Question 1

Allocative and productive efficiency are achieved under the market structure of:

Accepted Answer

A)   oligopoly.
B)   pure competition.
C)   pure monopoly.
D)   monopolistic competition.E) C) and D)
F) A) and B)

Question 2

A representative firm in monopolistic competition will tend to make economic profits:

Accepted Answer

A)   in the short run and long run.
B)   and losses in the short run and long run.
C)   or losses in the short run,but the firm will break even in the long run.
D)   or losses in the short run,but the firm will make economic profits in the long run.E) C) and D)
F) B) and C)

Question 3

In which industry is monopolistic competition most likely to be found?

Accepted Answer

A)   Utilities
B)   Agriculture
C)   Retail trade
D)   MiningE) A) and B)
F) A) and C)

Question 4

Which industry would be considered to be monopolistically competitive?

Accepted Answer

A)   Electronic computers
B)   Electric light bulbs
C)   Local dry cleaners
D)   Men's slacks and jeansE) B) and C)
F) All of the above

Question 5

Monopolistically competitive firms must produce where there is an optimal allocation of resources because the firms do not present significant barriers to entry to potential competitors.

Accepted Answer

A) True 
 B)False

Question 6

A potential negative effect of advertising for society is that it can:

Accepted Answer

A)   be the major cause of price wars among firms in the industry.
B)   reduce mutual interdependence and increase competition.
C)   be self-canceling and contribute to economic inefficiency.
D)   lower barriers to entry and undermine profits in the industry.E) B) and C)
F) A) and B)

Question 7

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50,price is $4.00,marginal revenue is $2.50,and marginal cost is $2.50.This firm is operating:

Accepted Answer

A)   with a profit in the short run.
B)   with a loss in the short run.
C)   at the break-even level of output in the short run.
D)   at an efficient level of output in the short run.E) A) and C)
F) A) and B)

Question 8

Suppose a few powerful firms control all production in an industry and face identical demand and cost schedules.If they successfully collude and maximize joint profits,then price,output,and profit levels in the industry will be the same as those in:

Accepted Answer

A)   pure monopoly.
B)   regulated monopoly.
C)   monopolistic competition.
D)   an oligopoly with a kinked-demand curve.E) A) and B)
F) None of the above

Question 9

The demand curve for a monopolistically competitive firm has a:

Accepted Answer

A)   positive slope and the marginal revenue curve has a negative slope.
B)   positive slope and the marginal revenue curve has a positive slope.
C)   negative slope and the marginal revenue curve has a negative slope.
D)   negative slope and the marginal revenue curve has a positive slope.E) All of the above
F) B) and D)

Question 10

Price leadership represents a situation where oligopolistic firms:

Accepted Answer

A)   reduce their reliance on nonprice competition.
B)   conspire to form a cartel.
C)   face a kinked-demand curve.
D)   tacitly collude.E) A) and C)
F) None of the above

Question 11

Refer to the above graph.Assume that in long-run equilibrium a purely competitive firm has the same cost curves as that of the monopolistically competitive firm shown.It can be concluded that the:

Accepted Answer

A)   purely competitive firm would have lower profits.
B)   purely competitive firm would have higher profits.
C)   purely competitive producer would produce less at a higher ATC.
D)   monopolistically competitive producer would produce less at a higher ATC.E) B) and C)
F) B) and D)

Question 12

In the kinked-demand model of noncollusive oligopoly,if one firm increases its price,the most likely reaction of the other firms will be to:

Accepted Answer

A)   decrease their prices.
B)   increase their prices.
C)   not change their prices.
D)   fix prices.E) C) and D)
F) A) and B)

Question 13

Patents and copyrights were established by the government to reduce oligopoly and monopoly power.

Accepted Answer

A) True 
 B)False

Question 14

In the long run an oligopoly:

Accepted Answer

A)   will always produce less than a monopoly.
B)   may be able to earn positive economic profits.
C)   will always produce in the range of decreasing returns to scale.
D)   will produce on the portion of the demand curve where demand is price-inelastic.E) A) and B)
F) All of the above

Question 15

Which makes it easier for a cartel to operate effectively over time?

