Which of the following is not a requirement for the existence of monopolistic competition in a market?

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A monopolistically competitive firm

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Firms have the option of maximizing sales revenue or maximizing profits.If a firm chooses to maximize sales, then it will produce

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A firm in a monopolistically competitive market makes no economic profit in the long run because

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A firm now produces its sales-maximizing level of output.If the firm increased its output by one unit, its marginal revenue would become

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Monopolistically competitive firms can earn large profits in the long run.

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A monopolistically competitive firm in the long run will

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A perfectly competitive firm and a monopolistically competitive firm are similar in each of the following respects except

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One of the most famous cartels is OPEC.

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Monopolistically competitive markets feature high barriers to entry.

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