Chapter 13

One shortcoming of the kinked demand curve model of oligopoly is that it does not explain: Why the marginal revenue curve is kinked What the level of profits is for the firm Why the firm is a least-cost producer How the current price gets determined

Monopolistic competition is characterized by firms: Producing at optimal productive efficiency Making economic profits in the long run Producing where price equals marginal cost Producing differentiated products

Informal collusion to restrict output and increase prices is sometimes referred to as a: Cartel Merger Kinked-demand oligopoly Tacit understanding

A potential negative effect of advertising for society is that it can: Be the major cause of price wars among firms in the industry Reduce mutual interdependence and increase competition Be self-canceling and contribute to economic inefficiency Lower barriers to entry and undermine profits in the industry

A prediction from the kinked demand curve model of oligopoly is that, for an individual firm, small changes in: Marginal revenue will lead to changes in price and output Marginal cost will lead to changes in price and output Demand will lead to changes in price or output Marginal cost will not lead to changes in price or output

A high concentration ratio indicates that: Many firms produce most of the output in an industry The industry is highly profitable Few firms produce most of the output in an industry The industry is highly competitive

A low concentration ratio means that: There is a low probability of success in the industry Each firm accounts for a small market share of the industry There is a low probability of entering the industry Each firm accounts for a large market share of the industry

Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to: Shift to the left Become less elastic Shift to the right Remain the same since entering firms serve other customers in the market

In which set of market models are there the most significant barriers to entry? Monopolistic competition and pure competition Oligopoly and monopolistic competition Monopolistic competition and pure monopoly Oligopoly and pure monopoly

Which of the following is a measure of the degree of industry concentration? Employment Cost Index S&P-500 Index Dow Jones Industrial Index Herfindahl Index

Which of the following is a characteristic of monopolistic competition? A relatively small number of firms Absence of nonprice competition Standardized product Relatively easy entry

Product variety in monopolistic competition comes at the cost of: Diminishing returns Nonprice competition Barriers to entry Excess capacity

http://ezto.mheducation.com/1325270529350269682.tp4?REQUEST=SHOWmedia&conId=13252705269169941&media=image028.png Refer to the above graph of the representative firm in monopolistic competition. Point b indicates: A point that cannot be the long-run equilibrium point A situation where the firm is earning economic profits The price-output combination that yields maximum profits The lowest possible cost of the firm's product

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will: Make the industry allocatively efficient as each firm seeks to maintain its profits Cause firms to standardize their product to limit the degree of competition Reduce the excess capacity in the industry as firms expand production Attract other firms to enter the industry, causing the existing firms' profits to shrink

The economic inefficiency in an oligopoly may be reduced by the following, except: Economic profits used to fund technological advance Increased competition from foreign producers Aggressive advertising by rivals Limit pricing due to potential entrants

Collusion refers to a situation where rival firms decide to: Agree with each other to set prices and output Cheat on each other Combine their operations and merge with each other Compete aggressively against each other

A monopolistically competitive industry is like a purely competitive industry in that: Firms in both industries face a horizontal demand curve Nonprice competition is a feature in both industries Neither industry has significant barriers to entry Each industry produces a standardized product

One difference between monopolistic competition and pure competition is that: There is some control over price in monopolistic competition Monopolistic competition has significant barriers to entry Firms differentiate their products in pure competition Products may be homogeneous in monopolistic competition

Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except: Bridge Chess Solitaire Poker

A strategy that is better than any alternative strategy - regardless of what the other firm does - is called a: Positive-sum strategy Best strategy Dominant strategy Nash strategy

Monopolistic competitive firms are productively inefficient because production occurs where: Marginal cost is less than price Price is greater than marginal revenue Marginal cost is not at its lowest Average total cost is not at its lowest

Mutual interdependence means that each firm in an oligopoly: Depends on the other firms for its markets Faces a perfectly inelastic demand for its product Depends on the other firms for its inputs Considers the reactions of its rivals when it determines its pricing policy

In which market model is there mutual interdependence? Oligopoly Monopolistic competition Pure competition Pure monopoly

MC Qu. 134 If a particular bank regularly announces cha... If a particular bank regularly announces changes in its interest rate schedules before its competitors, who then set rates very close to those announced by that bank, this could be described as: Explicit price collusion Markup pricing Price leadership Predatory pricing

The variety of products and features which 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