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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. The long run equilibrium occurs at a quantity of _______ and a price of _______. A) 50; $10 B) 65; $9.50 C) 50; $5 D) None of these are the long run equilibrium. The long run equilibrium occurs at a quantity of _______ and a price of _______.


A) 50; $10
B) 65; $9.50
C) 50; $5
D) None of these are the long run equilibrium.

E) A) and D)
F) B) and D)

Correct Answer

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If a monopolistically competitive firm is earning profits in the short run:


A) barriers to entry will allow the firm to enjoy profits in the long run as well.
B) it is acting like a perfectly competitive firm.
C) other firms have an incentive to enter the market.
D) it should leave the industry before competition enters.

E) C) and D)
F) A) and D)

Correct Answer

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What is a cartel?


A) A duopoly with more than two firms
B) A firm that always has a dominant strategy
C) A group of firms who collude to make collective production decisions about quantities or prices
D) The "leader" of an industry, typically the firm with the largest market share

E) A) and C)
F) A) and D)

Correct Answer

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. In the graph, area A represents: A) profits earned in the short and long run. B) profits earned in the short run. C) profits earned in the long run. D) consumer surplus. In the graph, area A represents:


A) profits earned in the short and long run.
B) profits earned in the short run.
C) profits earned in the long run.
D) consumer surplus.

E) B) and D)
F) B) and C)

Correct Answer

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It is important for business owners to understand the market structure in which they operate because:


A) it defines how much freedom they have to set prices.
B) it will tell how much attention to pay to competitors' behavior.
C) it can help in deciding whether to advertise.
D) All of these are true.

E) C) and D)
F) None of the above

Correct Answer

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In the short run, product differentiation enables firms in monopolistically competitive markets to:


A) produce goods for which there are exact substitutes.
B) produce standardized goods.
C) price goods at marginal cost.
D) earn positive economic profits.

E) A) and B)
F) A) and C)

Correct Answer

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. In the graph, which areas represent profit? A) A + B B) F + G C) A + B + C + D + F + G + H + I D) A + B + F + G + H In the graph, which areas represent profit?


A) A + B
B) F + G
C) A + B + C + D + F + G + H + I
D) A + B + F + G + H

E) B) and C)
F) A) and C)

Correct Answer

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The process of entry and exit into a monopolistically competitive market continues until profits are:


A) positive.
B) negative.
C) zero.
D) Any of these could be true.

E) B) and C)
F) A) and B)

Correct Answer

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Oligopoly describes a market with:


A) many sellers.
B) one seller.
C) only a few sellers.
D) few or many sellers, but only one buyer.

E) B) and D)
F) A) and C)

Correct Answer

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If a monopolistically competitive firm's demand curve is shifting to the left, it will stop shifting when:


A) the firm earns a small, positive economic profit.
B) the firm starts earning negative economic profit.
C) the firm is earning zero economic profit.
D) price falls to marginal cost.

E) B) and D)
F) None of the above

Correct Answer

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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. 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. What is the outcome of this game? A) Both firms will collude and act like a joint monopolist. B) Both firms will compete. C) Firm A will compete, and Firm B will collude. D) Firm B will compete, and Firm A will collude. What is the outcome of this game?


A) Both firms will collude and act like a joint monopolist.
B) Both firms will compete.
C) Firm A will compete, and Firm B will collude.
D) Firm B will compete, and Firm A will collude.

E) A) and C)
F) A) and B)

Correct Answer

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Collusion is _______ to maintain because firms _______.


A) easy; rarely have an incentive to renege
B) difficult; rarely can agree on the terms
C) easy; face similar cost curves
D) difficult; always have an incentive to renege

E) None of the above
F) A) and B)

Correct Answer

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Which of the following is a defining characteristic of an oligopoly?


A) Barriers to entry prevent new firms from entering the market.
B) A few large firms have market power.
C) Easy entry and exit into the market prevents firms from earning long run profits.
D) All firms in the market sell a standardized product.

E) All of the above
F) C) and D)

Correct Answer

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What is a tool that oligopolistic firms can use to analyze their production choices?


A) Game theory
B) Cost minimization theory
C) Marginal revenue maximization strategy
D) None of these can be used effectively by monopolists.

E) B) and C)
F) A) and D)

Correct Answer

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Strategic behavior is a key feature in which market structure?


A) Monopoly
B) Oligopoly
C) Monopolistic competition
D) Perfect competition

E) None of the above
F) All of the above

Correct Answer

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Product differentiation refers to the practice of:


A) selling products that are similar, but more attractive in some way, to competitors' products.
B) creating a standardized product at a lower cost than the method used by competitors.
C) informing the public of differences in products as a result of error.
D) sorting and grouping goods based on similar characteristics.

E) A) and B)
F) All of the above

Correct Answer

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Which of the following statements about regulation of a monopolistically competitive market is true?


A) It is easier to regulate a monopolistically competitive market than a monopoly.
B) It is more difficult to regulate a monopolistically competitive market than a monopoly.
C) Regulation of monopolistically competitive markets is very common in the United States today.
D) Regulation of monopolistically competitive markets has steadily increased over the past 50 years.

E) None of the above
F) B) and D)

Correct Answer

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