large number of firms and substantial entry barriers.
question
Under monopolistic competition, entry to the industry is:
answer
more difficult than under pure competition but not nearly
question
Which of the following is not a basic characteristic of monopolistic competition?
answer
Recognized mutual interdependence.
question
A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:
answer
product differentiation.
question
The monopolistic competition model assumes that:
answer
firms will engage in nonprice competition.
question
A monopolistically competitive firm's marginal revenue curve:
answer
is downsloping and lies below the demand curve.
question
In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits:
answer
will be equal to ATC.
question
Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?
answer
P exceeds minimum ATC.
question
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be:
<$10.
<$13.
<$16.
<$19.
answer
$16.
question
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:
<100.
<160.
<180.
<210.
answer
160.
question
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:
answer
profit of $480.
question
In short-run equilibrium, the monopolistically competitive firm shown will set its price:
answer
question
Which of the following is not characteristic of long-run equilibrium under monopolistic competition?
answer
Price equals minimum average total cost.
question
If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will:
answer
shift to the right.
question
In long-run equilibrium, monopolistic competition entails:
answer
an underallocation of resources due to excess capacity.
question
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be:
<12 units.
<8 units.
<10 units.
<9 units.
answer
8 units.
question
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing price will be:
<$9.
<$7.
<$11.
<$6.
answer
$9.
question
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, economic profit will be:
<$10.
<$19.
<$6.
<$8.
answer
$8.
question
Refer to the data. Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) shown to columns (2) and (3). Economic profit will:
answer
decline to zero.
question
Refer to the data. Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) shown to columns (2) and (3). We can conclude that this industry is:
answer
monopolistically competitive.
question
Refer to the data. With the demand schedule shown by columns (2) and (3), in long-run equilibrium:
answer
price will equal average total cost.
question
An important similarity between a monopolistically competitive firm and a pure monopolist is that both:
answer
face demand curves that are less than perfectly elastic.
question
In the long run a monopolistically competitive firm:
answer
produces where P = ATC.
question
A significant benefit of monopolistic competition compared with pure competition is:
answer
greater product variety.
question
Product variety is likely to be greater in:
answer
monopolistic competition than in pure competition.
question
The more elastic a monopolistic competitor's long-run demand curve, the:
answer
lower its average total cost at its profit-maximizing level of output.
question
The mutual interdependence that characterizes oligopoly arises because:
answer
each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
question
The copper, aluminum, cement, and industrial alcohol industries are examples of:
answer
homogeneous oligopoly.
question
Oligopoly is more difficult to analyze than other market models because:
answer
of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.
question
Which of the following is an illustration of differentiated oligopoly?
answer
The soft drink industry.
question
Differentiated oligopoly exists where a small number of firms are:
answer
producing goods that differ in terms of quality and design.
question
Homogeneous oligopoly exists where a small number of firms are:
answer
producing virtually identical products.
question
Clear-cut mutual interdependence with respect to the price-output policies exists in:
answer
oligopoly.
question
Concentration ratios measure the:
answer
percentage of total industry sales accounted for by the largest firms in the industry.
question
If the four-firm concentration ratio for industry X is 80:
answer
the four largest firms account for 80 percent of total sales.
question
The Herfindahl index for a pure monopolist is:
100.
10,000.
100,000.
10.
answer
10,000.
question
The four-firm sales concentration ratio for an industry measures the:
answer
extent to which the four largest firms dominate the production of a good.
question
Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10, and 10 percent. The Herfindahl index for this industry is:
<2,000.
<1,600.
<2,200.
<80.
answer
2,200.
question
Game theory:
answer
is the analysis of how people (or firms) behave in strategic situations.
question
Game theory is best suited to analyze the pricing behavior of:
answer
oligopolists.
question
Game theory can be used to demonstrate that oligopolists:
answer
can increase their profits through collusion.
question
The kinked-demand curve of an oligopolist is based on the assumption that:
answer
competitors will follow a price cut but ignore a price increase.
question
If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will:
answer
decrease total revenue by either increasing or decreasing price.
question
The kinked-demand curve model of oligopoly is useful in explaining:
answer
why oligopolistic prices might change only infrequently.
question
The kinked-demand curve model helps to explain price rigidity because:
answer
there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price.
question
OPEC provides an example of:
answer
an international cartel.
question
The likelihood of a cartel being successful is greater when:
answer
cost and demand curves of various participants are very similar.
question
Cartels are difficult to maintain in the long run because:
answer
individual members may find it profitable to cheat on agreements.
question
If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of:
a purely competitive producer.
a pure monopoly.
a monopolistically competitive producer.
an industry with a low four-firm concentration ratio.
answer
a pure monopoly.
question
One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?
answer
A very small number of firms producing a homogeneous product.
question
Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called:
answer
limit pricing.
question
A breakdown in price leadership leading to successive rounds of price cuts is known as:
answer
a price war.
question
Secret conspiracies to fix prices are examples of:
answer
covert collusion.
question
Advertising can enhance economic efficiency when it:
answer
expands sales such that firms achieve substantial
question
Advertising can impede economic efficiency when it:
answer
increases entry barriers.
question
The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because:
answer
over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive.
large number of firms and substantial entry barriers.
question
Under monopolistic competition, entry to the industry is:
answer
more difficult than under pure competition but not nearly
question
Which of the following is not a basic characteristic of monopolistic competition?
answer
Recognized mutual interdependence.
question
A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:
answer
product differentiation.
question
The monopolistic competition model assumes that:
answer
firms will engage in nonprice competition.
question
A monopolistically competitive firm's marginal revenue curve:
answer
is downsloping and lies below the demand curve.
question
In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits:
answer
will be equal to ATC.
question
Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?
answer
P exceeds minimum ATC.
question
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be:
<$10.