Accepted Answer

A)   Demand for the cartel's product decreases.
B)   Demand for the cartel's product becomes more elastic.
C)   The number of substitutes for the cartel's product increases.
D)   Each member firm observes the pricing and output decisions of other firms in the cartel.E) A) and D)
F) A) and C)

Question 16

Other things being equal,a firm in a cartel will most likely cheat on a price-fixing agreement by:

Accepted Answer

A)   increasing price and restricting its output.
B)   organizing promotions of the product.
C)   secretly increasing sales to a large number of small customers.
D)   secretly lowering price and increasing sales to a few customers.E) A) and B)
F) A) and C)

Question 17

In long-run equilibrium,a monopolistically competitive firm will produce where P > MR = MC > minimum ATC.

Accepted Answer

A) True 
 B)False

Question 18

The economic inefficiency of monopolistic competition means that:

Accepted Answer

A)   industries tend to evolve into oligopolies rather than become more competitive.
B)   industries spend money on advertising and sales promotion.
C)   firms produce at an output short of,and charge a price greater than,minimum average total cost.
D)   firms do not maximize profits at the MC equals MR output.E) All of the above
F) C) and D)

Question 19

In the long run,profits for a monopolistic competitor will be:

Accepted Answer

A)   the same as the profits for a monopolist.
B)   slightly less than the profits of a monopolist.
C)   the same as the profits for a purely competitive firm.
D)   slightly more than the profits of a purely competitive firm.E) C) and D)
F) B) and D)

Question 20

Annual design and model changes are a form of nonprice competition.

Accepted Answer

A) True 
 B)False

Exam 9: Monopolistic Competition and Oligopoly

In the kinked-demand model of noncollusive oligopoly,if one firm increases its price,the most likely reaction of the other firms will be to:

Correct AnswerverifiedShow Answer

Patents and copyrights were established by the government to reduce oligopoly and monopoly power.

Correct AnswerverifiedShow Answer

Price leadership represents a situation where oligopolistic firms:

Correct AnswerverifiedShow Answer

In the long run,profits for a monopolistic competitor will be:

Correct AnswerverifiedShow Answer

In the long run an oligopoly:

Correct AnswerverifiedShow Answer

Which makes it easier for a cartel to operate effectively over time?

Correct AnswerverifiedShow Answer

Other things being equal,a firm in a cartel will most likely cheat on a price-fixing agreement by:

Correct AnswerverifiedShow Answer

Allocative and productive efficiency are achieved under the market structure of:

Correct AnswerverifiedShow Answer

In which industry is monopolistic competition most likely to be found?

Correct AnswerverifiedShow Answer

A representative firm in monopolistic competition will tend to make economic profits:

Correct AnswerverifiedShow Answer

Which industry would be considered to be monopolistically competitive?

Correct AnswerverifiedShow Answer

Refer to the above graph.Assume that in long-run equilibrium a purely competitive firm has the same cost curves as that of the monopolistically competitive firm shown.It can be concluded that the:

Correct AnswerverifiedShow Answer

Annual design and model changes are a form of nonprice competition.

Correct AnswerverifiedShow Answer

The demand curve for a monopolistically competitive firm has a:

Correct AnswerverifiedShow Answer

The economic inefficiency of monopolistic competition means that:

Correct AnswerverifiedShow Answer

A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50,price is $4.00,marginal revenue is $2.50,and marginal cost is $2.50.This firm is operating:

Correct AnswerverifiedShow Answer

Suppose a few powerful firms control all production in an industry and face identical demand and cost schedules.If they successfully collude and maximize joint profits,then price,output,and profit levels in the industry will be the same as those in:

Correct AnswerverifiedShow Answer

A potential negative effect of advertising for society is that it can:

Correct AnswerverifiedShow Answer

Monopolistically competitive firms must produce where there is an optimal allocation of resources because the firms do not present significant barriers to entry to potential competitors.

Correct AnswerverifiedShow Answer

In long-run equilibrium,a monopolistically competitive firm will produce where P > MR = MC > minimum ATC.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified