Question 1

The U.S.primary steel industry is best described as a:

Accepted Answer

A)   cartel.
B)   monopoly.
C)   differentiated oligopoly.
D)   homogeneous oligopoly.

Question 2

An oligopolist producing where MR > MC should lower its price and increase output to maximize its profits.

Accepted Answer

A) True 
 B)False

Question 3

Compared to pure competition,monopolistic competition:

Accepted Answer

A)   provides greater product differentiation at the cost of some excess capacity.
B)   offers less product differentiation but attains equal productive efficiency.
C)   provides greater product differentiation and achieves greater productive efficiency.
D)   offers less product differentiation and lower productive efficiency.

Question 4

Refer to the above graph of a representative firm in monopolistic competition.What does line 2 represent?

Accepted Answer

A)   Demand
B)   Marginal cost
C)   Marginal revenue
D)   Average total cost

Question 5

Which set best describes the basic features of monopolistic competition?

Accepted Answer

A)   Easy entry,few firms,and standardized products
B)   Barriers to entry,few firms,and differentiated products
C)   Easy entry,many firms,and differentiated products
D)   Barriers to entry,many firms,and standardized products

Question 6

If a monopolistically competitive firm's optimal level of output occurs where P < AVC,it will shut down.

Accepted Answer

A) True 
 B)False

Question 7

Collusive control over price may permit oligopolists to:

Accepted Answer

A)   use new technology,achieve economies of scale,and get government subsidies.
B)   achieve economies of scale,reduce costs,and prevent price cheating.
C)   increase product demand,increase product supply,and lower cost.
D)   reduce uncertainty,increase profits,and possibly limit entry of new firms.

Question 8

The U.S.beer industry:

Accepted Answer

A)   sells a growing proportion of its product for consumption in bars and taverns.
B)   was made more competitive by technological advances such as faster bottling lines.
C)   was formerly a monopolistically competitive industry,but today it is an oligopoly.
D)   has experienced competition from a growing number of independent brewers over the past 40 years.

Question 9

A major characteristic of monopolistic competition is:

Accepted Answer

A)   mutual interdependence.
B)   a high degree of collusion among firms.
C)   a relatively large number of firms selling the product.
D)   relatively easy entry into an industry but a relatively difficult exit from the industry.

Question 10

Which statement about oligopoly is false?

Accepted Answer

A)   Oligopolistic firms recognize their interdependence.
B)   Prices in oligopoly are predicted to fluctuate widely and frequently.
C)   A few firms play an important role in the sale of an identical or differentiated product.
D)   There is no single predicted pattern of action and reaction for oligopolists because one firm's behavior is a function of what its rivals do.

Question 11

In monopolistic competition,there is:

Accepted Answer

A)   allocative efficiency.
B)   productive efficiency.
C)   both allocative and productive efficiency.
D)   neither allocative nor productive efficiency.

Question 12

If an oligopolist's demand curve has a "kink" in it,then:

Accepted Answer

A)   the oligopolist's marginal cost curve has a break in it.
B)   the oligopolist need not fear entry into the industry by new firms.
C)   the oligopolist's competitors will not react to its price changes,either up or down.
D)   over some interval,a change in the oligopolist's marginal cost will not cause a change in the oligopolist's profit-maximizing price.

Question 13

A characteristic of monopolistically competitive industries is that:

Accepted Answer

A)   there is product differentiation but only limited advertising of products by the representative firm.
B)   the entry and exit of firms causes the representative firm to break even in the long run.
C)   the representative firm is not very responsive to changes in consumer demand.
D)   the representative firm produces at that level of output where marginal cost equals minimum average total cost.

Question 14

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.

Question 15

Refer to the above graph of the representative firm in monopolistic competition.The intersection of marginal cost and average total cost is represented by point:

Accepted Answer

A)   a.
B)   b.
C)   c.
D)   d.

Question 16

0. B)  will produce more than Q0. C)  is earning an economic profit at Q0. D)  is suffering an economic loss at Q0." class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.It represents a monopolistically competitive firm in a constant-cost industry.The firm:

Accepted Answer

A)   will produce less than Q0.
B)   will produce more than Q0.
C)   is earning an economic profit at Q0.
D)   is suffering an economic loss at Q0.

Question 17

One shortcoming of the kinked-demand curve model of oligopoly is it does not explain:

Accepted Answer

A)   why the marginal revenue curve is kinked.
B)   how the going price gets determined in the first place.
C)   what the equilibrium level of profits is for the firm.
D)   why the firm is a least-cost producer.

Question 18

Firms are more likely to collude when the economy is in a recession.

Accepted Answer

A) True 
 B)False

Question 19

In the long run,a representative firm in a monopolistically competitive industry will typically:

Accepted Answer

A)   have an elasticity of demand that will be less than it was in the short run.
B)   have a larger number of competitors than it will in the short run.
C)   produce a level of output at which marginal cost and price are equal.
D)   earn a normal profit,but not an economic profit.

Question 20

Refer to the above payoff matrix.If both firms collude to maximize joint profits,the total profits for the two firms will be:

Accepted Answer

A)   $350 million.
B)   $400 million.
C)   $500 million.
D)   $525 million.Both firms collude and settle on a high-price strategy.This results in $250 million profits each,or $500 million total.

Exam 9: Monopolistic Competition and Oligopoly

Refer to the above graph of the representative firm in monopolistic competition.The intersection of marginal cost and average total cost is represented by point:

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Collusive control over price may permit oligopolists to:

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Firms are more likely to collude when the economy is in a recession.

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In monopolistic competition,there is:

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One shortcoming of the kinked-demand curve model of oligopoly is it does not explain:

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If a monopolistically competitive firm's optimal level of output occurs where P < AVC,it will shut down.

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If an oligopolist's demand curve has a "kink" in it,then:

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A characteristic of monopolistically competitive industries is that:

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Compared to pure competition,monopolistic competition:

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Refer to the above payoff matrix.If both firms collude to maximize joint profits,the total profits for the two firms will be:

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Which set best describes the basic features of monopolistic competition?

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The U.S.primary steel industry is best described as a:

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Refer to the above graph.It represents a monopolistically competitive firm in a constant-cost industry.The firm:

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In the long run,a representative firm in a monopolistically competitive industry will typically:

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Refer to the above graph of a representative firm in monopolistic competition.What does line 2 represent?

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A major characteristic of monopolistic competition is:

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An oligopolist producing where MR > MC should lower its price and increase output to maximize its profits.

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Which statement concerning monopolistic competition is false?

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The U.S.beer industry:

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Which statement about oligopoly is false?

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