<$13.
<$16.
<$19.
answer
$16.
question
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:
<100.
<160.
<180.
<210.
answer
160.
question
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:
answer
profit of $480.
question
In short-run equilibrium, the monopolistically competitive firm shown will set its price:
answer
question
Which of the following is not characteristic of long-run equilibrium under monopolistic competition?
answer
Price equals minimum average total cost.
question
If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will:
answer
shift to the right.
question
In long-run equilibrium, monopolistic competition entails:
answer
an underallocation of resources due to excess capacity.
question
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be:
<12 units.
<8 units.
<10 units.
<9 units.
answer
8 units.
question
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing price will be:
<$9.
<$7.
<$11.
<$6.
answer
$9.
question
Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, economic profit will be:
<$10.
<$19.
<$6.
<$8.
answer
$8.
question
Refer to the data. Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) shown to columns (2) and (3). Economic profit will:
answer
decline to zero.
question
Refer to the data. Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) shown to columns (2) and (3). We can conclude that this industry is:
answer
monopolistically competitive.
question
Refer to the data. With the demand schedule shown by columns (2) and (3), in long-run equilibrium:
answer
price will equal average total cost.
question
An important similarity between a monopolistically competitive firm and a pure monopolist is that both:
answer
face demand curves that are less than perfectly elastic.
question
In the long run a monopolistically competitive firm:
answer
produces where P = ATC.
question
A significant benefit of monopolistic competition compared with pure competition is:
answer
greater product variety.
question
Product variety is likely to be greater in:
answer
monopolistic competition than in pure competition.
question
The more elastic a monopolistic competitor's long-run demand curve, the:
answer
lower its average total cost at its profit-maximizing level of output.
question
The mutual interdependence that characterizes oligopoly arises because:
answer
each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
question
The copper, aluminum, cement, and industrial alcohol industries are examples of:
answer
homogeneous oligopoly.
question
Oligopoly is more difficult to analyze than other market models because:
answer
of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.
question
Which of the following is an illustration of differentiated oligopoly?
answer
The soft drink industry.
question
Differentiated oligopoly exists where a small number of firms are:
answer
producing goods that differ in terms of quality and design.
question
Homogeneous oligopoly exists where a small number of firms are:
answer
producing virtually identical products.
question
Clear-cut mutual interdependence with respect to the price-output policies exists in:
answer
oligopoly.
question
Concentration ratios measure the:
answer
percentage of total industry sales accounted for by the largest firms in the industry.
question
If the four-firm concentration ratio for industry X is 80:
answer
the four largest firms account for 80 percent of total sales.
question
The Herfindahl index for a pure monopolist is:
100.
10,000.
100,000.
10.
answer
10,000.
question
The four-firm sales concentration ratio for an industry measures the:
answer
extent to which the four largest firms dominate the production of a good.
question
Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10, and 10 percent. The Herfindahl index for this industry is:
<2,000.
<1,600.
<2,200.
<80.
answer
2,200.
question
Game theory:
answer
is the analysis of how people (or firms) behave in strategic situations.
question
Game theory is best suited to analyze the pricing behavior of:
answer
oligopolists.
question
Game theory can be used to demonstrate that oligopolists:
answer
can increase their profits through collusion.
question
The kinked-demand curve of an oligopolist is based on the assumption that:
answer
competitors will follow a price cut but ignore a price increase.
question
If an oligopoly is faced with a kinked-demand curve that is relatively elastic above, and relatively inelastic below, the going price, then it will:
answer
decrease total revenue by either increasing or decreasing price.
question
The kinked-demand curve model of oligopoly is useful in explaining:
answer
why oligopolistic prices might change only infrequently.
question
The kinked-demand curve model helps to explain price rigidity because:
answer
there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price.
question
OPEC provides an example of:
answer
an international cartel.
question
The likelihood of a cartel being successful is greater when:
answer
cost and demand curves of various participants are very similar.
question
Cartels are difficult to maintain in the long run because:
answer
individual members may find it profitable to cheat on agreements.
question
If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of:
a purely competitive producer.
a pure monopoly.
a monopolistically competitive producer.
an industry with a low four-firm concentration ratio.
answer
a pure monopoly.
question
One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?
answer
A very small number of firms producing a homogeneous product.
question
Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called:
answer
limit pricing.
question
A breakdown in price leadership leading to successive rounds of price cuts is known as:
answer
a price war.
question
Secret conspiracies to fix prices are examples of:
answer
covert collusion.
question
Advertising can enhance economic efficiency when it:
answer
expands sales such that firms achieve substantial
question
Advertising can impede economic efficiency when it:
answer
increases entry barriers.
question
The conclusion that oligopoly is inefficient relative to the competitive ideal must be qualified because:
answer
over time oligopolistic industries may promote more rapid product development and greater improvement of production techniques than if they were purely competitive.
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