QUESTION 1

"Price makers" refers to firms that

are pure monopolies or monopolistic competitors, but not oligopolies.

face a downward-sloping demand curve.

are pure monopolies, rather than monopolistic competitors.

have no ability to influence the market price.
1 points   

QUESTION 2

"Variety is the spice of life" is best applied to which market structure?

monopolistic competition

pure competition

monopoly

oligopoly
1 points   

QUESTION 3

A firm will earn economic profits whenever

average revenue exceeds average total costs.

average revenue exceeds average variable costs.

marginal revenue exceeds variable costs.

marginal revenue exceeds marginal costs.
1 points   

QUESTION 4

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that

one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve.

one is a price taker and the other is a price maker.

one always produces differentiated products and the other always produces a homogeneous product.

a recognized interdependence exists between firms in one industry but not in the other.
1 points   

QUESTION 5

A strategy that is better than any alternative strategy—regardless of what the other firm does—is called a

positive-sum strategy.

simultaneous strategy.

dominant strategy.

one-time strategy.
1 points   

QUESTION 6

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. If Firm A adopts the low-price strategy, then Firm B would adopt the

high-price strategy and earn $250.

low-price strategy and earn $325.

low-price strategy and earn $175.

high-price strategy and earn $200.
1 points   

QUESTION 7

Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit from either opening a coffee shop in a small town or not opening the coffee shop. If the firms are playing a sequential game, then

there are two potential Nash equilibriums for this game.

both firms will choose not to open a coffee shop.

there is only one Nash equilibrium for this game.

there is a dominant strategy for this game.
1 points   

QUESTION 8

Answer the question based on the payoff matrix for a duopoly, in which the numbers indicate the profit from following either an international strategy or a national strategy. Which of the following is true?

The international strategy is the dominant strategy for firm A, and the national strategy is the dominant strategy for firm B.

The national strategy is the dominant strategy for both firms.

The national strategy is the dominant strategy for firm A, and the international strategy is the dominant strategy for firm B.

The international strategy is the dominant strategy for both firms.
1 points   

QUESTION 9

As firms exit from a monopolistically competitive industry in the long run, the remaining firms' profits will begin to rise.
 True

 False

1 points   

QUESTION 10

Assume that an industry is significantly affected by import competition from foreign suppliers. Taking this factor into account, it would mean that

the Herfindahl index would be significantly higher in that industry because there are more firms in the industry.

there is a low degree of interindustry competition.

the industry is less concentrated than suggested by domestic concentration ratios.

there is a high degree of interindustry competition.
1 points   

QUESTION 11

At the profit-maximizing level of output for a monopolist,

total revenue is greater than total cost.

price is greater than average revenue.

price is greater than marginal cost.

average total cost equals marginal cost.
1 points   

QUESTION 12

Firm Market Share (%)
A 20
B 20
C 20
D 20
E 10
F 10
The industry characterized by these data is

a monopolistically competitive industry.

a pure monopoly.

an oligopoly.

a purely competitive industry.
1 points   

QUESTION 13

For a monopolist to sell an output level of 10 units, the price must be $8. MR at this output level will be

= $8.

> $8 and < $16.

< $8.

> $16.
1 points   

QUESTION 14

For a monopolistically competitive firm in long-run equilibrium,

marginal revenue will exceed marginal cost.

price will equal average total cost.

price will equal the minimum average total cost.

price will equal marginal cost.
1 points   

QUESTION 15

In order to maximize profits, the monopolist will produce the output level where MR = MC and charge a price equal to MR and MC.
 True

 False

1 points   

QUESTION 16

In the long run, a representative firm in a monopolistically competitive industry will end up

producing a level of output at which marginal cost and price are equal.

earning a normal profit, but not an economic profit.

having an elasticity of demand that will be less than it was in the short run.

having a larger number of competitors than it will in the short run.
1 points   

QUESTION 17

Monopolists are said to be allocatively inefficient because

at the profit-maximizing output, price is greater than AVC.

they produce only the type of product they desire and do not consider the consumer.

at the profit-maximizing output, the marginal benefit of the product to society exceeds its marginal cost.

they produce where MR > MC.
1 points   

QUESTION 18

One inherent factor that tends to destroy collusion among oligopolists is the

mutual interdependence.

product differentiation.

leadership of the dominant firm.

incentive to cheat.
1 points   

QUESTION 19

Output Total Cost Product Price
0 $250 $500
1 260 300
2 290 150
3 350 200
4 480 150
5 700 100
If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how many units will the firm produce?

5.

2.

4.

3.
1 points   

QUESTION 20

Refer to the above graph of a representative firm in monopolistic competition. If curve (2) represents ATC and line (3) represents demand, then we can conclude that the industry

is in long-run equilibrium.

will contract in the long run.

has positive economic profits.

is not maximizing profits.
1 points   

QUESTION 21

Refer to the above graphs. The long-run equilibrium for a monopolistically competitive firm is represented by graph

A.

B.

C.

D.
1 points   

QUESTION 22

Refer to the diagrams. With the industry structures represented by diagram

(B), price equals marginal cost, resulting in allocative efficiency.

(B), equilibrium price and quantity will be e and h, respectively.

(A), price exceeds marginal cost, resulting in allocative inefficiency.

(A), there will be only a normal profit in the long run, while in (B) an economic profit can persist.
1 points   

QUESTION 23

The following pairs of products illustrate product differentiation, except

New York-style pizza and Chicago-style pizza.

airport hotels and downtown hotels.

Coke and Pepsi.

tank tops and denim shorts.
1 points   

QUESTION 24

The highest possible value of the Herfindahl index is 1,000.
 True

 False

1 points   

QUESTION 25

The monopolistic competition model assumes that

allocative efficiency will be achieved.

firms will realize economic profits in the long run.

productive efficiency will be achieved.

firms will engage in nonprice competition.
1 points   

QUESTION 26

The payoff matrix represents

a negative-sum game.

a game that can only be played in a single time period.

a positive-sum game.

a zero-sum game.
1 points   

QUESTION 27

The variety of products and features that consumers may choose from in monopolistically competitive industries

guarantees that firms produce at full-capacity output levels.

leads to an optimal allocation of resources in the market structure.

at least partially offsets the economic inefficiencies of this market structure.

makes the demand curves facing firms in these industries perfectly elastic.
1 points   

QUESTION 28

When a firm is on the inelastic segment of its demand curve, it can

increase total revenue by more than the increase in total cost by increasing price.

decrease total costs by decreasing price.

increase total revenue by reducing price.

increase profits by increasing price.
1 points   

QUESTION 29

Which case best represents a case of price discrimination?

An insurance company offers discounts to safe drivers.

A professional baseball team pays two players with identical batting averages different salaries.

A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants.

A major airline sells tickets to senior citizens at lower prices than to other passengers.
1 points   

QUESTION 30

Which would make it easier to maintain an effective collusive agreement in a cartel?

a decrease in the elasticity of demand for the cartel's product

a new method of pricing that makes it more difficult for firms in the cartel to determine the prices at which other cartel members are selling their product

an increase in the number of substitutes for products produced by the cartel

the emergence of a number of potential entrant firms