Question 1

The fewer the number of firms present in a market, the:

Accepted Answer

A)  more competition is likely to be present.
B)  less likely barriers to entry are present.
C)  more likely market power will exist.
D)  less like a monopoly it will behave.E) B) and D)
F) A) and D)

Question 2

Monopolistically competitive firms have an incentive to:

Accepted Answer

A)  attempt to draw in more customers.
B)  advertise.
C)  engage in brand promotion.
D)  All of these are true.E) All of the above
F) C) and D)

Question 3

The welfare loss associated with the outcome in a competitive oligopoly is:

Accepted Answer

A)  larger than that of a monopoly.
B)  smaller than that of a monopoly.
C)  the same as that of a monopoly.
D)  the same as that of colluding oligopolists.E) A) and B)
F) None of the above

Question 4

A strategy that is always the best for a player to choose, regardless of what other players do, is called:

Accepted Answer

A)  a dominant strategy.
B)  a Nash equilibrium.
C)  collusion.
D)  the prisoner's dilemma.E) A) and D)
F) All of the above

Question 5

A market that consists of a few large firms and has barriers to entry:

Accepted Answer

A)  must be perfectly competitive.
B)  is likely an oligopoly.
C)  must be monopolistically competitive.
D)  is likely a monopoly.E) A) and D)
F) A) and C)

Question 6

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  This firm will produce _______ units.

Accepted Answer

A)  90
B)  100
C)  120
D)  160E) All of the above
F) B) and C)

Question 7

The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete.  How much will be produced if both firms collude?

Accepted Answer

A)  50 million units
B)  65 million units
C)  70 million units
D)  85 million unitsE) C) and D)
F) All of the above

Question 8

A dominant strategy is one that is:

Accepted Answer

A)  chosen by a player first, determining the best strategies of the other players that follow.
B)  cannot be changed without making at least one of the players worse off.
C)  always the best for a player to choose, regardless of what other players do.
D)  None of these is true.E) A) and B)
F) A) and D)

Question 9

Advertising can:

Accepted Answer

A)  convey useful information to consumers.
B)  cause perceived differences that don't exist and drive prices up.
C)  increase competition in the marketplace and lower prices.
D)  All of these are true.E) B) and D)
F) None of the above

Question 10

When a firm sells goods that are similar to, but more attractive than, those produced by competitors, that firm is conducting:

Accepted Answer

A)  product distinction.
B)  product differentiation.
C)  price-point pinning.
D)  deceptive advertising.E) A) and B)
F) B) and D)

Question 11

How can monopolistically competitive firms earn profits in the long run?

Accepted Answer

A)  Price discrimination
B)  Innovation
C)  Cost minimization
D)  Monopolistically competitive firms cannot earn profits in the long run.E) B) and C)
F) All of the above

Question 12

When choosing its production level, an oligopolist needs to consider how the _______ effect affects its profit.

Accepted Answer

A)  substitution
B)  supply
C)  price
D)  incomeE) None of the above
F) C) and D)

Question 13

Suppose Bank of America hires Jordan Rogers, a professional athlete, as a spokesperson. Bank of America likely made the decision to hire Rogers because:

Accepted Answer

A)  he is more informed about financial services than the general public.
B)  it signals to consumers that the company has a high quality product that it is willing to spend money advertising.
C)  it signals to other companies that they must advertise in order to compete with Bank of America.
D)  people are more likely to trust a familiar face.E) None of the above
F) A) and B)

Question 14

Just like a monopolist, a monopolistically competitive firm:

Accepted Answer

A)  cannot sell additional units of output without lowering price.
B)  is a price taker.
C)  sets price according to marginal revenue and marginal cost, ignoring the demand curve.
D)  faces a perfectly elastic demand curve.E) B) and C)
F) A) and D)

Question 15

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  This firm will charge a price of _______ in the _______ and earn _______ profits.

Accepted Answer

A)  P3; short run; positive
B)  P2; long run; zero
C)  P3; long run; zero
D)  P2; short run; positiveE) A) and C)
F) A) and B)

Question 16

Which of the following statements about cartels is true?

Accepted Answer

A)  Cartels can effectively sustain large profits in the long run.
B)  Cartels are usually illegal.
C)  A cartel can act as if it is a single monopoly.
D)  All of these are true.E) B) and D)
F) B) and C)

Question 17

In the long run, firms in a monopolistically competitive market operate:

Accepted Answer

A)  at the lowest average total costs possible.
B)  at full capacity.
C)  at less than full capacity.
D)  on an efficient scale.E) A) and C)
F) A) and B)

Question 18

In an oligopoly, the price effect is:

Accepted Answer

A)  the increase in price that occurs when the quantity sold decreases.
B)  the decrease in total revenue that occurs when an increased quantity sold pushes the market price down.
C)  the increase in total revenue that occurs when additional units are sold.
D)  the increase in output that occurs when the market price increases.E) B) and C)
F) A) and D)

Question 19

Which of the following market structures is considered imperfectly competitive?

Accepted Answer

A)  Perfect competition
B)  Monopolistic competition
C)  Monopoly
D)  All of these are considered imperfectly competitive.E) A) and B)
F) None of the above

Question 20

The demand curve faced by the monopolistically competitive firm is:

Accepted Answer

A)  flat.
B)  vertical.
C)  U-shaped.
D)  None of these is true.E) All of the above
F) B) and C)

Exam 15: Monopolistic Competition and Oligopoly

A market that consists of a few large firms and has barriers to entry:

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In the long run, firms in a monopolistically competitive market operate:

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Which of the following market structures is considered imperfectly competitive?

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Which of the following statements about cartels is true?

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Monopolistically competitive firms have an incentive to:

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will produce _______ units.

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Advertising can:

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Just like a monopolist, a monopolistically competitive firm:

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A strategy that is always the best for a player to choose, regardless of what other players do, is called:

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In an oligopoly, the price effect is:

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The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete. How much will be produced if both firms collude?

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Suppose Bank of America hires Jordan Rogers, a professional athlete, as a spokesperson. Bank of America likely made the decision to hire Rogers because:

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will charge a price of _______ in the _______ and earn _______ profits.

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When a firm sells goods that are similar to, but more attractive than, those produced by competitors, that firm is conducting:

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A dominant strategy is one that is:

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When choosing its production level, an oligopolist needs to consider how the _______ effect affects its profit.

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The fewer the number of firms present in a market, the:

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The welfare loss associated with the outcome in a competitive oligopoly is:

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The demand curve faced by the monopolistically competitive firm is:

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How can monopolistically competitive firms earn profits in the long run?

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will charge a price of ___ in the _ and earn _____ profits.

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